Lecture 1.1Introduction and Banking Sturucture in India.ppt
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Lecture 1.1Introduction and Banking Sturucture in India.ppt
- 1. DISCOVER . LEARN . EMPOWER Topic- Introduction and types INSTITUTE-UNIVERSITY SCHOOL OF BUSINESS DEPARTMENT-MBA Banking and Financial Services Management 23BAT-735 Chapter 1.1 FACULTY NAME: Dr. Richa Sharma (Assistant Professor)
- 2. 2 Banking structure in India Course Outcome Course Outcome Description Blooms Taxonomy Level CO1 To demonstrate a comprehensive knowledge of the disciplines of banking and financial services Understand/Re member CO2 To apply in depth knowledge of financial services in making a profitable decision. Apply CO3 To evaluate different investment vehicles on the basis of credit ratings Analyze CO4 To structure the understanding of financing to promote SDG Evaluate CO5 To predict the banking business using concepts of marketing Design/Create Will be covered in this lecture
- 3. Banking Banking Regulation Act of India, 1949 defines Banking as “accepting, for the purpose of lending or of investment of deposits of money from the public, repayable on demand or otherwise or withdrawable by cheque, draft order or otherwise.” The Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949, govern the banking operations in India.
- 4. Banking Structure in India • A well-regulated banking system is a key comfort for local and foreign stake- holders in any country. Prudent banking regulation is recognized as one of the reasons why India was less affected by the global financial crisis. • Banks can be broadly categorized as Commercial Banks or Co-operative Banks. • Banks which meet specific criteria are included in the second schedule of the RBI Act, 1934. These are called scheduled banks. • They may be commercial banks or co- operative banks. Scheduled banks are considered to be safer, and are entitled to special facilities like re-finance from RBI. • Inclusion in the schedule also comes with its responsibilities of reporting to RBI and maintaining a percentage of its demand and time liabilities as Cash Reserve Ratio (CRR) with RBI.
- 5. Structure of Banks in India
- 6. Broad Classification of Banks in India 1) The RBI: The RBI is the supreme monetary and banking authority in the country and has the responsibility to control the banking system in the country. It keeps the reserves of all scheduled banks and hence is known as the “Reserve Bank”. 2) Public Sector Banks (12): State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Central Bank of India, Canara Bank, Union Bank of India, Indian Overseas Bank, Punjab and Sind Bank, Indian Bank, UCO Bank, and Bank of Maharashtra. 3) Private Sector Banks (22): Axis Bank, Yes Bank, South Indian Bank, HDFC Bank, Bandhan Bank, Karur Vyasa Bank etc.
- 7. 4) Co-operative Sector Banks: State Co-operative Banks Central Co-operative Banks Primary Agricultural Credit Societies Land Development Banks State Land Development Banks 5) Development Banks: Development Banks mostly provide long term finance for setting up industries. They also provide short-term finance (for export and import activities) Industrial Finance Co-operation of India (IFCI) Industrial Development of India (IDBI) Industrial Investment Bank of India (IIBI) Small Industries Development Bank of India (SIDBI) National Bank for Agriculture and Rural Development (NABARD) Export-Import Bank of India
- 8. • Regional Rural Banks were established under the provisions of an ordinance passed on 26 Sept. 1975 and the RRB act. 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors • Examples are:- • Allahbad UP Gramin Bank • Baroda Gujrat Gramin Bank • BiharGramin Bank • DenaGujrat Gramin Bank • Himachal Gramin • JK Gramin Bank • MaharashtraGramin Bank • Punjab Gramin Bank • UttarakhandGramin Bank • Odisha Gramin Bank
- 9. Commercial Banks • Prof. Syers, defined banks as “Institutions whose debt—usually referred to as ‘bank deposits’—are commonly accepted in final settlement of other people’s debts”. According to Banking Regulation Act of 1949: • Banking means the accepting for the purpose of lending or investment of deposits of money from the public, • Repayable on demand or otherwise, and • Withdrawal by cheque, draft, order or otherwise. 9
- 10. Poll Question • Currently, how many public sector banks are there in India? A. 10 B. 11 C. 12 D. 14 10
- 11. FUNCTIONS OF COMMERCIAL BANKS 11
- 12. 10 Cooperative Bank • Cooperative banks are further divided into two categories - urban and rural. • Rural cooperative Banks are either short-term or long-term. • Short-term cooperative banks can be subdivided into State Co-operative Banks, District Central Co-operative Banks, Primary Agricultural Credit Societies. • Long-term banks are either State Cooperative Agriculture and Rural Development Banks (SCARDBs) or Primary Cooperative Agriculture and Rural Development Banks (PCARDBs). • Urban Co-operative Banks (UCBs) refer to primary cooperative banks located in urban and semi-urban areas.
- 13. Development Banks As per Indian Banking "Development banks are financial institutions established to lend (loan) finance (money) on subsidized interest rate. Such lending is sanctioned to promote and develop important sectors like agriculture, industry, import-export, housing and allied activities." 13
- 14. Features of a Development Bank • A Development Bank does not accept deposits from the public like commercial banks and other financial Institutions who entirely depend upon saving mobilization. • It is a specialized financial institution which provides medium term and long term lending facilities. • It provides financial assistance to both private as well as public sector institutions. • The objective of this bank is to serve Public Interest rather than earning profits. 14
- 15. Development Banks in India • Development banking was started after the World War II. • It provided finance to reconstruct the buildings and industries which were destroyed in the war. • In India, development banking was started immediately after independence. 15
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- 17. Classification of Development Banks • Industrial Development Banks : It includes, for example, Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), and Small Industries Development Bank of India (SIDBI). • Agricultural Development Banks : It includes, for example, National Bank for Agriculture & Rural Development (NABARD). • Export-Import Development Banks : It includes, for example, Export-Import Bank of India (EXIM Bank). • Housing Development Banks : It includes, for example, National Housing Bank (NHB). 17
- 18. Poll Question • What is the current CRR? A. 4.50% B. 18% C. 5% D. 6% 18
- 19. 13 Investment Banks • Meaning: Financial intermediaries that acquire the savings of people and direct these funds into the business enterprises seeking capital for the acquisition of plant and equipment and for holding inventories are called ‘investment banks’. • Features: Long term financing, Security, merchandiser, Security middlemen, Insurer, Underwriter • Functions: Capital formation, Underwriting, Purchase of securities, Selling of securities, Advisory services, Acting as dealer.
- 20. 14 Merchant Banks • Meaning: Institution that render wide range of services such as the management of customer’s securities, portfolio management, counseling, insurance, etc are called ‘Merchant Banks’. • Functions: Sponsoring issues, Loan syndication, Servicing of issues, Portfolio, management, Arranging fixed deposits, Helps in merger& acquisition
- 21. Indian private banks *IndusInd Bank *ING Vysya Bank *Jammu & Kashmir Bank *Karnataka Bank Limited *Karur Vysya Bank *Kotak Mahindra Bank *Lakshmi Vilas Bank *Nainital Bank *Ratnakar Bank *SBI Commercial and International Bank *South Indian Bank *Tamilnad Mercantile Bank Ltd. *Axis Bank *Bank of Rajasthan *Bharat Overseas Bank *Catholic Syrian Bank *Centurion Bank of Punjab *City Union Bank *Development Credit Bank *Dhanalakshmi Bank *Federal Bank *Ganesh Bank of Kurundwad *HDFC Bank *ICICI Bank *YES Bank
- 22. List of Foreign banks in India • ABN-AMRO Bank • Abu Dhabi Commercial Bank Ltd • American Express Bank Ltd • Citibank • DBS Bank Ltd • Deutsche Bank • HSBC Ltd • Standard Chartered Bank
- 23. Poll Question What is MICR? a. Magnetic Ink Character Recognition b. Magnetic Ink consumer reference number 23
- 24. 24
- 25. References • Bhole, L.M.,Financial Institutions & Markets.Tata McGraw Hill, New Delhi • Khan, M.Y.Financial Services Tata McGraw Hill, New Delhi • Meir,Kohn,Financial Institutions & Markets,Tta McGraw Hill,New Delhi • Prasanna Chandra: Financial Management, Tata McGraw Hill. • Kothari, C.R., Investment Banking & Customer Services Arihant Publishers, Jaipur • Sharpe, William F. etc. Investment. New Delhi, PHI • Pandey, I.M.,Financial Management,Vikas Publishing House ,New Delhi • Khan, M.Y. ―Financial Servicies – Tata MeGraw Hill Publishing Company Limited . • Ferrell , O.C. and Others, ―Marketing Strategy Vikas Publishing House. 25