Banking in India go back to the early half of

the 18th century.

3 Presidency Banks that were established in the

country namely the

Bank of Hindustan,
Bank of Madras and
Bank of Bombay can also be referred to as some
of the oldest banking institutions in the country.

The journey of Indian Banking System

can be segregated into three distinct
phases.
Early phase from 1786 to 1969 of Indian
Banks
Nationalization 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.

Early phase from 1786 to 1969 of

Indian Banks
The General Bank of India was set up in
the year 1786.
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

Early phase from 1786 to 1969 of Indian Banks

Bank of Bengal (1809),
Bank of Bombay (1840)
Bank of Madras (1843)
These three banks were amalgamated in 1920
Imperial Bank of India was established which
started as private shareholders banks, mostly
Europeans shareholders.

Early phase from 1786 to 1969 of Indian

Banks
Increase in number of banks.
Allahabad Bank, Punjab National Bank Ltd.,
Bank of India, Central Bank of India, Bank of
Baroda, Canada Bank, Indian Bank, and Bank
of Mysore and son on were set up.
Reserve Bank of India came in 1935.
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).

Government took major steps in this Indian

Banking Sector .
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
Nationalization of Banks.
In July 19 ,1969 14 banks.
A second dose of nationalization of 6 more
commercial banks followed in 1980.

Origin of the word Bank

Italian word Banco- which denotes an
accumulation of either stock or money.
Another group of people who believes that
the word bank has derived from the word
Bancus or Banque which denotes a Bench.
Dr.Herbert L in his law of banking he
says:
Receives current deposits.
Permits the depositors to draw cheques
against their deposits.

Meaning
Bank is an Institution, which deals in
money. It accepts deposits from the public
and creates credit with a view to lend.
Banks are those institutions which Borrow
money from those who have surplus and
lend money to those who need money and
the difference b/w interest that they get
from needy and give to those who have
surplus is their income.

Base rate : It is a rate fixed by RBI with in this

range banks should issue the loans.
Present base rate is
Lending loan-10.25%
Deposits
- 8%
Bank Rate: it is a rate at which RBI will issue
loans to commercial banks - 10.25 Increased
from - 8% which was continuing since
03/05/2013
Interest rate: It is a rate at which commercial
banks will provide loans to public.

http://www.deal4loans.com/homeloans-interest-rates.php
http://www.housingindia.info/NHBHome
LoanRates.aspx

Mobilization of savings.
Financing Industry.
Financing trade.
Development of capital market.
Financing agriculture.
Financing consumer activities. `

Central Bank
2. Commercial bank
a) Private Sector bank
b) Public Sector bank
c) Foreign bank
3. Development Bank and Industrial Bank
4. Cooperative Bank
a) Primary Credit societies
b) District co-operative bank
c) State co-operative Bank
5. Specialized bank
6. Agricultural bank
1.

Commercial Banking:
Commercial bank are those financial
institutions which accept deposits from
the public repayable on demand through
cheques and ATM.
Functions of Commercial Banks:
1. Primary functions.
2. Secondary functions.

Functions of Commercial Banks:

1.Primary functions.
A. Accepting deposits:
i) Current deposits
ii) Saving deposits.
iii) Fixed deposits.
B.

Lending money:
i)
ii)
iii)
iv)

Over draft
Cash Credit
Loans and advances
Discounting of bills of Exchange.

Functions of Commercial Banks:

1. Secondary Functions:
a) Agency services
Collection of cheques, drafts, bills and etc.,
Execution of Standing orders ex: Collection of dividends

and payment of premium.

Income tax services.
Acting as trustee.

Functions of Commercial Banks:

B. General Utility Services:
Accepting valuables and securities for safety custody.
Underwriting shares, debentures and government

securities.
Providing information relating to credit worthiness of their
customers.
Conducting exhibitions and scholarships for students.
Issuing travelers checks, letter of credit and etc

Role of Commercial Banks in Socio and

Economic Development :
1.Banks Promote capital formation.
2.Optimum utilization of resources.
3.Financing the priority sector.
4.Banks promote balanced regional development.
5.Expansion of credit.
6.Development of Agriculture.
7.Implementation of Monetary policies.
8.Regional Development
9.Industrial Development

Credit creation is an Important function of

Commercial Bank.
How money circulation occurs in the country?
The notes and coins issued by the National
Government
The currency notes issued by the Central bank.
Credit money or deposit money created by
banking system of the country.