Main Functions

[edit] Monetary Authority

The Reserve Bank of India is the main monetary authority of the country and beside that
the central bank acts as the bank of the national and state governments. 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 national economy depends on the
public sector and the central bank promotes an expensive monetary policy to push the
pivate sector since the financial market reforms of the 1990s.[26]

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 maintain public confidence in the system, protect
depositors' interest and provide cost-effective banking services to the public. The
Banking Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI)
for effective redressal of complaints by bank customers. The RBI controls the monetary
supply, monitors economic indicators like the gross domestic product and has to decide
the design of the rupee banknotes as well as coins.[27]

[edit] Manager of exchange control

The central bank manages to reach the goals of the Foreign Exchange Management Act,
1999. Objective: to facilitate external trade and payment and promote orderly
development and maintenance of foreign exchange market in India.

[edit] Issuer of currency

The bank issues and exchanges or destroys currency and coins not fit for circulation.
Objectivs 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, and to maintain the reserves. RBI maintains the
economic structure of the country so that it can achieve the objective of price stability as
well as economic development, because both objectives are diverse in themselves.

[edit] Developmental role

The central bank has to perform a wide range of promotional functions to support
national objectives and industries.[28] The RBI faces a lot of inter-sectoral and local
inflation-related problems. Some of this problems are results of the dominant part of the
public sector.[29]

[edit] Related functions

The RBI is also a banker to the Government and performs merchant banking function for
the central and the state governments. It also acts as their banker. The National Housing
Bank (NHB) was established in 1988 to promote private real estate acquisition.[30] The
institution maintains banking accounts of all scheduled banks, too.

There is now an international consensus about the need to focus the tasks of a central
bank upon central banking. RBI is far out of touch with such a principle, owing to the
sprawling mandate described above. The recent financial turmoil world-over, has
however, vindicated the Reserve Bank's role in maintaining financial stability in India.

Key rates------

CRR- 5.75

SLR- 25

REPORATE-5.00

REV. REPO- 3-5

BANK RATE-6.00

A bank is a financial intermediary that accepts deposits and channels those deposits into
lending activities. Banks are a fundamental component of the financial system, and are
also active players in financial markets. The essential role of a bank is to connect those
who have capital (such as investors or depositors), with those who seek capital (such as
individuals wanting a loan, or businesses wanting to grow).

WHY BANKING-

Banking system provides essential lubricant for the smooth functioning of the economy
of a country. Efficient banking system is an essential prerequisite of a developed country,
that’s why financial inclusion has become talk of the nation. I personally feels that the
indian banking industry has a long way to go and hence there is bright career prospects
for me in the bank. By starting my career in a bank like yours will help me achieve my
career objective and will also help me contribute in the development of the country.

The Banking Industry was once a simple and reliable business that took deposits from investors at a lower
interest rate and loaned it out to borrowers
at a higher rate.

However deregulation and technology led to a revolution in the Banking Industry that saw it transformed.
Banks have become global industrial powerhouses that have created ever more complex products that use
risk and securitisation in models that only PhD students can understand. Through technology development,
banking services have become available 24 hours a day, 365 days a week, through ATMs, at online
bankings, and in electronically enabled exchanges where everything from stocks
to currency futures contracts can be traded .
The Banking Industry at its core provides access to credit. In the lenders case, this includes access to their
own savings and investments
, and interest payments on those amounts. In the case of borrowers, it includes access to loans for the
creditworthy, at a competitive interest rate.

Banking services include transactional services, such as verification of account details, account balance
details and the transfer of funds, as well as advisory services, that help individuals and institutions to
properly plan and manage their finances. Online banking

channels have become key in the last 10 years.

The collapse of the Banking Industry in the Financial Crisis, however, means that some of the more
extreme risk-taking and complex securitisation activities that banks increasingly engaged in since 2000 will
be limited and carefully watched, to ensure that there is not another banking system meltdown in the future.

The growth in the Indian Banking Industry has been more qualitative than quantitative and it is expected to remain the same in
the coming years. Based on the projections made in the "India Vision 2020" prepared by the Planning Commission and the
Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total
assets of all scheduled commercial banks by end-March 2010 is estimated at Rs 40,90,000 crores. That will comprise about 65
per cent of GDP at current market prices as compared to 67 per cent in 2002-03. Bank assets are expected to grow at an annual
composite rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent that existed between
1994-95 and 2002-03. It is expected that there will be large additions to the capital base and reserves on the liability side.

The Indian Banking Industry can be categorized into non-scheduled banks and scheduled banks. Scheduled
banks constitute of commercial banks and co-operative banks. There are about 67,000 branches of Scheduled
banks spread across India. As far as the present scenario is concerned the Banking Industry in India is going through a
transitional phase.

The Public Sector Banks(PSBs), which are the base of the Banking sector in India account for more than 78 per cent of the
total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets (NPAs), massive
manpower and lack of modern technology. On the other hand the Private Sector Banks are making tremendous progress. They
are leaders in Internet banking, mobile banking, phone banking, ATMs. As far as foreign banks are concerned they are likely
to succeed in the Indian Banking Industry.

In the Indian Banking Industry some of the Private Sector Banks operating are IDBI Bank, ING Vyasa Bank, SBI
Commercial and International Bank Ltd, Bank of Rajasthan Ltd. and banks from the Public Sector include Punjab National
bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank among others. ANZ Grindlays Bank, ABN-AMRO Bank,
American Express Bank Ltd, Citibank are some of the foreign banks operating in the Indian Banking Industry.

Vision of Banks in India

The banking scenario in India has already gained all the momentum, with the domestic
and international banks gathering pace. The focus of all banks in India has shifted their
approach to 'cost', determined by revenue minus profit. This means that all the resources
should be used efficiently to better the productivity and ensure a win-win situation. To
survive in the long run, it is essential to focus on cost saving. Previously, banks focused
on the 'revenue' model which is equal to cost plus profit. Post the banking reforms, banks
shifted their approach to the 'profit' model, which meant that banks aimed at higher profit
maximization.

Focus of banks in India

The banking industry is slated for growth in future with a more qualitative rather than
quantitative approach. The total assets of all scheduled commercial banks by end-March
2010 is projected to touch Rs 40,90,000 crore. This is going to comprise around 65% of
GDP at current market prices as compared to 67% in 2002-03. The bank's assets are
estimated to grow at an annual composite rate of growth of 13.4% during the rest of the
decade as against 16.7% between 1994-95 and 2002-03.

Barring the asset side, on the liability perspective, there will be huge additions to the
capital base and reserves. People will rely more on borrowed funds, pace of deposit
growth slowing down side by side. However, advances and investments would not see a
healthy growth rate.

Consolidation of Banks in India

Would the banking industry in India get opened up for more international competition?
India would see a large number of global banks controlling huge stakes of the banking
entities in the country. The overseas banking units would bring along with it capital,
technology, and management skills. This would lead to higher competition in the banking
frontier and ensure greater efficiency. The FDI norms in the banking sector would give
more leverage to the Indian banks.

Thus, a consolidation phase in the banking industry in India is expected in the near future
with mergers and acquisitions gathering more pace. One might also see mergers between
public sector banks or public sector banks and private banks. Credit cards, insurance are
the next best strategic places where alliances can be formed.

Future challenges of Banks in India

The Indian banks are hopeful of becoming a global brand as they are the major source of
financial sector revenue and profit growth. The financial services penetration in India
continues to be healthy, thus the banking industry is also not far behind. As a result of
this, the profit for the Indian banking industry will surely surge ahead. The profit pool of
the Indian banking industry is probable to augment from US$ 4.8 billion in 2005 to US$
20 billion in 2010 and further to US$ 40 billion by 2015. This growth and expansion pace
would be driven by the chunk of middle class population. The increase in the number of
private banks, the domestic credit market of India is estimated to grow from US$ 0.4
trillion in 2004 to US$ 23 trillion by 2050. Third largest banking hub of the globe by
2040 - is that vision too far away?
Banking in India originated in the last decades of the 18th century. The oldest bank in
existence in India is the State Bank of India, a government-owned bank that traces its
origins back to June 1806 and that is the largest commercial bank in the country. Central
banking is the responsibility of the Reserve Bank of India, which in 1935 formally took
over these responsibilities from the then Imperial Bank of India, relegating it to
commercial banking functions. After India's independence in 1947, the Reserve Bank
was nationalized and given broader powers. In 1969 the government nationalized the 14
largest commercial banks; the government nationalized the six next largest in 1980.

Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks
(that is with the Government of India holding a stake), 31 private banks (these do not
have government stake; they may be publicly listed and traded on stock exchanges) and
38 foreign banks. They have a combined network of over 53,000 branches and 17,000
ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks
hold over 75 percent of total assets of the banking industry, with the private and foreign
banks holding 18.2% and 6.5% respectively

Nationalisation
By the 1960s, the Indian banking industry had become an important tool to facilitate the
development of the Indian economy. At the same time, it had emerged as a large
employer, and a debate had ensued about the possibility to nationalise the banking
industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the
GOI in the annual conference of the All India Congress Meeting in a paper entitled
"Stray thoughts on Bank Nationalisation." The paper was received with positive
enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance
and nationalised the 14 largest commercial banks with effect from the midnight of July
19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a
"masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the
Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking)
Bill, and it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The

stated reason for the nationalization was to give the government more control of credit
delivery. With the second dose of nationalization, the GOI controlled around 91% of the
banking business of India. Later on, in the year 1993, the government merged New Bank
of India with Punjab National Bank. It was the only merger between nationalized banks
and resulted in the reduction of the number of nationalised banks from 20 to 19. After
this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the
average growth rate of the Indian economy.

The nationalised banks were credited by some, including Home minister P.

Chidambaram, to have helped the Indian economy withstand the global financial crisis of
2007-2009.[1][2]