Escolar Documentos
Profissional Documentos
Cultura Documentos
Banking in India
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The banking system has grown enormously in the last thirty years.
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The Bank of Bengal, which later became the State Bank of India.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established
in Lahore in 1895, which has survived to the present and is now one of the largest
banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a
relative period of stability. Around five decades had elapsed since the Indian Mutiny,
and the social, industrial and other infrastructure had improved. Indians had established
small banks, most of which served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also some exchange
banks and a number of Indian joint stock banks. All these banks operated in different
segments of the economy. The exchange banks, mostly owned by Europeans,
concentrated on financing foreign trade. Indian joint stock banks were generally under
capitalized and lacked the experience and maturity to compete with the presidency and
exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking
it seems we are behind the times. We are like some old fashioned sailing ship, divided
by solid wooden bulkheads into separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by the
Swadeshi movement. The Swadeshi movement inspired local businessmen and political
figures to found banks of and for the Indian community. A number of banks established
then have survived to the present such as Bank of India,
Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank
of India.
The fervour of Swadeshi movement lead to establishing of many private banks in
Dakshina Kannada and Udupi district which were unified earlier and known by
the name South Canara ( South Kanara ) district. Four nationalised banks started
in this district and also a leading private sector bank. Hence undivided Dakshina
Kannada district is known as "Cradle of Indian Banking".
P[IND[P[ND[NC[
The period during the First World War (1914-1918) through the end of the Second
World War (1939-1945), and two years thereafter until the independence of India
were challenging for Indian banking. The years of the First World War were
turbulent, and it took its toll with banks simply collapsing despite the Indian
economy gaining indirect boost due to war-related economic activities. At least 94
banks in India failed between 1913 and 1918 as indicated in the following table:
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POSTIND[P[ND[NC[
The partition of India in 1947 adversely impacted the economies of Punjab and
West Bengal, paralyzing banking activities for months. India's independence
marked the end of a regime of the Laissez-faire for the Indian banking. The
Government of India initiated measures to play an active role in the economic life
of the nation, and the Industrial Policy Resolution adopted by the government in
1948 envisaged a mixed economy. This resulted into greater involvement of the
state in different segments of the economy including banking and finance. The
major steps to regulate banking included:
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However, despite these provisions, control and regulations, banks in India except the
State Bank of India, continued to be owned and operated by private persons. This
changed with the nationalisation of major banks in India on 19 July, 1969.
N TION IS TION
By the 1960s, the Indian banking industry has become an important tool to
facilitate the development of the Indian economy. At the same time, it has
emerged as a large employer, and a debate has 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.
IB[ IS TION
In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization,
licensing a small number of private banks. These came to be known as New Generation tech-
savvy banks, and included Global Trust Bank (the first of such new generation banks to be set
up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI
Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of
India, revitalized the banking sector in India, which has seen rapid growth with strong
contribution from all the three sectors of banks, namely, government banks, private banks and
foreign banks.
The next stage for the Indian banking has been setup with the proposed relaxation in
the norms for Foreign Direct Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of 10%,at present it has gone
up to 49% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks.All this led to the retail boom in India. People not just
demanded more from their banks but also received more.
Currently (2007), banking in India is generally fairly mature in terms of supply, product
range and reach-even though reach in rural India still remains a challenge for the
private sector and foreign banks. In terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets
relative to other banks in comparable economies in its region. The Reserve Bank of
India is an autonomous body, with minimal pressure from the government. The stated
policy of the Bank on the Indian Rupee is to manage volatility but without any fixed
exchange rate-and this has mostly been true.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake
in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor
has been allowed to hold more than 5% in a private sector bank since the RBI
announced norms in 2005 that any stake exceeding 5% in the private sector banks
would need to be vetted by them.
In recent years critics have charged that the non-government owned banks are too
aggressive in their loan recovery efforts in connection with housing, vehicle and
personal loans. There are press reports that the banks' loan recovery efforts have
driven defaulting borrowers to suicide.
Different types of banks
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Commercial banks are the oldest and fast growing financial
intermediaries in india. Their business mainly consists of receiving deposits, giving loans
and financing trade and industry in the country. The importance of different types of
commercial banks in terms of their business is in the descending order
Indian scheduled banks
Public sector banks(nationalized),
Private sector banks
Foreign banks
Regional rural banks
Non scheduled banks
These banks advance loans to industrial organizations.Industries
require capital for long term for buying machinery and equipments.They provide this
type of block capital.Industrial banks have a large capital base.They also receive
deposits for longer periods.there are few industrial banks in such as IDBI,Industrial
finance Corporation of India ,Industrial Credit and Investment Corporation of India and
State financial Corporations in the states.
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Co-operative banks work on principle of cooperation.They
operate on no-profit loss basis.They render banking services to their members and
customers.Basically they were set up provide funds to farmers for short term
funds.Long term capital is provided by land development banks.There are many Urban
Corperative banks operating efficiently in the big cities.
Exchange banks finance mostly the foreign trade(import-export) of
a country. Their main function is to discount, accept, and collect bills of exchange. They
also but and sell foreign currencies and help the businessmen convert their money into
foreign currency or foreign currency into Indian rupees if
their customers need.They also carry out ordinary banking business.Exim bank in India
is an example of Exchange bank.
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It is an apex institution promoted by central government for
monitoring,regulating,controlling and promoting the destiny of Indian Financial
System ,since its inception. Reserve bank of India is the Central bank of India.Central
Government is empowered to issue such directions to it as they might consider
necessary in the public interest. The Governor and Deputy Governor of RBI are
appointed by the Central Government.
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Central bank
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A
,
, or
is the entity
responsible for the monetary policy of a country or of a group of member
states. It is a bank that can lend money to other banks in times of need.[1]
Its primary responsibility is to maintain the stability of the national currency
and money supply, but more active duties include controlling subsidized-
loan interest rates, and acting as a lender of last resort to the banking
sector during times of financial crisis (private banks often being integral to
the national financial system). It may also have supervisory powers, to
ensure that banks and other financial institutions do not behave recklessly
or fraudulently.
Most richer countries today have an "independent" central bank, that is,
one which operates under rules designed to prevent political interference.
Examples include the European Central Bank (ECB) and the Federal
Reserve System in the United States. Some central banks are publicly
owned, and others are privately owned. For example, the United States
Federal Reserve is a quasi-public corporation.[2]
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HISTO
In Europe prior to the 17th century most money was commodity money, typically
gold or silver. However, promises to pay were widely circulated and accepted as
value at least five hundred years earlier in both Europe and Asia. The medieval
European Knights Templar ran probably the best known early prototype of a
central banking system, as their promises to pay were widely regarded, and many
regard their activities as having laid the basis for the modern banking system. At
about the same time, Kublai Khan of the Mongols introduced fiat currency to
China, which was imposed by force by the confiscation of specie.
The oldest central bank in the world is the Riksbank in Sweden, which was
opened in 1668 with help from Dutch businessmen. This was followed in
1694 by the Bank of England, created by Scottish businessman William
Paterson in the City of London at the request of the English government to
help pay for a war.
Although central banks are generally associated with fiat money, under the
international gold standard of the nineteenth and early twentieth centuries
central banks developed in most of Europe and in Japan, though elsewhere
free banking or currency boards were more usual at this time. Problems
with collapses of banks during downturns, however, was leading to wider
support for central banks in those nations which did not as yet possess
them, most notably in Australia.
With the collapse of the gold standard after World War II, central banks became
much more widespread. The US Federal Reserve was created by the U.S. Congress
through the passing of the Glass-Owen Bill, signed by President Woodrow Wilson
on December 23, 1913, whilst Australia established its first central bank in 1920,
Colombia in 1923, Mexico and Chile in 1925 and Canada and New Zealand in the
aftermath of the Great Depression in 1934. By 1935, the only significant
indepedent nation that did not possess a central bank was Brazil, which developed
a precursor thereto in 1945 and created its present central bank twenty years later.
When African and Asian countries gained independence, all of them rapidly
established central banks or monetary unions.
The People's Bank of China evolved its role as a central bank starting in
about 1979 with the introduction of market reforms in that country, and
this accelerated in 1989 when the country took a generally capitalist
approach to developing at least its export economy. By 2000 the People's
Bank of China was in all senses a modern central bank, and emerged as
such partly in response to the European Central Bank. This is the most
modern bank model and was introduced with the euro to coordinate the
European national banks, which continue to separately manage their
respective economies other than currency exchange and base interest
rates.
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French Polynesia
New Caledonia
Cameroon
Chad
Congo, Republic of
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Gabon
Anguilla
Dominica
Grenada
Montserrat
Saint Lucia
São Tomé and Príncipe ± Central Bank of São Tomé and Príncipe
Benin
Burkina Faso
Cote d'Ivoire
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[stablishment
The Reserve Bank of India was established on April 1, 1935 in accordance with the
provisions of the Reserve Bank of India Act, 1934.
The Central Office of the Reserve Bank was initially established in Calcutta but
was permanently moved to Mumbai in 1937. The Central Office is where the
Governor sits and where policies are formulated.
"...to regulate the issue of Bank Notes and keeping of reserves with a view to
securing monetary stability in India and generally to operate the currency and
credit system of the country to its advantage."
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Dr.K.C.Chakrabarty
Deputy Governor
Reserve Bank of India
Central Office
Mumbai 400 001.
Shri Suresh Neotia
B-32, Greater Kailash Part - I
New Delhi - 110 048
Dr. A. Vaidyanathan
B-1, Sonali Apartment, Old No. 11
Beach Road, Kalakshetra Colony
Chennai - 600 090
Government of India
Antariksh Bhavan, New BEL Road
Bangalore - 560 094
Dr. D. Jayavarthanavelu
Chairman & Managing Director
Lakshmi Machine Works Limited
34 A, Kamraj Road
Coimbatore -641018
Shri H. P. Ranina
Advocate, Supreme Court of India,
506, Raheja Centre,
214 Backbay Reclamation,
Free Press Journal Road,
Mumbai - 400 023
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SOUTHExN AxEA
Shri C. P. Nair,
Retd. Chief Secretary to Government of Kerala,
Narayaneeyam,
Jawahar Nagar,
Thiruvananthapuram - 695 041.
Shri Sovan Kanungo, Retd. IAS,
17/404, East End Apartments,
Mayur Vihar I (Extension),
New Delhi - 110 096.
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Subject xeleased On
CFSA xeports xeleased : Financial Sector Self Assessment finds March 30,
System Broadly xobust but Identifies Specific Concerns 2009
August 27,
xBI Discussion Paper on Holding Companies in Banking Groups
2007
Branch ricensing Policy for xegional xural Banks June 13, 2006
Authorised Persons - Categorisation March 6, 2006
February 28,
xoadmap for Foreign Banks and Ownership Guidelines 2005
February 28,
riberalised Policy for Overseas Presence of India 2005
Banks and Foreign Banks' Presence in India
February 2,
Guidelines on Mergers/ Amalgamation of Urban Banks 2005
September 30,
A xevisions Policy for India¶s Balance of Payments Data
2004
P[S[NT[D B
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