BANKS IN INDIA

INDIA
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

State Bank of India and its Associates

Scheduled Co-operative Banks

Regional Rural bank

Scheduled State Co-operative Banks

Scheduled Urban Co operative Banks

Nationalized Banks

Foreign Banks

Private Sector Banks,

Regional Rural Banks

Section 42(6) The Reserve Bank Of India Act, 1934 Scheduled Bank
The Bank shall, save as hereinafter provided, by

notification in the Gazette of India,- (a) direct the inclusion in the Second Schedule of any bank not already so included which carries on the business banking 3[ in India] and which
(i) has a paid- up capital and reserves of an aggregate

value of not less than five lakhs of rupees, and (ii) satisfies the Bank that its affairs are not being conducted in a manner detrimental to the interest of its depositors, and (iii) 4[ is a State co- operative bank or a company] as defined in 5[ section 3 of the Companies Act, 1956 (1 of 1956 ), or an institution notified by the Central Government in this behalf] or a corporation or a company incorporated by or under any law in force in any place 6[ outside India];

EVOLUTION OF BANKING
Prior to 1950
Some schedule banks after RBI founded in 1935

were PNB, Allahabad Bank, Oudh Commercial bank Total around 58 banks existed

Foundation Phase 1948-1967

1949 Banking Regulation Act

Imperial Bank Of India converted into State bank

of India Institutional frame work for long term financing to agri and industry By 1968 there were 281 banks 71 scheduled and 210 non scheduled Till 1968 RBI and SBI with associates were under the govt control

Expansion Phase 1968-1984

Socialization of Banking started in 1968 .Commercial banks were viewed as agents of change 14 banks were nationalized in 1969 6 in 1980 Birth of RRB in 1975 and NABARD in 1982 By 1984 scheduled banks 264 and non scheduled banks reduced to 268

Consolidation Phase( 1985-1990)

Consolidation of exiting banks

Focus on credit management , staff productivity

Assest liabilities priced by Rbi High CRR and SLR Consolidation of losses because of farmer debt

relief schemes

Reformatory Phase
NARASIMHAM COMMITTEE REPORT PHASE 1 report

submitted 1991 Recommended CRR reduction to 10% and SLR to 25%

Interest payment of 3% on cash balances above minimum

CRR balances Interest rate deregulation Minimum of 4% CAR capital adequacy ratio Income recognition ,assets classification and provisioning norms Restructure to create 3or 4 large banks gave the concept of universal banks Entry of Pvt. Banks with level playing field Abolishment of branch licensing Opening for foreign banks Supervision of banks rather than regulation Elimination of duality of control on banking sector

ACTION ON RECOMMENDATION
CRR brought down from 15% to 5% in 2004

SLR from 38.5% to 25%

Inclusion in other areas in priority sector lending

of 40% Bank to have PLR Capital adequacy norms of 8% Creation of Assets reconstruction fund Restructuring new India bank merged with PNB

CRR AND SLR DYNAMICS

Pvt banks
Banking regulation Amendment Act 1994

permited entry of pvt sector banks 30

Allowed entry of foreign banks currently 33

(Narasimham Committee IIBanking Sector Reforms

RECOMMENDATIONS
The Committee suggests that pending the emergence of markets in

India where market risks can be covered, it would be desirable that capital adequacy requirements take into account market risks in addition to the credit risks.

In the next three years, the entire portfolio of

Government securities should be marked to market and this schedule of adjustment should be announced at the earliest. It would be appropriate that there should be a 5% weight for market risk for Govt. and approved securities.

CENTRAL BANK RBI

CENTRAL BANK OF INDIA

UNDER RBI ACT 1934

FUNCTIONAL SINCE 1935

REGULATION OF MONEY AND CREDIT

MONETARY TECHNIQUES
CRR AND SLR OMO REPO AND REVERSE REPO THROUGH LAF

REGULATION OF MONEY AND CREDIT CONDITIONS

NON- MONETARY TECHNIQUES
DIRECT CREDIT ALLOCATION CREDIT RATIONING REPO AND REVERSE REPO