PROJECT REPORT ON

PUBLIC SECTOR vs PRIVATE SECTOR BANK

      SUBMITTED BY
       

TYBBI SEMESTER – VI
2021-22

UNDER THE
GUIDANCE OF 

MS. KHUSBOO JULKA

SUBMITTED TO
UNIVERSITY OF
MUMBAI

VIDYALANKAR SCHOOL OF INFORMATION

TECHNOLOGY (AFFILIATED TO UNIVERSITY OF
MUMBAI) VIDYALANKAR MARG, WADALA (E), MUMBAI
400 037
                                VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY
(Affiliated to Mumbai University)

Certificate
This is to certify that
Mr./Ms. _____________________________of B.Com. in

Banking & Insurance, /Bachelor in Management studies/ B.Com. in

financial

Markets Semester____has undertaken & completed

the project work

titled
_________________________________________________
_ during  the academic year under the guidance of
Mr./Ms. submitted ____________to this college in
fulfilment of the curriculum of B.Com. in Banking & Insurance
/Bachelor in Management studies/ B.Com. in financial Markets
University of Mumbai.

This is a Bonafede project work & the information

presented is True & original to the best of our knowledge and
belief.
PROJECT COURSE EXTERNAL PRINCIPAL
GUIDE CO-ORDINATOR EXAMINER
 ACKNOWLEDGMENT
I hereby acknowledge all those who directly or indirectly helped me in drafting of this
project report. It would not have been possible for me to complete the task without
their help and guidance.

First, I would like to thank to the principal Dr. Rohini Kelkar, the Vice-Principal Mr.
Vijay Gawde, and our Project in-charge Mr. Sagar Gaikwad who gave me the
opportunity to do this project work. They also conveyed the important instructions
from the university time to time. Secondly, I am very much obliged of Ms. Chitra
More for giving guidance for completing the project.

Last but not the least; I am thankful to the University of Mumbai for offering the
project in the syllabus. I must mention my hearty gratitude towards my family, other
faculties and friends who supported me to go ahead with the project.
 DECLARATION

Vidyalankar School of Information Technology

(Affiliated to University of Mumbai)
Vidyalankar Marg, Wadala (E),
Mumbai 400 037

I Naresh Khutikar student of T.Y.B.Com. Banking &

Insurance/Bachelor in Management studies/ B.Com. In financial
Markets Semester VI, Vidyalankar School of Information Technology,
hereby declare that I have completed the project on A study on
Public sector bank vs Private sectore bank

The information submitted is true and original to the best of my

knowledge.

                          Signature of student
 Executive summary
The objective of the study is to have a comparative study o fthe PSU Banks and
Private Sector Banksin Cachar District and also to find out th emost preferred
BankingSector among them.
For the above study a questionnaire was designed and the same was provided to
the respondents for their valuable inputs.Some o fthe input swere taken from
Qualtrics Survey Software and others were provided in the form of hardcopies.
. All the aspects of the study included introduction of the study, objective of the
study, research methodology, literature review, data interpretation and
analysis ,findings ,suggestions and recommendations.
The study suggests that in this part of the country the Public Sector Banks area head
of the Private Sector Banks.The main reasons according to our study are the trust
and reliability factor (DICGC assurance ondeposits) and the location of the branch
(Financial Inclusion policy of Reserve Bank of India)
The data collection of the study was mainly taken from primary source i.e.
Questionnaire. And secondary sources of the data i.e.internet and KiranPrakashan
Books and Arihant Books.
 INDEX
SR NO. PARTICULARS PAGE NO

Chapter
1
1:1 Introduction to Banking

1:2 Banking in India

1:3  History of banking in India

1:4 Adoption of Banking Technology

1:5  Expansion of Banking Infrastructure

1:6 Types of Bank

1:7 Function of Commercial banks

1:8 Public Sector Banks

1:9 Private Sector Banks

1:10 Business of Banking

Chapter
2
2:1 Objectives of the study

2:2 Literature Review

2;3 Research methodology

2:4 Personal details of Respondents

Chapetr Limitations of the study

3:1

Chapter Data analysis

4:1

Chapter Finding of the study

5:1

Chapter Suggestions given by the repondents

6:1

Chapter Recommendation
7:1

Chapter conlusion
8:1

Chapter References
9:1
1:1 Introduction to banking

Bank is defined in many ways by various authors in the book son economics and
commerce. It is very difficult to define a bank; because a bank performs multifarious
functions may be defined in many ways according to their functions. The evolution of
different types of banks, each specializing in a particular field, gives emphasis on
each and every kind of bank. A general and comprehensive definition to cover all
types of banking institutions would be unscientific and probably impossible. Each
type of bank should have its own definition, explaining its specialized functions.
Legislators have understood this difficulty and that is why the bill of exchange Act
1882 (England) defines

 “A bank includes a body of persons, whether incorporated or not, who carry on the
business of banking” 

From this definition it is clear to us that any institution, which performs the various
banking functions, may be termed as bank. But in practice it is found that many
banking functions wary from time to time and country to country. It is not possible on
the part of a single bank to perform all the banking functions at a time. So there
originated numbers of specialized banks with the objective of performing one or
more functions. As for example, Central Bank, Commercial bank, Industrial Bank,
Agricultural Bank, Co-operative Bank etc., are seen in the practical field.

Dr. Herbert L. Hart has defined a banker as 

“A banker is one who in the ordinary course of business honours cheques drawn
upon him by persons for whom he receives money on current account” 

According to Sir John Paget

 “No one and nobody corporate and otherwise can be a banker who does not (i) take
deposit accounts (ii) take current accounts (iii) issue and pay cheques drawn upon
him(iv) collect cheques crossed and uncrossed for his customers” 

Hilton banking commission defines bank or banker in the following words:

 “Every person, firm or company using in the description or its title, bank or banker or
banking and accepting deposits of money subject to withdrawal by cheque, draft or
order”
 In view of the above definitions, a simple and short definition can be given as “Bank
is an institution, which deals in money and credit
 According to this precise definition a bank accepts deposits from public and makes
advances and loans to them. In practice bank receives deposits of money in savings
and current accounts at lower rate of interest or profit and gives on credit to needy
persons and businessmen at a higher rate of interest or profit. It also transfers
money for the clients from one city or country to another and also performs various
other agency services for earnings.

1:2 Banking in India

Banking in India Banking in India in the modern sense originated in the last decades
of the 18th century. The first banks were Bank of Hindustan (1770-1829) and The
General Bank of India, established 1786 and since defunct.

The largest bank, and the oldest still in existence, is the State Bank of India, which
originated in the Bank of Calcutta in June 1806, which almost immediately became
the Bank of Bengal. This was one of the three presidency banks, the other two being
the Bank of Bombay and the Bank of Madras, all three of which were established
under charters from the British East India Company. The three banks merged in
1921 to form the Imperial Bank of India, which, upon India's independence, became
the State in 1955. For many years the presidency banks acted as quasi-central
banks, as did their successors, until the Reserve Bank of India was established in
1935.
In 1969 the Indian government nationalized all the major banks that it did not
already own and these have remained under government ownership. They are run
under a structure know as 'profit-making public sector undertaking' (PSU) and are
allowed to compete and operate as commercial banks. The Indian banking sector is
made up of four types of banks, as well as the PSUs and the state banks; they have
been joined since the 1990s by new private commercial banks and a number of
foreign banks.
Banking in India was generally fairly mature in terms of supply, product range and
reach- even though reach in rural India and to the poor still remains a challenge. The
government has developed initiatives to address this through the State Bank of India
expanding its branch network and through the National Bank for Agriculture and
Rural Development with things like microfinance.
 Indian Banking Industry currently employees 1,175,149 employees and has a total
of 109,811 branches in India and 171 branches abroad and manages an aggregate
deposit of 67504.54 billion (US$1.1 trillion or €820 billion) and bank credit of
52604.59 billion (US$880 billion or €640 billion). The net profit of the banks operating
in India was 1027.51 billion (US$17 billion or €12 billion) against a turnover of
9148.59 billion (US$150 billion or €110 billion) for the fiscal year 2012-13
1:3 History of banking India

In ancient India there is evidence of loans from the Vedic period (beginning 1750
BC). Later during the Maurya dynasty (321 to 185 BC), an instrument called adesha
was in use, which was an order on a banker desiring him to pay the money of the
note to a third person, which corresponds to the definition of a bill of exchange as we
understand it today. During the Buddhist period, there was considerable use of these
instruments. Merchants in large towns gave letters of credit to one another.

Colonial era

During the period of British rule merchants established the Union Bank of Calcutta in
1829, first as a private joint stock association, then partnership. Its proprietors were
the owners of the earlier Commercial Bank and the
Calcutta Bank, who by mutual consent created Union Bank to replace these two
banks. In 1840 it established an agency at Singapore, and closed the one at
Mirzapore that it had opened in the previous year. Also in 1840 the Bank revealed
that it had been the subject of a fraud by the bank's accountant. Union Bank was
incorporated in 1845 but failed in 1848, having been insolvent for some time and
having used new money from depositors to pay its dividends.
The Allahabad Bank, established in 1865 and still functioning today, is the oldest
Joint Stock bank in India, it was not the first though. That honour belongs to the Bank
of Upper India, which was established in 1863, and which survived until 1913, when
it failed, with some of its assets and liabilities being transferred to the Alliance Bank
of Simla.
Foreign banks too started to appear, particularly in Calcutta, in the 1860s. The
Comptoird'Escompte de Paris opened a branch in Calcutta in 1860, and another in
Bombay in 1862; branches in Madras and Pondicherry, then a French possession,
followed. HSBC established itself in Bengal in 1869. Calcutta was the most active
trading port in India, mainly due to the trade of the British Empire, and so became a
banking centre.
 The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National
Bank, established in Lahore in 1895, which has survived to the present and is now
one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a
relative period of stability. Around five decades had elapsed since the Indian Mutiny,
and the social, industrial and other infrastructure had improved. Indians had
established small banks, most of which served particular ethnic and religious
communities.
The presidency banks dominated banking in India but there were also some
exchange banks and a number of Indian joint stock banks. All these banks operated
in different segments of the economy. The exchange banks, mostly owned by
Europeans, concentrated on financing foreign trade. Indian joint stock banks were
generally under capitalized and lacked the experience and maturity to compete with
the presidency and exchange banks. This segmentation let Lord Curzon to observe,
"In respect of banking it seems we are behind the times. We are like some old
fashioned sailing ship, divided by solid wooden bulkheads into separate and
cumbersome compartments.
" The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and
political figures to found banks of and for the Indian community. A number of banks
established then have survived to the present such as Bank of India, Corporation
Bank, Indian Bank,Bank of Baroda, Canara Bank and Central Bank of India.
The fervour of Swadeshi movement lead to establishing of many private banks in
Dakshina Kannada and Udupi district which were unified earlier and known by the
name South Canara ( South Kanara ) district. Four nationalised banks started in this
district and also a leading private sector bank. Hence undivided Dakshina Kannada
district is known as "Cradle of Indian Banking". During the First World War (1914–
1918) through the end of the Second World War (1939– 1945), and two years
thereafter until the independence of India were challenging for Indian banking. The
years of the First World War were turbulent, and it took its toll with banks simply
collapsing despite the Indian economy gaining indirect boost due to war-related.
 economic activities. At least 94 banks in India failed between 1913 and 1918 as
indicated in the following table:

Years Number of bank Authorised capital Paid-up capital

That failed ( rs Lakhs) (rs lakhs)

1913 12 247 35

1914 42 710 109

1915 11 56 5

1916 13 231 4

1917 9 76 25

1918 7 209 1

Post-Independence

The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralysing banking activities for months. India's independence marked the
end of a regime of the Laissez-faire for the Indian banking. The Government of India
initiated measures to play an active role in the economic life of the nation, and the
Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed
economy. This resulted into greater involvement of the state in different segments of
the economy including banking and finance.
The major steps to regulate banking included:
The Reserve Bank of India, India's central banking authority, was established in
April 1935, but was nationalised on 1 January 1949 under the terms of the Reserve
Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b).
6 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". 

The Banking Regulation Act also provided that no new bank or branch of an existing
bank could be opened without a license from the RBI, and no two banks could have
common directors.

Nationalization in the 1960s

Despite the provisions, control and regulations of the Reserve Bank of India, banks
in India except the State Bank of India (SBI), continued to be owned and operated by
private persons. By the 1960s, the Indian banking industry had become an important
tool to facilitate the development of the Indian economy. At the same time, it had
emerged as a large employer, and a debate had ensued about the nationalization of
the banking industry. Indira Gandhi, the then Prime Minister of India, expressed the
intention of the Government of India in the annual conference of the All India
Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization."[7]
The meeting received the paper with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an
ordinance ('Banking Companies (Acquisition and Transfer of Undertakings)
Ordinance, 1969') and nationalised the 14 largest commercial banks with effect from
the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in
the country.[7] Jayaprakash Narayan, a national leader of India, described the step
as a "masterstroke of political sagacity." Within two weeks of the issue of the
ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer
of Undertaking) Bill, and it received the presidential approval on 9 August 1969.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The
stated reason for the nationalisation was to give the government more control of
credit delivery. With the second dose of nationalisation, the Government of India
controlled around 91% of the banking business of India. Later on, in the year 1993,
the government merged New Bank of India with Punjab National Bank. It was the
only merger between nationalised banks and resulted in the reduction of the number
of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised
banks grew at a pace of around 4%, closer to the average growth rate of the Indian
economy.

Liberalization in the 1990s

Liberalization in the 1990s In the early 1990s, the then government embarked on a
policy of liberalization, licensing a small number of private banks. These came to be
known as New Generation tech-savvy banks, and included Global Trust Bank (the
first of such new generation banks to be set up), which later amalgamated with
Oriental Bank of Commerce, UTI Bank (since renamed Axis), ICICI Bank and HDFC
Bank. This move, along with the rapid growth in the economy of India, revitalised the
banking sector in India, which has seen rapid growth with strong contribution from all
the three sectors of banks, namely, government banks, private banks and foreign
banks.
The next stage for the Indian banking has been set up with the proposed relaxation
in the norms for foreign direct investment, where all foreign investors in banks may
be given voting rights which could exceed the present cap of 10% at present. It has
gone up to 74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4–6–4 method (borrow at 4%; lend at 6%; go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks. All this led to the retail boom in India. People
demanded more from their banks and received more

Current period
 All banks which are included in the Second Schedule to the Reserve Bank of India
Act, 1934 are Scheduled Banks. These banks comprise Scheduled Commercial
Banks and Scheduled Co-operative Banks. Scheduled Commercial Banks in India
are categorised into five different groups according to their ownership and/or nature
of operation. These bank groups are:
State Bank of India and its Associates
 Nationalised Banks
 Private Sector Banks
 Foreign Banks
 Regional Rural Banks.

 In the bank group-wise classification, IDBI Bank Ltd. is included in Nationalised
Banks. Scheduled Co-operative Banks consist of Scheduled State Co-operative
Banks and Scheduled Urban Cooperative Banks.
By 2010, banking in India was generally fairly mature in terms of supply, product
range and reach-even though reach in rural India still remains a challenge for the
private sector and foreign banks. In terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets
relative to other banks in comparable economies in its region. The Reserve Bank of
India is an autonomous body, with minimal pressure from the government
. With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong. One may
also expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its
stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an
investor has been allowed to hold more than 5% in a private sector bank since the
RBI announced norms in 2005 that any stake exceeding 5% in the private sector
banks would need to be vetted by them.
In recent years critics have charged that the non-government owned banks are too
aggressive in their loan recovery efforts in connexion with housing, vehicle and
personal loans. There are press reports that the banks' loan recovery efforts have
driven defaulting borrowers to suicide. 

1:4 Adoption of banking technology

The IT revolution has had a great impact on the Indian banking system. The use
of computers has led to the introduction of online banking in India. The use of
computers in the banking sector in India has increased many fold after the
economic liberalisation of 1991 as the country's banking sector has been
exposed to the world's market. Indian banks were finding it. difficult to compete
with the international banks in terms of customer service, without the use of
information technology.

The RBI set up a number of committees to define and co-ordinate banking

technology. These have included:

In 1984 was formed the Committee on Mechanisation in the Banking Industry

(1984) whose chairman was Dr. C Rangarajan, Deputy Governor, Reserve Bank
of India. The major recommendations of this committee were introducing MICR
technology in all the banks in the metropolises in India. This provided for the use
of standardized cheque forms and encoders.

In 1988, the RBI set up the Committee on Computerisation in Banks (1988)

headed by Dr. C Rangarajan. It emphasized that settlement operation must be
computerized in the clearing houses of RBI in Bhubaneshwar, Guwahati, Jaipur,
Patna and Thiruvananthapuram. It further stated that there should be National
Clearing of inter-city cheques at Kolkata, Mumbai, Delhi, Chennai and MICR
should be made operational. It also focused on computerisation of branches and
increasing connectivity among branches through computers. It also suggested
modalities for implementing on-line banking. The committee submitted its reports
 in 1989 and computerisation began from 1993 with the settlement between IBA
and bank employees' associations.

In 1994, the Committee on Technology Issues relating to Payment systems,

Cheque Clearing and Securities Settlement in the Banking Industry (1994) was
set up under Chairman W S Saraf. It emphasized Electronic Funds Transfer
(EFT) system, with the BANKNET communications network as its carrier. It also
said that MICR clearing should be set up in all branches of all those banks with
more than 100 branches.

In 1995, the Committee for proposing Legislation on Electronic Funds Transfer

and other Electronic Payments (1995) again emphasized EFT system.

Total numbers of ATMs installed in India by various banks as on end June 2012
is 99,218. The New Private Sector Banks in India are having the largest numbers
of ATMs, which is followed by off-site ATMs belonging to SBI and its subsidiaries
and then by Nationalised banks and Foreign banks. While on site is highest for
the Nationalised banks of India.

Branches and ATMs of scheduled commercial Banks as on end

March 2005

Bank type Number of On-side OFF-side Total

branches ATMs ATMs ATMs

Nationalised banks 33,627 3,205 1,567 4,772

State bank of India 13,661 1,548 3,672 5,220

Old private sector 4,511 800 441 1,241

banks

New private sector 1,685 1,883 3,729 5,612

banks

Foreign banks 242 218 582 800

total 53,726 7,654 9,409 17,645

1:4 Expansion of Banking Infrastructure

As per Census 2011, 58.7% households are availing banking services in the country.
There are 102,343 branches of Scheduled Commercial Banks (SCBs) in the country,
out of which 37,953 (37%) bank branches are in the rural areas and 27,219 (26%) in
semi-urban areas, constituting 63% of the total numbers of branches in semi-urban
and rural areas of the country. However, a significant proportion of the households,
especially in rural areas, are still outside the formal fold of the banking system. To
extend the reach of banking to those outside the formal banking system,
Government and Reserve Bank of India (RBI) are taking various initiatives from time
to time some of which are enumerated below:

Opening of Bank Branches: Government had issued detailed strategy and

guidelines on Financial Inclusion in October 2011, advising banks to open branches
in all habitations of 21 5,000 or more population in under-banked districts and 10,000
or more population in other districts. Out of 3,925 such identified villages/habitations,
branches have been opened in 3,402 villages/habitations (including 2,121 Ultra
Small Branches) by end of April, 2013.

Each household to have at least one bank account: Banks have been advised to
ensure service area bank in rural areas and banks assigned the responsibility in
specific wards in urban area to ensure that every household has at least one bank
account.

Business Correspondent Model: With the objective of ensuring greater financial

inclusion and increasing the outreach of the banking sector, banks were permitted by
RBI in 2006 to use the services of intermediaries in providing financial and banking
services through the use of Business Facilitators (BFs) and Business
Correspondents (BCs). Business correspondents are retail agents engaged by
banks for providing banking services at locations other than a bank branch/ATM.
BCs and the BC Agents (BCAs) represent the bank concerned and enable a bank to
expand its outreach and offer limited range of banking services at low cost,
particularly where setting up a brick and mortar branch is not viable. BCs as agents
of the banks, thus, are an integral part of the business strategy for achieving greater
financial inclusion. Banks had been permitted to engage individuals/entities as BC
like retired bank employees, retired teachers, retired government employees, ex-
servicemen, individual owners of kirana/medical/fair price shops, individual Public
Call Office (PCO) operators, agents of Small Savings Schemes of Government of
India, insurance companies, etc. Further, since September 2010, RBI had permitted
banks to engage "for profit" companies registered under the Indian Companies Act,
1956, excluding Non-Banking Financial Companies (NBFCs), as BCs in addition to
individuals/entities permitted earlier. According to the data maintained by RBI, as in
December, 2012, there were over 152,000 BCs deployed by Banks. During 2012-
13, over 183.8 million transactions valued at 165 billion (US$2.8 billion) had been
undertaken by BCs till December 2012.

Swabhimaan Campaign: Under "Swabhimaan" - the Financial Inclusion Campaign

launched in February 2011, banks had provided banking facilities by March, 2012 to
over 74,000 habitations having population in excess of 2000 using various models
and technologies including branchless banking through Business Correspondents
Agents (BCAs). Further, in terms of Finance Minister's Budget Speech 2012-13, the
"Swabhimaan" campaign has been extended to habitations with population of more
than 1,000 in North and to habitations which22 have crossed population of 1,600 as
per census 2001. About 40,000 such habitations have been identified to be covered
under the extended "Swabhimaan" campaign.

Setting up of Ultra Small Branches (USBs): Considering the need for close
supervision and mentoring of the Business Correspondent Agents (BCAs) by the
respective banks and to ensure that a range of banking services are available to the
residents of such villages, Ultra Small Branches (USBs) are being set up in all
villages covered through BCAs under Financial Inclusion. A USB would comprise of
a small area of 100 sq ft (9.3 m2 ) - 200 sq ft (19 m2 ) where the officer designated
by the bank would be available with a laptop on pre- determined days. While the
cash services would be offered by the BCAs, the bank officer would offer other
services, undertake field verification and follow up on the banking transactions. The
periodicity and duration of visits can be progressively enhanced depending upon
business potential in the area. A total of over 50,000 USBs have been set up in the
country by March, 2013.

Banking Facilities in Unbanked Blocks: All the 129 unbanked blocks (91 in North
East States and 38 in other States) identified in the country in July 2009, had been
provided with banking facilities by March 2012, either through Brick Mortar Branch or
Business Correspondents or Mobile van. As a next step it has been advised to cover
all those blocks with BCA and Ultra Small Branch which have so far been covered by
mobile van only.

USSD Based Mobile Banking: National Payments Corporation of India (NPCI)

worked upon a "Common USSD Platform" for all banks and telcos who wish to offer
the facility of Mobile Banking using Unstructured Supplementary Service Data
(USSD) based Mobile Banking. The Department helped NPCI to get a common
USSD Code *99# for all telcos. More than 20 banks have joined the National Uniform
USSD Platform (NUUP) of NPCI and the product has been launched by NPCI with
BSNL and MTNL. Other telcos are likely to join in the near future. USSD based
Mobile Banking offers basic Banking facilities like Money Transfer, Bill Payments,
Balance Enquiries, Merchant Payments etc. on a simple GSM based Mobile phone,
without the need to download application on a phone as required at present in the
IMPS based Mobile Banking.
Steps taken by Reserve Bank of India (RBI) to strengthen the Banking
Infrastructure 

RBI has permitted domestic Scheduled Commercial Banks (excluding RRBs) to open branches
in tier 2 to tier 6 cities (with population up to 99,999 as per census 2001) without the need to take
permission from RBI in each case, subject to reporting.

RBI has also permitted SCBs (excluding RRBs) to open branches in rural, semi-urban and urban
centres in North Eastern States and Sikkim without having the need to take permission from RBI
in each case, subject to reporting.

Regional Rural Banks (RRBs) are also allowed to open branches in Tier 2 to Tier 6 centres (with
population up to 99,999 as per Census 2001) without the need to take permission from RBI in
each case, subject to reporting, provided they fulfill the following conditions, as per the latest
inspection report:

CRAR of at least 9%;

Net NPA less than 5%;

No default in CRR / SLR for the last year;

Net profit in the last financial year;

CBS compliant.

Domestic SCBs have been advised that while preparing their Annual Branch Expansion Plan
(ABEP), they should allocate at least 25% of the total number of branches proposed to be
opened during the year in unbanked Tier 5 and Tier 6 centres i.e. (population up to 9,999)
centres which do not have a brick and mortar structure of any SCB for customer based banking
transactions.

RRBs have also been advised to allocate at least 25% of the total number of branches proposed
to be opened during a year in unbanked rural (Tier 5 and Tier 6) Centres).

New private sector banks are required to ensure that at least 25% of their total branches are in
semi-urban and rural centres on an ongoing basis.

1:6 Types of banks

  Central bank

Development Bank

Investment Bank

Cooperative Credit Bank

Regional Rural Bank

Non Banking Financial Companies

Central Bank
The money market that acts as the central monetary authority of the country, serving as the
government bank as well as the bankers’ bank is known as a central bank of the country. The
main functions of central bank of a country are functions of note issue, bankers to government,
banker’s bank etc.The RBI as the central bank of the country is the centre of the Indian financial
and monetary system. It has been guiding, monitoring, and regulating, controlling, and promoting
destiny of the IFS. It is quite young compared with such central banks as the Bank of England,
Risks bank of Sweden, and the Federal Reserve Board of the U.S.

Main Functions of The Reserve bank of India

As the central banking authority of India, the reserve Bank of India performs the following
traditional functions of the central bank:

 It provides currency and operates the clearing system for the government and banks.
 It formulates and implements monetary and credit policies.
 It functions as the government’s and banker’s bank
 It supervises the operations of credit institutions.
 It regulates foreign exchange transactions.
 It moderates the fluctuations in the exchange value of the rupee.

 In addition to the traditional functions of the central banking authority, the Reserve bank of India
performs several functions aimed at developing the Indian financial system:

 It seeks to integrate the unorganized financial sector with the organized financial sector.
 It encourages the extension of the commercial banking system in the rural areas.
 It influences the allocation of credit.
 It promotes the development of new institutions

Development Banks

A development bank may be defined as a financial institution concerned with providing all types
of financial assistance to business units in the form of loans, underwriting, investment and
guarantee operations and promotional activities-economic development in general and industrial
development in particular.A development bank is basically a term lending institution. It is a
multipurpose financial institution with a broad development outlook. The concept of development
banks in a post independence phenomenon in India. With the end of II World War there was an
urgent need for speed industrial development in India. The usual agencies that provided finance
for large industries were inadequate. So the govt. of India came forward to set-up a series of
financial institution to provide funds to industries. The industrial finance corporation of India, the
first development bank was established in 1948. Subsequently many other institutions were set-
up. Ex. IDBI, IFCI, SIDBI etc.

Investment Banks

Financial intermediaries that acquire the savings of people and direct these funds into the
business enterprises seeking capital for the acquisition of plant and equipment and for holding
inventories are called ‘investment banks’.

Features:-Long term financing, Security, merchandiser, Security middlemen, Insurer,

Underwriter
Functions: - Capital formation, Underwriting, Purchase of securities, Selling of securities,
Advisory services, Acting as dealer.

Cooperative Banking Sector

These banks play a vital role in mobilizing savings and stimulating agricultural investment.Co-
operativecredit institutions account for the second largest proportion of 44.6% of total institutional
credit of Rs.3854000 corer to agricultural and allied activities in the rural sector in 1998 to 99.

Types of Co-operative Banking sector

The co-operative sector is very much useful for rural people. The co-operative banking sector is
divided into the following categories.

State co-operative Banks

Central co-operative banks

Primary Agriculture Credit Societies

Non Banking Finance companies

According to RBI it means financial institutions which is a company and a non banking institution
and which has as its principal business the receiving of deposits under any schemes or
arrangement or in any other manner or lending in any manner.

Merchant Banks
Institution that render wide range of services such as the management of customer’s securities,
portfolio management, counseling, insurance, etc are called ‘Merchant Banks’.

Functions: - Sponsoring issues, Loan syndication, Servicing of issues, Portfolio, management,

arranging fixed deposits, helps in merger& acquisition.

Commercial Banks
Commercial banks comprising public sector banks, foreign banks, and private sector banks
represent the most important financial intermediary in the Indian financial system.

The changes in banking structure and control have resulted dueto wider geographical spread
and deeper penetration of rural areas, higher mobilization of deposits, reallocation of bank credit
to priority activities, andlower operational autonomy for a bank management.
The largest commercial Banks in India, (SBI), was set up in 1955 when the Imperial Bank was
nationalized and merged with some banks of the princely states. In 1969, in one fell swoop, the
fourteen largest privately – owned commercial banks were nationalized. Subsequently, several
other privately – owned commercial banks were nationalized. As a result of these actions, public
sector commercial banks, dominate the commercial banking scene in the country.

1.7 Functions of commercial banks

Saving mobilization

Special loans

Bills discount ‘

Credit creation

Agencies function

General utility function

1.8 Public Sector Banks

State Bank of India .

17 out of 20 nationalized banks except Andhra Bank , Bank of Maharashtra and BharatiyaMahila
Bank.

Regional rural banks, Assam GrameenVikasBank,sponsored by United Bank of India

Regional rural Bank

They are oriented towards meeting the needs of the weaker section of the rural population
consisting of small and marginal farmers, agricultural laborerand small entrepreneurs. These
banks were set up after the nationalization of banks in 1969.

REGIONAL RURAL BANKS ACT, 1976 ACT NO. 21 OF 1976 [9th February, 1976.] An Act to
provide for the incorporation, regulation and winding up of Regional Rural Banks with a view to
developing the rural economy by providing, for the purpose of development of agriculture, trade,
commerce, industry and other productive activities in the rural areas, credit and other facilities,
particularly to the small and marginal farmers, agricultural laborers, artisans and small
entrepreneurs, and for matters connected therewith and incidental thereto.
 Definition of Public Sector Bank
Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by a
government. The shares of these banks are listed on stock exchanges. There are a total of 21
PSBs in India..

Emergence of Public Sector Banks

The Central Government entered the banking business with the nationalization of the Imperial
Bank Of India in 1955. A 60% stake was taken by the Reserve Bank of India and the new bank
was named as the State Bank of India. The seven other state banks became the subsidiaries of
the new bank when nationalised on 19 July 1960.[2] The next major nationalisation of banks took
place in 1969 when the government of India, under prime minister Indira Gandhi, nationalised an
additional 14 major banks. The total deposits in the banks nationalised in 1969 amounted to 50
crores. This move increased the presence of nationalised banks in India, with 84% of the total
branches coming under government control.

The next round of nationalisation took place in April 1980. The government nationalised six
banks. The total deposits of these banks amounted to around 200 crores. This move led to a
further increase in the number of branches in the market, increasing to 91% of the total branch
network of the country. The objectives behind nationalisation where:

To break the ownership and control of banks by a few business families,

To prevent the concentration of wealth and economic power,

To mobilize savings from masses from all parts of the country,

To cater to the needs of the priority sectors....

Number of Number of
List of Public Sector Banks Headquarter
Branches ATMs

State Bank of India (SBI) 24000 58559 Mumbai

Punjab National Bank (With Merger of Oriental Bank of Commerce 11437 8985 New Delhi
and United Bank of India)

Bank of Baroda (With Merger of Dena Bank & Vijaya Bank) 8581 10318 Vadodara

Canara Bank (With Merger of Syndicate Bank) 10391 12829 Bengaluru

 Number of Number of
List of Public Sector Banks Headquarter
Branches ATMs

Union Bank of India (With Merger of Andhra Bank and Corporation 9500 13300 Mumbai
Bank)

Bank of India 5825 5000 Mumbai

Indian Bank (With Merger of Allahabad Bank) 6000+ 6104 Chennai

Central Bank of India 2876 4666 Mumbai

Indian Overseas Bank 2995 3400 Chennai

UCO Bank 2377 4000 Kolkata

Bank of Maharashtra 1860 1897 Pune

Punjab & Sindh Bank 1045 1554 New Delhi

 1:9 list of Private sector Bank

Government Banks or Public Sector Banks are the banks that are owned by the
Government of the day. In such banks, the Government of the country is the major
shareholder with possession of more than 51% share of the bank. Check here the
updated list of the Government banks / Public Sector Banks in India in 2021 along
with the complete list of banks that got merged lately.

Banks are a major part of the Indian Economy. These are the place where all
transactions legitimately take place. India's economy is managed by the Finance
Ministry along with the Reserve Bank of India. Following this, there are 3 categories
of banks, namely, Public or Government banks, Private banks, Foreign or
International

Number of Number of
List of Private Banks Headquarter
Branches ATMs

Axis Bank 4094 17315 Mumbai

Bandhan Bank 1000 485 Kolkata, West Bengal

Catholic Syrian Bank 426 290 Thrissur, Kerala

City Union Bank 600 1724 Thanjavur, Tamil Nadu

DCB Bank 323 4,99 Mumbai, Maharashtra

Dhanlaxmi Bank 269 3,46 Thrissur, Kerala

Federal Bank 1252 1598 Aluva, Kerala

HDFC Bank 4787 13514 Mumbai, Maharashtra

ICICI Bank 4882 15159 Mumbai, Maharashtra

IDBI Bank 1892 3693 Mumbai, Maharashtra

 Number of Number of
List of Private Banks Headquarter
Branches ATMs

IDFC First Bank 301 216 Mumbai, Maharashtra

IndusInd Bank 1004 2662 Mumbai, Maharashtra

Jammu & Kashmir Bank 958 1322 Srinagar, Jammu and

Kashmir

Karnataka Bank 835 1503 Mangaluru, Karnataka

Karur Vysya Bank 668 1641 Karur, Tamil Nadu

Kotak Mahindra Bank 1369 2429 Mumbai, Maharashtra

Lakshmi Vilas Bank 570 1045 Chennai, Tamil Nadu

Nainital Bank 135 - Nainital, Uttarakhand

RBL Bank 342 - Mumbai, Maharashtra

South Indian Bank 852 1393 Thrissur, Kerala

Tamilnad Mercantile Bank Limited 509 1156 Thoothukudi, Tamil Nadu

Yes Bank 1050 1305 Mumbai, Maharashtra

 1:10 Business of Banking

Money
Money Surplus Units Money deficit Units
intermediary

( server ) ( Banks ) ( Investors )

Function of a Bank

Accepting Deosits from Leading money to

public \ others Public ( loans ) Transferring Money from
(deposits )
one place to another

General Function of a Bank

Doing Government business

Acting as Trustees
transaction Keeping valuables in safe
custody