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A banker or bank is a financial institution whose

primary activity is to act as a payment agent for
customers and to borrow and lend money.

An institution where one can place and borrow

money and take care of financial affairs.

A branch office of such an institution is bank.

The first modern bank was founded in Italy in

Genoa in 1406, its name was (Bank of St. George).
è
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 Accepting Deposits from public/others

(Deposits).
 Lending money to public (Loans).
 Transferring money from one place to
another (Remittances).
 Acting as trustees.
 Keeping valuables in safe custody.
 Government business.
 
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 Banking in India originated in last decade of 18th

century. First banks to be established were ›


 

 and 
  

, both were
established in 1786.
 The oldest bank existing in India is à 
 


 It was established in 1806 and at that time it
was known as 
 , which later on
become 
 
. 
 
 got merged
with 
  and 
  and
became
 
 

 in 1921 which after
independence known as SBI.
 ?
 was established in 1865 and it was
the very first joint stock bank to be established in
India.
 American civil war stopped the supply of cotton to

 from 
  , at that time
promoters opened banks to finance Indian cotton
activities. But because of the speculative nature of
this business all the banks established during that
time get failed.
 Foreign banks too started arriving in  around
1860.     established
its branch in kolkata in 1860.
 åSBC established itself in Bengal in 1869. At that
time Bengal was the most active trade centre
mostly due to trade of British Empire and so
become the banking centre.
 Punjab National Bank was established in 1895 in
Lahore and was able to survived till today and now
is among the largest banks of india.
 The period during 1906 to 1911 saw establishment
of banks inspired by swadeshi movement. Swadeshi
movement inspired the businessmen and political
figures of our country to establish their own bank.
 A large number of banks established then are still
functioning, like Bank Of India, Corporation Bank,
Indian Bank, Bank Of Baroda.
 The years of first world war and second world war
were challenging for the Indian banks. The years of
first world war turbulent, and it take its toll. At
least 94 banks collapsed during 1913 to 1918 during
first world war.
†
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 Reserve bank of India, India's central banking

regulatory authority, was nationalized on January
1,1949 under the term of Reserve Bank Of India.
 In 1949, Banking regulation act was passed which
empowered the Reserve Bank Of India to regulate,
control, and inspect the banks of India.
 The new banking act was provided that no new
bank or branch of an existing bank would be
established without permission from RBI.
 
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 In 1960, the then  
 of India,


›
 expressed the intention of nationalization
of banks in the annual conference of ?



  
in a paper entitled ´ 




 
µ.
 Government of India issued an ordinance and
nationalized the 14 largest commercial banks from
the midnight of July 1,1969.
 â 
, a national leader then,
described the step as ´   
!
 Second dose of nationlisation followed in 1980
when 6 more commercial banks were nationlised.
After this second dose of nationlisation 91% of
banking activities were controlled by Indian
Government.
 Later on "
 

 was merged in 
#

 Bank in 1993. It resulted in reduction in
number of nationlised banks from 20 to 19. Until
1990, the nationlised banks grew at the rate of 4%,
nearly at the same rate as Indian Economy was
growing.
è||
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 In early 1990 the then $ Government

embarked on policy of liberlisation, allowing the
some private bank to enter indian market like Axis
Bank, ICICI Bank and åDFC Bank.
 Currently the banking system in India is fairly
mature in terms of product supply, range and reach
but reach in rural areas is still a challenge for the
private and foreign banks.
 In terms of quality of assets and capital adequacy
the Indian banks are considered to have clean,
strong and transparent balance sheet.
 In the march 2006 O
 was allowed to
have 10% stake in %
. It was the first
time any foreign bank was allowed to have more
then 10% stake in any Indian bank.

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 There are various types of banks in India to

meet the financial requirements of different
sections of society engaged in agriculture,
business, profession etc. On this basis the
banks can be divided in following types on
the basis of their functions.

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 The Reserve Bank of India (RBI, åindi: MMMMMM

MMMMMMMMMMM) is the central banking system
of India and controls the monetary policy of the
rupee as well as US$300.21 billion (2010) of
currency reserves. The institution was established
on 1 April 1935 during the British Raj in accordance
with the provisions of the Reserve Bank of India
Act, 1934 and plays an important part in the
development strategy of the government. It is a
member bank of the Asian Clearing Union.
 The central bank was founded in 1935 to
respond to economic troubles after the first
world war. The Reserve Bank of India was
set up on the recommendations of the
åilton Young Commission. The commission
submitted its report in the year 1926,
though the bank was not set up for another
nine years.
 After partition, the Reserve Bank served as
the central bank for Pakistan until June
1948 when the State Bank of Pakistan
commenced operations. Though originally
set up as a shareholders· bank, the RBI has
been fully owned by the government of
India since its nationalization in 1949.
è
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&$'? & $
&' The Reserve Bank
of India is the main monetary authority of
the country. It formulates, implements and
monitors the monetary policy as well as it
has to ensure an adequate flow of credit to
productive sectors. Objectives are
maintaining price stability and ensuring
adequate flow of credit to productive
sectors.
 The institution is also the regulator and
supervisor of the financial system and
prescribes broad parameters of banking
operations within which the country's
banking and financial system functions.
Objectives are to maintain public
confidence in the system, protect
depositors' interest and provide cost-
effective banking services to the public.
 ÷
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àà ( $$ 'The bank issues and
exchanges or destroys currency and coins not fit for
circulation. The objectives are giving the public
adequate supply of currency of good quality and to
provide loans to commercial banks to maintain or
improve the GDP. The basic objectives of RBI are to
issue bank notes, to maintain the currency and
credit system of the country to utilize it in its best
advantage.
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 (a) 
$ : RBI (Reserve Bank of India) lends to

the commercial banks through its discount window
to help the banks meet depositor·s demands and
reserve requirements. The interest rate the RBI
charges the banks for this purpose is called bank
rate. If the RBI wants to increase the liquidity and
money supply in the market, it will decrease the
bank rate and if it wants to reduce the liquidity and
money supply in the system, it will increase the
bank rate.
 (b) à)*$ * 
 (SLR): Apart
from the CRR, banks are required to maintain liquid
assets in the form of gold, cash and approved
securities. RBI has stepped up liquidity
requirements for two reasons: - åigher liquidity
ratio forces commercial banks to maintain a larger
proportion of their resources in liquid form and thus
reduces their capacity to grant loans and advances
² thus it is an anti-inflationary impact. A higher
liquidity ratio diverts the bank funds from loans and
advances to investment in government and
approved securities.
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 º+$$?& : It is the rate of interest at which
the RBI provides loans to other commercial and non
commercial banks of India. The RBI could change it
with in certain limits.
 º +$,$à$$?& : It is the rate of interest
which it provides to other banks on the deposits
which they kept with RBI. In this case also RBI could
change the rate with in certain limits.
  | 

 Commercial Banks are banking institutions that

accept deposits and grant short-term loans and
advances to their customers. In addition to giving
short-term loans, commercial banks also give
medium-term and long-term loan to business
enterprises. Now-a-days some of the commercial
banks are also providing housing loan on a long-
term basis to individuals.
 
es of Commercial banks: Commercial banks are
of three types i.e., Public sector banks,
Private sector banks and Foreign banks. Total
number of commercial banks in India is 96 which
include
 (i) †ublic Sector Banks: These are banks where
majority stake is held by the Government of
India or Reserve Bank of India. Examples of public
sector banks are: State Bank of India,
Corporation Bank, Bank of Boroda and Dena Bank,
etc.
 (ii) †rivate Sectors Banks: In case of private sector
banks majority of share capital of the
bank is held by private individuals. These banks are
registered as companies with limited
liability. For example: The Jammu and Kashmir
Bank Ltd., Bank of Rajasthan Ltd.,
Development Credit Bank Ltd, Lord Krishna Bank
Ltd., Bharat Overseas Bank Ltd.
 (iii) èoreign Banks: These banks are registered and
have their headquarters in a foreign country
but operate their branches in our country. Some of
the foreign banks operating in our
country are åong Kong and Shanghai Banking
Corporation (åSBC), Citibank, American
Express Bank, Standard & Chartered Bank etc.
 So there are total 88 commercial banks in
India which include :-
 27 public sector banks
 31 private sector banks
 38 foreign banks

 †
 

 Business often requires medium and long-term

capital for purchase of machinery and equipment,
for using latest technology, or for expansion and
modernization. Such financial assistance is
provided by Development Banks. Following are
examples of the developmental banks functioning
in India :-
(a) IFCI Industrial finance corporation of India.
(b) SFC State finance corporation of India.
 †
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 People who come together to jointly serve their

common interest often form a co-operative
society under the Co-operative Societies Act. When
a co-operative society engages itself in
banking business it is called a Co-operative Bank.
The society has to obtain a license from the RBI.
There are following types of cooperative banks :-
 º+  
 º+
 - 

 º+à  - 

† ||
 

 There are some banks, which cater to the requirements and

provide overall support for setting
up business in specific areas of activity. EXIM Bank, SIDBI and
NABARD are examples of such banks.
i. ÷



 º
IM Bank): If you want to
set up a business for exporting
products abroad or importing products from foreign countries
for sale in our country, EXIM
bank can provide you the required support and assistance.
The bank grants loans to
exporters and importers and also provides information about
the international market.
 ii. à 





ºSIDBI): If you want to establish a
small-scale business unit or industry, loan on easy
terms can be available through SIDBI. It
also finances modernization of small-scale industry.
 iii. Y 

 
 


ºBRD): It is a central
or apex institution for financing agricultural and
rural sectors. If a person is engaged in
agriculture or other activities like handloom
weaving, fishing, etc.

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 With advancement in information and communication

technology, banking services are also made
available through computer. Now, in most of the branches
you see computers being used to
record banking transactions. Information about the balance in
your deposit account can be
known through computers. Let us now discuss some of the
instruments of the electronic banking.
 º+?&º   
+
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 º+ 
 º+ 


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 Citigroup totters on the brink. Bank of America is

neck deep in trouble. Governments everywhere are
at their wits· end in dealing with the financial
crisis. And yet little of this storm has touched the
Indian banking system. Not only is there no sign yet
of any bank failure the private banks along with
public sector banks have reported impressive
earnings growth even during these years of
recession.
 At a time when the financial system across the
globe is engulfed in a deep crisis, the Indian
banking system continues to show resilience.
 Unlike in the west where the supply of the credit is
collapsing, the credit supply in India grew at rate of
25% during 2007-08 and at the average rate of 20%
during the past two year.
 Thirdly, non-performing assets (NPAs) are at an all-
time low. The ratio of net NPAs to net advances is
down to 1%, down from 9% a decade ago.
Cå  S  IDI BI
IDUSRY

Deregulation: This continuous deregulation has

made the Banking market
extremely competitive with greater autonomy,
operational flexibility, and
decontrolled interest rate and liberalized norms for
foreign exchange.
Diffused Customer lo alt : This will definitely
impact Customer preferences,
as they are bound to react to the value added
offerings. Customers have
become demanding and the loyalties are diffused.
Modified ew rule : As a result, the market place
has been redefined with new rules of the game.
Banks are transforming to universal banking, adding
new channels with lucrative pricing and freebees to
offer.
Misaligned mindset : These changes are creating
challenges, as employees are made to adapt to
changing conditions. The employees are resisting to
change and the seller market mindset is yet to be
changed.
 R Cå  RUR R  : A large proportion of
rural population is still not having access to even
basic banking services. Getting loan passed is very
difficult.
 | 




 


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