BANKING SYSTEM IN INDIA
Bank of Hindustan (1770) was the first bank to be established in India (Alexander and Co.) at Kolkata under European management. Other banks set up were Bank of Bengal (1806), Bank of Bombay (1840) and the Bank of Madras (1843) these were called Presidency Banks. First bank with limited liability managed by an Indian board was Oudh Commercial Bank, founded in 1881. The first purely Indian bank was the Punjab National Bank (1894).
Reserve Bank of India
- It is the Central Bank of the country.
- It was established on Apr. 1, 1935, with a capital of Rs. 5 crores. This capital of Rs. 5 crores were divided into 5 lakh equity shares of Rs. 100 each. In the beginning, the ownership of almost all the share capital was with the non-government share - holders.
- It was nationalized on Jan 1, 1949, as government acquired the private share holdings.
- Administration 14 directors in Central Board of Directors besides the governor, 4 Deputy Governors and one government official. The governor is the Chairman of the board and Chief Executive of the Bank.
Governors
- 1st governor Sir Smith (1935 37)
- 1st Indian Governor CD Deshmukh (1948-49)
Functions
1. Issue of Notes
Regulates issue of bank notes above 1 rupee. It acts as the only source of legal tender money because the one-rupee notes issued by Ministry of Finance are also circulated through it. The Reserve Bank has adopted the Minimum Reserve System for the note issue. Since 1957, it maintains gold and foreign exchange reserve of Rs. 200 crores, or which at least 115 crores should be in gold. =
2. Banker to the Government
Acts as the banker, agent and advisor the government or India. It also manages the public debt for the government.
3. Banker's Bank
The Reserve Bank performs the same function for other banks as the other banks ordinarily perform for their customers.
4. Controller of Credit
The Reserve Bank undertakes the responsibility of controlling credits created by the commercial banks. To achieve this objective, it makes extensive use of quantitative and qualitative techniques to control and regulate the credit effectively in the country.
5. Custodian of Foreign Reserves
For the purpose of keeping the foreign exchange rates stable, the Reserve Banks buys and sells the foreign currencies and also protects the country's foreign exchange funds.
6. It formulates and administers the monetary policy.
7. Acts as the agent of the government of Indian in respect to India's membership of the IMF and the World Bank.
No personal accounts are maintained and operated in RBIReserve Bank (Amendment) Bill 2005 Approved
The Reserve Bank of India (Amendment) Bill 2005 has been approved. This bill amends the Reserve Bank act for providing flexibility to the central bank in fixing the cash reserve ratio (CRR) and statutory liquidity ratio (SLR). CRR is the cash that banks deposit with RBI and is one of the key instruments used by the Central Bank to inject or suck out liquidity from the market. SLR specifies the minimum amount that banks must invest in government securities. This bill is to arm RBl with greater autonomy and authority to deal with subjects (mainly CRR and SLR) under the Act. This bill also allows the central bank to regulate derivatives, repo instruments (overnight rates used to regulate liquidity) and securities. The amendments also seek to end the ambiguity about the legal validity of derivatives as it was seen to inhibit the growth of the market.
Imperial Bank of India
- It was created in Jan 1921 by amalgamation of 3 presidency banks, viz., Bank of Bengal Bank of Bombay and Bank of Madras.
- After nationalization in 1955, its name was changed to State Bank of India (SBI).
State Bank of India (SBI)
- It is the biggest commercial bank in the public sector of India.
- It has the largest number of branches in the world.
SBI has 7 subsidiaries. These are.
- State Bank of Bikaner
- State Bank of Indore
- State Bank of Patiala
- State Bank of Travancore
- State Bank of Hyderabad and Jaipur
- State Bank of Mysore
- State Bank of Saurashtra
Nationalization of Banks
In order to have more control over the banks, 14 large commercial banks, the reserves of which were more than Rs. 50 crore each, were nationalized on July 19, 1969. The banks were.
1. The Central Bank of India
2. Bank of India3. Punjab National Bank4. Canara Bank5. United Commercial Bank6. Syndicate Bank7. Bank of Baroda8. United Bank of India9. Union Bank of India10. Dena Bank11. Allahabad Bank12. Indian Bank13. Indian Overseas Bank14. Bank of Maharashtra
Regulates issue of bank notes above 1 rupee. It acts as the only source of legal tender money because the one-rupee notes issued by Ministry of Finance are also circulated through it. The Reserve Bank has adopted the Minimum Reserve System for the note issue. Since 1957, it maintains gold and foreign exchange reserve of Rs. 200 crores, or which at least 115 crores should be in gold. =
2. Banker to the Government
Acts as the banker, agent and advisor the government or India. It also manages the public debt for the government.
3. Banker's Bank
The Reserve Bank performs the same function for other banks as the other banks ordinarily perform for their customers.
4. Controller of Credit
The Reserve Bank undertakes the responsibility of controlling credits created by the commercial banks. To achieve this objective, it makes extensive use of quantitative and qualitative techniques to control and regulate the credit effectively in the country.
5. Custodian of Foreign Reserves
For the purpose of keeping the foreign exchange rates stable, the Reserve Banks buys and sells the foreign currencies and also protects the country's foreign exchange funds.
6. It formulates and administers the monetary policy.
7. Acts as the agent of the government of Indian in respect to India's membership of the IMF and the World Bank.
Reserve Bank (Amendment) Bill 2005 Approved
The Reserve Bank of India (Amendment) Bill 2005 has been approved. This bill amends the Reserve Bank act for providing flexibility to the central bank in fixing the cash reserve ratio (CRR) and statutory liquidity ratio (SLR). CRR is the cash that banks deposit with RBI and is one of the key instruments used by the Central Bank to inject or suck out liquidity from the market. SLR specifies the minimum amount that banks must invest in government securities. This bill is to arm RBl with greater autonomy and authority to deal with subjects (mainly CRR and SLR) under the Act. This bill also allows the central bank to regulate derivatives, repo instruments (overnight rates used to regulate liquidity) and securities. The amendments also seek to end the ambiguity about the legal validity of derivatives as it was seen to inhibit the growth of the market.
Imperial Bank of India
- It was created in Jan 1921 by amalgamation of 3 presidency banks, viz., Bank of Bengal Bank of Bombay and Bank of Madras.
- After nationalization in 1955, its name was changed to State Bank of India (SBI).
State Bank of India (SBI)
- It is the biggest commercial bank in the public sector of India.
- It has the largest number of branches in the world.
SBI has 7 subsidiaries. These are.
- State Bank of Bikaner
- State Bank of Indore
- State Bank of Patiala
- State Bank of Travancore
- State Bank of Hyderabad and Jaipur
- State Bank of Mysore
- State Bank of Saurashtra
Nationalization of Banks
In order to have more control over the banks, 14 large commercial banks, the reserves of which were more than Rs. 50 crore each, were nationalized on July 19, 1969. The banks were.
1. The Central Bank of IndiaNote PDF View
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