Introduction to Banking

Definition of Bank

It is an institution whose debts (bank deposits) are

widely accepted I settlement of other’s people debts to
each other.
Characteristics:-

 It deals with money.

 It also deals with credit.
 It is an commercial institution established.
 It aims at earning profits.
 It creates demand deposits and help for transfer of
money to settle the payments.
Origin
 Traceable to early times of human history, practice of lending
was widely prevalent In ancient Greece and roman periods.
 In England origin lies with goldsmith who in 17th century began
to accept deposits from merchants for safekeeping of
valuables.
 Public enterprises- banks made the first public appearance in
Italy in 1157 when ‘Bank of Venice’ was founded.
Ancestors of modern banking

Modern Banking

The Goldsmith Money lenders

Merchants (Goldsmith (Receiving deposits and
notes) advancing loans)
Banking System in India
RBI

Commercial Regional Co-operative

Banks Rural Banks Banks

State co-
Public Private operative
Banks

Urban co-
State Other Indian Foreig operative Banks
Banks Nationaliz n
Group e Banks

Central Co-
operative Banks

Primary Credit
Societies
Central Bank (RBI)

 Established in the year 1935 on 1st april

under Reserve Bank of india Act 1935.
Internal Management

 The governor of RBI is the chairman of Central Board of

Directors. He possesses the power of general superintendence
and direction of the affairs and business of the bank.
 Govt. does not interfere in the internal administration of the
bank as finance minister recognize the autonomy of the bank.
 Governor is assisted by four Deputy governors and four
executive Directors in discharging his duties.
 Central office is located in Mumbai which comprises of 18
departments.
Cont…

 The bank has local head offices and branches at several

places for its two major departments
a. Issue Department.
b. Banking Departments.
 In places where there is no office of Reserve Bank, the SBI
group represents it as its agent/subagents.
 RBI has three training establishments:
a. Banker’s Training college, Mumbai.
b. College of Agricultural Banking, Pune.
c. Reserve Bank Staff College, Chennai.
Monetary policy of RBI

Monetary policy- it refers to the use of instruments within the

control of central bank to influence the level of aggregate
demand for goods and services by regulation of the money
supply and credit.
Objective of the Monetary Policy in India

 To promote the savings and tap potential savings.

 To mobilize savings for capital formation and for growth
investment projects.
 To prepare investment climate conducive to the fulfillment of
plan objectives.
 To provid eextensive credit to cater the growing needs of
agriculture, industry,trade, commerce and other productive
activities.
 To curb inflation. To maintain the appropriate structure of
relative prices and relative price stability.
 To permits growth without any financial impediments.
Tools of monetary Policy

 Bank rate policy.

 Open market operations.
 Changing cash reserve ratio.
 Undertaking selective credit control measures.
* Repo rates/Reverse repo rates.
* Altering SLR.