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INDUSTRIAL PROFILE

INTRODUCTION ABOUT BANKING:


Bank may be defined as a financial institution which is engaged in the business of keeping money for savings and checking accounts or for exchange or for issuing loans and credit etc. A set of services intended for private customers and characterized by a higher quality than the services offered to retail customers. Based on the notion of tailor-made services, it aims to offer advice on investment, inheritance plans and provide active support for general transactions and the resolution of asset-related problems. The essential function of a bank is to provide services related to the storing of deposits and the extending of credit. Basic function may include Credit collection, Issuer of banking notes, Depositor of money and lending loans. Now a days banking is not in its traditional way , with the advancement of technology its focusing on more comfort of customer providing services such as: online banking investment banking electronic banking internet banking pc banking /mobile banking e-banking The importance of banking sector is immense in the progress and prosperity of any State or country. The economic progress and prosperity comes from the well-rounded development and an impeccable banking management. Banks in general, governmental and private, have eased our financial transactions, security, and facilitated the funding for establishing a business or industry.

HISTORY OF BANKING
Safe in the temple: 18th century BC Wealth compressed into the convenient form of gold brings one disadvantage. Unless well hidden or protected, it is easily stolen. In early civilizations a temple is considered the safest refuge; it is a solid building, constantly attended, with a sacred character which itself may deter thieves. In Egypt and Mesopotamia gold is deposited in temples for safe-keeping. But it lies idle there, while others in the trading community or in government have desperate need of it. In Babylon at the time of Hammurabi, in the 18th century BC, there are records of loans made by the priests of the temple. The concept of banking has arrived.

Greek and Roman financiers: from the 4th century BC Banking activities in Greece are more varied and sophisticated than in any previous society. Private entrepreneurs, as well as temples and public bodies, now undertake financial transactions. They take deposits, make loans, change money from one currency to another and test coins for weight and purity. They even engage in book transactions. Moneylenders can be found who will accept payment in one Greek city and arrange for credit in another, avoiding the need for the customer to transport or transfer large numbers of coins. Rome, with its genius for administration, adopts and regularizes the banking practices of Greece. By the 2nd century AD a debt can officially be discharged by paying the appropriate sum into a bank, and public notaries are appointed to register such transactions. The collapse of trade after the fall of the Roman empire makes bankers less necessary than before, and their demise is hastened by the hostility of the Christian church to the charging of interest. Usury comes to seem morally offensive. One anonymous medieval author declares vividly that 'a usurer is a bawd to his own money bags, taking a fee that they may engender together'. Religion and banking: 12th - 13th century AD The Christian prohibition on usury eventually provides an opportunity for bankers of another religion. European prosperity needs finance. The Jews, barred from most other forms of employment, supply this need. But their success, and their extreme visibility as a religious sect, brings dangers. The same is true of another group, the knights Templar, who for a few years become bankers to the mighty. They too, an exclusive sect with private rituals, easily fall prey to rumour, suspicion and persecution (see Templars in Europe). The profitable business of banking transfers into the hands of more ordinary Christian folk - first among them the Lombards. Bankers to Europe's kings: 13th - 14th century AD During the 13th century bankers from north Italy, collectively known as Lombards, gradually replace the Jews in their traditional role as money-lenders to the rich and powerful. The business skills of the Italians are enhanced by their invention of double-entry bookkeeping. Creative accountancy enables them to avoid the Christian sin of usury; interest on a loan is presented in the accounts either as a voluntary gift from the borrower or as a reward for the risk taken. Siena and Lucca, Milan and Genoa all profit from the new trade. But Florence takes the lion's share.

Florence is well equipped for international finance thanks to its famous gold coin, the florin. First minted in 1252, the florin is widely recognized and trusted. It is the hard currency of its day. By the early 14th century two families in the city, the Bardi and the Peruzzi, have grown immensely wealthy by offering financial services. They arrange for the collection and transfer of money due to great feudal powers, in particular the papacy. They facilitate trade by providing merchants with bills of exchange, by means of which money paid in by a debtor in one town can be paid out to a creditor presenting the bill somewhere else (a principle familiar now in the form of a cheque). The ability of the Florentine bankers to fulfil this service is shown by the number of Bardi branches outside Italy. In the early 14th century the family has offices in Barcelona, Seville and Majorca, in Paris, Avignon, Nice and Marseilles, in London, Bruges, Constantinople, Rhodes, Cyprus and Jerusalem. To add to Florence's sense of power, many of Europe's rulers are heavily in debt to the city's bankers. Therein, in the short term, lies the bankers' downfall. In the 1340s Edward III of England is engaged in the expensive business of war with France, at the start of the Hundred Years' War. He is heavily in debt to Florence, having borrowed 600,000 gold florins from the Peruzzi and another 900,000 from the Bardi. In 1345 he defaults on his payments, reducing both Florentine houses to bankruptcy. Florence as a great banking centre survives even this disaster. Half a century later great fortunes are again being made by the financiers of the city. Prominent among them in the 15th century are two families, the Pazzi and the Medici.

The Fugger dynasty: 15th - 16th century AD At the start of the 15th century the Medici are Europe's greatest banking dynasty, but their political power later distracts them from the highly focussed business of making money. After the reign of Lorenzo the Magnificent the bank's finances are in a perilous state. The Medici later triumph as dukes of Florence. But their role as leading bankers is usurped by a German dynasty, that of the Fuggers. Like the Medici, the Fuggers amass vast wealth by massaging the finances of the papacy and of great princes. The shift of European power to the Habsburgs in the late 15th century is the basis of the Fugger wealth. The family descends from an Augsburg weaver and their first fortune is in textiles. They make their first loan to a Habsburg archduke in 1487, taking as security an interest in silver and copper mines in the Tirol - the beginning of an extensive family involvement in mining and precious metals. In 1491 a loan is made to Maximilian; a subsequent loan to him in 1505 (by which

time Maximilian is the Holy Roman emperor) is secured by the feudal rights to two Austrian counties. But by far the largest Fugger project is undertaken in 1519 on behalf of Maximilian's grandson, Charles. Charles is determined to succeed his grandfather as German king and Holy Roman emperor, but the post involves election and there is a rival candidate - the French king, Francis I. Charles turns to the Fugger family for his election expenses. Out of a massive total of 852,000 florins, to be spent on bribing the seven electors, the Fuggers provide nearly two thirds (544,000 florins). The campaign succeeds. The candidate is elected as Charles V. Interest rates at the time are never less than 12% per annum. And when a loan has to be raised urgently, the 16th-century banker is often able to negotiate a rate of as high as 45%. Banking for emperors is profitable. Continuous warfare and other expenses of state are a constant drain on Charles's treasury. Like any ruler of the time, his costs outrun his sources of revenue. Loans from bankers fill the gap, and they are often repaid by leases on sources of royal income. Thus the Fuggers are granted in 1525 the revenues from the Spanish orders of knighthood, together with the profits from mercury and silver mines. The bankers therefore become, in a sense, both revenue collectors and managers of state assets. But their high rates of interest can quickly cripple a kingdom engaged in too many unprofitable wars.

The Fuggers use their wealth responsibly, as can still be seen in the Fuggerei - a community for the poor, built in Augsburg in 1519 (the year of the imperial election) and still in use today. By the end of the 16th century the family withdraws from financial risk-taking, after some disastrous ventures, and settles into the more conventional aristocratic existence which their wealth has bought. There will be other such exceptional dynasties, most notably the Rothschilds. But by the early 17th century banking begins also to exist in its modern sense - as a commercial service for customers rather than kings. Banks and cheques: from the 16th century AD In 1587 the Banco della Piazza di Rialto is opened in Venice as a state initiative. Its purpose it to carry out the important function of holding merchants' funds on safe deposit, and enabling financial transactions in Venice and elsewhere to be made without the physical transfer of coins. This was an accepted part of trade in ancient Greece, but it has previously been carried out by individual moneylenders - involving a high risk of bankruptcy. The Venetian initiative, with the expenses born by the state, is an attempt to provide a measure of security in this central aspect of the risky business of trade.

Other Mediterranean trading centres (in particular Barcelona and Genoa) have possibly taken this step before Venice, and it is soon followed in northern cities - Amsterdam in 1609, Hamburg in 1619, Nuremberg in 1621. A related development is that of the cheque, a device which depends on the existence of banks as recognized institutions. A bill of exchange, the original method of transferring money without the use of coins, is a complex contract between private parties and one or more moneylenders. A cheque is a bill of exchange between banks, payable by one of the banks to whoever holds and presents the cheque. This much simplified version of a bill of exchange slowly gains acceptance from the late 17th century. At the same time it is realized that the banking process has its own in-built potential for profit which can more than cover the costs of processing cheques and transferring money. The total of the money left on deposit by a bank's customers is a large sum, only a fraction of which is usually required for withdrawals. A proportion of the rest can be lent out at interest, bringing profit to the bank. When the customers later come to realize this hidden value of their unused funds, the bank's profit becomes the difference between the rates of interest paid to depositors and demanded from debtors.

The transformation from moneylenders into private banks is a gradual one during the 17th and 18th centuries. In England it is achieved by various families of goldsmiths who early in the period accept money on deposit purely for safe-keeping. Then they begin to lend some of it out. Finally, by the 18th century, they make banking their business in place of their original craft as goldsmiths. With private banking part of the fabric of commercial life, the next stage in the story is the development of national banks. National banks: 17th - 18th century AD Venice, after being possibly the first city to found a bank for the keeping of money on safe deposit and the clearing of cheques, is also a pioneer in the involvement of a bank with state finances. In 1617 the Banco Giro is established to solve problems encountered by the earlier Banco della Piazza di Rialto, which has got into trouble through the making of unsecured loans. Its debtors include the Venetian government. The Banco Giro is founded on the principle that the government's creditors accept payment in the form of credit with the new bank. In solving an existing problem, this also provides new opportunities. Venice now has a mechanism for raising public finance on the basis of guaranteed credit.

The logical extension of this concept is a national bank, established in some form of partnership with the state. The earliest example is the Bank of Sweden, founded in 1668 and today the world's oldest surviving bank. It is followed before the end of the century by the Bank of England, originally a joint-stock company which begins its existence in 1694 by arranging a loan of 1,200,000 to the government. During the 18th century the Bank of England gradually undertakes many of the tasks now associated with a central bank. It organizes the sale of government bonds when funds need to be raised. It acts as a clearing bank for government departments, facilitating and processing their daily transactions. The Bank of England also becomes the banker to other London banks, and through them to a much wider banking community. The London banks act as agents in the capital for the many small private banks which open around the country in the second half of the 18th century. All these banks use the Bank of England as a source of credit in a crisis. For this purpose the national bank needs a large reserve of gold, which it accumulates until almost the entire hoard of the nation's bullion is stored in its vaults. Bank notes: AD 1661-1821 Paper currency makes its first appearance in Europe in the 17th century. Sweden can claim the priority (as also, a few years later, in the first national bank). In 1656 Johan Palmstruch establishes the Stockholm Banco. It is a private bank but it has strong links with the state (half its profits are payable to the royal exchequer). In 1661, in consultation with the government, Palmstruch issues credit notes which can be exchanged, on presentation to his bank, for a stated number of silver coins. Palmstruch's notes (the earliest to survive dates from a 1666 issue) are impressivelooking pieces of printed paper with eight hand-written signatures on each. If enough people trust them, these notes are genuine currency; they can be used to purchase goods in the market place if each holder of a note remains confident that he can indeed exchange it for conventional coins at the bank.Predictably, the curse of paper money sinks the project. Palmstruch issues more notes than his bank can afford to redeem with silver. By 1667 he is in disgrace, facing a death penalty (commuted to imprisonment) for fraud. Another half century passes before the next bank notes are issued in Europe, again by a far-sighted financier whose schemes come to naught. John Law, founder of the Banque Gnrale in Paris in 1716 (and later of the ill-fated Mississippi scheme) issues bank notes from January 1719. Public confidence in the system is inevitably shaken when a government decree, in May 1720, halves the value of this paper currency.

Throughout the commercially energetic 18th century there are frequent further experiments with bank notes - deriving from a recognized need to expand the currency supply beyond the availability of precious metals. Gradually public confidence in these pieces of paper increases, particularly when they are issued by national banks with the backing of government reserves. In these circumstances it even becomes acceptable that a government should impose a temporary ban on the right of the holder of a note to exchange it for silver. This limitation is successfully imposed in Britain during the Napoleonic wars. The so-called Restriction Period lasts from 1797 to 1821. With governments issuing the bank notes, the inherent danger is no longer bankruptcy but inflation. When the Restriction Period ends, in 1821, the British government takes the precaution of introducing the gold standard. The Rothschild dynasty: AD 1801-1815 William IX, ruler of the German state of Hesse-Kappel and possessor of a vast fortune, has for some years consulted in a private capacity his friend Mayer Amschel Rothschild, a Jewish banker and merchant of Frankfurt. He values Rothschild's advice both on matters of finance and on additions to his art collection. In 1801 he formally appoints him his court agent, and encourages him to offer his financial skills to other European princes in these troubled years when Napoleon is unsettling the continent. Rothschild responds energetically to this opportunity. By 1803 he is in a position to lend 20 million francs to the Danish government. The Danish loan is the first of many such transactions on behalf of governments which rapidly establish the Rothschild family as Europe's most powerful bankers, rising to a pre-eminence comparable to that of the Medici and the Fugger in earlier centuries. The family is soon represented in all the important centres of the continent. Mayer Amschel has five sons. He keeps the eldest, Anselm Mayer, at his side to inherit the Frankfurt bank. The four younger sons establish branches elsewhere: Solomon in Vienna, Nathan Mayer in London, Karl in Naples and Jacob in Paris. The Rothschild family gambles heavily on the eventual defeat of Napoleon. Their loans are all to his enemies (surprisingly Napoleon allows Jacob, operating from Paris, to raise money for the exiled Bourbons). Their network of contacts enables them to move money around Europe even in wartime conditions. A famous example, but only one of many, is Nathan's transfer of large sums of money from London to Portugal to pay the British troops in the Peninsular War.

By the end of the war the Rothschild family has a vast reputation among the allies, and a close involvement in the government finances of many nations. The qualities soundly underpinning their good fortune, in addition to undoubted financial flair, are that they are trustworthy and very well informed. An example of the former is the fortune left in Mayer Amschel Rothschild's care when his patron flees from Hesse-Kassel after Napoleon's victory at Jena in 1806. It amounts to perhaps half a million pounds in the money of those days. In spite of every attempt by Napoleon's agents to make him make him hand it over, Rothschild keeps it safe and returns it, with interest, to its owner in 1815. As to reliable information, the most famous incident concerns that same year, 1815. On June 20 Nathan Mayer Rothschild calls on the government in London, during the morning, with a startling piece of good news. The duke of Wellington, he informs the officials - who are at first somewhat incredulous - has two days earlier won a decisive victory over Napoleon at Waterloo. Confirmation arrives that afternoon through the government's own channels. The Rothschild network of communication includes, famously, the use of homing pigeons. But on this occasion their success is due to one of their couriers, who was waiting in the harbour at Ostend for the first scrap of news. History of Banking in India Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money have become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III. Phase I The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in india as the Central Banking Authority. During those days public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Phase II Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. 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 : Nationalisation of State Bank of India. 1959 : Nationalisation of SBI subsidiaries. 1961 : Insurance cover extended to deposits. 1969 : Nationalisation of 14 major banks. 1971 : Creation of credit guarantee corporation. 1975 : Creation of regional rural banks. 1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions. Phase III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure. Reserve Bank of India (RBI) The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the begining. The Government held shares of nominal value of Rs. 2,20,000.

Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following:

To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage.

Functions of Reserve Bank of India The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the Reserve Bank of India. Bank of Issue Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank notes of all denominations. The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. The assets and liabilities of the Issue Department are kept separate from those of the Banking Department. Originally, the assets of the Issue Department were to consist of not less than two-fifths of gold coin, gold bullion or sterling securities provided the amount of gold was not less than Rs. 40 crores in value. The remaining three-fifths of the assets might be held in rupee coins, Government of India rupee securities, eligible bills of exchange and promissory notes payable in India. Due to the exigencies of the Second World War and the post-was period, these provisions were considerably modified. Since 1957, the Reserve Bank of India is required to maintain gold and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores should be in gold. The system as it exists today is known as the minimum reserve system.

Banker to Government The second important function of the Reserve Bank of India is to act as Government banker, agent and adviser. The Reserve Bank is agent of Central Government and of all State Governments in India excepting that of Jammu and Kashmir. The Reserve Bank has the obligation to transact Government business, via. to keep the cash balances as deposits free of interest, to receive and to make payments on behalf of the Government and to carry out their exchange remittances and other banking operations. The Reserve Bank of India helps the Government - both the Union and the States to float new loans and to manage public debt. The Bank makes ways and means advances to the Governments for 90 days. It makes loans and advances to the States and local authorities. It acts as adviser to the Government on all monetary and banking matters. Bankers' Bank and Lender of the Last Resort The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a cash balance equivalent to 5% of its demand liabilites and 2 per cent of its time liabilities in India. By an amendment of 1962, the distinction between demand and time liabilities was abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate deposit liabilities. The minimum cash requirements can be changed by the Reserve Bank of India. The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get financial accommodation in times of need or stringency by rediscounting bills of exchange. Since commercial banks can always expect the Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the lender of the last resort. Controller of Credit The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of credit created by banks in India. It can do so through changing the Bank rate or through open market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India can ask any particular bank or the whole banking system not to lend to particular groups or persons on the basis of certain types of securities. Since 1956, selective controls of credit are increasingly being used by the Reserve Bank. The Reserve Bank of India is armed with many more powers to control the Indian money market. Every bank has to get a licence from the Reserve Bank of India to do banking business within India, the licence can be cancelled by the Reserve Bank of certain stipulated conditions are not fulfilled. Every bank will have to get the permission of the Reserve Bank

before it can open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank showing, in detail, its assets and liabilities. This power of the Bank to call for information is also intended to give it effective control of the credit system. The Reserve Bank has also the power to inspect the accounts of any commercial bank. As supereme banking authority in the country, the Reserve Bank of India, therefore, has the following powers: (a) It holds the cash reserves of all the scheduled banks. (b) It controls the credit operations of banks through quantitative and qualitative controls. (c) It controls the banking system through the system of licensing, inspection and calling for information. (d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.

Banking Outlook for 2011


Mobile technology to drive the next leg of the banking sector growth; would also support financial inclusion: Technology has played a key role in the Indian banking sector. As per the FY10 RBI release, around 90% of the public sector branches have been updated with core banking software, while around 97.8% of the public sector banks branches have been fully computerized. The trend of transactions too can be seen to have shifted from paper based to electronic based. In FY10, the share of electronic transactions to total transactions stood at around 89% in value terms and around 40% in volume terms. The next leg of growth is expected to be driven by mobile banking technology. This would also be in corroboration with the RBIs thrust on financial inclusion. There were around 525.9 million mobile connections in India as of Nov 10, compared with around 69,160 branches and 60,153 ATMs. Mobile technology is expected to widen the reach of the banking network on one side along with providing for ease of transactions on the other. Corroborated with the business correspondent model and UID, the same is expected to making banking services accessible to very small habitations by utilizing mobile technology where setting up a branch is unfeasible. Consolidation the way forward for the banking sectors; would help banks finance larger transactions: The Indian banking sector has witnessed consolidation over the past couple of years. As per RBI data there have around 25 mergers in the banking sector in the last two decades. Some of the key mergers which have taken place in the last couple of years have been Global Trust Bank with Oriental Bank of Commerce, Bank of Punjab with Centurion Bank, further Lord Krishna Bank with Centurion Bank of Punjab and then eventually with HDFC Bank, The Sangli Bank with ICICI Bank and the latest one being Bank of Rajasthan with ICICI Bank.

Having a minimum capital of more than Rs. 10 billion is one of the options that RBI is contemplating as the minimum capital requirement to obtain a new bank license. Given that around eight domestic banks still have a net worth lower than Rs.10 billion, in FY10, there is further scope for consolidation. Also, this would help banks in meeting capital adequacy requirements and financing large transactions and investments made by the Indian corporate sector.