1 | a g e

istory of Banking Sector

WealLh compressed lnLo Lhe convenlenL form of gold brlngs one
dlsadvanLage unless well hldden or proLecLed lL ls easlly sLolen ln
early clvlllzaLlons a Lemple ls consldered Lhe safesL refuge lL ls a solld bulldlng
consLanLly aLLended wlLh a sacred characLer whlch lLself may deLer Lhleves ln
LgypL and MesopoLamla gold ls deposlLed ln Lemples for safekeeplng 8uL lL
lles ldle Lhere whlle oLhers ln Lhe Lradlng communlLy or ln governmenL have
desperaLe need of lL ln 8abylon aL Lhe Llme of Pammurabl ln Lhe 18Lh cenLury
8C Lhere are records of loans made by Lhe prlesLs of Lhe Lemple 1he concepL
of banklng has arrlved
Greek and koman f|nanc|ers from the 4th century 8C
8anklng acLlvlLles ln Creece are more varled and sophlsLlcaLed Lhan ln any
prevlous socleLy rlvaLe enLrepreneurs as well as Lemples and publlc bodles
now underLake flnanclal LransacLlons 1hey Lake deposlLs make loans change
money from one currency Lo anoLher and LesL colns for welghL and purlLy 1hey
even engage ln book LransacLlons Moneylenders can be found who wlll accepL
paymenL ln one Creek clLy and arrange for credlL ln anoLher avoldlng Lhe need
for Lhe cusLomer Lo LransporL or Lransfer large numbers of colns 8ome wlLh
lLs genlus for admlnlsLraLlon adopLs and regularlzes Lhe banklng pracLlces of
Creece 8y Lhe 2nd cenLury Au a debL can offlclally be dlscharged by paylng Lhe
approprlaLe sum lnLo a bank and publlc noLarles are appolnLed Lo reglsLer
such LransacLlons 1he collapse of Lrade afLer Lhe fall of Lhe 8oman Lmplre
makes bankers less necessary Lhan before and Lhelr demlse ls hasLened by Lhe
hosLlllLy of Lhe ChrlsLlan church Lo Lhe charglng of lnLeresL usury comes Lo
seem morally offenslve Cne anonymous medleval auLhor declares vlvldly LhaL
a usurer ls a bawd Lo hls own money bags Laklng a fee LhaL Lhey may
engender LogeLher
ke||g|on and bank|ng 12th 13th century AD
1he ChrlsLlan prohlblLlon on usury evenLually provldes an opporLunlLy for
bankers of anoLher rellglon Luropean prosper|ty needs flnance 1he Iews
barred from mosL oLher forms of employmenL supply Lhls need 8uL Lhelr
success and Lhelr exLreme vlslblllLy as a rellglous secL brlngs dangers

1he same ls Lrue of anoLher group Lhe knlghLs 1emplar who for a few years
become bankers Lo Lhe mlghLy 1hey Loo an excluslve secL wlLh prlvaLe rlLuals
easlly fall prey Lo rumor susplclon and persecuLlon (see 1emplers ln Lurope)
H
2 | a g e

1he proflLable buslness of banklng Lransfers lnLo Lhe hands of more ordlnary
ChrlsLlan folk flrsL among Lhem Lhe Lombards
8ankers to Luropes k|ngs 13th 14th century AD
uurlng Lhe 13Lh cenLury bankers from norLh lLaly collecLlvely known as
Lombards gradually replace Lhe Iews ln Lhelr LradlLlonal role as moneylenders
Lo Lhe rlch and powerful 1he buslness skllls of Lhe lLallans are enhanced by
Lhelr lnvenLlon of doub|eentry bookkeep|ng CreaLlve accounLancy enables
Lhem Lo avold Lhe ChrlsLlan sln of usury lnLeresL on a loan ls presenLed ln Lhe
accounLs elLher as a volunLary glfL from Lhe borrower or as a reward for Lhe
rlsk Laken Slena and Lucca Mllan and Cenoa all proflL from Lhe new Lrade 8uL
llorence Lakes Lhe llons share llorence ls well equlppped for lnLernaLlonal
flnance Lhanks Lo lLs famous gold coln Lhe florln llrsL mlnLed ln 1232 Lhe
florln ls wldely recognlzed and LrusLed lL ls Lhe hard currency of lLs day 8y Lhe
early 14Lh cenLury Lwo famllles ln Lhe clLy Lhe 8ardl and Lhe eruzzl have
grown lmmensely wealLhy by offerlng flnanclal servlces 1hey arrange for Lhe
collecLlon and Lransfer of money due Lo greaL feudal powers ln parLlcular Lhe
papacy 1hey faclllLaLe Lrade by provldlng merchanLs wlLh bllls of exchange by
means of whlch money pald ln by a debLor ln one Lown can be pald ouL Lo a
credlLor presenLlng Lhe blll somewhere else (a prlnclple famlllar now ln Lhe
form of a cheque) 1he ablllLy of Lhe llorenLlne bankers Lo fulfll Lhls servlce ls
shown by Lhe number of 8ardl branches ouLslde lLaly ln Lhe early 14Lh cenLury
Lhe famlly has offlces ln 8arcelona Sevllle and Ma[orca ln arls Avlgnon nlce
and Marsellles ln London 8ruges ConsLanLlnople 8hodes Cyprus and
!erusalem 1o add Lo llorences sense of power many of Luropes rulers are
heavlly ln debL Lo Lhe clLys bankers 1hereln ln Lhe shorL Lerm lles Lhe
bankers downfall ln Lhe 1340s Ldward lll of Lngland ls engaged ln Lhe
expenslve buslness of war wlLh lrance aL Lhe sLarL of Lhe nundred ears War
Pe ls heavlly ln debL Lo llorence havlng borrowed 600000 gold florlns from
Lhe eruzzl and anoLher 900000 from Lhe 8ardl ln 1343 he defaulLs on hls
paymenLs reduclng boLh llorenLlne houses Lo bankrupLcy llorence as a greaL
banklng cenLre survlves even Lhls dlsasLer Palf a cenLury laLer greaL forLunes
are agaln belng made by Lhe flnanclers of Lhe clLy romlnenL among Lhem ln
Lhe 13Lh cenLury are Lwo famllles Lhe azzl and Lhe Medlcl
1he Iugger dynasty 1Sth 16th century AD
AL Lhe sLarL of Lhe 13Lh cenLury Lhe Medlcl are Luropes greaLesL banklng
dynasLy buL Lhelr pollLlcal power laLer dlsLracLs Lhem from Lhe hlghly focussed
buslness of maklng money AfLer Lhe relgn of Lorenzo Lhe MagnlflcenL
Lhe banks f|nances are ln a perllous sLaLe 1he Medlcl laLer Lrlumph as dukes
of llorence 8uL Lhelr role as leadlng bankers ls usurped by a Cerman dynasLy
3 | a g e

LhaL of Lhe luggers Llke Lhe Medlcl Lhe luggers amass vasL wealLh by
massaglng Lhe flnances of Lhe papacy and of greaL prlnces 1he shlfL of
Luropean power Lo Lhe nabsburgs ln Lhe laLe 13Lh cenLury ls Lhe basls of Lhe
lugger wealLh 1he famlly descends from an Augsburg weaver and Lhelr flrsL
forLune ls ln LexLlles 1hey make Lhelr flrsL loan Lo a Pabsburg archduke ln
1487 Laklng as securlLy an lnLeresL ln sllver and copper mlnes ln Lhe 1lrol Lhe
beglnnlng of an exLenslve famlly lnvolvemenL ln mlnlng and preclous meLals ln
1491 a loan ls made Lo Max|m|||an a subsequenL loan Lo hlm ln 1303 (by
whlch Llme Maxlmlllan ls Lhe Poly 8oman emperor) ls secured by Lhe feudal
rlghLs Lo Lwo AusLrlan counLles 8uL by far Lhe largesL lugger pro[ecL ls
underLaken ln 1319 on behalf of Maxlmlllans grandson Charles Charles ls
deLermlned Lo succeed hls grandfaLher as Cerman klng and Poly 8oman
emperor buL Lhe posL lnvolves elecLlon and Lhere ls a rlval candldaLe Lhe
lrench klng lrancls l Charles Lurns Lo Lhe lugger famlly for hls elecLlon
expenses CuL of a masslve LoLal of 832000 florlns Lo be spenL on brlblng
Lhe seven e|ectors Lhe luggers provlde nearly Lwo Lhlrds (344000 florlns) 1he
campalgn succeeds 1he candldaLe ls elecLed as Charles v lnLeresL raLes aL Lhe
Llme are never less Lhan 12 per annum And when a loan has Lo be ralsed
urgenLly Lhe 16LhcenLury banker ls ofLen able Lo negoLlaLe a raLe of as hlgh as
43 8anklng for emperors ls proflLable ConLlnuous warfare and oLher
expenses of sLaLe are a consLanL draln on Charless Lreasury Llke any ruler of
Lhe Llme hls cosLs ouLrun hls sources of revenue Loans from bankers flll Lhe
gap and Lhey are ofLen repald by leases on sources of royal lncome 1hus Lhe
luggers are granLed ln 1323 Lhe revenues from Lhe Spanlsh orders of
knlghLhood LogeLher wlLh Lhe proflLs from mercury and sllver mlnes 1he
bankers Lherefore become ln a sense boLh revenue collecLors and managers
of sLaLe asseLs 8uL Lhelr hlgh raLes of lnLeresL can qulckly crlpple a klngdom
engaged ln Loo many unproflLable wars
Nat|ona| banks 17th 18th century AD
venlce afLer belng posslbly Lhe flrsL clLy Lo found a bank for Lhe keeplng of
money on safe deposlL and Lhe clearlng of cheques ls also a ploneer ln Lhe
lnvolvemenL of a bank wlLh sLaLe flnances ln 1617 Lhe 8anco Clro ls
esLabllshed Lo solve problems encounLered by Lhe earller 8anco de||a |azza
d| k|a|to whlch has goL lnLo Lrouble Lhrough Lhe maklng of unsecured loans lLs
debLors lnclude Lhe veneLlan governmenL 1he 8anco Clro ls founded on Lhe
prlnclple LhaL Lhe governmenLs credlLors accepL paymenL ln Lhe form of credlL
wlLh Lhe new bank ln solvlng an exlsLlng problem Lhls also provldes new
opporLunlLles venlce now has a mechanlsm for ralslng publlc flnance on Lhe
basls of guaranLeed credlL 1he loglcal exLenslon of Lhls concepL ls a naLlonal
4 | a g e

bank esLabllshed ln some form of parLnershlp wlLh Lhe sLaLe 1he earllesL
example ls Lhe 8ank of Sweden founded ln 1668 and Loday Lhe worlds oldesL
survlvlng bank lL ls followed before Lhe end of Lhe cenLury by Lhe 8ank of
Lngland orlglnally a [o|ntstock company whlch beglns lLs exlsLence ln 1694 by
arranglng a loan of 1200000 Lo Lhe governmenL uurlng Lhe 18Lh cenLury Lhe
8ank of Lngland gradually underLakes many of Lhe Lasks now assoclaLed wlLh a
cenLral bank lL organlzes Lhe sale of governmenL bonds when funds need Lo be
ralsed lL acLs as a clearlng bank for governmenL deparLmenLs faclllLaLlng and
processlng Lhelr dally LransacLlons1he 8ank of Lngland also becomes Lhe
banker Lo oLher London banks and Lhrough Lhem Lo a much wlder banklng
communlLy 1he London banks acL as agenLs ln Lhe caplLal for Lhe many small
prlvaLe banks whlch open around Lhe counLry ln Lhe second half of Lhe 18Lh
cenLury All Lhese banks use Lhe 8ank of Lngland as a source of credlL ln a
crlsls lor Lhls purpose Lhe naLlonal bank needs a large reserve of gold whlch lL
accumulaLes unLll almosL Lhe enLlre hoard of Lhe naLlons bulllon ls sLored ln lLs
vaulLs


















S | a g e

anking Sectoi INBIA:
ntroduct|on
1he banklng secLlon wlll navlgaLe Lhrough all Lhe aspecLs of Lhe
8anklng SysLem ln lndla lL wlll dlscuss upon Lhe maLLers wlLh Lhe blrLh of Lhe
banklng concepL ln Lhe counLry Lo new players addlng Lhelr names ln Lhe
lndusLry ln comlng few years

1he banker of all banks 8eserve 8ank of lndla (88l) Lhe lndlan 8anks
AssoclaLlon (l8A) and Lop 20 banks llke lu8l PS8C lClCl A8n AM8C eLc has
been well deflned under Lhree separaLe heads wlLh one page dedlcaLed Lo
each bank

Powever ln Lhe lnLroducLlon parL of Lhe enLlre banklng cosmos Lhe pasL has
been well explalned under Lhree dlfferenL heads namely
O PlsLory of 8anklng ln lndla
O naLlonallzaLlon of 8anks ln lndla
O Scheduled Commerclal 8anks ln lndla
1he flrsL deals wlLh Lhe hlsLory parL slnce Lhe dawn of banklng sysLem ln lndla
CovernmenL Look ma[or sLep ln Lhe 1969 Lo puL Lhe banklng secLor lnLo
sysLems and lL naLlonallzed 14 prlvaLe banks ln Lhe menLloned year 1hls has
been elaboraLed ln naLlonallzaLlon 8anks ln lndla 1he lasL buL noL Lhe leasL
explalns abouL Lhe scheduled and unscheduled banks ln lndla SecLlon 42 (6) (a)
of 88l AcL 1934 lays down Lhe condlLlon of scheduled commerclal banks 1he
descrlpLlon along wlLh a llsL of scheduled commerclal banks are glven on Lhls
page
n|story of 8ank|ng |n nd|a
WlLhouL a sound and effecLlve banklng sysLem ln lndla lL cannoL have a healLhy
economy 1he banklng sysLem of lndla should noL only be hassle free buL lL
should be able Lo meeL new challenges posed by Lhe Lechnology and any oLher
exLernal and lnLernal facLors

lor Lhe pasL Lhree decades lndlas banklng sysLem has several ouLsLandlng
achlevemenLs Lo lLs credlL 1he mosL sLrlklng ls lLs exLenslve reach lL ls no
longer conflned Lo only meLropollLans or cosmopollLans ln lndla ln facL lndlan
banklng sysLem has reached even Lo Lhe remoLe corners of Lhe counLry 1hls ls

6 | a g e

one of Lhe maln reason of lndlas growLh process

1he governmenLs regular pollcy for lndlan bank slnce 1969 has pald rlch
dlvldends wlLh Lhe naLlonallsaLlon of 14 ma[or prlvaLe banks of lndla

noL long ago an accounL holder had Lo walL for hours aL Lhe bank counLers for
geLLlng a drafL or for wlLhdrawlng hls own money 1oday he has a cholce
Cone are days when Lhe mosL efflclenL bank Lransferred money from one
branch Lo oLher ln Lwo days now lL ls slmple as lnsLanL messaglng or dlal a
plzza Money have become Lhe order of Lhe day

1he flrsL bank ln lndla Lhough conservaLlve was esLabllshed ln 1786 lrom
1786 Llll Loday Lhe [ourney of lndlan 8anklng SysLem can be segregaLed lnLo
Lhree dlsLlncL phases 1hey are as menLloned below
O Larly phase from 1786 Lo 1969 of lndlan 8anks
O naLlonallsaLlon of lndlan 8anks and up Lo 1991 prlor Lo lndlan banklng
secLor 8eforms
O new phase of lndlan 8anklng SysLem wlLh Lhe advenL of lndlan llnanclal
8anklng SecLor 8eforms afLer 1991
1o make Lhls wrlLeup more explanaLory l preflx Lhe scenarlo as hase l hase
ll and hase lll

hase

1he Ceneral 8ank of lndla was seL up ln Lhe year 1786 nexL came 8ank of
PlndusLan and 8engal 8ank 1he LasL lndla Company esLabllshed 8ank of
8engal (1809) 8ank of 8ombay (1840) and 8ank of Madras (1843) as
lndependenL unlLs and called lL resldency 8anks 1hese Lhree banks were
amalgamaLed ln 1920 and lmperlal 8ank of lndla was esLabllshed whlch sLarLed
as prlvaLe shareholders banks mosLly Luropeans shareholders

ln 1863 Allahabad 8ank was esLabllshed and flrsL Llme excluslvely by lndlans
un[ab naLlonal 8ank LLd was seL up ln 1894 wlLh headquarLers aL Lahore
8eLween 1906 and 1913 8ank of lndla CenLral 8ank of lndla 8ank of 8aroda
Canara 8ank lndlan 8ank and 8ank of Mysore were seL up 8eserve 8ank of
lndla came ln 1933

uurlng Lhe flrsL phase Lhe growLh was very slow and banks also experlenced
perlodlc fallures beLween 1913 and 1948 1here were approxlmaLely 1100
7 | a g e

banks mosLly small 1o sLreamllne Lhe funcLlonlng and acLlvlLles of commerclal
banks Lhe CovernmenL of lndla came up wlLh 1he 8anklng Companles AcL
1949 whlch was laLer changed Lo 8anklng 8egulaLlon AcL 1949 as per amendlng
AcL of 1963 (AcL no 23 of 1963) 8eserve 8ank of lndla was vesLed wlLh
exLenslve powers for Lhe supervlslon of banklng ln lndla as Lhe CenLral 8anklng
AuLhorlLy

uurlng Lhose days publlc has lesser confldence ln Lhe banks As an afLermaLh
deposlL moblllsaLlon was slow AbreasL of lL Lhe savlngs bank faclllLy provlded
by Lhe osLal deparLmenL was comparaLlvely safer Moreover funds were
largely glven Lo Lraders

hase

CovernmenL Look ma[or sLeps ln Lhls lndlan 8anklng SecLor 8eform afLer
lndependence ln 1933 lL naLlonallsed lmperlal 8ank of lndla wlLh exLenslve
banklng faclllLles on a large scale speclally ln rural and semlurban areas lL
formed SLaLe 8ank of lndla Lo acL as Lhe prlnclpal agenL of 88l and Lo handle
banklng LransacLlons of Lhe unlon and SLaLe CovernmenLs all over Lhe counLry

Seven banks formlng subsldlary of SLaLe 8ank of lndla was naLlonallsed ln 1960
on 19Lh !uly 1969 ma[or process of naLlonallsaLlon was carrled ouL lL was Lhe
efforL of Lhe Lhen rlme MlnlsLer of lndla Mrs lndlra Candhl 14 ma[or
commerclal banks ln Lhe counLry was naLlonallsed

Second phase of naLlonallsaLlon lndlan 8anklng SecLor 8eform was carrled ouL
ln 1980 wlLh seven more banks 1hls sLep broughL 80 of Lhe banklng segmenL
ln lndla under CovernmenL ownershlp

1he followlng are Lhe sLeps Laken by Lhe CovernmenL of lndla Lo 8egulaLe
8anklng lnsLlLuLlons ln Lhe CounLry
O 1949 LnacLmenL of 8anklng 8egulaLlon AcL
O 1933 naLlonallsaLlon of SLaLe 8ank of lndla
O 1939 naLlonallsaLlon of S8l subsldlarles
O 1961 lnsurance cover exLended Lo deposlLs
O 1969 naLlonallsaLlon of 14 ma[or banks
O 1971 CreaLlon of credlL guaranLee corporaLlon
O 1973 CreaLlon of reglonal rural banks
O 1980 naLlonallsaLlon of seven banks wlLh deposlLs over 200 crore
8 | a g e

AfLer Lhe naLlonallsaLlon of banks Lhe branches of Lhe publlc secLor bank lndla
rose Lo approxlmaLely 800 ln deposlLs and advances Look a huge [ump by
11000

8anklng ln Lhe sunshlne of CovernmenL ownershlp gave Lhe publlc lmpllclL
falLh and lmmense confldence abouL Lhe susLalnablllLy of Lhese lnsLlLuLlons

hase

1hls phase has lnLroduced many more producLs and faclllLles ln Lhe banklng
secLor ln lLs reforms measure ln 1991 under Lhe chalrmanshlp of M
naraslmham a commlLLee was seL up by hls name whlch worked for Lhe
llberallsaLlon of banklng pracLlces

1he counLry ls flooded wlLh forelgn banks and Lhelr A1M sLaLlons LfforLs are
belng puL Lo glve a saLlsfacLory servlce Lo cusLomers hone banklng and neL
banklng ls lnLroduced 1he enLlre sysLem became more convenlenL and swlfL
1lme ls glven more lmporLance Lhan money

1he flnanclal sysLem of lndla has shown a greaL deal of reslllence lL ls
shelLered from any crlsls Lrlggered by any exLernal macroeconomlcs shock as
oLher LasL Aslan CounLrles suffered 1hls ls all due Lo a flexlble exchange raLe
reglme Lhe forelgn reserves are hlgh Lhe caplLal accounL ls noL yeL fully
converLlble and banks and Lhelr cusLomers have llmlLed forelgn exchange
exposure
Nat|ona||sat|on of 8anks |n nd|a
1he naLlonallsaLlon of banks ln lndla Look place ln 1969 by Mrs lndlra Candhl
Lhe Lhen prlme mlnlsLer lL naLlonallsed 14 banks Lhen 1hese banks were
mosLly owned by buslnessmen and even managed by Lhem
O CenLral 8ank of lndla
O 8ank of MaharashLra
O uena 8ank
O un[ab naLlonal 8ank
O SyndlcaLe 8ank
O Canara 8ank
O lndlan 8ank
O lndlan Cverseas 8ank
O 8ank of 8aroda
| a g e

O unlon 8ank
O Allahabad 8ank
O unlLed 8ank of lndla
O uCC 8ank
O 8ank of lndla

8efor Lhe sLeps of naLlonallsaLlon of lndlan banks only SLaLe 8ank of lndla (S8l)
was naLlonallsed lL Look place ln !uly 1933 under Lhe S8l AcL of 1933
naLlonallsaLlon of Seven SLaLe 8anks of lndla (formed subsldlary) Look place on
19Lh !uly 1960

1he SLaLe 8ank of lndla ls lndlas largesL commerclal bank and ls ranked one of
Lhe Lop flve banks worldwlde lL serves 90 mllllon cusLomers Lhrough a neLwork
of 9000 branches and lL offers elLher dlrecLly or Lhrough subsldlarles a
wlde range of banklng servlces

1he second phase of naLlonallsaLlon of lndlan banks Look place ln Lhe year
1980 Seven more banks were naLlonallsed wlLh deposlLs over 200 crores 1lll
Lhls year approxlmaLely 80 of Lhe banklng segmenL ln lndla were under
CovernmenL ownershlp

AfLer Lhe naLlonallsaLlon of banks ln lndla Lhe branches of Lhe publlc secLor
banks rose Lo approxlmaLely 800 ln deposlLs and advances Look a huge [ump
by 11000
O 1933 naLlonallsaLlon of SLaLe 8ank of lndla
O 1939 naLlonallsaLlon of S8l subsldlarles
O 1969 naLlonallsaLlon of 14 ma[or banks
O 1980 naLlonallsaLlon of seven banks wlLh deposlLs over 200 crores

chedu|ed Commerc|a| 8anks n nd|a
1he commerclal banklng sLrucLure ln lndla conslsLs of
O Scheduled Commerclal 8anks ln lndla
O unscheduled 8anks ln lndla
Scheduled 8anks ln lndla consLlLuLe Lhose banks whlch have been lncluded ln
Lhe Second Schedule of 8eserve 8ank of lndla(88l) AcL 1934 88l ln Lurn
10 | a g e

lncludes only Lhose banks ln Lhls schedule whlch saLlsfy Lhe crlLerla lald down
vlde secLlon 42 (6) (a) of Lhe AcL

As on 30Lh !une 1999 Lhere were 300 scheduled banks ln lndla havlng a LoLal
neLwork of 64918 branches1he scheduled commerclal banks ln lndla
comprlse of SLaLe bank of lndla and lLs assoclaLes (8) naLlonallsed banks (19)
forelgn banks (43) prlvaLe secLor banks (32) cooperaLlve banks and reglonal
rural banks

Scheduled banks ln lndla means Lhe SLaLe 8ank of lndla consLlLuLed under
Lhe SLaLe 8ank of lndla AcL 1933 (23 of 1933) a subsldlary bank as deflned ln
Lhe SLaLe 8ank of lndla (Subsldlary 8anks) AcL 1939 (38 of 1939) a
correspondlng new bank consLlLuLed under secLlon 3 of Lhe 8anklng
Companles (AcqulslLlon and 1ransfer of underLaklngs) AcL 1970 (3 of 1970) or
under secLlon 3 of Lhe 8anklng Companles (AcqulslLlon and 1ransfer of
underLaklngs) AcL 1980 (40 of 1980) or any oLher bank belng a bank lncluded
ln Lhe Second Schedule Lo Lhe 8eserve 8ank of lndla AcL 1934 (2 of 1934) buL
does noL lnclude a cooperaLlve bank

nonscheduled bank ln lndla means a banklng company as deflned ln clause
(c) of secLlon 3 of Lhe 8anklng 8egulaLlon AcL 1949 (10 of 1949) whlch ls noL a
scheduled bank

1he fo||ow|ng are the chedu|ed 8anks |n nd|a (ub||c ector)
O SLaLe 8ank of lndla
O SLaLe 8ank of 8lkaner and !alpur
O SLaLe 8ank of Pyderabad
O SLaLe 8ank of lndore
O SLaLe 8ank of Mysore
O SLaLe 8ank of SaurashLra
O SLaLe 8ank of 1ravancore
O Andhra 8ank
O Allahabad 8ank
O 8ank of 8aroda
O 8ank of lndla
O 8ank of MaharashLra
O Canara 8ank
O CenLral 8ank of lndla
O CorporaLlon 8ank
O uena 8ank
11 | a g e

O lndlan Cverseas 8ank
O lndlan 8ank
O CrlenLal 8ank of Commerce
O un[ab naLlonal 8ank
O un[ab and Slnd 8ank
O SyndlcaLe 8ank
O unlon 8ank of lndla
O unlLed 8ank of lndla
O uCC 8ank
O vl[aya 8ank

1he fo||ow|ng are the chedu|ed 8anks |n nd|a (r|vate ector)
O lnC vysya 8ank LLd
O Axls 8ank LLd
O lnduslnd 8ank LLd
O lClCl 8ank LLd
O SouLh lndlan 8ank
O PulC 8ank LLd
O CenLurlon 8ank LLd
O 8ank of un[ab LLd
O lu8l 8ank LLd
O !ammu kashmlr 8ank LLd

1he fo||ow|ng are the chedu|ed Iore|gn 8anks |n nd|a
O Amerlcan Lxpress 8ank LLd
O AnZ Crldlays 8ank lc
O 8ank of Amerlca n1 SA
O 8ank of 1okyo LLd
O 8anquc naLlonale de arls
O 8arclays 8ank lc
O ClLl 8ank nC
O ueuLsche 8ank AC
O Pongkong and Shanghal 8anklng CorporaLlon
O SLandard CharLered 8ank
O 1he Chase ManhaLLan 8ank LLd
O uresdner 8ank AC
12 | a g e

Banks In India
ln lndla Lhe banks are belng segregaLed ln dlfferenL groups Lach group has
Lhelr own beneflLs and llmlLaLlons ln operaLlng ln lndla Lach has Lhelr own
dedlcaLed LargeL markeL lew of Lhem only work ln rural secLor whlle oLhers ln
boLh rural as well as urban Many even are only caLerlng ln clLles Some are of
lndlan orlgln and some are forelgn players

All Lhese deLalls and many more ls dlscussed over here 1he banks and lLs
relaLlon wlLh Lhe cusLomers Lhelr mode of operaLlon Lhe names of banks
under dlfferenL groups and oLher such useful lnformaLlons are Lalked abouL

Cne more secLlon has been Laken noLe of ls Lhe upcomlng forelgn banks ln
lndla 1he 88l has shown cerLaln lnLeresL Lo lnvolve more of forelgn banks Lhan
Lhe exlsLlng one recenLly 1hls sLep has paved a way for few more forelgn
banks Lo sLarL buslness ln lndla
Public Sector Banks In India
Among Lhe ubllc SecLor 8anks ln lndla unlLed 8ank of lndla ls one of Lhe 14
ma[or banks whlch were naLlonallsed on !uly 19 1969 lLs predecessor ln Lhe
ubllc SecLor 8anks Lhe unlLed 8ank of lndla LLd was formed ln 1930 wlLh Lhe
amalgamaLlon of four banks vlz Comllla 8anklng CorporaLlon LLd (1914)
8engal CenLral 8ank LLd (1918) Comllla unlon 8ank LLd (1922) and Pooghly
8ank LLd (1932)

CrlenLal 8ank of Commerce (C8C) a CovernmeL of lndla underLaklng offers
uomesLlc n8l and Commerclal banklng servlces C8C ls lmplemenLlng a
C8AMLLn 8C!LC1 ln uehradun ulsLrlcL (u) and Panumangarh ulsLrlcL
(8alasLhan) dlsburslng small loans 1hls ubllc SecoLor 8ank lndla has
lmplemenLed 14 polnL acLlon plan for sLrengLhenlng of credlL dellvery Lo
women and has deslgnaLed 3 branches as speclallzed branches for women
enLrepreneurs

1he fo||ow|ng are the ||st of ub||c ector 8anks |n nd|a
O Allahabad 8ank
O Andhra 8ank
O 8ank of 8aroda
O 8ank of lndla
O 8ank of MaharasLra
13 | a g e

O Canara 8ank
O CenLral 8ank of lndla
O CorporaLlon 8ank
O uena 8ank
O lu8l 8ank
O lndlan 8ank
O lndlan Cverseas 8ank
O CrlenLal 8ank of Commerce
O un[ab Slnd 8ank
O un[ab naLlonal 8ank
O SyndlcaLe 8ank
O uCC 8ank
O unlon 8ank of lndla
O unlLed 8ank of lndla
O vl[aya 8ank

|st of tate 8ank of nd|a and |ts subs|d|ary a ub||c ector 8anks
O tate 8ank of nd|a
4 SLaLe 8ank of 8lkaner !alpur
4 SLaLe 8ank of Pyderabad
4 SLaLe 8ank of lndore
4 SLaLe 8ank of Mysore
4 SLaLe 8ank of SaurasLra
4 SLaLe 8ank of 1ravancore

Private Sector Banks
rlvaLe banklng ln lndla was pracLlced slnce Lhe beglnlng of banklng sysLem ln
lndla 1he flrsL prlvaLe bank ln lndla Lo be seL up ln rlvaLe SecLor 8anks ln lndla
was lnduslnd 8ank lL ls one of Lhe fasLesL growlng 8ank rlvaLe SecLor 8anks ln
lndla lu8l ranks Lhe LengLh largesL developmenL bank ln Lhe world as rlvaLe
8anks ln lndla and has promoLed a world class lnsLlLuLlons ln lndla

1he flrsL rlvaLe 8ank ln lndla Lo recelve an ln prlnclple approval from Lhe
8eserve 8ank of lndla was Pouslng uevelopmenL llnance CorporaLlon LlmlLed
Lo seL up a bank ln Lhe prlvaLe secLor banks ln lndla as parL of Lhe 88ls
llberallsaLlon of Lhe lndlan 8anklng lndusLry lL was lncorporaLed ln AugusL
14 | a g e

1994 as PulC 8ank LlmlLed wlLh reglsLered offlce ln Mumbal and commenced
operaLlons as Scheduled Commerclal 8ank ln !anuary 1993

lnC vysya yeL anoLher rlvaLe 8ank of lndla was lncorporaLed ln Lhe year
1930 8angalore has a prlde of place for havlng Lhe flrsL branch lncepLlon ln Lhe
year 1934 WlLh successlve years of paLronage and consLanLly seLLlng new
sLandards ln banklng lnC vysya 8ank has many credlLs Lo lLs accounL

|st of r|vate 8anks |n nd|a
O 8ank of un[ab
O 8ank of 8a[asLhan
O CaLhollc Syrlan 8ank
O CenLurlon 8ank
O ClLy unlon 8ank
O uhanalakshml 8ank
O uevelopmenL CredlL 8ank
O lederal 8ank
O PulC 8ank
O lClCl 8ank
O lnduslnd 8ank
O lnC vysya 8ank
O !ammu kashmlr 8ank
O karnaLaka 8ank
O karur vysya 8ank
O Laxml vllas 8ank
O SouLh lndlan 8ank
O unlLed WesLern 8ank
O u1l 8ank

Cooperative Banks in India
1he Co operaLlve banks ln lndla sLarLed funcLlonlng almosL 100 years ago 1he
CooperaLlve bank ls an lmporLanL consLlLuenL of Lhe lndlan llnanclal SysLem
[udglng by Lhe role asslgned Lo co operaLlve Lhe expecLaLlons Lhe co operaLlve
ls supposed Lo fulfll Lhelr number and Lhe number of offlces Lhe cooperaLlve
bank operaLe 1hough Lhe co operaLlve movemenL orlglnaLed ln Lhe WesL buL
Lhe lmporLance of such banks have assumed ln lndla ls rarely paralleled
anywhere else ln Lhe world 1he cooperaLlve banks ln lndla plays an lmporLanL
1S | a g e

role even Loday ln rural flnanclng 1he buslnessess of cooperaLlve bank ln Lhe
urban areas also has lncreased phenomenally ln recenL years due Lo Lhe sharp
lncrease ln Lhe number of prlmary cooperaLlve banks

Co operaLlve 8anks ln lndla are reglsLered under Lhe CooperaLlve SocleLles
AcL 1he cooperaLlve bank ls also regulaLed by Lhe 88l 1hey are governed by
Lhe 8anklng 8egulaLlons AcL 1949 and 8anklng Laws (CooperaLlve SocleLles)
AcL 1963

Cooperat|ve banks |n nd|a f|nance rura| areas under
O larmlng
O CaLLle
O Mllk
O PaLchery
O ersonal flnance

Cooperat|ve banks |n nd|a f|nance urban areas under
O SelfemploymenL
O lndusLrles
O Small scale unlLs
O Pome flnance
O Consumer flnance
O ersonal flnance

ome facts about Cooperat|ve banks |n nd|a
O Some cooperaLlve banks ln lndla are more forward Lhan many of Lhe
sLaLe and prlvaLe secLor banks
O Accordlng Lo nAlCu8 Lhe LoLal deposlLs lendlngs of CooperaLlve 8anks
ln lndla ls much more Lhan Cld rlvaLe SecLor 8anks also Lhe new
rlvaLe SecLor 8anks
O 1hls exponenLlal growLh of Co operaLlve 8anks ln lndla ls aLLrlbuLed
malnly Lo Lhelr much beLLer local reach personal lnLeracLlon wlLh
cusLomers Lhelr ablllLy Lo caLch Lhe nerve of Lhe local cllenLele

16 | a g e

Regional Rural Banks in India
8ural banklng ln lndla sLarLed slnce Lhe esLabllshmenL of banklng secLor ln
lndla 8ural 8anks ln Lhose days malnly focussed upon Lhe agro secLor
8eglonal rural banks ln lndla peneLraLed every corner of Lhe counLry and
exLended a helplng hand ln Lhe growLh process of Lhe counLry

S8l has 30 8eglonal 8ural 8anks ln lndla known as 888s 1he rural banks of S8l
ls spread ln 13 sLaLes exLendlng from kashmlr Lo karnaLaka and Plmachal
radesh Lo norLh LasL 1he LoLal number of S8ls 8eglonal 8ural 8anks ln lndla
branches ls 2349 (16) 1lll daLe ln rural banklng ln lndla Lhere are 14473
rural banks ln Lhe counLry of whlch 2126 (91) are locaLed ln remoLe rural
areas

AparL from S8l Lhere are many oLher banks whlch funcLlon for Lhe
developmenL of Lhe rural areas ln lndla 1hese banks are llsLed below
Andhra radesh


8|har

O Andhra radesh Crameena
vlkas 8ank
O Andhra ragaLhl Crameena
8ank
O ueccan Crameena 8ank
O ChalLanya Codavarl
Crameena 8ank
O SapLaglrl Crameena 8ank
Chhatt|sgarh
O ChhaLLlsgarh Cramln 8ank
O Surgu[a ksheLrlya Cramln
8ank
O uurg8a[nandgaon Cramln
8ank
naryana
O Parayana Cramln 8ank
O Curgaon Cramln 8ank
O Madhya 8lhar Cramln 8ank
O 8lhar ksheLrlya Cramln
8ank
O uLLar 8lhar ksheLrlya
Cramln 8ank
O kosl ksheLrlya Cramln 8ank
O SamasLlpur ksheLrlya
Cramln 8ank
Gu[arat
O uena Cu[araL Cramln 8ank
O 8aroda Cu[araL Cramln
8ank
O SaurashLra Cramln 8ank
n|macha| radesh
O Plmachal Cramln 8ank
O arvaLlya Cramln 8ank
un[ab
17 | a g e

Iammu kashm|r
O !ammu 8ural 8ank
O Lllaqual uehaLl 8ank
O kamraz 8ural 8ank
Assam
O Assam Cramln vlkash 8ank
O Langpl uehangl 8ural 8ank
Iharkhand
O !harkhand Cramln 8ank
O vananchal Cramln 8ank
Madhya radesh
O narmada Malwa Cramln
8ank
O SaLpura ksheLrlya Cramln
8ank
O Madhya 8haraLh Cramln
8ank
O ChambalCwallor ksheLrlya
Cramln 8ank
O 8ewaSldhl Cramln 8ank
O Sharda Cramln 8ank
O 8aLlam Mandsaur
ksheLrlya Cramln 8ank
O vldlsha 8hopal ksheLrlya
Cramln 8ank
O Mahakaushal ksheLrlya
Cramln 8ank
O !habua uhar ksheLrlya
Cramln 8ank
O un[ab Cramln 8ank
O larldkoL8haLlnda ksheLrlya
Cramln 8ank
O Malwa Cramln 8ank
kera|a
O narmada Malwa Cramln
8ank
O norLh Malabar Cramln
8ank
1am|| Nadu
O andyan Crama 8ank
O allavan Crama 8ank
Maharashtra
O MaraLhwada Cramln 8ank
O Aurangabad !alna Cramln
8ank
O Walnganga ksheLrlya
Cramln 8ank
O vldharbha ksheLrlya
Cramln 8ank
O Solapur Cramln 8ank
O 1hane Cramln 8ank
O 8aLnaglrlSlndhudurg
Cramln 8ank
karnataka
O karnaLaka vlkas Crameena
ka[asthan
O 8aroda 8a[asLhan Cramln
18 | a g e

8ank
O ragaLhl Cramln 8ank
O Cauvery kalpaLharu
Crameena 8ank
O krlshna Crameena 8ank
O Chlkmagalurkodagu
Crameena 8ank
O vlsveshvaraya Cramln 8ank
8ank
O Marwar Canganagar
8lkaner Cramln 8ank
O 8a[asLhan Cramln 8ank
O !alpur 1har Cramln 8ank
O PodoLl ksheLrlya Cramln
8ank
O Mewar Anchallk Cramln
8ank
r|ssa
O kallnga Cramya 8ank
O uLkal Cramya 8ank
O 8alLaranl Cramya 8ank
O neelachal Cramya 8ank
O 8ushlkulya Cramya 8ank
West 8enga|
O 8anglya Cramln vlkash
8ank
O aschlm 8anga Cramln
8ank
O uLLar 8anga ksheLrlya
Cramln 8ank
Megha|aya
O ka 8ank nogkyndong 8l
khasl !alnLla
Arunacha| radesh
O Arunachal radesh 8ural
8ank
Man|pur
O Manlpur 8ural 8ank
M|zoram
O Mlzoram 8ural 8ank
Naga|and
O nagaland 8ural 8ank
1r|pura
O 1rlpura Cramln 8ank
Dttar radesh
O urvanchal Cramln 8ank
O kashl ComLl SamyuL
Cramln 8ank
O uLLar radesh Cramln 8ank
O Shreyas Cramln 8ank
O Lucknow ksheLrlya Cramln
Dttarancha|
O uLLaranchal Cramln 8ank
O nalnlLal Almora ksheLrlya
Cramln 8ank
1 | a g e

8ank
O 8allla ksheLrlya Cramln
8ank
O 1rlvenl ksheLrlya Cramln
8ank
O AryavarL Cramln 8ank
O klsan Cramln 8ank
O ksheLrlya klsan Cramln
8ank
O LLawah ksheLrlya Cramln
8ank
O 8anl Laxml 8al ksheLrlya
Cramln 8ank
O 8aroda WesLern uLLar
radesh Cramln 8ank
O uevlpaLan ksheLrlya Cramln
8ank
O raLhama 8ank
O 8aroda LasLern uLLar
radesh Cramln 8ank
Foreign Banks In India
lorelgn 8anks ln lndla always broughL an explanaLlon abouL Lhe prompL
servlces Lo cusLomers AfLer Lhe seL up forelgn banks ln lndla Lhe banklng
secLor ln lndla also become compeLlLlve and accuraLlve

new rules announced by Lhe 8eserve 8ank of lndla for Lhe forelgn banks ln
lndla ln Lhls budgeL has puL up greaL hopes among forelgn banks whlch allows
Lhem Lo grow unfeLLered now forelgn banks ln lndla are permlLLed Lo seL up
local subsldlarles 1he pollcy conveys LhaL forlgn banks ln lndla may noL acqulre
lndlan ones (excepL for weak banks ldenLlfled by Lhe 88l on lLs Lerms) and
Lhelr lndlan subsldlarles wlll noL be able Lo open branches freely lease see
Lhe llsL of lorelgn banks ln lndla Llll daLe

|st of Iore|gn 8anks |n nd|a
O A8nAM8C 8ank
O Abu uhabl Commerclal 8ank
O 8ank of Ceylon
20 | a g e

O 8n arlbas 8ank
O ClLl 8ank
O Chlna 1rusL Commerclal 8ank
O ueuLsche 8ank
O PS8C
O !Morgan Chase 8ank
O SLandard CharLered 8ank
O ScoLla 8ank
O 1alb 8ank
Financial and Banking Sector Reforms
1he lasL decade wlLnessed Lhe maLurlLy of lndlas flnanclal markeLs Slnce 1991
every governmenLs of lndla Look ma[or sLeps ln reformlng Lhe flnanclal secLor
of Lhe counLry 1he lmporLanL achlevemenLs ln Lhe followlng flelds ls dlscussed
under serparaLe heads
O llnanclal markeLs
O 8egulaLors
O 1he banklng sysLem
O nonbanklng flnance companles
O 1he caplLal markeL
O MuLual funds
O Cverall approach Lo reforms
O ueregulaLlon of banklng sysLem
O CaplLal markeL developmenLs
O ConsolldaLlon lmperaLlve

I|nanc|a| Markets

ln Lhe lasL decade rlvaLe SecLor lnsLlLuLlons played an lmporLanL role 1hey
grew rapldly ln commerclal banklng and asseL managemenL buslness WlLh Lhe
openlngs ln Lhe lnsurance secLor for Lhese lnsLlLuLlons Lhey sLarLed maklng
debL ln Lhe markeL

CompeLlLlon among flnanclal lnLermedlarles gradually helped Lhe lnLeresL raLes
Lo decllne ueregulaLlon added Lo lL 1he real lnLeresL raLe was malnLalned 1he
borrowers dld noL pay hlgh prlce whlle deposlLors had lncenLlves Lo save lL
was someLhlng beLween Lhe nomlnal raLe of lnLeresL and Lhe expecLed raLe of
21 | a g e

lnflaLlon

kegu|ators

1he llnance MlnlsLry conLlnuously formulaLed ma[or pollcles ln Lhe fleld of
flnanclal secLor of Lhe counLry 1he CovernmenL accepLed Lhe lmporLanL role
of regulaLors 1he 8eserve 8ank of lndla (88l) has become more lndependanL
SecurlLles and Lxchange 8oard of lndla (SL8l) and Lhe lnsurance 8egulaLory and
uevelopmenL AuLhorlLy (l8uA) became lmporLanL lnsLlLuLlons Cplnlons are
also Lhere LhaL Lhere should be a superregulaLor for Lhe flnanclal servlces
secLor lnsLead of mulLlpllclLy of regulaLors

1he bank|ng system

AlmosL 80 of Lhe buslness are sLlll conLrolled by ubllc SecLor 8anks (S8s)
S8s are sLlll domlnaLlng Lhe commerclal banklng sysLem Shares of Lhe leadlng
S8s are already llsLed on Lhe sLock exchanges

1he 88l has glven llcences Lo new prlvaLe secLor banks as parL of Lhe
llberallsaLlon process 1he 88l has also been granLlng llcences Lo lndusLrlal
houses Many banks are successfully runnlng ln Lhe reLall and consumer
segmenLs buL are yeL Lo dellver servlces Lo lndusLrlal flnance reLall Lrade small
buslness and agrlculLural flnance

1he S8s wlll play an lmporLanL role ln Lhe lndusLry due Lo lLs number of
branches and forelgn banks faclng Lhe consLralL of llmlLed number of branches
Pence ln order Lo achleve an efflclenL banklng sysLem Lhe onus ls on Lhe
CovernmenL Lo encourage Lhe S8s Lo be run on professlonal llnes

Deve|opment f|nance |nst|tut|ons

llss access Lo SL8 funds reduced now Lhey have Lo approach Lhe caplLal
markeL for debL and equlLy funds

ConverLlblllLy clause no longer obllgaLory for asslsLance Lo corporaLes
sancLloned by Lermlendlng lnsLlLuLlons

CaplLal adequacy norms exLended Lo flnanclal lnsLlLuLlons

ulls such as lu8l and lClCl have enLered oLher segmenLs of flnanclal servlces
22 | a g e

such as commerclal banklng asseL managemenL and lnsurance Lhrough
separaLe venLures 1he move Lo unlversal banklng has sLarLed

Nonbank|ng f|nance compan|es

ln Lhe case of new n8lCs seeklng reglsLraLlon wlLh Lhe 88l Lhe requlremenL of
mlnlmum neL owned funds has been ralsed Lo 8s2 crores

unLll recenLly Lhe money markeL ln lndla was narrow and clrcumscrlbed by
LlghL regulaLlons over lnLeresL raLes and parLlclpanLs 1he secondary markeL
was underdeveloped and lacked llquldlLy Several measures have been
lnlLlaLed and lnclude new money markeL lnsLrumenLs sLrengLhenlng of exlsLlng
lnsLrumenLs and seLLlng up of Lhe ulscounL and llnance Pouse of lndla (ulPl)

1he 88l conducLs lLs sales of daLed securlLles and Lreasury bllls Lhrough lLs
open markeL operaLlons (CMC) wlndow rlmary dealers bld for Lhese
securlLles and also Lrade ln Lhem 1he ulPl ls Lhe prlnclpal agency for
developlng a secondary markeL for money markeL lnsLrumenLs and
CovernmenL of lndla Lreasury bllls 1he 88l has lnLroduced a llquldlLy
ad[usLmenL faclllLy (LAl) ln whlch llquldlLy ls ln[ecLed Lhrough reverse repo
aucLlons and llquldlLy ls sucked ouL Lhrough repo aucLlons

Cn accounL of Lhe subsLanLlal lssue of governmenL debL Lhe gllL edged markeL
occuples an lmporLanL poslLlon ln Lhe flnanclal seL up 1he SecurlLles 1radlng
CorporaLlon of lndla (S1Cl) whlch sLarLed operaLlons ln !une 1994 has a
mandaLe Lo develop Lhe secondary markeL ln governmenL securlLles

LongLerm debL markeL 1he developmenL of a longLerm debL markeL ls cruclal
Lo Lhe flnanclng of lnfrasLrucLure AfLer brlnglng some order Lo Lhe equlLy
markeL Lhe SL8l has now declded Lo concenLraLe on Lhe developmenL of Lhe
debL markeL SLamp duLy ls belng wlLhdrawn aL Lhe Llme of demaLerlallsaLlon
of debL lnsLrumenLs ln order Lo encourage paperless Lradlng

1he cap|ta| market

1he number of shareholders ln lndla ls esLlmaLed aL 23 mllllon Powever only
an esLlmaLed Lwo lakh persons acLlvely Lrade ln sLocks 1here has been a
dramaLlc lmprovemenL ln Lhe counLrys sLock markeL Lradlng lnfrasLrucLure
durlng Lhe lasL few years LxpecLaLlons are LhaL lndla wlll be an aLLracLlve
emerglng markeL wlLh Lremendous poLenLlal unforLunaLely durlng recenL
23 | a g e

Llmes Lhe sLock markeLs have been consLralned by some unsavoury
developmenLs whlch has led Lo reLall lnvesLors deserLlng Lhe sLock markeLs

Mutua| funds

1he muLual funds lndusLry ls now regulaLed under Lhe SL8l (MuLual lunds)
8egulaLlons 1996 and amendmenLs LhereLo WlLh Lhe lssuance of SL8l
guldellnes Lhe lndusLry had a framework for Lhe esLabllshmenL of many more
players boLh lndlan and forelgn players

1he unlL 1rusL of lndla remalns easlly Lhe blggesL muLual fund conLrolllng a
corpus of nearly 8s70000 crores buL lLs share ls golng down 1he blggesL
shock Lo Lhe muLual fund lndusLry durlng recenL Llmes was Lhe lnsecurlLy
generaLed ln Lhe mlnds of lnvesLors regardlng Lhe uS 64 scheme WlLh Lhe
growLh ln Lhe securlLles markeLs and Lax advanLages granLed for lnvesLmenL ln
muLual fund unlLs muLual funds sLarLed becomlng popular

1he forelgn owned AMCs are Lhe ones whlch are now seLLlng Lhe pace for Lhe
lndusLry 1hey are lnLroduclng new producLs seLLlng new sLandards of
cusLomer servlce lmprovlng dlsclosure sLandards and experlmenLlng wlLh new
Lypes of dlsLrlbuLlon

1he lnsurance lndusLry ls Lhe laLesL Lo be Lhrown open Lo compeLlLlon from Lhe
prlvaLe secLor lncludlng forelgn players lorelgn companles can only enLer [olnL
venLures wlLh lndlan companles wlLh parLlclpaLlon resLrlcLed Lo 26 per cenL of
equlLy lL ls Loo early Lo conclude wheLher Lhe ersLwhlle publlc secLor
monopolles wlll successfully be able Lo face up Lo Lhe compeLlLlon posed by
Lhe new players buL lL can be expecLed LhaL Lhe cusLomer wlll galn from
lmproved servlce

1he new players wlll need Lo brlng ln lnnovaLlve producLs as well as fresh ldeas
on markeLlng and dlsLrlbuLlon ln order Lo lmprove Lhe low per caplLa
lnsurance coverage Cood regulaLlon wlll of course be essenLlal

vera|| approach to reforms

1he lasL Len years have seen ma[or lmprovemenLs ln Lhe worklng of varlous
flnanclal markeL parLlclpanLs 1he governmenL and Lhe regulaLory auLhorlLles
have followed a sLepbysLep approach noL a blg bang one 1he enLry of
forelgn players has asslsLed ln Lhe lnLroducLlon of lnLernaLlonal pracLlces and
24 | a g e

sysLems 1echnology developmenLs have lmproved cusLomer servlce Some
gaps however remaln (for example lack of an lnLerbank lnLeresL raLe
benchmark an acLlve corporaLe debL markeL and a developed derlvaLlves
markeL) Cn Lhe whole Lhe cumulaLlve effecL of Lhe developmenLs slnce 1991
has been qulLe encouraglng An lndlcaLlon of Lhe sLrengLh of Lhe reformed
lndlan flnanclal sysLem can be seen from Lhe way lndla was noL affecLed by Lhe
SouLheasL Aslan crlsls

Powever flnanclal llberallsaLlon alone wlll noL ensure sLable economlc growLh
Some Lough declslons sLlll need Lo be Laken WlLhouL flscal conLrol flnanclal
sLablllLy cannoL be ensured 1he faLe of Lhe llscal 8esponslblllLy 8lll remalns
unknown and hlgh flscal deflclLs conLlnue ln Lhe case of flnanclal lnsLlLuLlons
Lhe pollLlcal and legal sLrucLures hve Lo ensure LhaL borrowers repay on Llme
Lhe loans Lhey have Laken 1he phenomenon of rlch lndusLrlallsLs and bankrupL
companles conLlnues lurLher frauds cannoL be LoLally prevenLed even wlLh
Lhe besL of regulaLlon Powever punlshmenL has Lo follow crlme whlch ls
ofLen noL Lhe case ln lndla

Deregu|at|on of bank|ng system

rudenLlal norms were lnLroduced for lncome recognlLlon asseL classlflcaLlon
provlslonlng for dellnquenL loans and for caplLal adequacy ln order Lo reach
Lhe sLlpulaLed caplLal adequacy norms subsLanLlal caplLal were provlded by
Lhe CovernmenL Lo S8s

CovernmenL preempLlon of banks resources Lhrough sLaLuLory llquldlLy raLlo
(SL8) and cash reserve raLlo (C88) broughL down ln sLeps lnLeresL raLes on Lhe
deposlLs and lendlng sldes almosL enLlrely were deregulaLed

new prlvaLe secLor banks allowed Lo promoLe and encourage compeLlLlon
S8s were encouraged Lo approach Lhe publlc for ralslng resources 8ecovery
of debLs due Lo banks and Lhe llnanclal lnsLlLuLlons AcL 1993 was passed and
speclal recovery Lrlbunals seL up Lo faclllLaLe qulcker recovery of loan arrears

8ank lendlng norms llberallsed and a loan sysLem Lo ensure beLLer conLrol over
credlL lnLroduced 8anks asked Lo seL up asseL llablllLy managemenL (ALM)
sysLems 88l guldellnes lssued for rlsk managemenL sysLems ln banks
encompasslng credlL markeL and operaLlonal rlsks

A credlL lnformaLlon bureau belng esLabllshed Lo ldenLlfy bad rlsks uerlvaLlve
2S | a g e

producLs such as forward raLe agreemenLs (l8As) and lnLeresL raLe swaps
(l8Ss) lnLroduced

Cap|ta| market deve|opments

1he CaplLal lssues (ConLrol) AcL 1947 repealed offlce of Lhe ConLroller of
CaplLal lssues were abollshed and Lhe lnlLlal share prlclng were deconLrolled
SL8l Lhe caplLal markeL regulaLor was esLabllshed ln 1992

lorelgn lnsLlLuLlonal lnvesLors (llls) were allowed Lo lnvesL ln lndlan caplLal
markeLs afLer reglsLraLlon wlLh Lhe SL8l lndlan companles were permlLLed Lo
access lnLernaLlonal caplLal markeLs Lhrough euro lssues

1he naLlonal SLock Lxchange (nSL) wlLh naLlonwlde sLock Lradlng and
elecLronlc dlsplay clearlng and seLLlemenL faclllLles was esLabllshed Several
local sLock exchanges changed over from floor based Lradlng Lo screen based
Lradlng

r|vate mutua| funds perm|tted

1he ueposlLorles AcL had glven a legal framework for Lhe esLabllshmenL of
deposlLorles Lo record ownershlp deals ln book enLry form uemaLerlallsaLlon
of sLocks encouraged paperless Lradlng Companles were requlred Lo dlsclose
all maLerlal facLs and speclflc rlsk facLors assoclaLed wlLh Lhelr pro[ecLs whlle
maklng publlc lssues

1o reduce Lhe cosL of lssue underwrlLlng by Lhe lssuer were made opLlonal
sub[ecL Lo condlLlons 1he pracLlce of maklng preferenLlal alloLmenL of shares
aL prlces unrelaLed Lo Lhe prevalllng markeL prlces sLopped and fresh
guldellnes were lssued by SL8l

SL8l reconsLlLuLed governlng boards of Lhe sLock exchanges lnLroduced caplLal
adequacy norms for brokers and made rules for maklng cllenL or broker
relaLlonshlp more LransparenL whlch lncluded separaLlon of cllenL and broker
accounLs

8uy back of shares a||owed

1he SL8l sLarLed lnslsLlng on greaLer corporaLe dlsclosures SLeps were Laken Lo
lmprove corporaLe governance based on Lhe reporL of a commlLLee
26 | a g e


SL8l lssued deLalled employee sLock opLlon scheme and employee sLock
purchase scheme for llsLed companles

SLandard denomlnaLlon for equlLy shares of 8s 10 and 8s 100 were abollshed
Companles glven Lhe freedom Lo lssue demaLerlallsed shares ln any
denomlnaLlon

uerlvaLlves Lradlng sLarLs wlLh lndex opLlons and fuLures A sysLem of rolllng
seLLlemenLs lnLroduced SL8l empowered Lo reglsLer and regulaLe venLure
caplLal funds

1he SL8l (CredlL 8aLlng Agencles) 8egulaLlons 1999 lssued for regulaLlng new
credlL raLlng agencles as well as lnLroduclng a code of conducL for all credlL
raLlng agencles operaLlng ln lndla

Conso||dat|on |mperat|ve

AnoLher aspecL of Lhe flnanclal secLor reforms ln lndla ls Lhe consolldaLlon of
exlsLlng lnsLlLuLlons whlch ls especlally appllcable Lo Lhe commerclal banks ln
lndla Lhe banks are ln huge quanLlLy llrsL Lhere ls no need for 27 S8s wlLh
branches all over lndla A number of Lhem can be merged 1he merger of
un[ab naLlonal 8ank and new 8ank of lndla was a dlfflculL one buL Lhe
slLuaLlon ls dlfferenL now no one expecLed so many employees Lo Lake
volunLary reLlremenL from S8s whlch aL one Llme were much soughL afLer
[obs rlvaLe secLor banks wlll be self consolldaLed whlle cooperaLlve and rural
banks wlll be encouraged for consolldaLlon and anyway play only a nlche role

ln Lhe case of lnsurance Lhe Llfe lnsurance CorporaLlon of lndla ls a behemoLh
whlle Lhe four publlc secLor general lnsurance companles wlll probably move
Lowards consolldaLlon wlLh a blL of nudglng 1he u1l ls yeL agaln a blg
lnsLlLuLlon even Lhough faclng dlfflculL Llmes and mosL oLher publlc secLor
players are already exlLlng Lhe muLual fund buslness 1here are a number of
small muLual fund players ln Lhe prlvaLe secLor buL Lhe buslness belng
comparaLlvely new for Lhe prlvaLe players lL wlll Lake some Llme

We flnally come Lo convergence ln Lhe flnanclal secLor Lhe new buzzword
lnLernaLlonally PlLech and Lhe need Lo meeL lncreaslng consumer needs ls
encouraglng convergence even Lhough lL has noL always been a success Llll
daLe ln lndla organlsaLlons such as lu8l lClCl PulC and S8l are already Lrylng
27 | a g e

Lo offer varlous servlces Lo Lhe cusLomer under one umbrella 1hls
phenomenon ls expecLed Lo grow rapldly ln Lhe comlng years Where mergers
may noL be posslble alllances beLween organlsaLlons may be effecLlve varlous
forms of bancassurance are belng lnLroduced wlLh Lhe 88l havlng already
come ouL wlLh deLalled guldellnes for enLry of banks lnLo lnsurance 1he LlC
has boughL lnLo CorporaLlon 8ank ln order Lo spread lLs lnsurance dlsLrlbuLlon
neLwork 8oLh banks and lnsurance companles have sLarLed enLerlng Lhe asseL
managemenL buslness as Lhere ls a greaL deal of synergy among Lhese
buslnesses 1he penslons markeL ls expecLed Lo open up fresh opporLunlLles
for lnsurance companles and muLual funds

lL ls noL posslble Lo play Lhe role of Lhe Cracle of uelphl when a vasL naLlon llke
lndla ls lnvolved Powever a few Lrends are evldenL and Lhe comlng decade
should be as lnLeresLlng as Lhe lasL one
Fact Files of Banks in India
e fiist, te oluest, te laigest, te biggest, get all suc types of
infoimations about anking in Inuia in tis section.

1he flrsL bank ln lndla Lo be glven an lSC CerLlflcaLlon Canara 8ank

1he flrsL bank ln norLhern lndla Lo geL lSC 9002 cerLlflcaLlon
for Lhelr selecLed branches
un[ab and Slnd
8ank
1he flrsL lndlan bank Lo have been sLarLed solely wlLh lndlan
caplLal
un[ab naLlonal
8ank
1he flrsL among Lhe prlvaLe secLor banks ln kerala Lo
become a scheduled bank ln 1946 under Lhe 88l AcL
SouLh lndlan
8ank
lndlas oldesL largesL and mosL successful commerclal bank
offerlng Lhe wldesL posslble range of domesLlc
lnLernaLlonal and n8l producLs and servlces Lhrough lLs
vasL neLwork ln lndla and overseas
SLaLe 8ank of
lndla
lndlas second largesL prlvaLe secLor bank and ls now Lhe
largesL scheduled commerclal bank ln lndla
1he lederal 8ank
LlmlLed
8ank whlch sLarLed as prlvaLe shareholders banks mosLly
Luropeans shareholders
lmperlal 8ank of
lndla
28 | a g e

1he flrsL lndlan bank Lo open a branch ouLslde lndla ln
London ln 1946 and Lhe flrsL Lo open a branch ln conLlnenLal
Lurope aL arls ln 1974
8ank of lndla
founded ln 1906
ln Mumbal
1he oldesL ubllc SecLor 8ank ln lndla havlng branches all
over lndla and servlng Lhe cusLomers for Lhe lasL 132 years
Allahabad 8ank
1he flrsL lndlan commerclal bank whlch was wholly owned
and managed by lndlans
CenLral 8ank of
lndla

8ank of lndla was founded ln 1906 ln Mumbal lL became Lhe flrsL lndlan bank
Lo open a branch ouLslde lndla ln London ln 1946 and Lhe flrsL Lo open a branch
ln conLlnenLal Lurope aL arls ln 1974

TECHNULUCY IN BANKINC
1echnology wlll brlng fundamenLal shlfL ln Lhe funcLlonlng of banks lL would
noL only help Lhem brlng lmprovemenLs ln Lhelr lnLernal funcLlonlng buL also
enable Lhem Lo provlde beLLer cusLomer servlce 1echnology wlll break all
boundarles and encourage cross border banklng buslness 8anks would have Lo
underLake exLenslve 8uslness rocess 8eLnglneerlng and Lackle lssues llke a)
how besL Lo dellver producLs and servlces Lo cusLomers b) deslgnlng an
approprlaLe organlzaLlonal model Lo fully capLure Lhe beneflLs of Lechnology
and buslness process changes broughL abouL c) how Lo explolL Lechnology for
derlvlng economles of scale and how Lo creaLe cosL efflclencles and d) how Lo
creaLe a cusLomer cenLrlc operaLlon model

LnLry of A1Ms has changed Lhe proflle of fronL offlces ln bank branches
CusLomers no longer need Lo vlslL branches for Lhelr day Lo day banklng
LransacLlons llke cash deposlLs wlLhdrawals cheque collecLlon balance
enqulry eLc Lbanklng and lnLerneL banklng have opened new avenues ln
convenlence banklng" lnLerneL banklng has also led Lo reducLlon ln
LransacLlon cosLs for banks Lo abouL a LenLh of branch banklng
2 | a g e


1echnology soluLlons would make flow of lnformaLlon much fasLer more
accuraLe and enable qulcker analysls of daLa recelved 1hls would make Lhe
declslon maklng process fasLer and more efflclenL lor Lhe 8anks Lhls would
also enable developmenL of appralsal and monlLorlng Lools whlch would make
credlL managemenL much more effecLlve 1he resulL would be a deflnlLe
reducLlon ln LransacLlon cosLs Lhe beneflLs of whlch would be shared beLween
banks and cusLomers

Whlle appllcaLlon of Lechnology would help banks reduce Lhelr operaLlng cosLs
ln Lhe long run Lhe lnlLlal lnvesLmenLs would be slzeable l1 spenL by banklng
and flnanclal servlces lndusLry ln uSA ls approxlmaLely 7 of Lhe revenue as
agalnsL around 1 by lndlan 8anks WlLh greaLer use of Lechnology soluLlons
we expecL l1 spendlng of lndlan banklng sysLem Lo go up slgnlflcanLly

Cne area where Lhe banklng sysLem can reduce Lhe lnvesLmenL cosLs ln
Lechnology appllcaLlons ls by sharlng of faclllLles We are already seelng banks
comlng LogeLher Lo share A1M neLworks Slmllarly ln Lhe comlng years we
expecL Lo see banks and lls comlng LogeLher Lo share faclllLles ln Lhe area of
paymenL and seLLlemenL back offlce processlng daLa warehouslng eLc Whlle
deallng wlLh Lechnology banks wlll have Lo deal wlLh aLLendanL operaLlonal
rlsks 1hls would be a crlLlcal area Lhe 8ank managemenL wlll have Lo deal wlLh
ln fuLure

aymenL and SeLLlemenL sysLem ls Lhe backbone of any flnanclal markeL place
30 | a g e

1he presenL aymenL and SeLLlemenL sysLems such as SLrucLured llnanclal
Messaglng SysLem (SlMS) CenLrallsed lunds ManagemenL SysLem (ClMS)
CenLrallsed lunds 1ransfer SysLem (Cl1S) and 8eal 1lme Cross SeLLlemenL
SysLem (81CS) wlll undergo furLher flneLunlng Lo meeL lnLernaLlonal
sLandards needless Lo add necessary securlLy checks and conLrols wlll have
Lo be ln place ln Lhls regard lnsLlLuLlons such as lu881 wlll have a greaLer role
Lo play