Banking System - Introduction

History of Banking in India  |  Nationalisation of Banks in India  |  Scheduled Commercial

Banks in India
History of Banking in India
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Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or
cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of
the country. This is one of the main reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with the
nationalisation of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or
for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient
bank transferred money from one branch to other in two days. Now it is simple as instant
messaging or dial a pizza. Money have become the order of the day.
The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are as
mentioned below:

 Early phase from 1786 to 1969 of Indian Banks

 Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
 New phase of Indian Banking System with the advent of Indian Financial & Banking
Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.

Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These
three banks were amalgamated in 1920 and Imperial Bank of India was established which started
as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National
Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of
India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore
were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the
functioning and activities of commercial banks, the Government of India came up with The
Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive
powers for the supervision of banking in india as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an aftermath deposit
mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department
was comparatively safer. Moreover, fundswere largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence. In 1955,
it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially
in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI
and to handle banking transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July,
1969, major process of nationalisation was carried out. It was the effort of the then Prime
Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was
nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with
seven more banks. This step brought 80% of the banking segment in India under Government
ownership. 

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

 1949 : Enactment of Banking Regulation Act.

 1955 : Nationalisation of State Bank of India.
 1959 : Nationalisation of SBI subsidiaries.
 1961 : Insurance cover extended to deposits.
 1969 : Nationalisation of 14 major banks.
 1971 : Creation of credit guarantee corporation.
 1975 : Creation of regional rural banks.
 1980 : Nationalisation of seven banks with deposits over 200 crore.
After the nationalisation of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and immense
confidence about the sustainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his
name which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone banking and net banking is introduced. The entire
system became more convenient and swift. Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisis
triggered by any external macroeconomics shock as other East Asian Countries suffered. This is
all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not
yet fully convertible, and banks and their customers have limited foreign exchange exposure.

Banks In India
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In India the banks are being segregated in different groups. Each group has their own benefits
and limitations in operating in India. Each has their own dedicated target market. Few of them
only work in rural sector while others in both rural as well as urban. Many even are only catering
in cities. Some are of Indian origin and some are foreign players.

All these details and many more is discussed over here. The banks and its relation with the
customers, their mode of operation, the names of banks under different groups and other such
useful informations are talked about.

One more section has been taken note of is the upcoming foreign banks in India. The RBI has
shown certain interest to involve more of foreign banks than the existing one recently. This step
has paved a way for few moreforeign banks to start business in India.

Click here to find location of all Bank Branches in India

Major Banks in India

 ABN-AMRO Bank  Indian Overseas Bank

 Abu Dhabi Commercial  IndusInd Bank
Bank  ING Vysya Bank
 American Express Bank  Jammu & Kashmir Bank
 Andhra Bank  JPMorgan Chase Bank
 Allahabad Bank  Karnataka Bank
 Axis Bank (Earlier UTI  Karur Vysya Bank
 Bank)  Laxmi Vilas Bank
 Bank of Baroda  Oriental Bank of
 Bank of India Commerce
 Bank of Maharastra  Punjab National Bank
 Bank of Punjab  Punjab & Sind Bank
 Bank of Rajasthan  Scotia Bank
 Bank of Ceylon  South Indian Bank
 BNP Paribas Bank  Standard Chartered Bank
 Canara Bank  State Bank of India (SBI)
 Catholic Syrian Bank  State Bank of Bikaner &
 Central Bank of India Jaipur
 Centurion Bank  State Bank of Hyderabad

 China Trust Commercial  State Bank of Indore

Bank  State Bank of Mysore
 Citi Bank  State Bank of Saurastra
 City Union Bank  State Bank of Travancore
 Corporation Bank  Syndicate Bank
 Dena Bank  Taib Bank
 Deutsche Bank  UCO Bank
 Development Credit Bank  Union Bank of India
 Dhanalakshmi Bank  United Bank of India
 Federal Bank  United Western Bank
 HDFC Bank  Vijaya Bank
 HSBC  Kotak Mahindra Bank
 ICICI Bank  Yes Bank
 IDBI Bank
 Indian Bank
Banking services in India
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With years, banks are also adding services to their customers. The Indian banking industry is

passing through a phase of customers market. The customers have more choices in choosing
their banks. A competition has been established within the banks operating in India.

With stiff competition and advancement of technology, the services provided by banks has
become more easy and convenient. The past days are witness to an hour wait before withdrawing
cash from accounts or a cheque from north of the country being cleared in one month in the
south.

This section of banking deals with the latest discovery in the banking instruments along with the
polished version of their old systems. 

Financial and Banking Sector Reforms

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The last decade witnessed the maturity of India's financial markets. Since 1991, every
governments of India took major steps in reforming the financial sector of the country. The
important achievements in the following fields is discussed under serparate heads: 

 Financial markets
 Regulators
 The banking system
 Non-banking finance companies
 The capital market
 Mutual funds
 Overall approach to reforms
 Deregulation of banking system
 Capital market developments
 Consolidation imperative

Now let us discuss each segment seperately.

Financial Markets

In the last decade, Private Sector Institutions played an important role. They grew rapidly in
commercial banking and asset management business. With the openings in the insurance sector
for these institutions, they started making debt in the market.
Competition among financial intermediaries gradually helped the interest rates to decline.
Deregulation added to it. The real interest rate was maintained. The borrowers did not pay high
price while depositors had incentives to save. It was something between the nominal rate of
interest and the expected rate of inflation. 

Regulators

The Finance Ministry continuously formulated major policies in the field of financial sector of
the country. The Government accepted the important role of regulators. The Reserve Bank of
India (RBI) has become more independant. Securities and Exchange Board of India (SEBI) and
the Insurance Regulatory and Development Authority (IRDA) became important institutions.
Opinions are also there that there should be a super-regulator for the financial services sector
instead of multiplicity of regulators.

The banking system

Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are still
dominating the commercial banking system. Shares of the leading PSBs are already listed on the
stock exchanges.

The RBI has given licences to new private sector banks as part of the liberalisation process. The
RBI has also been granting licences to industrial houses. Many banks are successfully running in
the retail and consumer segments but are yet to deliver services to industrial finance, retail trade,
small business and agricultural finance.

The PSBs will play an important role in the industry due to its number of branches and foreign
banks facing the constrait of limited number of branches. Hence, in order to achieve an efficient
banking system, the onus is on the Government to encourage the PSBs to be run on professional
lines.
Development finance institutions

FIs's access to SLR funds reduced. Now they have to approach the capital market for debt and
equity funds. 

Convertibility clause no longer obligatory for assistance to corporates sanctioned by term-

lending institutions. 

Capital adequacy norms extended to financial institutions. 

DFIs such as IDBI and ICICI have entered other segments of financial services such as
commercial banking, asset management and insurance through separate ventures. The move to
universal banking has started.

Non-banking finance companies

In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net
owned funds, has been raised to Rs.2 crores. 

Until recently, the money market in India was narrow and circumscribed by tight regulations
over interest rates and participants. The secondary market was underdeveloped and lacked
liquidity. Several measures have been initiated and include new money market instruments,
strengthening of existing instruments and setting up of the Discount and Finance House of India
(DFHI). 

The RBI conducts its sales of dated securities and treasury bills through its open market
operations (OMO) window. Primary dealers bid for these securities and also trade in them. The
DFHI is the principal agency for developing a secondary market for money market instruments
and Government of India treasury bills. The RBI has introduced a liquidity adjustment facility
(LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out
through repo auctions. 
On account of the substantial issue of government debt, the gilt- edged market occupies an
important position in the financial set- up. The Securities Trading Corporation of India (STCI),
which started operations in June 1994 has a mandate to develop the secondary market in
government securities. 

Long-term debt market: The development of a long-term debt market is crucial to the financing
of infrastructure. After bringing some order to the equity market, the SEBI has now decided to
concentrate on the development of the debt market. Stamp duty is being withdrawn at the time of
dematerialisation of debt instruments in order to encourage paperless trading. 

The capital market 

The number of shareholders in India is estimated at 25 million. However, only an estimated two
lakh persons actively trade in stocks. There has been a dramatic improvement in the country's
stock market trading infrastructure during the last few years. Expectations are that India will be
an attractive emerging market with tremendous potential. Unfortunately, during recent times the
stock markets have been constrained by some unsavoury developments, which has led to retail
investors deserting the stock markets. 

Mutual funds 

The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996
and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework for
the establishment of many more players, both Indian and foreign players. 

The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly
Rs.70,000 crores, but its share is going down. The biggest shock to the mutual fund industry
during recent times was the insecurity generated in the minds of investors regarding the US 64
scheme. With the growth in the securities markets and tax advantages granted for investment in
mutual fund units, mutual funds started becoming popular. 
The foreign owned AMCs are the ones which are now setting the pace for the industry. They are
introducing new products, setting new standards of customer service, improving disclosure
standards and experimenting with new types of distribution. 

The insurance industry is the latest to be thrown open to competition from the private sector
including foreign players. Foreign companies can only enter joint ventures with Indian
companies, with participation restricted to 26 per cent of equity. It is too early to conclude
whether the erstwhile public sector monopolies will successfully be able to face up to the
competition posed by the new players, but it can be expected that the customer will gain from
improved service. 

The new players will need to bring in innovative products as well as fresh ideas on marketing
and distribution, in order to improve the low per capita insurance coverage. Good regulation will,
of course, be essential. 

Overall approach to reforms

The last ten years have seen major improvements in the working of various financial market
participants. The government and the regulatory authorities have followed a step-by-step
approach, not a big bang one. The entry of foreign players has assisted in the introduction of
international practices and systems. Technology developments have improved customer service.
Some gaps however remain (for example: lack of an inter-bank interest rate benchmark, an
active corporate debt market and a developed derivatives market). On the whole, the cumulative
effect of the developments since 1991 has been quite encouraging. An indication of the strength
of the reformed Indian financial system can be seen from the way India was not affected by the
Southeast Asian crisis. 

However, financial liberalisation alone will not ensure stable economic growth. Some tough
decisions still need to be taken. Without fiscal control, financial stability cannot be ensured. The
fate of the Fiscal Responsibility Bill remains unknown and high fiscal deficits continue. In the
case of financial institutions, the political and legal structures hve to ensure that borrowers repay
on time the loans they have taken. The phenomenon of rich industrialists and bankrupt
companies continues. Further, frauds cannot be totally prevented, even with the best of
regulation. However, punishment has to follow crime, which is often not the case in India. 

Deregulation of banking system

Prudential norms were introduced for income recognition, asset classification, provisioning for
delinquent loans and for capital adequacy. In order to reach the stipulated capital adequacy
norms, substantial capital were provided by the Government to PSBs. 

Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash
reserve ratio (CRR) brought down in steps. Interest rates on the deposits and lending sides almost
entirely were deregulated. 

New private sector banks allowed to promote and encourage competition. PSBs were encouraged
to approach the public for raising resources. Recovery of debts due to banks and the Financial
Institutions Act, 1993 was passed, and special recovery tribunals set up to facilitate quicker
recovery of loan arrears. 

Bank lending norms liberalised and a loan system to ensure better control over credit introduced.
Banks asked to set up asset liability management (ALM) systems. RBI guidelines issued for risk
management systems in banks encompassing credit, market and operational risks. 

A credit information bureau being established to identify bad risks. Derivative products such as
forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced. 

Capital market developments 

The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were
abolished and the initial share pricing were decontrolled. SEBI, the capital market regulator was
established in 1992. 

Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after
registration with the SEBI. Indian companies were permitted to access international capital
markets through euro issues. 

The National Stock Exchange (NSE), with nationwide stock trading and electronic display,
clearing and settlement facilities was established. Several local stock exchanges changed over
from floor based trading to screen based trading. 

Private mutual funds permitted

The Depositories Act had given a legal framework for the establishment of depositories to record
ownership deals in book entry form. Dematerialisation of stocks encouraged paperless trading.
Companies were required to disclose all material facts and specific risk factors associated with
their projects while making public issues. 

To reduce the cost of issue, underwriting by the issuer were made optional, subject to conditions.
The practice of making preferential allotment of shares at prices unrelated to the prevailing
market prices stopped and fresh guidelines were issued by SEBI. 

SEBI reconstituted governing boards of the stock exchanges, introduced capital adequacy norms
for brokers, and made rules for making client or broker relationship more transparent which
included separation of client and broker accounts. 

Buy back of shares allowed

The SEBI started insisting on greater corporate disclosures. Steps were taken to improve
corporate governance based on the report of a committee. 

SEBI issued detailed employee stock option scheme and employee stock purchase scheme for
listed companies. 

Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given
the freedom to issue dematerialised shares in any denomination. 

Derivatives trading starts with index options and futures. A system of rolling settlements
introduced. SEBI empowered to register and regulate venture capital funds. 

The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating
agencies as well as introducing a code of conduct for all credit rating agencies operating in
India. 

Consolidation imperative 

Another aspect of the financial sector reforms in India is the consolidation of existing institutions
which is especially applicable to the commercial banks. In India the banks are in huge quantity.
First, there is no need for 27 PSBs with branches all over India. A number of them can be
merged. The merger of Punjab National Bank and New Bank of India was a difficult one, but the
situation is different now. No one expected so many employees to take voluntary retirement from
PSBs, which at one time were much sought after jobs. Private sector banks will be self
consolidated while co-operative and rural banks will be encouraged for consolidation, and
anyway play only a niche role. 

In the case of insurance, the Life Insurance Corporation of India is a behemoth, while the four
public sector general insurance companies will probably move towards consolidation with a bit
of nudging. The UTI is yet again a big institution, even though facing difficult times, and most
other public sector players are already exiting the mutual fund business. There are a number of
small mutual fund players in the private sector, but the business being comparatively new for the
private players, it will take some time.

We finally come to convergence in the financial sector, the new buzzword internationally. Hi-
tech and the need to meet increasing consumer needs is encouraging convergence, even though it
has not always been a success till date. In India organisations such as IDBI, ICICI, HDFC and
SBI are already trying to offer various services to the customer under one umbrella. This
phenomenon is expected to grow rapidly in the coming years. Where mergers may not be
possible, alliances between organisations may be effective. Various forms of bancassurance are
being introduced, with the RBI having already come out with detailed guidelines for entry of
banks into insurance. The LIC has bought into Corporation Bank in order to spread its insurance
distribution network. Both banks andinsurance companies have started entering
the asset management business, as there is a great deal of synergy among these businesses. The
pensions market is expected to open up fresh opportunities for insurancecompanies and mutual
funds. 

It is not possible to play the role of the Oracle of Delphi when a vast nation like India is
involved. However, a few trends are evident, and the coming decade should be as interesting as
the last one.

Reserve Bank of India (RBI)

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Kindly Take Note : Reserve Bank of India (RBI) is the central bank of the country and is
different from Central Bank of India. 

RBI Governor announces Mid-term Review of Annual Policy for 2006-07

The central bank of the country is the Reserve Bank of India (RBI). It was established in April
1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton
Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which
was entirely owned by private shareholders in the begining. The Government held shares of
nominal value of Rs. 2,20,000.

Reserve Bank of India was nationalised in the year 1949. The general superintendence and
direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor
and four Deputy Governors, one Government official from the Ministry of Finance, ten
nominated Directors by the Government to give representation to important elements in the
economic life of the country, and four nominated Directors by the Central Government to
represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New
Delhi. Local Boards consist of five members each Central Government appointed for a term of
four years to represent territorial and economic interests and the interests of co-operative and
indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of
1934) provides the statutory basis of the functioning of the Bank.

The Bank was constituted for the need of following:

 To regulate the issue of banknotes

 To maintain reserves with a view to securing monetary stability and
 To operate the credit and currency system of the country to its advantage.
Functions of Reserve Bank of India 

The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the
Reserve Bank of India. 

Bank of Issue

Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank
notes of all denominations. The distribution of one rupee notes and coins and small coins all over
the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank
has a separate Issue Department which is entrusted with the issue of currency notes. The assets
and liabilities of the Issue Department are kept separate from those of the Banking Department.
Originally, the assets of the Issue Department were to consist of not less than two-fifths of gold
coin, gold bullion or sterling securities provided the amount of gold was not less than Rs. 40
crores in value. The remaining three-fifths of the assets might be held in rupee coins,
Government of India rupee securities, eligible bills of exchange and promissory notes payable in
India. Due to the exigencies of the Second World War and the post-was period, these provisions
were considerably modified. Since 1957, the Reserve Bank of India is required to maintain gold
and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores should be in
gold. The system as it exists today is known as the minimum reserve system. 

Banker to Government

The second important function of the Reserve Bank of India is to act as Government banker,
agent and adviser. The Reserve Bank is agent of Central Government and of all State
Governments in India excepting that of Jammu and Kashmir. The Reserve Bank has the
obligation to transact Government business, via. to keep the cash balances as deposits free of
interest, to receive and to make payments on behalf of the Government and to carry out their
exchange remittances and other banking operations. The Reserve Bank of India helps the
Government - both the Union and the States to float new loans and to manage public debt. The
Bank makes ways and means advances to the Governments for 90 days. It makes loans and
advances to the States and local authorities. It acts as adviser to the Government on all monetary
and banking matters.

Bankers' Bank and Lender of the Last Resort

The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking
Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a
cash balance equivalent to 5% of its demand liabilites and 2 per cent of its time liabilities in
India. By an amendment of 1962, the distinction between demand and time liabilities was
abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate
deposit liabilities. The minimum cash requirements can be changed by the Reserve Bank of
India.

The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible
securities or get financial accommodation in times of need or stringency by rediscounting bills of
exchange. Since commercial banks can always expect the Reserve Bank of India to come to their
help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the
lender of the last resort.

Controller of Credit

The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume
of credit created by banks in India. It can do so through changing the Bank rate or through open
market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India
can ask any particular bank or the whole banking system not to lend to particular groups or
persons on the basis of certain types of securities. Since 1956, selective controls of credit are
increasingly being used by the Reserve Bank.

The Reserve Bank of India is armed with many more powers to control the
Indian money market. Every bank has to get a licence from the Reserve Bank of India to do
banking business within India, the licence can be cancelled by the Reserve Bank of certain
stipulated conditions are not fulfilled. Every bank will have to get the permission of the Reserve
Bank before it can open a new branch. Each scheduled bank must send a weekly return to the
Reserve Bank showing, in detail, its assets and liabilities. This power of the Bank to call for
information is also intended to give it effective control of the credit system. The Reserve Bank
has also the power to inspect the accounts of any commercial bank. 

As supereme banking authority in the country, the Reserve Bank of India, therefore, has the
following powers:
(a) It holds the cash reserves of all the scheduled banks. 

(b) It controls the credit operations of banks through quantitative and qualitative controls. 

(c) It controls the banking system through the system of licensing, inspection and calling for
information. 

(d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.

Custodian of Foreign Reserves

The Reserve Bank of India has the responsibility to maintain the official rate of exchange.
According to the Reserve Bank of India Act of 1934, the Bank was required to buy and sell at
fixed rates any amount of sterling in lots of not less than Rs. 10,000. The rate of exchange fixed
was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange rate fixed at lsh.6d.
though there were periods of extreme pressure in favour of or against

the rupee. After India became a member of the International Monetary Fund in 1946, the Reserve
Bank has the responsibility of maintaining fixed exchange rates with all other member countries
of the I.M.F.

Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the
custodian of India's reserve of international currencies. The vast sterling balances were acquired
and managed by the Bank. Further, the RBI has the responsibility of administering the exchange
controls of the country.

Supervisory functions

In addition to its traditional central banking functions, the Reserve bank has certain non-
monetary functions of the nature of supervision of banks and promotion of sound banking in
India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI
wide powers of supervision and control over commercial and co-operative banks, relating to
licensing and establishments, branch expansion, liquidity of their assets, management and
methods of working, amalgamation, reconstruction, and liquidation. The RBI is authorised to
carry out periodical inspections of the banks and to call for returns and necessary information
from them. The nationalisation of 14 major Indian scheduled banks in July 1969 has imposed
new responsibilities on the RBI for directing the growth of banking and credit policies towards
more rapid development of the economy and realisation of certain desired social objectives. The
supervisory functions of the RBI have helped a great deal in improving the standard of banking
in India to develop on sound lines and to improve the methods of their operation.

Promotional functions

With economic growth assuming a new urgency since Independence, the range of the Reserve
Bank's functions has steadily widened. The Bank now performs a varietyof developmental and
promotional functions, which, at one time, were regarded as outside the normal scope of central
banking. The Reserve Bank was asked to promote banking habit, extend banking facilities to
rural and semi-urban areas, and establish and promote new specialised financing agencies.
Accordingly, the Reserve Bank has helped in the setting up of the IFCI and the SFC; it set up the
Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964, the Industrial
Development Bank of India also in 1964, the Agricultural Refinance Corporation of India in
1963 and the Industrial Reconstruction Corporation of India in 1972. These institutions were set
up directly or indirectly by the Reserve Bank to promote saving habit and to mobilise savings,
and to provide industrial finance as well as agricultural finance. As far back as 1935, the Reserve
Bank of India set up the Agricultural Credit Department to provide agricultural credit. But only
since 1951 the Bank's role in this field has become extremely important. The Bank has developed
the co-operative credit movement to encourage saving, to eliminate moneylenders from the
villages and to route its short term credit to agriculture. The RBI has set up the Agricultural
Refinance and Development Corporation to provide long-term finance to farmers.

Classification of RBIs functions

The monetary functions also known as the central banking functions of the RBI are related to
control and regulation of money and credit, i.e., issue of currency, control of bank credit, control
of foreign exchange operations, banker to the Government and to the money market. Monetary
functions of the RBI are significant as they control and regulate the volume of money and credit
in the country.

Equally important, however, are the non-monetary functions of the RBI in the context of India's
economic backwardness. The supervisory function of the RBI may be regarded as a non-
monetary function (though many consider this a monetary function). The promotion of sound
banking in India is an important goal of the RBI, the RBI has been given wide and drastic
powers, under the Banking Regulation Act of 1949 - these powers relate to licencing of banks,
branch expansion, liquidity of their assets, management and methods of working, inspection,
amalgamation, reconstruction and liquidation. Under the RBI's supervision and inspection, the
working of banks has greatly improved. Commercial banks have developed into financially and
operationally sound and viable units. The RBI's powers of supervision have now been extended
to non-banking financial intermediaries. Since independence, particularly after its nationalisation
1949, the RBI has followed the promotional functions vigorously and has been responsible for
strong financial support to industrial and agricultural development in the country.

RESERVE BANK OF INDIA ADDRESS

Reserve Bank of India,
Central Office,
Shaheed Bhagat Singh Road,
Mumbai - 400 001.

Website of Reserve Bank of India

www.rbi.org.in

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banking secctor will be at a finger tip. Now its possible. A mobile hand set with a connection is
the only instrument needed to make a gateway to your banking transaction, the latest innovation
of technology.

Apart from the Mobile Banking, including of SMS Banking, Net Banking and ATMs are the
major steps taken by thebanks in India towards modernisation. With all these devises and
systems, there is a complete freedom to experience.

Check your account, transfer your fund, make payments and what more, do anything of
everything what has been followed in physical banking since ages. But this time no standing for
hours in front of cash counter and no time boundation in withdrawing your own money.

Banking Services for NRIs in India

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Almost all the Indian Banks provide services to the NRIs. There are different types of accounts
for them. They are:

 Non-Resident (Ordinary) Account - NRO A/c

 Non-Resident (External) Rupee Account - NRE A/c
 Non-Resident (Foreign Currency) Account - FCNR A/c

An Indian resident who is earning forign exchange can also maintain Foreign Currency account
in the country with an authorised dealer bank but only to the maximum limit of 50% of such
foreign exchange earnings under the Exchange Earners Foreign Currency Account (EEFC)
Scheme.
Some of the FAQs given below will make it easy to understand the services provided by banks to
the NRIs.

FAQ for NRIs

a. What are the special features of each bank account?

b. Can Non Resident accounts be opened/ operated by the Power of Attorney holder in
India, on behalf of the non-resident?

c. What happens to the status of these accounts when the non-resident holder becomes a
person, resident in India?

d. What are the various facilities available to NRIs/OCBs?

e. Are NRIs permitted to send remittances outside India out of the assets in India that are
inherited by them?

f. Can a person of Indian origin acquire any immovable property in India by way of
inheritance?

g. Can NRIs and Overseas Corporate Bodies (OCBs) invest in India?

h. What is the extent and application of Foreign Exchange Management Act (FEMA)?

i. What is the penalty for contravention of FEMA?

j. Can a person of Indian origin resident outside India gift properties acquired earlier in
terms of the provisions of FERA/FEMA?

k. Can an NRI account be opened in the name of crew members of shipping companies?

a. What are the special features of each bank account? 

The special features are as under:

NRO A/c.: The funds, credited to this account, cannot be repatriated outside India in

foreign exchange, without prior permission of the Reserve Bank of India. Interest, earned
is eligible for repatriation outside India, net of Indian taxes. The remittance of interest
(net of taxes) will be permitted by the authorised dealer who maintains the account, if the
account holder makes an application to the authorised dealer, in the prescribed form. No
RBI permission is required for remittance of interest.

NRE A/c.: The funds, standing to the credit of this account, as well as interest earned
thereon, are remittable outside India in free foreign exchange, without permission of the
RBI. The interest income is not subject to Indian Income-tax. Credits to the accounts
should be in the form of remittance in foreign exchange from outside India, as well as
other funds, which are eligible to be remitted outside India, in free foreign exchange.
Funds, emanating from local sources, are not eligible to be credited to these accounts,
unless these funds are otherwise remittable outside India, in terms of the existing
Exchange Control Regulations.

FCNR A/c.: These accounts can be opened in four foreign currencies:

o Pounds Sterling;
o US Dollars;
o Japanese Yen;
o Euro.

For the purpose of opening an account, remittance in foreign exchange, in the same
currency, should be received in India. The accounts can be opened only as fixed deposits,
with a minimum maturity of one year and, a maximum maturity of three years. The
principal, as well as interest, earned on these accounts, is remittable outside India, in the
same currency or, in other convertible currency, as desired by the account holder. The
interest, earned on these deposits, is exempt from Indian Income-tax.
b. Can Non Resident accounts be opened/ operated by the Power of Attorney holder in
India, on behalf of the non-resident?

The accounts cannot be opened by the Power of Attorney holder in India. However, the
latter can operate the accounts for the purpose of local payments to be made on behalf of
the non-resident account holder. The Power of Attorney holder is not permitted to make
gifts from these accounts and, is not allowed to make remittances outside India.

c. What happens to the status of these accounts when the non-resident holder becomes
a person, resident in India?

The accounts are to be re-designed as resident accounts, when the non-resident account
holder becomes a person, resident in India. In the case of fixed deposits opened by the
account holder, before becoming resident in India, the contracted rate of interest will be
paid till maturity of the deposits. Similarly, FCNR deposits will be eligible to be held in
respective currencies till maturity of the deposits, even after the non-resident holder
become a resident in India. He will, however, cease to get tax exemption on interest on
the erstwhile deposits (NRE/FCNR deposits), after he becomes resident in India. In
certain situations, it might be advisable for the account holder to convert the account to a
Resident Foreign Currency Account Deposit (RFC)

d. What are the various facilities available to NRIs/OCBs?

The facilities available to NRIs/OCBs for making investment in India are as follows:
o opening and maintenance of bank accounts in India;

o investment in shares and securities of Indian companies, government securities,

units of domestic mutual funds and ,deposits with Indian companies/firms;

o investment in immovable properties in India;

o investment in proprietorship/partnership concerns in India.

e. Are NRIs permitted to send remittances outside India out of the assets in India that
are inherited by them? 

Yes. RBI will consider application from NRIs for remittance of assets, inherited by them
in India. Such remittance may be permitted up to US$ 100,000 per year.

f. Can a person of Indian origin acquire any immovable property in India by way of
inheritance? 

A person of Indian origin, resident outside India, may acquire any immovable property in
India by way of inheritance from a person, resident outside India, who had acquired such
property in accordance with the provisions of foreign exchange law in force at the time of
acquisition by him or the provisions of Foreign Exchange Management (Acquisition and
Transfer of Immovable Property in India) Regulations, 2000. Immovable property, by
way of inheritance, can also be acquired by a person of Indian origin resident outside
from a person resident in India.

g. Can NRIs and Overseas Corporate Bodies (OCBs) invest in India? 

The Government of India has adopted a liberal policy, with respect to investments by
NRIs and OCBs in India. Such investments are allowed, both, through the RBI route and
also through the Government route, i.e., through the Foreign Investment Promotion
Board (FIPB) NRIs and OCBs are permitted to invest up to 100% equity in real estate
development activity and civil aviation sectors. Investment, made by the NRIs and OCBs,
are fully repatriable, except in the case of real estate, which has a 3 year lock-in period on
original investment and, 16% cap on dividend repatriation. For those proposals that do
not qualify under the automatic route, Government approval is granted through FIPB.

h. What is the extent and application of Foreign Exchange Management Act (FEMA)?

FEMA extends to the whole of India. It also applies to all branches, offices and agencies
 outside India, owned or controlled by a person, resident in India. It also applies to any
contravention, there under, committed in or, outside India, by any person to whom the
Act applies.

i. What is the penalty for contravention of FEMA?

Any person, contravening FEMA, shall be liable, upon adjudication, to a penalty up to

three times the sum involved in such contravention, where such amount is quantifiable, or
up to Rupees Two hundred thousand, where the amount is not quantifiable. In addition,
where such contravention is a continuing one, the person will be liable to further penalty,
which may extend to Rupees Five thousand for every day after the first day, during which
the contravention continues.

j. Can a person of Indian origin resident outside India gift properties acquired earlier
in terms of the provisions of FERA/FEMA?

Yes. A person of Indian origin resident outside India may transfer residential or
commercial property in India by way of gift to a person resident in India or to a person
resident outside India who is a citizen of India or to a person of Indian origin resident
outside India. A Person of Indian origin resident outside India may also transfer by way
of gift agriculture land/farm house/plantation property in India to a person resident in
India who is a citizen of India.

k. Can an NRI account be opened in the name of crew members of shipping

companies?

Yes, if their posting is not based in India and they derive their income from other country
in foreign currency.
Proxy Banking in India
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Indian villages were miles away from mutual funds, insurance and even equity trading. Thanks
to Internet Kiosk and the ATM duo which has made it possible for rural India. This kiosk has
been set up by ICICI Bank in partnership with network n-Logue Communications in remote
villages of Southern part of the country. This is known as Proxi Banking. With the help of fibre
optic cables, this kiosk works on wireless in local loop technology.

Reasons for setting-up of Proxi Banking

 58% of rural households still do not have bank accounts.

 Only 21% of rural households have access to credit from a formal source.

 70% of marginal farmers do not have deposit account.

 87% households have no formal credit.

  Only 1% rural househlods rely on a loan from a financial intermediary. · The loans take
between 24 to 33 weeks to get sanctioned.

 Consumers bribe officials to get loans approved which varies between 10 and 20 per cent
of the loan amount.

 Branch banking in rurals is a loss-making.

Benefits to rurals

 Small loans given for buying buffaloes.

 Loans for setting up a tea shop.
 Life and non-life insurance provided.
 Weather insurance given to farmers.
 Insurance policies sold to farmers like groundnut, castor, soya, paddy crop, etc.

The Proxy Banking is an innovative approach to rural lending and will add to the government's
expanding base of kisan credit cards and the good old guidelines for agricultural lending.

Fact Files of Banks in India

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The first, the oldest, the largest, the biggest, get all such types of informations about Banking in
India in this section.

The first bank in India to be given an ISO Certification Canara Bank

The first bank in Northern India to get ISO 9002 certification for their
Punjab and Sind Bank
selected branches
The first Indian bank to have been started solely with Indian capital Punjab National Bank
The first among the private sector banks in Kerala to become a
South Indian Bank
scheduled bank in 1946 under the RBI Act
India's oldest, largest and most successful commercial bank, offering
the widest possible range of domestic, international and NRI products State Bank of India
and services, through its vast network in India and overseas
India's second largest private sector bank and is now the largest The Federal Bank
scheduled commercial bank in India Limited
Bank which started as private shareholders banks, mostly Europeans
Imperial Bank of India
shareholders
The first Indian bank to open a branch outside India in London in 1946 Bank of India, founded
and the first to open a branch in continental Europe at Paris in 1974 in 1906 in Mumbai
The oldest Public Sector Bank in India having branches all over India
Allahabad Bank
and serving the customers for the last 132 years
The first Indian commercial bank which was wholly owned and
Central Bank of India
managed by Indians
Bank of India was founded in 1906 in Mumbai. It became the first Indian bank to open a branch
outside India in London in 1946 and the first to open a branch in continental Europe at Paris in
1974.

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Credit cards in India is gaining ground. A number of banks in India are encouraging people to
use credit card. The concept of credit card was used in 1950 with the launch of charge cards in
USA by Diners Club and American Express. Credit card however became more popular with use
of magnetic strip in 1970.

Credit card in India became popular with the introduction of foreign banks in the country. 

Credit cards are financial instruments, which can be used more than once to borrow money or
buy products and services on credit. Basically banks, retail stores and other businesses issue
these. 
Major Banks issuing Credit Card in India

 State Bank of India credit card (SBI credit card)

 Bank of Baroda credit card or BoB credit card
 ICICI credit card
 HDFC credit card
 IDBI credit card
 ABN AMRO credit card
 Standard Chartered credit card
 HSBC credit card
 Citibank Credit Card

Precautions taken after receiving credit card

To Avoid: 

 Bending the Card.

 Exposure to electronic devices and gadgets.

 Direct exposure to sunlight.

 Be cautious about disclosing your account number over the phone unless you know
you're dealing with a reputable company.

 Never put your account number on the outside of an envelope or on a postcard.

 Draw a line through blank spaces on charge or debit slips above the total so the amount
cannot be changed.

 Don't sign a blank charge or debit slip.

 Tear up carbons and save your receipts to check against your monthly statements.
  Cut up old cards - cutting through the account number - before disposing of them.

 Open monthly statements promptly and compare them with your receipts. Report
mistakes or discrepancies as soon as possible to the special address listed on your
statement for inquiries. Under the FCBA (credit cards) and the EFTA (ATM or debit
cards), the card issuer must investigate errors reported to them within 60 days of the date
your statement was mailed to you.

 Keep a record - in a safe place separate from your cards - of your account numbers,
expiration dates, and the telephone numbers of each card issuer so you can report a loss
quickly.

 Carry only those cards that you anticipate you'll need.

To Do:

 Please sign on the signature panel on the reverse of the Card immediately with a non-
erasable ball-point pen (preferably in black ink). This will ensure that the benefits of
membership are yours and yours alone.

 Keep the Card in a prominent place in your wallet. You will notice if it is missing.

Reasons credit card being rejected at retail outlet:

 One may have exceeded the borrowing limit or defaulted (constantly) on minimum
payment due.

 The Card is hotlisted.

 The card has crossed its expiration date.

 Non-receipt of dues of one-card blocks future transactions on any other card(s) held of
the same card-issuing bank.
  The magnetic stripe on the reverse of the card is damaged i.e. has been scratched or
exposed to continuous heat/direct sunlight or magnetic field-like card kept near a TV set /
other electronic appliances.

 Systems or technology failures have in rare instances also led to non acceptance of cards
when swiped through an Electronic Terminal.

Global player in credit card market

MasterCard

MasterCard is a product of MasterCard International and along with VISA are distributed by
financial institutions around the world. Cardholders borrow money against a line of credit and
pay it back with interest if the balance is carried over from month to month. Its products are
issued by 23,000 financial institutions in 220 countries and territories. In 1998, it had almost 700
million cards in circulation, whose users spent $650 billion in more than 16.2 million locations.

VISA Card

VISA cards is a product of VISA USA and along with MasterCard is distributed by financial
institutions around the world. A VISA cardholder borrows money against a credit line and repays
the money with interest if the balance is carried over from month to month in a revolving line of
credit. Nearly 600 million cards carry one of the VISA brands and more than 14 million
locations accept VISA cards.

American Express

The world's favorite card is American Express Credit Card. More than 57 million cards are in
circulation and growing and it is still growing further. Around US $ 123 billion was spent last
year through American Express Cards and it is poised to be the world's No. 1 card in the near
future. In a regressive US economy last year, the total amount spent on American Express cards
rose by 4 percent. American Express cards are very popular in the U.S., Canada, Europe and
Asia and are used widely in the retail and everyday expenses segment. 

Diners Club International

Diners Club is the world's No. 1 Charge Card. Diners Club cardholders reside all over the world
and the Diners Card is a alltime favourite for corporates. There are more than 8 million Diners
Club cardholders. They are affluent and are frequent travelers in premier businesses and
institutions, including Fortune 500 companies and leading global corporations.

JCB Cards

The JCB Card has a merchant network of 10.93 million in approximately 189 countries. It is
supported by over 320 financial institutions worldwide and serves more than 48 million
cardholders in eighteen countries world wide. The JCB philosophy of "identify the customer's
needs and please the customer with Service from the Heart" is paying rich dividends as their
customers spend US$43 billion annually on their JCB cards.

Grace / Interest Free Period

The number of days you have on a card before a card issuer starts charging you interest is called
grace period. Usually this period is the number of days between the statement date and the due
date of payment. Grace periods on credit cards are usually 2-3 weeks. However, there is likely to
be no grace for balances carried forward from previous month and fresh purchases thereafter if
any.

The following are some of the varieties of credit cards in India

 ANZ - Gold
 ANZ - Silver
 Bank Of India - Indiacard
 Bol - Taj Premium
 Bol - Gold
 BoB - Exclusive
 BoB - Premium
 Canara Bank - Cancard
 Citibank - Gold
 Citibank - Silver
 Citibank WWF Card
 Citibank Visa Card for Women
 Citibank Cry Card
 Citibank Silver International Credit Card
 Citibank Women's International Credit Card
 Citibank Gold International Credit Card
 Citibank Electronic Credit Card
 Citibank Maruti International Credit Card
 Citibank Times Card
 Citibank Indian Oil International Credit Card
 Citibank Citi Diners Club Card
 HSBC - Gold
 HSBC - Classic
 ICICI Sterling Silver Credit Card
 ICICI Solid Gold Credit Card
 ICICI True Blue Credit Card
 SBI Card
 Stanchart - Gold
 Stanchart - Executive
 Stanchart - Classic
 Thomas Cook Standard Chartered Global Credit Card
Standard segregation of credit cards

 Standard Card - It is the most basic card (sans all frills) offered by issuers.

 Classic Card - Brand name for the standard card issued by VISA.

 Gold Card/Executive Card - A credit card that offers a higher line of credit than a
standard card. Income eligibility is also higher. In addition, issuers provide extra perks or
incentives to cardholders.

 Platinum Card - A credit card with a higher limit and additional perks than a gold card.

 Titanium Card - A card with an even higher limit than a platinum card.

The following are some of the plus features of credit card in India

 Hotel discounts
 Travel fare discounts
 Free global calling card
 Lost baggage insurance
 Accident insurance
 Insurance on goods purchased
 Waiver of payment in case of accidental death
 Household insurance 

Some facts of credit cards

 The first card was issued in India by Visa in 1981.

 The country's first Gold Card was also issued from Visa in 1986.
  The first international credit card was issued to a restricted number of customers by
Andhra Bank in 1987 through the Visa program, after getting special permission from the
Reserve Bank of India.

 The credit cards are shape and size, as specified by the ISO 7810 standard. It is generally
of plastic quality. It is also sometimes known as Plastic Money.

FAQs

 What does Grace / Interest Free Period Mean?

 What is implied in Cash Advance?

 How to make payments from Dubai to the already existing Citibank cards in India. How
to avail of the statements to know the current bank balance of each card. Is online facility
available?

 Can I use my Global credit card on the net to pay some US company for web hosting
charges? or I have to obtain permission from RBI. If any permissions are needed, How to
get them?

 How will I know if my Credit Card application has got approved?

 How will I know if my Credit Card application has got declined?

 What to do if Credit Card is Lost or Stolen?

What does Grace / Interest Free Period Mean?

The number of days given to you on your card before the card issuer starts charging you interest
is called grace period. Generally the grace period is the number of days between the statement
date and the due date of payment. Grace periods on credit cards are usually 2-3 weeks. However,
there is likely to be no grace for balances carried forward from previous month and fresh
purchases thereafter if any.
What is implied in Cash Advance?
cash advances on Credit Cards are convenient and the easiest facility to utilise. Manority of the
banks in India charge a transaction fee as well as service fee / interest charge on cash advances.
This service fee accrues from the date of the advance (as soon as you receive the cash) to the
date of full payment. The charges varies from banks to banks. Cash advance facility is a part of
the overall credit limit assigned to a cardholder. The limit is of cash acvance is always lesser than
the borrowing limit or the credit limit.

How to make payments from Dubai to the already existing Citibank cards in India. How to
avail of the statements to know the current bank balance of each card. Is online facility
available?
According to RBI " Resident Indians may be nominated as additional/add-on card holders by
non-residents. However, the non-residents from their foreign currency funds should meet claims
arising out of use of such cards by residents only.In cases where the cards have been arranged by
NRIs these liabilities may be met out of NRE/FCNR accounts in India also. Under no
circumstances will any remittance be allowed by residents from India to settle their claims
against use of such additional/add-on cards". NRIs get rupee credit cards which are valid for use
in India, Nepal and Bhutan.

Can I use my Global credit card on the net to pay some US company for web hosting
charges? or I have to obtain permission from RBI. If any permissions are needed, How to
get them?
The RBI's exchange control manual mentions that 'International Credit Cards' can be used for
"Registration of Internet domain name, hosting charges for website/home pages overseas and
access fees for Internet related services through website". Before using your Global Credit Card
on the net for web hosting charges, you further clarify the aforesaid issue or seek permission
from your card issuer. Even get in touch with the card issuing bank or organisation directly for
such clarifications.

How will I know if my Credit Card application has got approved?

It is suggested to give your mobile number and e-mail id at the time of application for the Credit
Card. This will help the issuer to intimate you either through SMS or through e-mail with the
approved status of your application. You will also receive a letter by post informing you of the
Card approval. You should be receiving your Card around the same time as the approval letter. 

How will I know if my Credit Card application has got declined?

You will receive a letter from the Bank even if your application for Card is not approved. If in
case there is a further information of missing documents, you will be sent a letter asking for the
same. Then you need to fulfil with the documents to the specified address.

What to do if Credit Card is Lost or Stolen?

Report the loss or theft of your credit cards to the card issuers to the earliest through their 24-
hour helpline service. Follow up your phone calls with a letter. Include your account number,
when you noticed your card was missing, and the date you first reported the loss.

After doing these, check your homeowner's insurance policy to see if it covers your liability for
card thefts. If yes its fine otherwise change your policy to include this protection.

Before the intimation, different banks have their own limit of loss bearing by the card holder.
After the intimation, it is the bank who bears the loss if any amount is spent.

TYPES OF BANKS IN INDIA

Public Sector Banks In India

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Among the Public Sector Banks in India, United Bank of India is one of the 14 major banks
which were nationalised on July 19, 1969. Its predecessor, in the Public Sector Banks, the United
Bank of India Ltd., was formed in 1950 with the amalgamation of four banks viz.
Comilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla
Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932).

Oriental Bank of Commerce (OBC), a Governmet of India Undertaking offers Domestic, NRI
and Commercialbanking services. OBC is implementing a GRAMEEN PROJECT in Dehradun
District (UP) and Hanumangarh District (Raiasthan) disbursing small loans. This Public Secotor
Bank India has implemented 14 point action plan for strengthening of credit delivery to women
and has designated 5 branches as specialized branches for women entrepreneurs. 

The following are the list of Public Sector Banks in India

 Allahabad Bank
 Andhra Bank
 Bank of Baroda
 Bank of India
 Bank of Maharastra
 Canara Bank
 Central Bank of India
 Corporation Bank
 Dena Bank
 IDBI Bank
 Indian Bank
  Indian Overseas Bank
 Oriental Bank of Commerce
 Punjab & Sind Bank
 Punjab National Bank
 Syndicate Bank
 UCO Bank
 Union Bank of India
 United Bank of India
 Vijaya Bank

List of State Bank of India and its subsidiary, a Public Sector Banks

 State Bank of India

o State Bank of Bikaner & Jaipur
o State Bank of Hyderabad
o State Bank of Indore
o State Bank of Mysore
o State Bank of Saurastra
o State Bank of Travancore

Private Sector Banks

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Private banking in India was practiced since the begining of banking system in India. The first
private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. It is one of
the fastest growing Bank Private Sector Banks in India. IDBI ranks the tength largest
development bank in the world as Private Banks in India and has promoted a world class
institutions in India.

The first Private Bank in India to receive an in principle approval from the Reserve Bank of
India was Housing Development Finance Corporation Limited, to set up a bank in the private
sector banks in India as part of the RBI's liberalisation of the Indian Banking Industry. It was
incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and
commenced operations as Scheduled Commercial Bank in January 1995.

ING Vysya, yet another Private Bank of India was incorporated in the year 1930. Bangalore has
a pride of place for having the first branch inception in the year 1934. With successive years of
patronage and constantly setting new standards in banking, ING Vysya Bank has many credits to
its account. 

List of Private Banks in India

 Bank of Punjab
 Bank of Rajasthan
 Catholic Syrian Bank
 Centurion Bank
 City Union Bank
 Dhanalakshmi Bank
 Development Credit Bank
  Federal Bank
 HDFC Bank
 ICICI Bank
 IndusInd Bank
 ING Vysya Bank
 Jammu & Kashmir Bank
 Karnataka Bank
 Karur Vysya Bank
 Laxmi Vilas Bank
 South Indian Bank
 United Western Bank
 UTI Bank

Cooperative Banks in India

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The Co operative banks in India started functioning almost 100 years ago. The Cooperative bank
is an important constituent of the Indian Financial System, judging by the role assigned to co
operative, the expectations the co operative is supposed to fulfil, their number, and the number of
offices the cooperative bank operate. Though the co operative movement originated in the West,
but the importance of such banks have assumed in India is rarely paralleled anywhere else in the
world. The cooperative banks in India plays an important role even today in rural financing. The
businessess of cooperative bank in the urban areas also has increased phenomenally in recent
years due to the sharp increase in the number of primary co-operative banks. 

Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative
bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and
Banking Laws (Co-operative Societies) Act, 1965. 

Cooperative banks in India finance rural areas under:

 Farming
 Cattle
 Milk
 Hatchery
 Personal finance

Cooperative banks in India finance urban areas under:

 Self-employment
 Industries
 Small scale units
 Home finance
 Consumer finance
  Personal finance

Some facts about Cooperative banks in India

 Some cooperative banks in India are more forward than many of the state and private
sector banks.

 According to NAFCUB the total deposits & lendings of Cooperative Banks in India is
much more than Old Private Sector Banks & also the New Private Sector Banks.

 This exponential growth of Co operative Banks in India is attributed mainly to their much
better local reach, personal interaction with customers, their ability to catch the nerve of
the local clientele.

Regional Rural Banks in India

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Rural banking in India started since the establishment of banking sector in India. Rural Banks in
those days mainly focussed upon the agro sector. Regional rural banks in India penetrated every
corner of the country and extended a helping hand in the growth process of the country.

SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI is spread in
13 states extending from Kashmir to Karnataka and Himachal Pradesh to North East. The total
number of SBIs Regional Rural Banks in India branches is 2349 (16%). Till date in rural banking
in India, there are 14,475 rural banks in the country of which 2126 (91%) are located in remote
rural areas. 

Apart from SBI, there are many other banks which function for the development of the rural
areas in India. These banks are listed below:

Andhra Pradesh Bihar

 Andhra Pradesh Grameena Vikas  Madhya Bihar Gramin Bank
Bank  Bihar Kshetriya Gramin Bank
 Andhra Pragathi Grameena Bank  Uttar Bihar Kshetriya Gramin
 Deccan Grameena Bank Bank
 Chaitanya Godavari Grameena  Kosi Kshetriya Gramin Bank
Bank  Samastipur Kshetriya Gramin
 Saptagiri Grameena Bank Bank

Chhattisgarh Gujarat
 Chhattisgarh Gramin Bank  Dena Gujarat Gramin Bank
 Surguja Kshetriya Gramin Bank  Baroda Gujarat Gramin Bank
 Durg-Rajnandgaon Gramin Bank  Saurashtra Gramin Bank
Haryana Himachal Pradesh
 Harayana Gramin Bank  Himachal Gramin Bank
 Gurgaon Gramin Bank  Parvatiya Gramin Bank

Jammu & Kashmir Punjab

 Jammu Rural Bank  Punjab Gramin Bank
 Ellaquai Dehati Bank  Faridkot-Bhatinda Kshetriya
 Kamraz Rural Bank Gramin Bank
 Malwa Gramin Bank
Assam
 Assam Gramin Vikash Bank Kerala
 Langpi Dehangi Rural Bank  Narmada Malwa Gramin Bank
 North Malabar Gramin Bank
Jharkhand
 Jharkhand Gramin Bank Tamil Nadu
 Vananchal Gramin Bank  Pandyan Grama Bank
 Pallavan Grama Bank
Madhya Pradesh
 Narmada Malwa Gramin Bank Maharashtra
 Satpura Kshetriya Gramin Bank  Marathwada Gramin Bank
 Madhya Bharath Gramin Bank  Aurangabad -Jalna Gramin Bank
 Chambal-Gwalior Kshetriya  Wainganga Kshetriya Gramin
Gramin Bank Bank
 Rewa-Sidhi Gramin Bank  Vidharbha Kshetriya Gramin
 Sharda Gramin Bank Bank

 Ratlam- Mandsaur Kshetriya  Solapur Gramin Bank

Gramin Bank  Thane Gramin Bank

 Vidisha Bhopal Kshetriya Gramin  Ratnagiri-Sindhudurg Gramin
Bank Bank
 Mahakaushal Kshetriya Gramin
Bank
  Jhabua Dhar Kshetriya Gramin
Bank

Karnataka Rajasthan
 Karnataka Vikas Grameena Bank  Baroda Rajasthan Gramin Bank
 Pragathi Gramin Bank  Marwar Ganganagar Bikaner
 Cauvery Kalpatharu Grameena Gramin Bank
Bank  Rajasthan Gramin Bank
 Krishna Grameena Bank  Jaipur Thar Gramin Bank
 Chikmagalur-Kodagu Grameena  Hodoti Kshetriya Gramin Bank
Bank  Mewar Anchalik Gramin Bank
 Visveshvaraya Gramin Bank

Orissa West Bengal

 Kalinga Gramya Bank  Bangiya Gramin Vikash Bank
 Utkal Gramya Bank  Paschim Banga Gramin Bank
 Baitarani Gramya Bank  Uttar Banga Kshetriya Gramin
 Neelachal Gramya Bank Bank
 Rushikulya Gramya Bank

Meghalaya Arunachal Pradesh

 Ka Bank Nogkyndong Ri Khasi-  Arunachal Pradesh Rural Bank
Jaintia
Manipur
Nagaland
 Manipur Rural Bank
 Nagaland Rural Bank

Mizoram
Tripura
 Mizoram Rural Bank
 Tripura Gramin Bank

Uttar Pradesh Uttaranchal

 Purvanchal Gramin Bank  Uttaranchal Gramin Bank
 Kashi Gomti Samyut Gramin
 Bank  Nainital Almora Kshetriya
 Uttar Pradesh Gramin Bank Gramin Bank
 Shreyas Gramin Bank
 Lucknow Kshetriya Gramin Bank
 Ballia Kshetriya Gramin Bank
 Triveni Kshetriya Gramin Bank
 Aryavart Gramin Bank
 Kisan Gramin Bank
 Kshetriya Kisan Gramin Bank
 Etawah Kshetriya Gramin Bank

Foreign Banks In India

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Foreign Banks in India always brought an explanation about the prompt services to customers.

After the set up foreign banks in India, the banking sector in India also become competitive and
accurative.

New rules announced by the Reserve Bank of India for the foreign banks in India in
this budget has put up great hopes among foreign banks which allows them to grow unfettered.
Now foreign banks in India are permitted to set up local subsidiaries. The policy conveys that
forign banks in India may not acquire Indian ones (except for weak banks identified by the RBI,
on its terms) and their Indian subsidiaries will not be able to open branches freely. Please see the
list of Foreign banks in India till date.

List of Foreign Banks in India

 ABN-AMRO Bank
 Abu Dhabi Commercial Bank
 Bank of Ceylon
 BNP Paribas Bank
 Citi Bank
 China Trust Commercial Bank
 Deutsche Bank
 HSBC
 JPMorgan Chase Bank
 Standard Chartered Bank
 Scotia Bank
 Taib Bank
By the year 2009, the list of foreign banks in India is going to become more quantitative as
number of foreign banks are still waiting with baggage to start business in India.

Upcoming Foreign Banks in India

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By 2009 few more names is going to be added in the list of foreign banks in India. This is as an
aftermath of the sudden interest shown by Reserve Bank of India paving roadmap for foreign
banks in India greater freedom in India. Among them is the world's best private bank by
EuroMoney magazine, Switzerland's UBS. 

The following are the list of foreign banks going to set up business in India

 Royal Bank of Scotland

 Switzerland's UBS
 US-based GE Capital
 Credit Suisse Group
 Industrial and Commercial Bank of China
Merrill Lynch is having a joint venture in Indian investment banking space -- DSP Merrill
Lynch. Goldman Sachsholds stakes in Kotak Mahindra arms.

GE Capital is also having a wide presence in consumer finance through GE Capital India.

India's GDP is seen growing at a robust pace of around 7% over the next few years, throwing up
opportunities for the banking sector to profit from. 

The credit of banks has risen by over 25% in 2004-05 and the growth momentum is expected to
continue over the next four to five years.

Participation in the growth curve of the Indian economy in the next four years will provide
foreign banks a launch pad for greater business expansion when they get more freedom after
April 2009.
A