Overview Of Banking Sector

Introduction

A bank is a financial institution and a financial intermediary that accepts

deposits and channels those deposits into lending activities, either directly or

through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses.

Due to their critical status within the financial system and the economy

generally, banks are highly regulated in most countries. They are generally

subject to minimum capital requirements which are based on an international set of capital standards, known as the Basel Accords.

Banking in India originated in the last decades of the 18th century. The first

banks were The General Bank of India, which started in 1786, and Bank of

Hindustan, which started in 1790; both are now defunct. The oldest bank in

existence in India 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. For many years the Presidency

banks acted as quasi-central banks, as did their successors. The three banks

merged in 1921 to form the Imperial Bank of India, which, upon India's

independence, became the State Bank of India in 1955.

Structure of Indian Banking

As per Section 5(b) of the Banking Regulation Act 1949: “Banking” means the

accepting, for the purpose of lending or investment, of deposits of money from

the public, repayable on demand or otherwise, and withdawal by cheque, draft,

order or otherwise.”

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 Cooperative 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:

(i) State Bank of India and its Associates,

(ii) Nationalised Banks,

(iii) Regional Rural Banks,

(iv) Foreign Banks and

(v) Other Indian Scheduled Commercial Banks (in the private sector).

Besides the Nationalized banks (majority equity holding is with the

Government), the State Bank of India (SBI) (majority equity holding being with the Reserve Bank of India) and the associate banks of SBI (majority holding being with State Bank of India), the commercial banks comprise foreign and Indian private banks. While the State bank of India and its associates, nationalized banks and Regional Rural Banks are constituted under respective enactments of the Parliament, the private sector banks are banking companies as defined in the Banking Regulation Act. These banks, along with regional rural banks, constitute the public sector (state owned) banking system in India.

The Public Sector Banks in India are back bone of the Indian financial system.The cooperative credit institutions are broadly classified into urban credit cooperatives and rural credit cooperatives. Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Co-operative Banks.

Regional Rural Banks (RRB’s) are state sponsored, regionally based and rural oriented commercial banks. The Government of India promulgated the Regional Rural Banks Ordinance on 26th September 1975, which was later replaced by the Regional Rural Bank Act 1976. The preamble to the Act states the objective to develop rural economy by providing credit and facilities for the development of agriculture, trade, commerce, industry and other productive activities in the rural areas, particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs.

List of Nationalised Banks in India

1. Allahabad Bank

2. Andhra Bank

3. Bank of Baroda

4. Bank of India

5. Bank of Maharashtra

6. Canara Bank

7. Central Bank of India

8. Corporation Bank

9. Dena Bank

10. Indian Bank

11. Indian Overseas Bank

12. Oriental Bank of Commerce

13. Punjab and Sind Bank

14. Punjab National Bank

15. State Bank of Bikaner & Jaipur

16. State Bank of Hyderabad

17. State Bank of India (SBI)

18. State Bank of Indore

19. State Bank of Mysore

20. State Bank of Patiala

21. State Bank of Travancore

22. Syndicate Bank

23. UCO Bank

24. Union Bank of India

25. United Bank of India

26. Vijaya Bank