Origin of Banking and

Banking structure in India

Prof. Divya Gupta

 ORIGIN OF BANKING

 Bank

 Banker

 Banking Company
 BANKER

“The real business of the banker

is to obtain deposits of money
which he may use for his own
profit by lending it out again.”
 BANKING

 “ Banking for the purpose of

lending or investment of
deposits of money from the
public, repayable on demand
or otherwise, & withdrawable
by cheque, draft, order or
otherwise.”
 BANKS

 Phases of Banking in India

Evolutionary phase(prior to 1949)

Nationalization phase(1949 -1990)
Reformatory phase (Since 1991)
Continue…
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 : Nationalization of State Bank of India.
 1959 : Nationalization of SBI subsidiaries.
 1969 : Nationalization of 14 major banks.
 1975 : Creation of regional rural banks.
 1980 : Nationalization of seven banks with deposits
over 200 crore.
INDIAN BANKING STRUCTURE

RBI-Central Bank

Scheduled Banks
Commercial Banks Cooperative Banks

Foreign
PSB
RRB
SBI & Assoc. Private Urban Co

Nationalized old new Rural Co

 Scheduled Banks
 Scheduled Banks are banks which are
included in the second schedule of RBI
Act 1934.

1. Must have paid up capital &

reserves of not less than
Rs.500000.
2. Compliance with the RBI rules.

Minimum capital of Rs.200 crores for

starting a new commercial bank.
http://www.rbi.org.in/scripts/PublicationsView.aspx?id=10780
 Scheduled Banks
1. Scheduled Co-operative banks
 Urban co. Banks
 Rural co. Banks

2. Scheduled Commercial Banks

 Indian Banks
 Foreign Banks
 Regional Rural Banks
Co-operative Banks

 The objective of co-operative banks

is to offer banking facilities to
persons of limited means requiring
credit for productive purposes in the
use of the land and labor at their
disposal.

 Different from Commercial Banks

Structure of Cooperative Banks in India
Cooperative Banks in Jammu &
Kashmir
 There are 9 banks in the Cooperative Sector in the J&K
State. Of these 4 are Non-Urban Banks and 4 Urban
Banks. J&K State Cooperative Bank for Agriculture and
Rural Development (SCARDB) is the 9th Bank. The 4
Urban and Non-Urban Cooperative Banks are as follows:

Non-Urban Cooperative Banks:

1. J&K State Cooperative Bank
2. Jammu Central Cooperative Bank
3. Baramulla Central Cooperative Bank
4. Anantnag Central Cooperative Bank

Urban Cooperative Banks:

1. Jammu Citizen's Cooperative Bank
2. Urban Cooperative Bank, Anantnag
3. Devika Urban Cooperative Bank, Udhampur
4. Kashmir Mercantile Cooperative Bank, Sopore.
Three Tier Co-operative
Banks structure
 Primary cooperative societies: Funds of the
society are derived from the share capital
and deposits of members and loans from
central co-operative banks
 central co-operative bank - These are the
federations of primary societies in a district.
The funds of a bank consist of share
capital, deposits, loans and overdrafts from
State co-op banks
 The state co-op bank is a federation of
central co-operative bank and acts as a
watchdog of the co-operative banking
structure in the state.
Haryana State Co-operative Apex Bank Li
mited (HARCOBANK)
–

 This bank is commonly known as HARCOBANK. It

is involved in financing farmers, rural artisans,
agricultural labourers and entrepreneurs of Haryana
for the last 35 years. It has 13 branches and 2
extension counters at the State level, 19 Central
Cooperative Banks with 336 branches at the district
level and 2384 PACS (Mini Banks) catering to the 
financial needs of 25.25 lacs members  who are
residing, mostly, in the rural areas of Haryana.
Commercial Banks:

 Commercial Banks are the oldest

banking institutions having a wide
network of branches, commanding
utmost public confidence.
 Types are:
1. Indian Banks
2. Foreign Banks
3. Regional Rural Banks
Indian Banks & Foreign Banks:

1. Public Sector
 Nationalized Banks
 SBI Associates Banks

2. Private Sector Banks

 Old Banks
 New Banks
Economic Times
ON 25 Jun 2007, 1548 hrs IST

 RBI to sell stake in SBI to govt

for Rs 35,531.33 cr

After RBI sells its full stake, the government will hold

59.73% stake in SBI.

Regional Rural Banks
 Objectives: The main objective is to
provide credit and other facilities mainly to
small and marginal farmers, agricultural
laborers who had not been adequately
served by the existing credit institutions.

 They have been established by the

Government of India under regional rural
Act, 1976.

 Organization & Capital: It is established by

sponsor bank and capital is contributed by
central govt, state govt and sponsor bank.
RRB

http://www.krishnagrameenabank.com/
aboutus.html
Krishna Grameena Bank (KGB) is a Regional Rural
Bank established in terms of provisions of Regional
Rural Banks Act 1976 & is sponsored by State Bank
of India.

The shareholders of the Bank are Govt. of India

(50%), State Bank of India(35%) and  Govt. of
Karnataka (15 %).

The Bank is operating in Bidar and Gulbarga districts

of Karnataka state since 01.12.1978. The present
Branch network is 106, of which 85 branches
functioning in rural area, catering to the needs of
farming community, rural artisans and other  Rural
mass.
 NBFC
 A non-banking institution which is a company
and which has its principal business of
receiving deposits under any scheme or
arrangement or any other manner, or lending
in any manner is also a non-banking financial
company
 Difference between a bank and NBFCs
 NBFC

 With effect from December 6, 2006 the above

NBFCs registered with RBI have been reclassified
as
(i) Asset Finance Company (AFC)
(ii) Investment Company (IC)
(iii) Loan Company  (LC)

 Other way of classifying

1. NBFCs-D
2. NBFCs-ND
3. NBFCs- ND-SI

 Residuary NBFCs
New Type of NBFC

 Infrastructure Finance Company

 Criteria:
Development Banks/ Financial
Institutions regulated by RBI as on
31st march, 2008
 NABARD

 SIDBI

 NHB

 EXIM
FI’s
NABARD
 NABARD is set up as an apex
Development Bank with a mandate for
facilitating credit flow for promotion and
development of agriculture, small-scale
industries, cottage and village industries,
handicrafts and other rural crafts.

 It also has the mandate to support all other

allied economic activities in rural areas,
promote integrated and sustainable rural
development and secure prosperity of rural
areas.
NABARD
 NABARD has been entrusted with the statutory
responsibility of conducting inspections of
State Cooperative Banks (SCBs), District
Central Cooperative Banks (DCCBs) and
Regional Rural Banks (RRBs) under the
provision of the Banking Regulation Act, 1949.
 In addition, NABARD has also been
conducting periodic inspections of state level
cooperative institutions such as State
Cooperative Agriculture and Rural
Development Banks (SCARDBs), Apex
Weavers Societies, etc. on a voluntary basis
SIDBI
 SIDBI was established on April 2, 1990.
 The Charter establishing it, The Small
Industries Development Bank of India Act,
1989
 It envisaged SIDBI to be "the principal
financial institution for the promotion,
financing and development of industry in
the small scale sector and to co-ordinate
the functions of the institutions engaged in
the promotion and financing or developing
industry in the small scale sector.
Continue…

 Small scale industries are the

industrial units in which the
investment in plant and
machinery does not exceed
Rs.10 million .
NHB
 NHB, as the Apex level financial institution
for the housing sector in the country.

 The National Housing Bank (NHB) was

established on 9th July 1988 under an Act
of the Parliament viz. the National Housing
Bank Act, 1987 to function as a principal
agency to promote Housing Finance
Institutions and to provide financial and
other support to such institutions.
Continue…

 Issue directions to housing finance institutions to

ensure their growth on sound lines.

 NHB has also a window for direct lending to Public

Agencies such as, State Level Housing Boards and
Area Development Authorities for large scale
integrated housing projects and slum
redevelopment projects.

 NHB is also operating a special window for

extending financial assistance to the people
affected by natural calamities viz. earthquake,
cyclone etc.
EXIM
 Export-Import Bank of India is the premier export
finance institution of the country, set up in 1982
under the Export-Import Bank of India Act 1981.

 Its objective is to provide financial assistance to

exporters and importers, and for functioning as the
principal financial institution for coordinating the
working of institutions engaged in financing export
and import of goods and services with a view to
promoting the country’s international trade
Thank You!!!