COMMERCIAL BANKING

A PRESENTATION BY J.K.OKE

COMMERCIAL BANKING

COMMERCIAL BANKS ARE CRITICAL INTERMEDIARIRS IN THE PROCESS OF ECONOMIC GROWTH / DEVELOPMENT THEY ARE CONSIDERED AS ENGINE FOR ECONOMIC DEVELOPMENT AS THE LENDING, INVESTMENT & RELATED SERVICE ACTIVITIES OF THE COMMERCIAL BANKS FACILITATE PROCESSES OF PRODUCTION, DISTRIBUTION & CONSUMPTION

COMMERCIAL BANKING

COMMERCIAL BANKS HELP IN MOBILISING OF COMMUNITYS SAVINGS & ACT AS REPOSITORIES OF THE COMMUNITYS SAVINGS THEY ALSO ACT AS PURVEYORS OF CREDIT THEY WORK AS A CATALYST FOR AREA DEVELOPMENT BY UNDERTAKING MULTIDIMENSIONAL TASKS

COMMERCIAL BANKING

COMMERCIAL BANKS ARE ALSO CONSIDERED TO BE A CRITICAL CONSTITUENT OF INSTITUTIONAL INFRASTRUCTURE

COMMERCIAL BANKING

TO PUT IT SIMPLY, A BANK IS AN ORGANISATION THAT ACCEPTS MONIES (DEPOSITS), REPAYABLE ON DEMAND, EITHER BY CASH, CHEQUE OR DEMAND DRAFT, AND THE MONIES SO MOBILISED ARE UTILISED FOR THE PURPOSES OF LENDINGS (ADVANCES /CREDIT) & INVESTMENTS (CRR / SLR)

COMMERCIAL BANKING

COMMERCIAL BANKS TEND TO OPERATE IN TWO WAYS: BRANCH BANKING UNIT BANKING IN INDIA, TRADITIONALLY, COURTESEY THE BRITISH RULE,THE BANKS HAVE BEEN OPERATING IN THE BRANCH BANKING MODE

COMMERCIAL BANKING

AS BANKS IN INDIA WERE STARTED ON THE BRITISH PATTERN, IN THE BEGINNING OF THE 19th CENTURY, ALL BANKS WERE SET UP AS JOINT STOCK COMPANIES AND WERE GOVERNED BY THE COMPANIES LAW

INDIAN COMMERCIAL BANKING: EVOLUTION

1949

1955
1959

REGULATION (BANKING COMPANIES ACT,1949) NATIONALISATION PHASE I (IMPERIAL BANK INTO SBI) NATIONALISATION PHASE II (PRINCELY STATE BANKS INTO SBI SUBSIDIARIES)

1961

INDIAN COMMERCIAL BANKING EVOLUTION

1968
1969

INSURANCE COVER TO DEPOSITORS (DEPOSIT INSURANCE CORPORATION) NATIONAL CREDIT COUNCIL NATIONALISATION III
(14 MAJOR BANKS WITH DTL OF OVER RS. 50 CRORES NATIONALISED)

1971

INDIAN COMMERCIAL BANKING EVOLUTION GUARANTEE CREDIT

1975

(CREDIT GUARANTEE CORPORATION) NEW RURAL BANKS (REGIONAL RURAL BANKS)

NATIONALISATION PHASE II ( SIX COMMERCIAL BANKS WITH DTL OF Rs. 200 CRORES NATIONALISED )

1980

1985 1996 1998

INDIAN COMMERCIAL BANKING EVOLUTION

RE-ORGANISATION OF BANKING NEW BANKS (NEW PRIVATE BANKS) REVIEWRE-EXAMINATION

COMMERCIAL BANKING STRUCTURE IN INDIA

THE COMMERCIAL BANKS IN INDIA ARE BROADLY DIVIDED INTO TWO CATEGORIES AS FOLLOWS: SCHEDULED BANKS NON-SCHEDULED BANKS

COMMERCIAL BANKING STRUCTURE IN INDIA

THE SCHEDULED COMMERCIAL BANKS ARE FURTHER DIVIDED INTO FOUR CATEGORIES AS FOLLOWS: PUBLIC SECTOR BANKS PRIVATE SECTOR BANKS FOREIGN BANKS CO-OPERATIVE BANKS

COMMERCIAL BANKING STRUCTURE IN INDIA

THE PUBLIC SECTOR BANKS CONSIST OF: STATE BANK OF INDIA ASSOCIATE BANKS OF SBI NATIONALISED BANKS IDBI BANK LTD. REGIONAL RURAL BANKS

COMMERCIAL BANKING STRUCTURE IN INDIA

THE PRIVATE SECTOR BANKS CONSIST OF OLD PRIVATE SECTOR BANKS NEW (POST-1996) PRIVATE SECTOR BANKS

COMMERCIAL BANKING STRUCTURE IN INDIA

THE CO-OPERATIVE BANKS CONSIST OF: URBAN CO-OPERATIVE BANKS STATE CO-OPERATIVE BANKS DISTRICT CENTRAL CO-OPERATIVE BANKS LAND DEVELOPMENT BANKS

COMMERCIAL BANKING FUNCTIONS IN INDIA

COMMERCIAL BANKS PERFORM / DISCHARGE BROADLY DISCHARGE THEFOLLOWING: MOBILISING DEPOSITS PROVIDING CREDIT INVESTMENTS (CRR / SLR) PROVIDING FINANCIAL SERVICES

COMMERCIAL BANKING: DEPOSIT FUNCTIONS

CURRENT DEPOSITS SAVINGS DEPOSITS RECURRING DEPOSITS TERM / FIXED DEPOSITS (CUMULATIVE / NON-CUMULATIVE)

COMMERCIAL BANKING CREDIT FUNCTIONS

PROVIDE WORKING CAPITAL PROVIDING TERM LOANS

COMMERCIAL BANKING
CREDIT FUNCTIONS : WORKING CAPITAL

Working capital: CASH CREDIT FACILITY OVER DRAFT FACILITY

COMMERCIAL BANKING
CREDIT FUNCTIONS : WORKING CAPITAL

AGAINST PLEDGE / HYPOTHECATION OF RAW MATERIAL / WORK-INPROCESS / FINISHED GOODS USANCE BILLS FOR COLLECTION / DISCOUNT / PURCHASE EXPORT FINANCE (PRE-SHIPMENT & POST-SHIPMENT CREDIT) CLEAN ADVANCES

COMMERCIAL BANKING CREDIT FUNCTIONS:TERM LOANS

DEMAND LOAN MEDIUM TERM LOAN INSTALMENT CREDIT LONG TERM LOAN

COMMERCIAL BANKING CREDIT FUNCTIONS:TERM LOANS LONG TERM LOANS WOULD ENCOMPASS: EQUITY LOAN PLANT & MACHINERY HOUSING LOANS INDUSTRIAL ESTATES

WHY BANK NATIONALISATION?

THE MAJOR OBJECTIVES OF BANK NATIONALISATION IN INDIA WERE: WIDENING THE BRANCH NETWORK OF BANKS PARTICULARLY IN THE RURAL & SEMI-URBAN AREAS GREATER MOBILISATION OF SAVINGS THROUGH BANK DEPOSITS RE-ORIENTATION OF CREDIT FLOWS SO AS TO BENEFIT THE HITHERTO NEGLECTED SECTORS (AGRICULTURE / SSI / SMALL BUSINESS)

BANK NATIONALISATION: MEASURES INITIATED

EXTENSIVE EXPANSION IN RURAL & SEMI-URBAN AREAS (RATIO OF 4:1) SIGNIFICANT EXPANSION OF CREDIT TO THE HITHERTO WEAKER / NEGLECTED SECTOR, THANKS TOMANDATORY PRIORITY ADVANCES (INITIALLY-33.33%, SUBSEQUENTLY RAISED TO 40% OF TOTAL ADVANCES)

BANK NATIONALISATION: MEASURES INITIATED

MAINTAINING A CREDIT/DEPOSIT RATIO OF60% IN RURAL / SEMI-URBAN AREAS, TO PREVENT SIPHONING OFF OF FUNDS FROM THESE AREAS TO URBAN / METRO AREAS SPECIFIC TARGETS FOR BANKS UNDER POVERTY ALLEVIATION PROGRAMMES LIKE IRDP

BANK NATIONALISATION: MEASURES INITIATED

INTEREST RATES REGULATED TO ENSURE AN ELEMENT OF BUILT-IN CROSS SUBSIDISATION (HIGHER INTEREST RATES FOR BIGGER BORROWERS, LOWER INTEREST RATES FOR SMALLER BORROWERS) RRBs SET UP DURING 1970s TO MEET MORE EFFECTIVELY THE CREDIT NEEDS OF WEAKER SECTIONS IN THE RURAL AREAS

BANK NATIONALISATION: MEASURES INITIATED

LEAD BANK SCHEME LAUNCHED. FORMULATION OF DISTRICT CREDIT PLANS / ANNUAL ACTION PLANS INITIATED AS PART OF AREA PLANNING TO ENSURE DOVE-TAILING OF BANKS CREDIT PLANS WITH DEVELOPMENTAL PLANS

BANK NATIONALISATION: MEASURES INITIATED

CREDIT AUTHORISATION SCHEME / TANDON COMMITTEE NORMS IMPLEMENTED TO ENSURE CREDIT RATIONING TO PREVENT LARGE BORROWERS FROM PRE-EMPTING CREDIT FROM BANKING SYSTEM BANKS REQUIRED TO FORMULATE A CREDIT PLAN FOR THE BANK AS A WHOLE EACH YEAR SO THAT OBJECTIVES OF OVERALL MONETARY & CREDIT POLICY COULD BE ACHIEVED

BANK NATIONALISATION: MEASURES INITIATED

FORMALITIES REGARDING APPLICATION, PROCESSING , GUARANTEE FROM P.S.BORROWERS STREAMLINED & SIMPLIFIED, WITH STIPULATED TIME FRAME FOR SANCTIONING DISCRETIONARY POWERS REVIEWED / ENHANCED TO FACILITATE SPEEDY DISPOSAL

BANK NATIONALISATION: MEASURES INITIATED

MOVE FROM SECURITY / GUARANTEE TO ACTIVITY / PURPOSE MOVE FROM THIRD PARTY COLLATERALS TO CREATING SECURITY FROM ASSETS FINANCED BY THE BANK EMPHASIS ON NEED-BASED FINANCE & END-USE OF CREDIT