Non Scheduled Banks

Non Scheduled Banks :

Non-Scheduled bank’s are those Banks whose names do appear in the list of scheduled Banks maintained by the Reserve Bank.

However, these banks come within the sweep of the banking regulation act,1949 and are therefore obliged to follow the Reserve Bank’s guidelines and provisions of the act. For instance these banks are required to have a minimum capital of Rs 5 lakhs, these banks have to comply with the cash reserve requirements condition of the Reserve Bank etc.

Non scheduled Banks are not eligible for having financial assistance from Reserve Bank except under emergency situations. These banks are also deprived of privileges available to scheduled Banks.

Non scheduled Bank

Schedule bank:

Schedule bank refers to those banking institutions whose names are included in the second schedule of the Central Bank of India Act 1934.

Under Section 42(6) of the Reserve Bank of India Act, a banking company included in this scheduled list must fulfil the following conditions –

  1. The paid up capital and reserve of the bank should not be less than 5 lakhs.
  2. The bank must satisfy the Central Bank that it’s affairs are not conducted in a manner detrimental to the interest of the depositors.
  3. The bank must be a corporation or cooperate society and not a partnership or single own firm.

Types Of Scheduled Bank :

  1. Scheduled commercial bank – Indian as well as foreign banks.
  2. Schedule state cooperative bank’s

A. Scheduled Commercial Bank :

A commercial bank is a financial institution that grants loans, accepts deposits and offers basic financial products like savings account and certificate of deposits to individuals and businesses.

The commercial bank’s funds come from money deposited by the bank customers in saving account, checking accounts, money market accounts and certificates of deposits.

Types Of Schedule Commercial Bank:

  1. Public sector banks
  2. Private Sector banks
  3. Foreign Banks
  4. Regional Rural banks

Public Sector Banks :

Public sector banks are those Banks in which the government has majority shareholding more than 51 percent. Public sector banks are owned and controlled by the government either directly or indirectly through the central banks. These banks are also known as National Bank.

Private Sector Banks :

Private sector banks are those Banks in which the government has majority shareholding less than 51 percent. Private sector banks are those Banks which are owned by private individuals or business corporation.

Foreign Banks :

Foreign Banks are from out of country it’s origin. These banks are incorporated outside of the country under the law of the home country but have a place of business In other country . Foreign Banks have their presence from the British period in our country . Initially they were allowed to operate only through branches but now they are allowed to set up subsidiaries in India.

Some Example of Foreign Banks : Standard Chartered Banks, Hongkong Shanghai Banking Corporation, American Express Banking corporation, Bank of Tokyo, Citi Bank.

Regional Rural Banks :

In order to provide efficient banking services in rural areas ,Regional rural banks were setup on 1975 under sponsorship of the commercial bank’s. The regional rural banks are governed by the Regional Rural banks act 1976.

B. Scheduled State Cooperative Bank’s :

Cooperative bank’s are small sized bank’s organised in small cooperative sector which have the ability to operate both urban and non urban areas. Cooperative bank’s are registered under the cooperative societies Act. The cooperative bank’s is regulated by the Reserve Bank of India. It is also governed by the Banking regulation act 1949 and Banking laws act 1965.

Types of State Cooperative Bank’s :

  1. State Cooperative bank’s
  2. Primary credit society
  3. Central cooperative bank’s

State Cooperative Bank’s : These are the apex cooperative banks in all the states of the country. Cooperative bank’s mobilise funds and help in the proper channnelisation among various sectors. The money reaches the individual borrowers from the state cooperative bank’s through the central cooperative bank’s and primary credit society. Cooperative bank’s in India finance rural areas under : Farming, Cattle, milk and personal finance including others.

Primary Credit Society : These societies are formed as the village level or town level with the borrower or non borrower members residing in one locality. The operation of each society are restricted to a small area so that the members know each other and are able to watch over the activities of all members to prevent frauds.

Central Cooperative Bank’s : These banks operate at district level. It may have some of the primarily credit societies belonging to the same district as their members.

Frequently Questions And Answers :

Which bank is not regulated by Reserve Bank?

Ans: Non scheduled Bank is not regulated by Reserve Bank of India.

Related:

What Is Schedule Bank

Lead Bank Scheme

Lead Bank Scheme :

The lead Bank scheme was introduced in December 1969 to promote integrated development of each district of the country. Under this scheme, a commercial bank was assigned the lead role in a district and all other financial institutions works jointly under the lead banks.

In the pre- nationalisation days the banking facilities in India were not evenly distributed in different parts of the country. There was a large unbanked area. After nationalising the bank’s in 1969 , the government strived to expand the geographical coverage of the banking system so as to provide banking facilities to unbaked backward areas.

Initially lead banks were :

  1. State bank group I.e State bank of India and it’s 7 subsidiaries
  2. 14 Nationalised Banks
  3. 3 private sector banks.

At present public sector banks are playing the role of lead banks.

Lead bank scheme

Applicability :

The lead bank scheme was introduced in 398 districts of the country excluding greater Bombay, Calcutta , Madras, Delhi, Chandigarh and Goa. At present there number of districts covered by the scheme are 588.

Mechanism:

The Reserve Bank is responsible to prepare the scheme. The Reserve Bank nominates a particular banks as a leader banks for one district in different states of the country. A district is allocated to a particular bank taking into account the resources man and capital, location of the district, the presence of the bank in the area etc. While making allotment, the Reserve Bank ensures that each bank plays role in more than one state and each state has more than one lead bank.

Objectives of Lead Bank :

The lead bank was initiated primarily to extend banking facilities to the book and corner of the country. The basic objectives of the scheme are stayed below –

  1. Opening of bank scheme in the allotted district.
  2. Mobilisation of savings in the alloted district.
  3. Extending financial assistance /credit facilities for the development of the allotted districts.
  4. Maintaining liasion with district administration and promoting district development programmes.
  5. Coordinating the activities of commercial banks ,cooperative bank’s and other financial institutions in the allotted districts.

Functions of Lead Bank :

The main functions of a lead bank are as follows :

  1. To ascertain the availability of resources and the scope of development of banking in the allotted district.
  2. To ascertain the credit needs of business and industrial units in the allotted districts and also the dependence of these units on money lenders.
  3. To make provisions for storage and marketing of agricultural and industrial products and arrange credit facilities for them.
  4. To make provisions for storage of agricultural implements as well as repairing and servicing of the agricultural equipments.
  5. To make provision for training of small farmers and other small borrowers so as ensure proper utilisation of funds.
  6. To provide assistance to other lending institutions of the allotted districts.

Working And Performance :

The lead bank prepare the district credit plan taking into account the prospects of agricultural and industrial sectors of the allotted districts. In each district a District advisory committee is constituted comprising representative of Government officers, concerns government or semi government departments , commercial Banks and other financial institutions. These committee provides a platform for discussion of matters related to the development of the district. The lead bank, after consultations,identify the grow centres, prepare the Plan for economics development and determiners the role of the banks.

The performance of the lead bank scheme is analysed here under :

Branch Expansion :

The lead bank is responsible for expansion of banking facilities in the allotted districts. The lead bank scheme has contributed a lot in wide disbursal of banking facilities. The number of bank branches in July 1969 was 8262 of these 1860 were in rural areas and 3344 were in semi urban areas. In March 1986, number of rural branches increased to 29633 . The number of bank branches was 60884 in March 1993 and of these 35313 were in the rural areas and 11314 in the semi urban areas. The bank branches increased to 93080 at the end of March 2011 and of these 43.7 % were in rural and unbanked areas.

Deposit Mobilisation :

Deposit mobilisation was one of the important objective of the lead bank scheme. Expansion of banking facilities resulted in increasing solvency of the banks, greater public confidence on banks and development of banking habits among the people. As a result of these, banks in different parts of the country mobilised huge savings. The amount of deposits in 1969 was only Rs 4646 crore. The deposits increased to Rs 315132 Crore at the end of March 1994 and further to Rs 1575143 Crore by the end of March 2004. As on March, 2011 the deposits of banks stood at Rs 5207969 Crore. The lead bank scheme was introduced in 398 districts of the country excluding greater Bombay, Calcutta , Madras, Delhi, Chandigarh and Goa. At present there number of districts covered by the scheme are 588.

Credit Deployment :

Credit facilities for different activities has also been granted with the increase in bank branches and deposit mobilisation. Financial assistance to the priority sectors specially the agriculture, small and cottage industries, rural artisans etc gained momentum with the introduction of the lead bank scheme. The amount of credit granted to the priority sectors was Rs 441 Crore in 1969. It increased to Rs 53875 Crore in March 1994 and further to Rs 632647 Crore as on March 2007.

Problems In Lead Bank Scheme :

  1. Lack of trained and efficient personnel.
  2. Faulty appraisal of projects and weak supervision of end use of loans.
  3. Absence of transport and communication facilitates in certain areas.
  4. Lack of coordination between bank’s, Government departments and other agencies.

The lead bank can play a critical role in local development and therefore should overcome all the hurdles and aim at achieving it’s broad objectives.

Frequently Questions And Answers :

1. What is the basic Aim of lead bank scheme?

Ans: To promote integrated development of each district of the country.

2. How many districts covered by Lead Bank scheme?

Ans: At present 588 districts covered by lead bank scheme.

3. How many districts lead bank scheme was introduced?

Ans: The lead bank scheme was introduced in 398 districts of the country .

4. What is District Credit plan?

Ans: The lead bank prepare the district credit plan taking into account the prospects of agricultural and industrial sectors of the allotted districts.

5. What is Branch Expansion mean?

Ans: The lead bank is responsible for expansion of banking facilities in the allotted districts.

6. How many branches of Lead Bank scheme?

Ans : As per record of 2011 The bank branches of lead bank scheme was 93080 .

7. What is the main problems in lead bank scheme?

Ans: Lack of trained and efficient person in Lead Bank scheme.

Ralated : SCHEDULE BANK

Schedule bank

Schedule bank :

Schedule bank refers to those banking institutions whose names are included in the second schedule of the Central Bank of India Act 1934.

Under Section 42(6) of the Reserve Bank of India Act, a banking company included in this scheduled list must fulfil the following conditions –

  1. The paid up capital and reserve of the bank should not be less than 5 lakhs.
  2. The bank must satisfy the Central Bank that it’s affairs are not conducted in a manner detrimental to the interest of the depositors.
  3. The bank must be a corporation or cooperate society and not a partnership or single own firm.
Schedule bank

Types Of Scheduled Bank :

  1. Scheduled commercial bank – Indian as well as foreign banks.
  2. Schedule state cooperative bank’s

A. Scheduled Commercial Bank :

A commercial bank is a financial institution that grants loans, accepts deposits and offers basic financial products like savings account and certificate of deposits to individuals and businesses.

The commercial bank’s funds come from money deposited by the bank customers in saving account, checking accounts, money market accounts and certificates of deposits.

Types Of Schedule Commercial Bank:

  1. Public sector banks
  2. Private Sector banks
  3. Foreign Banks
  4. Regional Rural banks

Public Sector Banks :

Public sector banks are those Banks in which the government has majority shareholding more than 51 percent. Public sector banks are owned and controlled by the government either directly or indirectly through the central banks. These banks are also known as National Bank.

Private Sector Banks :

Private sector banks are those Banks in which the government has majority shareholding less than 51 percent. Private sector banks are those Banks which are owned by private individuals or business corporation.

Functions of Private Sector Banks :

  1. These banks have bought in state of the art technology in the banking sector.
  2. These banks provides a healthy competition in the banking system and contributed to the efficiency public sector banks.
  3. These banks have helped in introducing a high degree of professional management and marketing concepts into banking.
  4. These banks especially the foreign banks have promoted foreign investments in India and helped in organizing joint ventures .

Foreign Banks :

These banks are foreign in origin. These banks are incorporated outside of the country under the law of the home country but have a place of business In other country . Foreign Banks have their presence from the British period in our country . Initially they were allowed to operate only through branches but now they are allowed to set up subsidiaries in India. Some Example of Foreign Banks : Standard Chartered Banks, Hongkong Shanghai Banking Corporation, American Express Banking corporation, Bank of Tokyo, Citi Bank.

Functions of Foreign Banks:

  1. Bringing together foreign institutional investors and Indian companie.
  2. Helping foreign companies and Indian companies to enter into joint ventures.
  3. Raising finance for power generation, telecommunications and mining projects in India.
  4. Managing data and information systems by using latest technology.

Regional Rural Banks :

In order to provide efficient banking services in rural areas ,Regional rural banks were setup on 1975 under sponsorship of the commercial bank’s. The regional rural banks are governed by the Regional Rural banks act 1976.

Functions of Regional Rural Banks :

  1. This bank mobilize financial resources from rural /semi urban areas and grant loans and advances.
  2. The area of operation of Regional Rural banks is limited to the area as notified by the Reserve Bank of India covering one or more district in a state.
  3. The issued capital of a Regional Rural banks is shared by the owner in the different proportion ranging from 15 to 20 percent.

B. Scheduled State Cooperative Bank’s :

Cooperative bank’s are small sized bank’s organised in small cooperative sector which have the ability to operate both urban and non urban areas. Cooperative bank’s are registered under the cooperative societies Act. The cooperative bank’s is regulated by the Reserve Bank of India. It is also governed by the Banking regulation act 1949 and Banking laws act 1965.

Types of Schedule Cooperative Bank’s:

  1. State Cooperative bank’s
  2. Primary credit society
  3. Central cooperative bank’s

State Cooperative Bank’s :

These are the apex cooperative banks in all the states of the country. Cooperative bank’s mobilise funds and help in the proper channnelisation among various sectors. The money reaches the individual borrowers from the state cooperative bank’s through the central cooperative bank’s and primary credit society. Cooperative bank’s in India finance rural areas under : Farming, Cattle, milk and personal finance including others.

Primary Credit Society :

These societies are formed as the village level or town level with the borrower or non borrower members residing in one locality. The operation of each society are restricted to a small area so that the members know each other and are able to watch over the activities of all members to prevent frauds.

Central Cooperative Bank’s :

These banks operate at district level. It may have a primary credit societies belonging to the same district as their members.

Functions of Central cooperative banks:

  1. These banks provides loans to their members .
  2. It functions as provide link between primary credit society and state cooperative bank’s.

Benefits of Scheduled Bank :

  1. Get financial assistance from Reserve Bank of India when ever required.
  2. Borrow money from RBI at Repo rate.
  3. Automatically alarm the clearing house membership.
  4. People trust these banks.

Privileges Of Scheduled Banks :

  1. Scheduled Banks are covered by the deposit insurance and credit guarantee scheme.
  2. Scheduled Banks are eligible for obtaining loans at Bank rate from the Reserve Bank of India.
  3. Such banks automatically acquires the membership of the clearing house and avail of clearing house facilities.
  4. Such banks get the facility of rediscounting of bills from the reserve bank.
  5. Scheduled Banks are also entitled to receive refinance facility from appropriate institutions.
  6. An account with scheduled bank carries for the account holders, a greater assurance of safety and also prestige value.

The affairs of the scheduled Banks are closely watched and largely controlled by the Reserve Bank. The scheduled Banks operate under strict supervision of the Reserve Bank and are required to follow the guidelines issued by the Reserve Bank from time to time. These banks are required to present recurring financial statements and other informations to the Reserve Bank. Moreover these banks are also required to maintain certain minimum statutory cash reserve with the Reserve Bank.

Related :

WHAT IS COMMERCIAL BANK ?

Indian Banking history

Indian Banking History :

Indian Banking industry has a long history. It has traversed a long path to assure it’s present form. It has taken in its stride many hurdles and impediments, stresses and strains and moved ahead with vigour. The banking industry started with small money lenders and has now large joint stock world class bank’s in its fold.

The growth of banks in India is discussed below over two eras :-

A. Pre- Independence Period

B. Post Independence Period

A. Pre- Independence Period of Indian Banking History :

Banking in its crude form is as old as authentic history. All throughout the period of Indian banking history, indigenous bankers and money lenders are recorded to have existed and carried on the business of banking and money lending on a large scale. From 1400 to 200 BC during the Vedic period records of deposits and lending are found. Renowned Hindu law giver menu has dealth with the matter of deposits and pledges in a section of work.

1. Agency houses :

The indigenous bankers lost their importance to a certain extent with the advent of the English traders in India. The genesis of banking on modern lines in India can be traced to the beginning of the East India companys trade relation with our country. The growing trade interest of the English merchants and non existence of any organised banks in India, prompted many English agency houses which were essentially trading company to add banking business to their activities. For instance M/S Alexander and company and M/S Fergussan and company, both trading firms, combined banking with other kinds of business and both were the predecessor of the early joint stock bank In India.

The banking business of agency houses could not continue for long. Majority of these houses failed because of their complete disregar for the rules of banking business.

2. Presidency Bank :

The banking business of agency houses which survived and continued to carry on trade and Indian banking history together was progressively taken over by the presidency banks .

The three presidency banks are :

  1. Banks of Bengal (1809)
  2. The bank of Bombay (1840)
  3. The Bank of Madras (1843) we’re established under the Charter Of the East India company. These banks acted as banker to the East India company at Calcutta, Bombay and Madras and performed Central Banking functions for their respective areas.
  1. Bank of Bengal : The bank of Bengal was setup in 1806 and it obtained it’s Charter in 1809. The establishment of the Bank of Bengal marked the advent of joint stock banking in India. The bank of Bengal was set up with a capital of Rs 50 lakes divided into 500 equity shares of Rs 10000 each. The Bengal government contributed 100 shares. The charter gave the power of note issues to the Bank in 1823 and the fixed the maximum rate of interest of the bank at 12 percent per anum. In 1839 ,the bank was allowed to open branches and to deal in inland exchanges. It took the responsibility of public debt management from 1865.
  2. Bank Of Bombay : The bank of Bombay, the second presidency bank was established in 1840 with the share capital of Rs 52.25 lakhs. The bank was given the power to deal in inland exchanges, public debt and also to open branches.
  3. Bank of Madras : The Bank of Madras, the third presidency bank was established in 1843 with the share capital of Rs 30 lakes. The bank also acted like other two presidency bank.

3. The Swadeshi Movement :

Swadeshi movement was promoted in India for start many new institutions. The number of joint stock banks increased during 1906-1913. The peoples bank of India limited, The bank of India limited, the central bank of India limited, Indian Bank Limited and the Bank of Baroda limited were setup during that period. The boom continued till it was overtaken by the crises of 1913-1919.

4. Imperial Bank of India :

The three presidency banks were amalgamated into the imperial bank of India which was bought into existence on 27th January, 1921 , by the imperial bank of India act 1920. The liability of shareholders of the imperial bank was not unlimited like that of shareholders of other banks registered under the company act. However the word ” UnLimited” didn’t form a part of the name of the bank.

The imperial bank work for both central and commercial banking business. The major central banking functions discharged by the bank before the establishment of the Reserve BANK OF INDIA were as follows –

  1. It acted as the main ‘banker’ to the Government and as the custodian of public funds and government cash balances.
  2. It managed the public debt of the government and provided the machinery for the issue of government securities.
  3. It acted as a bankers bank.
  4. It acted as an exchange bank and promoted foreign trade.

5. Reserve Bank of India :

There was a strong demand for the establishment of a Seperate central bank in India during the first part of the 20th Century. Through the imperial bank undertook some central banking functions, it could not fully satisfy the demand for a central Bank. The Hilton Young commission in 1926 recommended the setting up of the reserve bank of India as a full fledged Central Bank of the country. Accordingly ,in 1934 an act was passed and under this act, the Reserve Bank was setup in 1935. It took over all the Central banking functions from the imperial bank and the Imperial bank was authorized to act as the agent of the reserve bank.

B. Post Independence Period of Indian banking history :

Independent India saw a number of landmark developments in the field of banking. The pace of growth of banks gained momentum largely due to the efforts of the government.

  1. Nationalisation of the Reserve Bank of India : The Reserve Bank was setup as a private shareholders bank in 1935. After independence, it was decided to nationalise the Reserve Bank in order to have better integration of the policies of the bank and the macro economic policies of the government. Accordingly on January 1, 1949 ,the Reserve Bank was nationalised under the Reserve Bank act 1948.
  2. Banking Regulation act 1949: At the time of independence there was no special legislation which could govern the functioning of banks in India. In order to promote sound and balanced growth of banking business in India, the government enacted the banking Regulation act in 1949.
  3. Nationalisation of the imperial bank of India: After independence there was strong demand for the nationalisation of the imperial bank. The management of the bank was in the hands of few people who discriminated in favour of the European companies. The rural credit survey committee recommended the nationalisation of the imperial bank of India. In pursuance of this recommendations the government of India nationalised the imperial bank of India and renamed as the state Bank of India on July 1, 1955.
  4. Associate Banks of the state Bank of India : The state Bank of India act was passed by the parliament in 1959 enabling the state Bank to take over eight state owned bank’s as its subsidiaries. However two of these banks ( state bank of Bikaner and State bank of Jaipur) merged in 1963 and in July 2008 state bank Saurashtra was merged with the state Bank of India and thus there are now six associate Banks. The state banks and it’s associate Banks are together known as State Bank group.
  5. Deposit Insurance Scheme: Deposit insurance scheme was introduced in India with effect from January 1, 1962 to protect the interest of the small of the small depositor and to restore public confidence among the people of the soundness of the banking system.
  6. Social Controls: The government introduced a comprehensive scheme of social controls on banks on February 1, 1969 to serve the cause of economic growth and fulfil the social objectives. The basic aim of social control was to bring about changes in the management and credit policies of the commercial bank’s.
  7. Bank Nationalisation : Social control on banks could not fulfill the objectives of the government and was found to be unsatisfactory and inadequate. Ultimately the government took the decision to nationalise the major commercial banks. Initially in July 1969, the government nationalised 14 major commercial banks and again in 1980 , the government took over 6 more commercial banks. With the nationalisation of these banks, a new era of banking development started in India and has been aptly termed as the start of the Banking Revolution in India.
  8. Lead Bank Scheme: The lead Bank scheme was introduced in December 1969 to promote integrated development of each district of the country. Under this scheme, a commercial bank was assigned the lead role in a district and all other financial institutions works jointly under the lead banks. In the pre- nationalisation days the banking facilities in India were not evenly distributed in different parts of the country. There was a large unbanked area. After nationalising the bank’s in 1969 , the government strived to expand the geographical coverageof the banking system so as to provide banking facilities to unbaked backward areas.
  9. Regional Rural Bank : In order to provide efficient banking services in rural areas, Regional Rural Bank were setup in 1975 under the sponsorship of the commercial bank’s. The Regional Rural Banks are governed by the Regional Rural Banks act 1976. Apart from these developments , a large number of specialised financial institutions were set up in India to meet specific credit and investment needs of the country.

Frequently Questions And Answers :

1. How many bank’s are nationalised in India?

Ans: There are 19 bank’s nationalised in India.

2. When did banking start in India?

Ans: In India banking system started in the year 1770 and the name of bank was Bank of Hindustan.

3. Which is the number 1 banking in India?

Ans: I think HDFC bank is the no 1 bank in India.

4. Which bank started banking system in India?

Ans: Savings account system started in India with Presidency bank.

5. Which is the biggest bank in India?

Ans: State Bank of India is the biggest bank in India.

6. Which is the safest Bank in India ?

Ans: State Bank of India is the safest Bank in India.

7. Who invested bank ?

Ans: The first bank was invented by Assyria and Babylonia.

Related :

WHAT IS BANK AND WHAT ARE THE TYPES OF BANK ?

Public sector banks: Meaning, Functions And 27 different types

Public sector banks are those Banks in which the government has majority shareholding atleast 51 percent. In India, public sector banks are owned and controlled by the government either directly or indirectly through the Reserve Bank of India. These banks are also known as “National Banks”.

Public Sector Banks may be classified into three categories :

  1. State Bank Group : The public sector commercial banking in India started with the setting up of state bank of India in 1955. State bank group consists of the state Bank of India and it’s 6 associate Banks.
  2. Nationalised Banks : An important step towards public sector banking was taken in July 1969, when major banks were nationalised. Again in 1980, 6 more private sector banks were nationalised, bringing up the total number of such banks to 20. However in 1993 one of these banks viz, New Bank of India merged with Punjab National Bank and hence at present there are 19 nationalised Banks in India.

The nationalised Banks occupy a prominent position in the commercial banking structure of the country. The bulk of the banking business is in the hands of these banks. These banks have their presence throughout the country and undertake all types of commercial banking business.

3. Regional Rural Banks : Regional Rural Banks were setup on the recommendations of a working group headed by M.Narasimham in 1975.Initially 5 such banks were setup on 2nd October, 1975. In 1976, the regional rural banks act was passed by the parliament paving the way for the establishment of such banks throughout the country. Regional rural banks are rural oriented banking institutions establishment with the object of providing credit and other facilities to the neglected sectors on the rural areas.

In the year 2005, a process was initiated for the structural consolidations of RRBs sponsored by the same bank within a state. As a result of amalgamation of RRBs throughout the country , 196 RRBS have now been reduced to 84.

Objective Of Public Sector Bank :

  1. To extend banking facility on a large scale, particularly in the rural and semi urban areas.
  2. To promote agricultural finance and to remove the defects in the system agricultural finance.
  3. To help the Reserve Bank in implementing it’s credit policies.
  4. To help the Government to purse it’s broad economic policies.
  5. Public sector banks may be set up as a statutory corporation by special Acts passed by the parliament. Eg. State Bank of India.
  6. Public sector banks are Indian Banks and they do not include foreign banks.
  7. Public sector banks aims at serving the society beside earning profit.
  8. Public sector banks have offices or branches throughout the country. They are founded in rural, semi urban and urban areas.

List of Public Sector Banks In India :

There are currently 27 Public Sector banks in India out of these 19 are nationalised bank and 6 Sbi And it’s associate Banks and rest two banks are IDBI bank and Bharatiya Mahila Banks which are categorized as other public sector banks. There are total 93 commercial banks in India.

A. State Bank of India : The state bank of India was established under the state Bank of India act, 1955, by nationalising the imperial bank of India. It came into existence on July 1, 1955 . This marked the beginning of the nationalisation of banks in India. Some State bank of India Associate Banks :

  1. State Bank of Bikaner.
  2. State bank of Jaipur.
  3. Stats bank of Hyderabad.
  4. State bank of Indore.
  5. State bank of Mysore
  6. State bank of Patiala
  7. State bank of Saurashtra
  8. State bank of Travancore

B. Allahabad Bank : The headquarter of Allahabad Bank at Kolkata, Tagline : Tradition of trust And CMD and Chairman Atul Kumar Goel.

C. Andra Bank : The headquarter of Andra Bank at Hyderabad, Tagline : Such More to do in focus and CMD&chairman J Packirisamy.

D. Bank of India : The headquarter of bank of India at Mumbai, Tagline : Relationship Beyond Banking And CMD& chairman Dinbanchu Mahapatra.

E. Bank of Baroda: The headquarter of Bank of Baroda at Vadodara ,Tagline : India’s International bank and CMD&chairman PS Jaya kumar.

F. Bank of Maharashtra: The headquarter of Bank of Maharashtra at Pune, Tagline : One Family One bank And CMD&Chairman AS Rajeev .

G. Canara Bank: The headquarter of Canara bank at Bangalore, Tagline : Together we can .

H. Central Bank of India : The headquarter of Central Bank of India at Mumbai, Tagline : Build a better life around us and CMD&Chairman Pallav Mahapatra.

I. Corporation Bank : The headquarter of Corporation bank at Manglore, Tagline : Prosperity for all And CMD&chairman PV Bharathi.

J. Dena Bank & Vijaya Bank : These two banks are merged into Bank of Baroda and now Bank of Baroda is third largest bank in India.

K. Indian Bank : The headquarter of Indian Bank at Chennai, Tagline : Talking Banking Technology to common man and CMD&Chairman Phadmaja Chunduru.

L. Oriented Bank of Commerce: The headquarter of Oriented Bank of Commerce at Gurugram, Tagline : Where every Individual is committed and CMD&chairman Mukesh Kumar Jain.

M. Punjab National Bank : The headquarter of Punjab National Bank at New Delhi, Tagline : The name you can bank upon and the CMD&Chairman Sunil Mehta.

N. UCO bank : The headquarter of UCO at Kolkata, Taglines : Honor your trust And CMD & chairman SS Mallikarjuna.

O. Union Bank : The headquarter of Union Bank at Mumbai, Tagline Good people to bank with And CMD&Chairman Rajoran Raj.

P. United Bank of India : The headquarter of this bank at Kolkata, Tagline: The bank’s that begins with u and CMD& Chairman Ashok Kumar.

Other Public sector Banks :

A. IDBI bank

B. BMB bank

C. State bank of Sikkim

Frequently Questions And Answers :

1. Which banks are public sector banks?

Ans: Some Public sector banks are :

  1. State Bank of India
  2. United Bank of India
  3. Punjab National Bank
  4. UCO bank
  5. Union Bank
  6. Indian Bank

2. How many public sector banks in India in 2019 ?

Ans: There are currently 27 Public Sector banks in India out of these 19 are nationalised bank and 6 SBI And it’s associate Banks and rest two banks are IDBI bank and Bharatiya Mahila Banks which are categorized as other public sector banks.

3. Who is Chairman of Punjab National Bank?

Ans:Sunil Mehta is the Chair man of Punjab National Bank.

4. In which year State bank of India was established?

Ans: State Bank of India was established in the year 1955 under Indian act with 6 associate Banks.

5. Why Public Sector Bank are known as Government bank?

Ans: Public sector banks are known as government bank because here government has majority shareholding more than 51 percent.

Related :

  1. Private Sector Bank
  2. Function Of Bank?

Importance Functions of commercial banks

Functions Of Commercial Bank:

A Commercial bank normally perform the following functions :

  1. Primary Function
  2. Secondary Functions

Primary Function:

Primary function is the key function of a commercial bank. A commercial bank earn money by using this functions.

Types Of Primary Functions :

  1. Acceptance of Deposits
  2. Granting loans and advances

A ) Acceptance Of Deposits :

The most important activity of a commercial bank is to mobilize deposit from the public. People who have more income and savings , find it easy to deposit the amount with commercial banks in different types of deposits account which are as follows :

1. Savings Account Deposit :

This type of account is generally maintained by the households or business individual. The depositor can deposit or withdraw money under this account only for a limited number of times. This account also attracts a nominal rate of interest to the account holders.This account as the name recommends is intended for promotion of savings funds.A person having regular and fixed income can deposit their savings in this account.

2. Current Account Deposit :

This type of account is generally maintained by the business entities and money under this deposit are payable on demand of the depositor . The depositor are free to deposit or withdraw money from their account any number of times without any restrictions.

3. Fixed Deposits Account :

A fixed account is deposited for the fixed period of time. It is also known as term deposit . The fixed period of time might be from 30 days to 5 years or more . The rate of interest on these accounts is higher than savings and current account deposit because the amount accepted is invested elsewhere for a long term by the bank. The depositor can get a loan against this account.

4. Recurring Deposit Account :

In this type of deposits, a depositor deposits a fixed amount of money every month for a fixed period of time . The amount are deposited on monthly basis. This money can not be withdrawn before the expiry of a fixed term except in certain conditions. This account attracts higher interest in comparison to other accounts except fixed deposits.

5. Multiple option deposit account :

It is a kind of savings deposit account in which deposits of more than a specific point of limit gets naturally transferred into fixed deposits. On the other hand, in case adequate fund is not available in our savings bank account so as to honour a cheque that we have issued, the requirements account gets automatically transferred from fixed deposit to savings deposit account.

B) Granting Loans And Advances

This is another important functions of a commercial bank. This is the main source of income of any commercial bank. Banks grant loans and advances out of surplus money after keeping certain percentage of their total deposit are called reserves. Some important forms of loans and advances are ordinary loans, overdraft facility, discounting of bill of exchange.

Types of loans and advances granted by a bank :

  1. Loans
  2. Cash Credit
  3. Overdraft
  4. Purchasing and discounting of bill of exchange

1. Loans:

Sanctioning of a specified lump sum amount by the banker to the customer is called a loan. In case of a loan, a specified amount of money is sanctioned by the banker to the customer for a specific purpose. The customer can obtain loan from the bank with or without any tangible securities. The entire loan amount is paid to the borrower either in cash or by sending cash to his account. Loan is given for a certain fixed period of time at an agreed rate of interest. The borrower is required to pay interest on the entire amount of the loan from the date of sanction.

2. Cash Credit :

Cash credit is an important and frequently used mode of borrowing from the banks. Cash credit is an arrangement by which a customer can borrow money from the bank through his current account upto a certain limit. The banker sanction cash credit against some tangible securities which are charged with the bank. The borrower is authorized to withdraw money from his credit limit according to his needs and he can also deposit any surplus amount with him in the account. The cash credit account is thus an active and running account to which withdrawals and deposits may be effected frequently. The interest in case of cash credit is charged on the actual amount utilised by the borrower and for the period of actual utilisation.

3. Overdraft :

Overdraft means am arrangement with a bank by which a current account holder is allowed to withdrawn more than the balance standing to his credit upto certain limit.Overdraft account can either be clean overdraft, partly secured or fully secured. The borrower is allowed to withdraw the amount as and when he needs and repay it by means of deposits in his account as and when it is feasible for him. Interest on overdraft credit is higher than on loans but is lower as compared to cash credit. Interest is charged on the exact amount overdrawn by the customer and for the period of its actual utilisation.

4. Purchasing and Discounting of bills

Purchasing and discounting of bills is the most important form in which a bank lends without any collateral securities. A customer having bills can obtain immediate cash from the bank and do not have to wait till the bank collects the payments of the bills. The bills which are used by the customer to borrow from banks may be demand bills or time bills. Demand bills are payable on demand while time bills after the expiry of a definite period of time.

Secondary Functions :

The bank perform a number of secondary functions which are follows :

A) Agency Functions :

Commercial Banks receives and collects different kinds of payments on behalf of their Clients through the instructions of cheques, drafts, bills and promissory note and also buy and sell gold, silver and other securities on behalf of their customers.

Types Of Agency Function :

  1. Transfer of money
  2. Sale and purchase of foreign exchange
  3. Collection of cheques
  4. Periodic collection
  1. Transfer of money : The commercial bank provides facilities of funds transfer to it’s customers through the instructions of cheques, demand draft or electronic fund transfer from one place to another place or one person to another person.
  2. Sale And purchase of foreign exchange : This is another important functions of commercial bank which has increased tremendously with increasing the volume of the international trade particularly in the era of globalization .
  3. Collection of Cheques : The commercial bank collects the money of the cheques as per the customer want.
  4. Periodic Collection : The commercial bank also collects the periodic payment like pension, salary and other periodic payment on behalf of the customer.

B) General Utility Services :

In modern days the commercial bank also perform some very useful functions for the benefits of their customers.

Types of Utility Services:

  • Collection and publication of data
  • Advisory functions
  • Issue of locker facility
  • Under writing of shares and debentures
  • Issuing of letter of credit
  • Collection and publication of data : A commercial bank collects and published data on behalf of their customers satisfaction.
  • Advisory functions : A commercial bank also perform advisory functions for their customer.
  • Issuing of locker facility : A commercial bank provides locker facilities to their customers for keeping valuable things like gold and silver etc.
  • Underwriting of shares and debentures : A commercial bank underwrite the shares and debentures through their merchant banking.
  • Issuing of letter of credit : A commercial bank also issuing letter of credit for their customer.

What is Liquidity?

The term liquidity implies the capacity of the bank to give money on demand . In simple words , it is the ability of the banker to satisfy the interest of clients for cash in exchange for deposits. Liquidity depends on the availability of liquid assets. Liquid assets are those assets which can be readily converted into cash without loss. More the liquid assets, more noteworthy will be the liquidity and vice versa.

What is statutory liquidity ratio?

A variant of the cash reserve ratio is the method of statutory liquidity ratio which is used by the central bank as an instrument of credit control. The commercial bank’s beside maintaining the cash reserve with the central bank are also statutorily required to maintain certain liquid assets to meet it’s liabilities.

Related :

  1. What Is Commercial Bank ?

Different Types of Crossings of cheques

Types of crossings :

A crossed cheque is one which bears two parallel transverse lines across the face of the cheque with or without any words. Other words, a cheque may be crossed by drawing two parallel lines on the face of the cheque. Crossing initially began in England when checks were sent From bank to another bank.

Crossing of a cheque may be defined as an instruction from the drawer of the cheque to the banker that he is only to pay the cheque provided certain conditions are fulfilled .Crossing is a unique feature associated with a cheque affecting to a certain extent the obligation of the paying banker and also it’s negotiates character.

Different Types of Crossings Cheque :

  1. General Crossing
  2. Special crossing
  3. Account Payee Crossing
  4. Not negotiable crossing

What is General Crossing ?

A general crossing is a crossing where a cheque simply bears two parallel lines with or without any words and without any specification for payment. Sec 123 of the negotiable instruments act 1881 defines general crossing as follows, “where a cheque bears across it’s face an addition of the words, and company”or any abbreviations there of, between two parallel transverse lines or of two parallel transverse lines simply either words or without the words, Not Negotiable that addition shall be deemed crossing and the cheque shall be deemed to be crossed generally.

The essential requirements of general crossing are drawing of two lines : (Types of Crossings )

  1. On the face of the cheque
  2. Parallel to each other and
  3. In cross direction

Specimens of General Crossing :

What is Special Crossing ?

A special crossing is a crossing where a cheque bears across it’s face the name of a banker. Sec 124 of the negotiable instruments act 1881, defines special crossing as follows, ” where a cheque bears across it’s face an addition of the name of a banker, either with or without the words “not negotiable“, the addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially and to be crossed to the banker.

Incase of special crossing two parallel transverse lines are not necessary, but the name of a bank should be written on theface of the cheque. The name of the banker on the cheque must appear otherwise than as drawer, payee, drawer or endorser of the cheques to continue special crossing.

Specimens Of Special Crossing :

What is Account Payee Crossing ?

Account payee crossing is a crossing where a cheque bears across it’s face the words such as “Account payee” or “payee’s account only” along with general or special crossings. It may be noted here that the words “Account payee” or payee’s account are not recognised by the negotiable instruments Act like, but are being used due to the practice prevalent in the business community.

What is Not-Negotiable Crossing ?

A not negotiable crossing is a crossing where a cheques bears across it’s face the words “Not Negotiable” along with general or special crossings. According to the section 123 and 124 of the Negotiable instruments act, 1881 , a cheques may be crossed either generally or specially with the words “not negotiable“.

Objects Of Not Negotiable Crossing :

  1. To provide safeguard against miscarriage and dishonesty to the holder of the cheques.
  2. To provide protection to the collecting banker.
  3. To provide protection to the paying banker.

What is Double crossing ?

Where a cheques bears across it’s face two Seperate special special crossing I.e the name of two banks, it is termed as double crossing. A specially crossed cheques is required to be collected through the banker specified in the crossing.

In the double crossing two banks name will appear on the cheques.

What is Obliterating a Crossing ?

Obliterating a crossing means illegally destroying or removing all signs of crossing on a cheque. It may be done by dishonest person to convert crossed cheques into open cheques and obtain payment through the counter of the bank.

In case the paying banker could not detect the obliteration of crossing and pays the cheque as open cheque, he is protected by the Negotiable instruments act provided some conditions are fulfilled. Section 89 provides the following conditions to be fulfilled :

  1. The cheque doesn’t appear to be a crossed one or obliteration of crossing is not apparent at the time of presentation for payment .
  2. The payment is made in due course under section 10 Of the act.

Related:

  1. What is Cheque?
  2. Different types of Cheques ?

Functions and services of Stock Exchange

Functions of stock exchange :

Functions of stock exchange : A stock exchange is a highly organised financial market where second hand securities can bought and sold. It’s main function is to create a link between buyer and sellers .

Following are the important functions performed by the Stock Exchange:

  1. Ready market and liquidity : Stock exchange provides a ready and continuous market where investors can convert their money into securities easily and quickly. It provides a convenient meeting place for buyers and sellers of securities. Regular dealing in securities ensure increased liquidity of the securities.
  2. Evaluation of securities : Stock exchange helps in deciding the costs of different securities that help their genuine worth. It enables correct appraisal of securities. The forces of demand and supply act freely in the stock exchange and help in the valuation of securities. The prices at which transactions take place are recorded and made public in the form of market quotations to enable the investors to know current market prices of various securities.
  3. Mobilisation Of Savings : Stock exchanges ensure helps in mobilising surplus funds of individuals and instructions for investment in securities. In the absence of facilities for quick and profitable disposal of securities, such funds may remain idle.
  4. Protection Of Investors : Stock exchange ensure fair dealing and safety of dealing. The members of the stock exchanges have to operate under certain rules and regulations which seek to check the expploitation of ignorant investors. In the way, stock exchange serves as the watch-dog of the investors interests.
  5. Capital formation : Stock exchange not only mobilises the old savings but also induces the public to save money. It provides avenue for investment in various securities which yield higher returns. It helps in the rational allocation of available funds and directs the flow of savings into most productive channels. Thus, stock exchange facilities capital formation in the country.
  6. Regulation Of Corporate Sector : Stock exchanges frame their rules and regulations. Every company which wants it’s securities to be dealt in at the stock exchange has to follow the rules framed by the stock exchange in his regard. In this way, stock exchanges practice a sound impact on the working and the board of organizations.
  7. Clearing house of data : A stock exchange is a vehicle of helpful business data.Many stock exchanges publish directories which provide data on the general economic and business trends. Such information influences decision making of business concerns, investors etc.
  8. Facilities Transfer : The basic functions of the stock exchange exchange is to transfer purchasing power between countries I.e to provide a platform whereby currency of one country is converted into currency of another country at the prevailing exchange rate. The transfer function is performed through the credit instruments like foreign bill of exchange, Bank draft and telephonic transfers.
  9. Facilitates Credit : This is another important functions of stock exchange that it’s provide Foreign bills of exchange used in the international payments normally have maturity period of three to six months. This period of credit is required to enable the importer to take possession of goods, sell them and realise money to make payments to the exporter. The stock market performs the function of providing credit to promote foreign trade. The credit function is performed through the acceptance houses who accept bills on behalf of their customers.
  10. Facilitates hedging : In a situation of exchange risks, the stock exchange performs the hedging function. Hedging is the act of equating ones assets and liabilities in a foreign currency to avoid the risk resulting from future changes in the value of foreign currency. In a free stock exchange market, when the value of foreign currency varies, there may be a gain or loss to the traders concerned. To avoid or reduce this exchange risk, the exchange market provides facilities for hedging anticipated or actual claims or liabilities through forward contracts in exchange. Forward agreement is an agreement of buying or selling foreign currency at some fixed date in future at a value settled upon now.
  11. Facilitates trade and investment :International trade and investment would not have been possible without the arrangements or mechanism for buying and selling foreign currency. The stock exchange market is required to undertake import/export transactions. Foreign payment are made by converting currency of one country into another at the prevailing exchange rate.

Facilitates of Stock exchange

The services of stock exchange can be studied under the following heads :

Services to Companies or Corporate sector

  1. A company whose shares are listed on a stock exchange enjoys reputation in the capital market.
  2. The marketability of shares is guaranteed and in result the organization appreciates a wide market for its shares.
  3. Stock exchange helps to minimise fluctuations in the prices of securities. The forces of demand and supply interact freely on the stock exchange.
  4. New companies may raise their funds easily from capital market because it provided indirect support by the stock exchange.

Services to the Investors

  1. Stock exchange ensures liquidity of investment by ready marketability of securities.
  2. Stock exchanges make scrutiny before listing of securities. Thus, stock exchange ensures safe and fair dealing in securities.
  3. Price quotations of stock exchange help the investors to know the market value of their investors.
  4. Stock exchange serves as a clearing house of information and provide guidance to investors. The investors are spared from the danger of investment in unsound organizations.
  5. Facility of quick disposal of securities at the stock exchange helps to diversify investment and risk.

Services to community Or society

  1. Stock exchange generates economic growth by encouraging investors to invest their savings in securities. It encourages capital information in the country.
  2. Stock exchange provides a forum for raising public debt which is required for projects of national importance.
  3. Stock exchange helps in the process of economic development of the country. The rapid increase in the growth of the corporate sector in recent decades has been possible because of the facilities provided by the stock exchange.
  4. Stock exchange helps in the optimum utilisation of scarce financial resources.

Related :

WHAT IS STOCK EXCHANGE AND ITS TYPES?

Private Sector Banks of India: Definition and types

Private Sector banks are those Banks which are owned by private individuals or business corporation. In other words a private sector banks are those Banks which government share less than 51 percent.

Private Sector banks may be classified into two categories :

A) Indian Bank : These are the banks which are incorporated in India under the Indian companies act. These banks are owned and controlled by the Indian entrepreneurs. In the pre-reform period, there was only 24 banks in the private sector. The Narasimham committee in its first report recommended the freedom of entry of private banks in the financial system. It recommended that the central bank should permit the establishment of new banks in the private sector. The central bank considered the recommendations and allowed banks to be set up in the private sector. At present there are 27 Indian private sector banks operating in the banking sector.

Some of the leading Indian Private Sector Banks Are :

  1. ICICI bank limited: ICICI BANK is a type of private bank which was founded in the year 1994 (25 years ago) . Headquarters of this bank at Mumbai, Maharashtra. No of branches of this bank all over the country almost 4850. Key people of this bank is Chanda Kochar (MD&CEO).Total assets of this bank are Rs 771,791.16 Crore. Share price of the bank Rs 358.30 .
  2. HDFC bank limited : This is a type of private bank which was founded in the year 1994 (23 years ago). Headquarters of this bank is Mumbai, Maharashtra. No of branches of this bank all over the country almost 4712. Key people Adithya Puri (MD). Total assets of this bank are Rs 863840. Share price of the bank Rs 1970.
  3. AXIS Bank Limited : Axis Bank is a type of private bank which was founded in the year 1993 as UTI . Headquarter of this bank at Mumbai Maharashtra. No of Branches all over the country almost 3299 . Key people of this bank is Shikha Sharma (MD& CEO). Total assets of this bank are Rs 601467.66 Crores. Share price of Rs 613.
  4. Yes Bank Limited : This is a type of private bank which was founded in the year 2004 (15 years ago). Headquarter of this bank is Mumbai, Maharashtra. Key people of this bank is Rana Kapoor (MD &CEO). Total assets of this bank are Rs 215059 . Share price of Rs 362.
  5. Federal Bank Limited : This is a kind of private bank which was founded in the year 1949 (70 years ago). Headquarters of this bank at Kochi,Kerala . Key people of this bank is Shyam Srinivasan , MD & CEO. Total assets of this bank are Rs 114976 Crore. Share price of Rs 101.
  6. Standard Chartered Bank : This is a type of private bank which was founded in the year 1858 (160 years ago). The headquarter of this bank at Mumbai, Maharashtra. No of branches all over the country almost 100 . Key people Zarin ,Daruwala. Total assets of this bank are Rs 1449888 Crore. The share price of Rs 67 .
  7. Industrial Bank Limited : This bank is a type of private bank which was founded in the year 1994 (25 years ago). Headquarter of this bank is Mumbai, Maharashtra. No of branches all over the country almost 1211 . Key people Ramesh Sobti ,CEO. Total assets of this bank are Rs 178648 crores. Share price of Rs 1730.
  8. J&K Bank : This is a type of private bank which was founded in the year 1938 (80 years ago). Headquarter of this bank is Srinagar, Jammu& Kashmir. No of branches of this bank almost 866. Key People of this bank is Parvej Ahmed (Chair man & CEO). Total assets of this bank are Rs 82018 Crore. Share price of this bank is Rs 75 .
  9. IDFC bank limited : This is a type of private bank which was founded in the year 2015 ( 4 Years ago). Headquarter of this bank is Mumbai, Maharashtra. No of branches all over the country almost 77 . Total assets of this bank Rs 112159. Share price of Rs 58
  10. Federal Bank Limited : This is a type of private bank which was founded in the year 1949( 70 years ago). Headquarters of this bank is Kochi Kerala. No of branches 1741 approximately. Total assets of this bank Rs 114976. Share price of Rs 101.
  11. Kotak Mahindra Bank Limited : Kotak Mahindra Bank is a type of private bank which was founded in the year 1985 as a Kotak Mahindra finance Ltd. Headquarters of this bank is Mumbai, Maharashtra. No of branches almost 1369 . Key people Uday Kotak (Founder And Executive vice Chairman. Total assets of Rs 214589 Crore. Share price of Rs 1091.
  12. RBL bank limited : This is a type of private bank which was founded in the year 2002. Headquarters of this bank is Mumbai, Maharashtra.
Private sector banks

B) Foreign Banks : These banks are foreign in origin. These banks are incorporated outside India under the law of the home country but have a place of business In India.

Foreign Banks have their presence from the British period in India. Initially they were allowed to operate only through branches but now they are allowed to set up subsidiaries in India.

With the changes in the banking policy in post-Reform period, the number of foreign banks have shown an increase. There are 29 foreign banks from 21 countries operating in India with 272 branches as on June 2007 . The branches or offices of foreign banks are mainly located in urban areas of big cities.

The foreign banks performs mostly the same range of functions as being performed by Indian Banks. However, they are most active players in the export and import trade and foreign exchange transactions. Foreign Banks have created an entirely new playing field in the banking sector through their vast range of products, superior technology and a very high level of customer service.

Some of the leading Foreign banks operating in India are –

  1. Standard Chartered Bank
  2. Hongkong Shanghai Banking Corporation (HSBC)
  3. American Express Banking Corporation
  4. Bank of Tokyo
  5. Deutsche bank
  6. Citizen bank etc.

Functions of Foreign Banks:

  1. Bringing together foreign institutional investors and Indian companies.
  2. Helping foreign companies and Indian companies to enter into joint ventures.
  3. Raising finance for power generation, telecommunications and mining projects in India.
  4. Managing data and information systems by using latest technology.

Importance Of Private Sector Banks :

The private sector banks are playing a viral role in the Indian economy. The following points highlights their importance:

  1. These banks have bought in state of the art technology in the banking sector.
  2. These banks provides a healthy competition in the banking system and contributed to the efficiency of public sector banks.
  3. These banks have helped in introducing a high degree of professional management and marketing concepts into banking.
  4. These banks especially the foreign banks have promoted foreign investments in India and helped in organizing joint ventures.
  5. These banks have helped the Indian entrepreneurs and companies in tapping the international financial markets to raise funds.

Reserve Bank Of Indias Guidelines on Private Banks :

The Central Bank of India recognised the need to introduce greater between public sector banks and private sector banks to achieve higher productivity and efficiency in the banking system and hence allowed the entry of private banks. It issued the following guidelines relating to private Banks :

  1. The private banks should be registered as a public limited company under the companies act 1956.
  2. The various provisions of the Reserve Bank of India Act, 1934 and the banking regulation act 1949 shall also apply to private banks.
  3. It prescribed a minimum initial paid up capital of Rs 200 crore. Moreover, the initial minimum paid up capital shall be increased to Rs 300 crore in subsequent three years after commencement of business.
  4. The private banks having head office at a place which do not have Head office any other bank will be given preference while granting licenses .
  5. The private banks has to comply with the prudential norms in relation to income recognition, classification of assets, capital adequacy norms and other matters relating to banking operations .
  6. A non banking financial company (NBFC) can convert itself into a commercial bank if it satisfies the following criteria of –

a) A minimum net worth of Rs 200 crore.

b) A credit rating of not less than AAA (or it’s equivalent) in the previous year.

c) Capital adequacy of not less than 12 percent

d) Net NPAs not more than 5 percent.

Frequently Questions And Answers :

1. How many private sector banks in india ?

Ans: There are 27 private sector banks in India.

2. Which is the largest private sector banks in India?

Ans: ICICI bank is the largest private sector bank.

3. Which is the first private sector banks in india ?

Ans: Standard Chartered Bank is the first private sector bank in India.

Related :

  1. WHAT IS BANK AND WHAT ARE THE TYPES OF
  2. WHAT IS A COMMERCIAL BANK?

Functions of bank : 10 Important functions of bank

A bank normally perform the following functions :

  1. Primary Function
  2. Secondary Functions

Primary Function:

Primary function is the key function of a bank. A bank earn money by using this functions.

Types Of Primary Functions :

  1. Acceptance of Deposits
  2. Granting loans and advances

A ) Acceptance Of Deposits :

The most important activity of a bank is to mobilize deposit from the public. People who have more income and savings , find it easy to deposit the amount with banks in different types of deposits account which are as follows :

A) Savings Account Deposit : This type of account is generally maintained by the households or business individual. The depositor can deposit or withdraw money under this account only for a limited number of times. This account also attracts a nominal rate of interest to the account holders. This account as the name suggests, is meant for promotion of savings. A person having regular and fixed income can deposit their savings in this account.

B) Current Account Deposit : This type of account is generally maintained by the business entities and money under this deposit are payable on demand of the depositor . The depositor are free to deposit or withdraw money from their account any number of times without any restrictions.

C) Fixed Deposits Account : A fixed account is deposited for the fixed period of time. It is also known as term deposit. The fixed period of time might be from 30 days to 5 years or more. The rate of interest on these accounts is higher than savings and current account deposit because the amount accepted is invested elsewhere for a long term by the bank. The depositor can get a loan against this account.

D) Recurring Deposit Account : In this type of deposits, a depositor deposits a fixed amount of money every month for a fixed period of time . The amount are deposited on monthly basis. This money can not be withdrawn before the expiry of a fixed term except in certain conditions. This account attracts higher interest in comparison to other accounts except fixed deposits.

E) Multiple option deposit account : It is a type of savings deposit account in which deposits in excess of a particular limit gets automatically transferred into fixed deposits. On the other hand, in case adequate fund is not available in our savings bank account so as to honour a cheque that we have issued, the requirements account gets automatically transferred from fixed deposit to savings deposit account.

Functions of bank : 10 Important functions of bank

B) Granting Loans And Advances

This is another important functions of a bank. This is the main source of income of any bank. Banks grant loans and advances out of surplus money after keeping certain percentage of their total deposit are:

Types of loans and advances granted by a bank :

  1. Loans
  2. Cash Credit
  3. Overdraft
  4. Purchasing and discounting of bill of exchange
  1. Loans: Sanctioning of a specified lump sum amount by the banker to the customer is called a loan. In case of a loan, a specified amount of money is sanctioned by the banker to the customer for a specific purpose. The customer can obtain loan from the bank with or without any tangible securities. The entire loan amount is paid to the borrower either in cash or by sending to his account. Loan is given for a certain fixed period of time at an agreed rate of interest.The borrower is required to paid interest on the entire amount of the loan from the date of sanctioned .
  2. Cash Credit : Cash credit is an important and frequently used mode of borrowing from the banks. Cash credit is an arrangement by which a customer can borrow money from the bank through his current account upto a certain limit. The banker sanction cash credit against some tangible securities which are charged with the bank. The borrower is authorized to withdraw money from his credit limit according to his needs and he can also deposit any surplus amount with him in the account. The cash credit account is thus an active and running account to which withdrawals and deposits may be effected frequently. The interest in case of cash credit is charged on the actual amount utilised by the borrower and for the period of actual utilisation.
  3. Overdraft : Overdraft means am arrangement with a bank by which a current account holder is allowed to withdrawn more than the balance standing to his credit upto a certain limit. Overdraft account can either be clean overdraft, partly secured or fully secured. The borrower is allowed to withdraw the amount as and when he needs and repay it by means of deposits in his account as and when it is feasible for him. Interest on overdraft credit is higher than on loans but is lower as compared to cash credit. Interest is charged on the exact amount overdrawn by the customer and for the period of its actual utilisation.
  4. Purchasing and Discounting of bills : Purchasing and discounting of bills is the most important form in which a bank lends without any collateral securities. A customer having bills can obtain immediate cash from the bank and do not have to wait till the bank collects the payments of the bills. The bills which are used by the customer to borrow from banks may be demand bills or time bills. Demand bills are payable on demand while time bills after the expiry of a definite period of time.

Secondary Functions :

The bank perform a number of secondary functions which are follows :

A) Agency Functions :

Banks receives and collects different kinds of payments on behalf of their Clint’s through the instructions of cheques, drafts, bills and promissory note and also buy and sell gold, silver and other securities on behalf of their customers.

Types Of Agency Function :

Transfer of money

Sale and purchase of foreign exchange

Collection of cheques

Periodic collection

  1. Transfer of money : The bank provides facilities of funds transfer to it’s customers through the instructions of cheques, demand draft or electronic fund transfer from one place to another place or one person to another person.
  2. Sale And purchase of foreign exchange : This is another important functions of bank which has increased tremendously with increasing the volume of the international trade particularly in the era of globalization .
  3. Collection of Cheques : The bank collects the money of the cheques as per the customer want.
  4. Periodic Collection : The bank also collects the periodic payment like pension, salary and other periodic payment on behalf of the customer.

B) General Utility Services :

In modern days the bank also perform some very useful functions for the benefits of their customers.

Types of Utility Services:

  • Collection and publication of data
  • Advisory functions
  • Issue of locker facility
  • Under writing of shares and debentures
  • Issuing of letter of credit
  1. Collection and publication of data : A bank collects and published data on behalf of their customers satisfaction.
  2. Advisory functions : A bank also perform advisory functions for their customer.
  3. Issuing of locker facility : A bank provides locker facilities to their customers for keeping valuable things like gold and silver etc.
  4. Underwriting of shares and debentures : A bank underwrite the shares and debentures through their merchant banking.
  5. Issuing of letter of credit : A bank also issuing letter of credit for their customer.

What is Liquidity?

The term liquidity implies the capacity of the bank to give money on request.In simple words, it is the ability of the banker to fulfill the interest of clients for money in return for deposits. depends on the availability of liquid assets. Liquid assets are those assets which can be readily converted into cash without loss.

What is statutory liquidity ratio?

A variant of the cash reserve ratio is the method of statutory liquidity ratio which is used by the central bank as an instrument of credit control. The commercial bank’s beside maintaining the cash reserve with the central bank are also statutorily required to maintain certain liquid assets to meet it’s liabilities.

Related :

WHAT IS BANK AND WHAT ARE IT TYPES?