History of banking sector in india

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History of banking sector in india

HISTORY OF BANKING SECTOR

The first bank in india was established in 1786from 1786 till now the journey of Indian banking system can be segregated into three distint phases
Early phase from 1786 to 1969 of Indian banks
Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms
New phase of Bankig System after banking sector reforms

STEPS TAKEN BY THE GOVERNMENT

The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country

1949 Enactment of Banking Regulation Act

1955 Nationalisation of State Bank of India

1959 Nationalisation of SBI subsidiaries

1961 Insurance cover extended to deposits

1969 Nationalisation of 14 major banks

1971 Creation of credit guarantee corPoration

1975 Creation of regional rural banks

1980 Nationalisation of seven banks with deposits over 200

The commercial role of banks is not limited to banking and includes
issue of banknotes
processing of payments by way of telegraphic transfer EFTPOS internet

banking or other means
Issuing bank drafts and bank cheques
Accepting money on term deposit
lending money by way of overdraft installment loan or otherwise
providing documentary and standby letters of credit tradefinanceguarantees

performance bonds securities underwriting commitments and other forms of off balance sheet exposures
safekeeping of documents and other items in safe deposit boxes
currency exchange
Acting as a financial supermarket for the sale distribution or brokerage with or without advice of insurance unit trusts and similar financialproducts

ROLE OF BANKS
Capital formation
Monetization
Innovations
Finance for priority sectors
Provision for medium and long term finance
Cheap money policy
Need for a sound banking system

FUNCTIONS OF A BANK
Accepting Deposits from publicothers deposit
Lending money to public loan
Transferring money from one place to another remittances
Credit Creation
Acting as trustees
Keeping valuable in safe custody
Investment decisions and analysis
Government business
Other type of lending and transaction

TYPES OF BANKING
Central bank
Commercial bank
Industrial bank
Agricultural bank
Foreign Exchange bank
Indigenous bank
Rural bank
Cooperative bank

ANKING CHANNEL
Branch
ATM
Mail
Telephone
Online
Mobile
video

BANKING SECTOR REFORMS

In 1991 the RBI had proposed to from the committee chaired by M Narasimham former RBI Governor in order to review the Financial System viz aspects relating to the Structure Organisations and Functioning of the financial system TheNarasimham Committee report submitted to the finance minister ManmohanSingh on the banking sector reforms highlighted the weaknesses in the Indian banking system and suggested reform measures based on the Basle normsThe main recommendations of the Committee were
Reduction of Statutory Liquidity Ratio SLR to 25 per cent over a period of five years
Progressive reduction in Cash Reserve Ratio CRR Phasing out of directed credit programmes and redefinition of the priority sector
Deregulation of interest rates so as to reflect emerging market conditions
Imparting transparency to bank balance sheets and making more disclosures
Setting up of special rule to speed up the process of recovery of loan
Restructuring of the banking system national bank to international bank some and nationalised some other bank
Abolition of branch licensing
Liberalising the policy with regard to allowing foreign banks to open offices in India
Rationalisation of foreign operations of Indian banks
Giving freedom to individual banks to recruit officers
Inspection by supervisory authorities based essentially on the internal audit and inspection reports
Ending duality of control over banking system by Banking Division and RBI

PEST ANALYSIS

TECHNOLOGICAL ENVIROMENT

Technology environment plays a very impor

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