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Chapter 1 Banking and Operations

Banks play a crucial role in India's economy by accepting deposits and lending money. The banking system has evolved over time from privately-owned presidency banks to nationalized public sector banks. Key stages included the 1949 Banking Regulation Act, nationalization of banks in 1969 and 1980, and liberalization in the 1990s allowing private banks. Currently, India has 81 scheduled commercial banks including public, private, and foreign banks with over 53,000 branches. Reforms aimed to remove structural bottlenecks and promote a more market-oriented banking system through deregulation and technological upgrades. Banks are important for capital formation, innovation, economic activity, and facilitating monetary policy in developing economies like India.

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ManavAgarwal
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318 views

Chapter 1 Banking and Operations

Banks play a crucial role in India's economy by accepting deposits and lending money. The banking system has evolved over time from privately-owned presidency banks to nationalized public sector banks. Key stages included the 1949 Banking Regulation Act, nationalization of banks in 1969 and 1980, and liberalization in the 1990s allowing private banks. Currently, India has 81 scheduled commercial banks including public, private, and foreign banks with over 53,000 branches. Reforms aimed to remove structural bottlenecks and promote a more market-oriented banking system through deregulation and technological upgrades. Banks are important for capital formation, innovation, economic activity, and facilitating monetary policy in developing economies like India.

Uploaded by

ManavAgarwal
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© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
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Subject - Banking Operations - 1 Class - M.B.

A
Course Code - 315F Semester - III
History of Banking Video Clip
BANKS AND BANKING

The Banking Companies Act of 1949, defines :

Banking Company as a company which transacts the business of


banking in India. It defines banking as, accepting for the purpose of
lending or investment of deposit money from the public, repayable
on demand or otherwise and withdraw able by cheque draft , order
or otherwise

A bank as an institution dealing in money and credit. It safeguard


of the savings of the public and gives loans and advances.
Structure of Banks in India
Stages in History of Banking in India

History of Banking has been divided into Stages like:


• Pre-independence stage
• Post Independence stage

• Nationalisation of Banks

• Introduction of Financial Sector Reforms


History of Banking in India
(Pre-Independence Stage)
There were three oldest Banks called Presidency Banks.
• Bank of Bengal (Earlier Bank of Calcutta)

• Bank of Bombay
• Bank of Madras

They merged in 1925 to form the Imperial Bank of India, which after
independence became State Bank of India.
Reserve Bank of India came into existence in 1935 which took the
responsibility of regulating Banking sector as Central Bank in India.
Banking Scenario after Independence
• In 1948, the Reserve Bank of India was nationalized, and it became
an institution owned by the Government of India.
• In 1949, the Banking Regulation Act was enacted which empowered
the Reserve Bank of India (RBI) "to regulate, control, and inspect the
banks in India."
Nationalisation of Banks
• On July 19, 1969, 14 major banks were nationalised.
• On April 15, 1980 another 6 banks were nationalised.
• With the nationalisation, the banking in India shifted from
‘Class’ banking to ‘Mass’ Banking
Liberalisation
• In the early 1990s the Govt embarked on a
policy of liberalisation and gave licences to a
small number of private banks, which came to
be known as New Generation tech-savvy
banks like Global Trust Bank, UTI Bank(now re-
named as Axis Bank), ICICI Bank and HDFC
Bank.
Narasimham Committee
The first Narasimham Committee was set up in 1991 to suggest
remedial measures for strengthening the banking system
encompassing:
Banking Policy
Institutional Structure
Supervisory System
Legislative changes
technological changes
Thrust of reforms
The main thrust of economic reforms was on:
1. Removal of structural bottlenecks
2. Improvement in trading, clearing and settlement practices
3. Introduction of new players and instruments

4. Introduction of free pricing of financial assets


5. Relaxation of quantitative restrictions
6. Promotion of institutional infrastructure

7. Ensuring of technological upgradation.


Current Banking Scenario
• Currently, India has 81 scheduled commercial banks (SCBs) – 28 (19
Nationalised banks + 8 SBI Group + 1 IDBI), 29 Foreign banks and 24
Private banks.
• They have a combined network of over 53,000 branches and 17,000
ATMs.
• The public sector banks hold over 75 percent of total assets of the
banking industry, with the private and foreign banks holding 18% and 7%
respectively.
Banking & Indian Economy
A study of the economic history of western country shows that without
the evolution of commercial banks in the 18th and 19th centuries, the
industrial revolution would not have taken place in Europe. 
The economic importance of banks to the developing countries may be
viewed thus:
1. PROMOTING CAPITAL FORMATION
2. ENCOURAGING INNOVATION
3. MONETSATION
4. INFLUENCE ECONOMIC ACTIVITY

5. FACILITATOR OF MONETARY POLICY


Manav Agarwal
[email protected]
9823962733

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