Bank- History and

Structure
Dr. Satish Kumar
Assistant Professor, DMS
MNIT Jaipur

Bank
Abankis

afinancial institutionand afinancial

intermediarythat acceptsdepositsand channels those
depositsintolendingactivities,eitherdirectlybyloaning
orindirectlythroughcapitalmarkets.
Abankistheconnectionbetweencustomersthathave
capitaldeficitsandcustomerswithcapitalsurpluses.

History of Banking
Banking in the modern sense of the word can be traced
toItaly, to the rich cities in the north
likeFlorence,VeniceGenoa.
TheBardiandPeruzzifamilies dominated banking in 14th
century in Florence, establishing branches in many other
partsofEurope.
OneofthemostfamousItalianbankswastheMediciBank,
setupbyGiovanni di Bicci de'Mediciin1397
The earliest known state deposit bank,Banco di San
Giorgio(Bank of St. George), was founded in 1407
atGenoa,Italy.

 The

wordbankwas
borrowed
inMiddle
bank
EnglishfromMiddle
Frenchbanque,
from
OldItalianbanca, fromOld High Germanbanc,
bank"bench, counter".
Benches were used as desks or exchange counters
byFlorentinebankers, who used to make their
transactionsatopdeskscoveredbygreentablecloths.

Banking System in
India

EvolutionofBankinginIndia
The Indian banking industry has its foundations in the

18th century, and has had a varied evolutionary

experiencesincethen.
TheinitialbanksinIndiawereprimarilytradersbanks
engagedonlyinfinancingactivities.Bankingindustryin
the pre-independence era developed with the
Presidency Banks, which were transformed into the
Imperial Bank of India and subsequently into the
StateBankofIndia.

 Theinitialdaysoftheindustry(Banking)sawamajority

private ownership and a highly volatile work

environment. Major strides towards public ownership
and accountability were made with nationalisation in
1969 and 1980 whichtransformedthe face of banking
inIndia.
The industry in recent times has recognised the
importance of private and foreign players in a
competitive scenario and has moved towards greater
liberalisation.

Banking in India- History

The commercial banking industry in India started in 1786 with the

establishmentoftheBankofBengalinCalcutta.
The Indian Government at the time established three Presidency
banks,viz.,theBankofBengal,theBankofBombayandtheBank
ofMadras
In 1921, the three Presidency banks were amalgamated to form the
ImperialBankofIndia,whichtookuptheroleofacommercialbank,a
bankers'bankandabankertotheGovernment.
The Imperial Bank of India was established with mainly European
shareholders. It was only with the establishment of Reserve Bank of
India(RBI)asthecentralbankofthecountryin1935,thatthequasicentralbankingroleoftheImperialBankofIndiacametoanend.

In 1860, the concept of limited liability was introduced in Indian

banking,resultingintheestablishmentofjoint-stockbanks.In1865,
theAllahabadBankwasestablishedwithpurelyIndianshareholders.
Punjab National Bank came into being in 1895. Between 1906 and
1913,otherbankslikeBankofIndia,CentralBankofIndia,Bankof
Baroda,CanaraBank,IndianBank,andBankofMysoreweresetup.
Afterindependence,theGovernmentofIndiastartedtakingstepsto
encouragethespreadofbankinginIndia.
In order to serve the economy in general and the rural sector in
particular,theAllIndiaRuralCreditSurveyCommitteerecommended
the creation of a state-partnered and state-sponsored bank taking
over the Imperial Bank of India and integrating with it, the former
state-ownedandstate-associatebanks

Accordingly, State Bank of India (SBI) was constituted in 1955.

Subsequently in 1959, the State Bank of India (subsidiary bank)Act
was passed, enabling the SBI to take over eight former stateassociatebanksasitssubsidiaries.
To better align the banking system to the needs of planning and
economic policy, it was considered necessary to have social control
over banks. In 1969, 14 of the major private sector banks were
nationalized.
ThiswasanimportantmilestoneinthehistoryofIndianbanking.This
was followed by the nationalisation of another six private banks in
1980. With the nationalization of these banks,the major segmentof
thebankingsectorcameunderthecontroloftheGovernment.

Becauseofnationalization,Branchexpansioninun-bankedruraland
semi-urbanareas,whichinturnresultedinhugedepositmobilization,
thereby giving boost to the overall savings rate of the economy. It
also resulted in scaling up of lending to agriculture and its allied
sector.
To create a strong and competitive banking system, a number of
reform measures were initiated in early 1990s. The thrust of the
reforms was on increasing operational efficiency, strengthening
supervision over banks, creating competitive conditions and
developingtechnologicalandinstitutionalinfrastructure.
These measures led to the improvement in the financial health,
soundnessandefficiencyofthebankingsystem

Oneimportantfeatureofthereformsofthe1990swasthat
theentryofnewprivatesectorbankswaspermitted.
Followingthisdecision,newbankssuchasICICIBank,
HDFCBank,IDBIBankandUTIBankweresetup.

BANKING SYSTEM IN INDIA

Reserve
Bank of India

A. Commercial
Banks

B. Co-operative
Banks

C. Regional Rural
Banks (RRBs)

Banking Structure in India

BankingRegulator

TheReserveBankofIndia(RBI)isthecentralbankingandmonetary
authorityofIndia,andalsoactsastheregulatorandsupervisorof
commercialbanks.

ScheduledBanksinIndia

Scheduled banks comprise scheduled commercial banks and

scheduledco-operativebanks.Scheduledcommercialbanksformthe
bedrock of the Indian financial system, currently accounting for more
thanthree-fourthsofallfinancialinstitutions'assets.SCBsarepresent
throughoutIndia,andtheirbranches,havinggrownmorethanten-fold
inthelast40yearnownumbermorethan91000acrossthecountry

Scheduled Commercial Banks

(SCBs)

According to the RBI definition, commercial

banks which conduct the business of banking in
India and which
(a) have paid up capital and reserves of an aggregate
real and exchangeable value of not less than Rs 0.5
million and
(b) satisfy the RBI that their affairs are not being
conducted in a manner detrimental to the interest of their
depositors

are eligible for inclusion in the Second Schedule

to the Reserve Bank of India Act, 1934, and
when included are known as Scheduled
Commercial Banks.

ScheduledBankingStructureinIndia

Commercial Banks Structure

Commercial Banks

PUBLIC
SECTOR BANKS

PRIVATE
SECTOR BANKS

Old Private
Sector Banks

FOREIGN BANKS

New Private
Sector Banks

REGIONAL RURAL
BANKS (RRBS)

Branches of Banks in India

PublicSectorBanks

Publicsectorbanksarethoseinwhichthemajoritystakeisheld
bytheGovernmentofIndia(GoI).Publicsectorbankstogether
makeupthelargestcategoryintheIndianbankingsystem.
Therearecurrently26publicsectorbanksinIndia.Theyinclude
theSBIandits5associatebanks(suchasStateBankofBikaner
andJaipur,StateBankofMysoreetc),19nationalisedbanks
(suchasAllahabadBank,CanaraBanketc)andIDBIBankLtd.
Inscheduledcommercialbanks,around60,000bankbranches
areheldbyPSBsinIndia.

 RegionalRuralBanks

RegionalRuralBanks(RRBs)wereestablishedduring1976-1987
with a view to develop the rural economy. Each RRB is owned
jointly by the Central Government, concerned State Government
and a sponsoring public sector commercial bank. RRBs provide
credit to small farmers, artisans, small entrepreneurs and
agriculturallabourers.
Over the years, the Government has introduced a number of
measures of improve viability and profitability of RRBs, one of
thembeingtheamalgamationoftheRRBsofthesamesponsored
bankwithinaState.AsonDecember2012thereare82RRBsin
India

 PrivateSectorBanks

Inthistypeofbanks,themajorityofsharecapitalisheldby
private individuals and corporates. Not all private sector
bankswerenationalizedinin1969,and1980.
The private banks which were not nationalized are
collectively known as the old private sector banks and
includebankssuchasTheJammuandKashmirBankLtd.,
LordKrishnaBankLtdetc.

Entryofprivatesectorbankswashoweverprohibitedduring
the post-nationalisation period. In July 1993, as part of the
banking reform process and as a measure to induce
competitioninthebankingsector,RBIpermittedtheprivate
sectortoenterintothebankingsystem.Thisresultedinthe
creation of a new set of private sector banks, which are
collectivelyknownasthenewprivatesectorbanks.
As on December 2012, there are 20 Indian Private sector
Banks(Old=13,New=7)operatinginIndia.

ForeignBanks

Foreign banks have their registered and head offices in a foreign

country but operate their branches in India. The RBI permits these
banks to operate either through branches; or through wholly-owned
subsidiaries.
The primary activity of most foreign banks in India has been in the
corporate segment. However,someofthelargerforeignbankshave
also made consumer financing a significant part of their portfolios.
Thesebanksofferproductssuchasautomobilefinance,homeloans,
creditcards,householdconsumerfinanceetc.

Foreign Banks contd

Foreign banks in India are required to adhere to all banking

regulations, including priority-sector lending norms as applicable to
domesticbanks.
Inadditiontotheentryofthenewprivatebanksinthemid-90s,the
increasedpresenceofforeignbanksinIndiahasalsocontributedto
boostingcompetitioninthebankingsector.
AsonDecember2012thereareand41ForeignBanksoperatingin
India.

 Co-operativeBanks

Co-operative banks cater to the financing needs of agriculture,

retail trade, small industry and self-employed businessmen in
urban,semi-urbanandruralareasofIndia.Adistinctivefeatureof
theco-operativecreditstructureinIndiaisitsheterogeneity.

Thestructurediffersacrossurbanandruralareas,acrossstates
andloanmaturities.Urbanareasareservedbyurbancooperative
banks(UCBs),whoseoperationsareeitherlimitedtoonestateor
stretchacrossstates.

Theco-operativebankingsectoristheoldestsegmentof
theIndianbankingsystem.
Theruralco-operativebankscompriseStateco-operative
banks,districtcentralcooperativebanks,SCARDBsand
PCARDBs

SCARDBs: State Co-operative Agriculture and Rural Development Banks.

PCARDBs: Primary Co-operative Agriculture and Rural Development Banks.

Functions of Commercial
Banks
1.

Basic Function:

(i) Mobilization of Deposits.

Saving Deposit Account
Fixed Deposit Account
Recurring Deposit Account
Current Deposit Account

Functions of Commercial
Banks
(ii)

Credit Deployment:
Money at Call
Cash Credit
Overdraft
Discounting Bills of Exchange
Term Loan
(iii) Credit Creation
The process of 'Credit Creation' begins with
banks lending money out of primary deposits.

Agency Functions

Remittance of Funds
Collection & Payment of Credit Instruments
Execution of standing orders
Sale and Purchase of securities
Trustees and Executors of Wills
Collection of Dividend on Shares and Interest
on Debentures

General Utility Functions

Locker Facility
Travellers Cheque Facility
Merchant Banking Service
Acting as Underwriters
Acting an Information Provider
Acting as a Referee

Development Functions

Capital Formation
Rural Development
Priority Sector Advances
Creating Employment
Assistance of Money & Capital Market

Modern Functions

ATMs
Tele-Banking
Internet Banking
Smart Cards
Round the Clock Banking

Commercial Banking

A commercial bank is a financial intermediary

which collects deposits from the public and
lends in the form of loans.

Commercial banks in India have traditionally

focused on meeting the short-term financial
needs of industry, trade and agriculture.

However, given the increasing sophistication and

diversification of the Indian economy, the range
of services extended by commercial banks has
increased significantly, leading to an overlap with
the functions performed by other financial
institutions.

Functions of Commercial
Banks

Payment System: Banks help in settling the

financial transaction process by issuing and
paying cheques issued on behalf of customers.
Further, in modern banking, the payment system
also involves electronic banking, wire transfers,
settlement of credit card transactions, etc.

Financial Intermediation: Bank is to take

different types of deposits from customers and
then lend these funds to borrowers, in other
words, financial intermediation.

Functions of Commercial
Banks

Financial Services and Products: In addition

to acting as financial intermediaries, banks today
are increasingly involved with offering customers
a wide variety of financial services including
investment banking, insurance-related services,
government-related business, foreign exchange
businesses, wealth management services etc.
and products like gold coins, insurance etc.

Banking
FUNCTIONS AND SERVICES OF A BANK

Receiving deposits

Loans

Making
loans and
advances

Cash credit

Agency
functions

Overdraft

General
utility
services

Bill Financing

FUNCTIONS OF
BANK

PRIMARY
FUNCTIONS

ACCEPTING
DEPOSITS

GRANTING
ADVANCES

SECONDARY
FUNCTIONS

AGENCY
FUNCTIONS

UTILITY
FUNCTIONS

Saving Deposits

Loans

Transfer of Funds

Drafts

Fixed Deposits

Overdraft

Periodic Payments

Lockers

Current Deposits

Cash Credit

Cheques Collection

Underwriting

Portfolio Management

Project Reports

Recurring Deposits Bill Financing

Periodic Collections

Social Welfare

Other functions

Other functions

DEPOSITS

Deposits from the public are principal sources of

funds for the banks. The bank deposits can be
classified into
(a) Demand deposits
(b) Time deposits

Demand deposits are defined as deposits

payable on demand through cheque or
otherwise.

Time deposits are defined as those deposits

which are not payable on demand and on which
cheques cannot be drawn. They have a fixed
term to maturity. A certificate of deposit (CD), for
example, is a time deposit.

Types of deposit accounts

offered
by banks
Current account
Savings bank account
Fixed deposit account
Recurring deposit account

Cash Withdrawal Form

Cheque Deposit Form

Draft Application Form

Draft Application Form

Cheque
A cheque (or check in American English) is a document
that orders a payment of money from a bank account
A cheque is a bill of exchange drawn on a specified
banker and not expressed to be payable otherwise than
on demand. Cheque includes electronic image of a
truncated cheque and a cheque in electronic form.
The definition is amended by Amendment Act, 2002,
making

provision

clearance of cheque.

for

electronic

submission

and

Cheque

Crossing of Cheques

CHEQUE CROSSED GENERALLY

Where a cheque bears across its face an addition of the words and
company or any abbreviation thereof, between two parallel transverse lines,
or of two parallel transverse lines simply, either with or without the words
not negotiable, that addition shall be deemed a crossing, and the cheque
shall be deemed to be crossed generally.

CHEQUE CROSSED SPECIALLY

Where a cheque bears across its face an addition of the name of a banker,
either with or without the words not negotiable, that addition shall be
deemed a crossing, and the cheque shall be deemed to be crossed
specially, and to be crossed to that banker.

Cheque

Demand Draft

A demand draft or "DD" is an instrument most banks in

India use for affecting transfer of money. To buy a "DD"
from a Bank, you are required to fill an application form
which asks the following :
The application form along with the cheque on your
account or cash is deposited with the counter clerk who
gives you a Demand Draft (which looks like a cheque)
for the amount.

Demand Draft

Bill of Exchange
According to section 5 of The Negotiable
Instrument Act, A Bill Of Exchange is an
instrument
in
writing
containing
an
unconditional order, signed by the maker ,
directing a certain person to pay a sum of
money only to or to the order of a certain
person or to the bearer of the instrument.

Special features
1.
2.
3.
4.
5.
6.
7.
8.

A Bill Of Exchange is an instrument in writing.

It must be signed by the maker.
It contains an unconditional order.
The order must be to pay money and money
only.
The sum payable must be specific.
The amount must be paid within a stipulated
time.
The name of the drawee must be clearly
mentioned.
It must be dated and stamped.

Specimen of a bill of exchange

Types of Bills

Demand Bill- Payable immediately on presentment to

employee

Usance Bill- Time period recognized for payment of bills

Documentary Bill- This is accompanied by documents

that confirm trade has taken place

Clean Bill- This is not accompanied by any document.

Interest rate is charged higher than documentary bill.

ADVANCES

Classification of Advances
Fund based lending: This is a direct form of
lending in which a loan with an actual cash
outflow is given to the borrower by the Bank.
Non-fund based lending: In this type of facility,
the Bank makes no funds outlay. However, such
arrangements may be converted to fund-based
advances if the client fails to fulfill the terms of
his contract with the counterparty.

METHODS OF
GRANTING
ADVANCES

Loan System

Granting of an advance in lump sum usually on

the basis of some acceptable securities.

Funds are provided at one go and repayment is

made in installments.

Interest is to be paid on the entire amount

whether fully utilized or not.

CASH CREDIT

The banker fixes a cash credit limit on an annual basis,

and the customer is at liberty to withdraw any amount as
and when he needs, provided the amount does not
exceed the cash credit limit.

Borrower has to provide security of tangible assets.

Interest is charged only on the actual amount withdrawn,

and for the actual period for which it is utilized.

OVERDRAFT
This is a facility given to a current account
holder, by which he is allowed to withdraw more
money from his account than what stands to his
credit.
The banker may insist on either a collateral
security or grant it on the personal security of the
borrower.
Interest is charged on the actual amount utilized.

Bill Financing

Post Sale limits are extended by way of

discounting/
purchasing
of
bills/cheques,
advances against book debts etc.

Bill Purchase - These may be in the nature of on

demand Clean or Documentary bills being the bills
payable on demand drawn on outstation centres
for which immediate credit is afforded to your
business account less our discount and handling
charges.

Bill Financing

Usance Bill Purchased - Usance Clean or Documentary

bills are bills payable on due date after expiry of the
usance period drawn on drawees/payees against which
immediate credit is given to your business account less
interest for the usance period, handling charges, postage
etc.

Cheques Discounted - Outstanding cheques/drafts

drawn on our bank or other banks are purchased and
immediate credit is afforded to your business account
less our discount/commission.

TYPES OF CREDIT

Working capital finance

It is utilized for operating purposes, resulting in

creation of current assets.

It consists mainly of cash credit facilities, short

term loans and bill discounting

Project Finance

Consists mainly of extending medium-term and

long-term rupee and foreign currency loans to
the manufacturing and infrastructure sectors.

Loans
to
Small
and
Medium
A substantial quantum of loans is granted by
Enterprises
banks to small and medium enterprises (SMEs).

While granting credit facilities to smaller units,

banks often use a cluster-based approach,
which encourages financing of small enterprises
that have a homogeneous profile such as
leather manufacturing units, chemical units, or
even export oriented units.

Comprises loans to farmers, small and medium

enterprises in rural areas, dealers and vendors
Rural
and
Agricultural
Loans
linked to these entities and even corporate.

For farmers, banks extend term loans for

equipments used in farming, including tractors,
pump sets, etc. Banks also extend crop loan
facility to farmers.

DIRECTED LENDING
The RBI requires banks to deploy a certain
minimum amount of their credit in certain
identified sectors of the economy. This is called
directed lending.
Priority sector lending
Export Credit

Priority Sector

Agriculture
Small scale industries
Small road and water transport operators
Small business
Retail trade
Professional and self-employed persons
State sponsored organizations for Scheduled
Castes/Scheduled Tribes
Micro-credit provided by banks either directly or through
any intermediaty
Loans to self help groups(SHGs) / Non Governmental
Organisations (NGOs) for onlending to SHGs

Retail Loan
Home loans,
Automobile loans,
Personal loans (for marriage, medical expenses
etc)
Consumer loans (such as TV sets, personal
computers etc).

International Loans Extended by Banks

Indian corporate houses raise foreign currency

loans from banks based in India as well as
abroad as per guidelines issued by RBI/
Government of India.

Further, banks based in India have an access to

deposits placed by Non Resident Indians (NRIs)
in the form of FCNR (B) deposits, which can be
used by banks in India for lending to Indian
customers.

LETTER OF CREDIT
A letter from a bank guaranteeing that a buyer's
payment to a seller will be received on time and
for the correct amount. In the event that the
buyer is unable to make payment on the
purchase, the bank will be required to cover the
full or remaining amount of the purchase.

Parties to a letter of credit

a beneficiary who is to receive the money

the issuing bank of whom the applicant is a

client

the advising bank of whom the beneficiary is a

client

Bank Guarantee
A guarantee from a lending institution ensuring
that the liabilities of a debtor will be met. In other
words, if the debtor fails to settle a debt, the
bank will cover it.

MODES OF CREATING
CHARGES

CHARGE
A charge confers a right on the secured party to
look to (or appropriate) a particular asset in the
event

of

enforceable

the
by

debtor's
either

default,
power

of

which

is

sale

or

appointment of a receiver. Technically, a charge

cannot include the power to enforce without
judicial intervention.

TYPES OF CHARGES
1.

Hypothecation

2.

Pledge

3.

Mortgage

4.

Assignment

5.

Lien and Set Off

1. Hypothecation

1. HYPOTHECATION

It is an extended idea of pledge, whereby the

creditor permits the debtor to retain possession
of goods, either on behalf of or in trust for
himself.

It is an equitable charge

Charge is created only on movable goods like

stocks, machinery and vehicles.

2. Pledge

2. PLEDGE

Pledge is the bailment of goods as security for

payment of a debt or performance of a promise.

The banker can retain the goods for the

payment of the debt, for any interest that has
accrued on it as well as any expenses incurred
by him for keeping the goods safe and secure.

BAILMENT
Bailment describes a legal relationship in
common law where physical possession of
personal property is transferred from one person
(the 'bailor') to another person (the 'bailee')
who subsequently has possession of the
property. It arises when a person gives property
to someone else for safekeeping.

3. Mortgage

3. MORTGAGE
When a customer secures an advance on the
security of specific immovable property, the
charge created thereon is called a mortgage.
The instrument through which it is affected is
called mortgage deed, the customer is called
mortgagor and the bank is called mortgagee.
The payment so secured which includes both
the principal money and the interest thereon is
called mortgage money.

TYPES OF MORTGAGE

In a Simple mortgage, the possession of the

mortgaged property is not transferred from
mortgagor to the mortgagee. If the mortgagor
fails to repay the loan, the mortgagee has the
right to sell the property and recover the loan
from the sale amount.

TYPES OF MORTGAGE

In a usufructuary mortgage, the possession

of the mortgaged property is transferred to the
mortgagee. The mortgagee receives the
income from the property (rent, profit, interest,
etc) until the repayment of the loan. The title
deeds remain with the owner.

TYPES OF MORTGAGE

In an English Mortgage:
The mortgagor binds himself to repay the
borrowed money on a certain date.
The mortgagor transfers the property absolutely
to the mortgagee.
But such transfer is subject to the condition that
the mortgagee will retransfer the property on
repayment before the agreed date.

TYPES OF MORTGAGE

An equitable mortgage can arise in two

different ways either as a legal mortgage
which was never perfected by conveying the
underlying assets, or by specifically creating a
mortgage as an equitable mortgage.

4. Assignment

4. ASSIGNMENT

Assignment of a contract means transfer of

contractual rights and liabilities to a third party.

The borrower can assign any of his rights to the

banker as security for a loan.

The transferor or borrower is called the assignor,

and the transferee or banker is called the
assignee.

5. Lien and Set Off

5. Lien and Set Off

A lien is the right of a creditor to retain the goods

and the securities owned by the debtor until the
debt due from him is repaid.

Set off is the banks legal right to seize a

borrowers any account balance in the same
bank to apply it towards the borrower's any loan
in arrears or in anticipation of default

TYPES OF LIENS

A special lien can only be exercised in respect

of fees relating to the instant transaction; the
lienee cannot use the property held as security
for past debts as well.

A general lien affects all of the property of the

lienor in the possession of the lienee, and
stands as security for all of the debts of the
lienor to the lienee.

Performance of Indian
Commercial Banks

Size of the Banking industry

The total assets size of the banking industry rose
by more than five times between March 2000
and March 2010 - from US$ 250 billion to more
than US$ 1.3 trillion - a Compound Annual
Growth Rate (CAGR) of 18 per cent compared
to the average GDP growth of 7.2 per cent
during the same period.
(Source: iba.org.in)

Key Financial Highlights of

SCBs
The number of banked centres of Scheduled
Commercial Banks (SCB) stood at 35,151 at the
end of March, 2011.
The top hundred centres according to size of
deposits accounted for 69.7% of total deposits.
Similarly top hundred centres according to size
of credits accounted for 78.6% of total bank
credit.

Key Financial Highlights of

SCBs

The credit-deposit (C-D) ratio of all SCB stood at

75.5%.
(Source: 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks
June 2011 issued by RBI)

Growth of SCBs

Presence of Commercial Banks over the years

Source: http://rbidocs.rbi.org.in

Physical presence of offices of

Scheduled Commercial Banks
Source: http://rbidocs.rbi.org.in/

Business of SCBs-Deposits
Source: http://rbidocs.rbi.org.in/

Business of SCBs-Credits
Source: http://rbidocs.rbi.org.in/

Bank Group-wise Aggregates

Old Pvt. New Pvt.
Items
Source: A Profile of SBI
Banks, RBI
Nationalize
Foreign
All
Sector Sector
Group
d Banks
Banks SCBs
Banks
Bans

Operational Statistics of SCBs in 2011

No. of offices

18114

43187

5174

5213

310

(%age share)
No. of
employees
(%age share)
Business per
employee (in
Rs. lakh)
(%age of
average)
Profit per
employee (in
Rs. lakh)

25.16

59.98

7.19

7.24

0.43

267332

467262

54860

127424

28.30

49.47

5.81

13.49

735.52

947.40

700.02

84

108

80

96

166

4.65

5.74

4.22

8.47

17.09

71998

27742 944620
2.94

840.71 1445.87

873.32

6.05

Percentage
Category
2011

Share
of( Credit
and
Deposit
in SCBs in
Deposit
% of
Credit
(% of
Credit-Deposit
total)

total)

Ratio (in %)

SBI and
Associates

22.8

23.2

75.2

Nationalized
Banks

51.3

51.5

74.2

Foreign Banks

5.1

5.34

77

New Private
Sector Banks

13

13

73.9

Old Private
Sector Banks

4.8

4.6

71.7

Regional Rural
Banks

3.1

2.5

59.8

Overall

73.9

Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks

June 2011 issued by RBI

Distribution of Employees in 2008

Region-wise and Category-wise
Statistical Tables Relating to Banks in India 2008-09, RBI

SubOfficers Clerks ordinates Total

Northern Region

%age
share

66515

55124

28400

150039

17.89

6380

8113

4814

19757

2.36

Eastern Region

48131

56449

30565

135145

16.11

Central Region

53677

50182

30480

134969

16.09

Western Region

63205

67421

32866

163492

19.49

Southern Region

96526

95495

43346

235367

28.06

334434 332784

170471

838769

North-Eastern Region

Total
%age share

39.87

39.68

20.32

Favorable Factors for the

Banking Sector
Indian banks have compared favorably on
growth, asset quality and profitability with other
regional banks.
Policy makers have made notable changes in
policy and regulation to strengthen the sector.
Changes
include strengthening prudential
norms, enhancing the payment system and
integrating regulations between commercial and
co-operative banks.

Favorable Factors for the

Banking Sector
India has the potential to become the third
largest banking sector by 2050 after China and
US, according to a Pricewaterhouse Coopers
(PwC) report titled Banking In 2050. The report
states that India has particularly strong longterm growth potential.

Obstacles to the Growth of

Banking Sector
Cost of intermediation remains high as
compared to other countries.
Competition from foreign banks
Failure of some weak banks can threaten the
stability of the system.
Structural weaknesses such as fragmented
industry structure, weak corporate governance,
lack of support infrastructure.

Obstacles to the Growth of

Banking Sector
Bank penetration is limited to few customer
segments and geographies.
Based on research conducted by The Boston
Consulting Group in 2006, 144 million
households are financially excluded. As per the
2008 Report on Financial Inclusion by Dr. C.
Rangarajan, over 73 percent of farmer
households currently do not have access to
formal sources of credit. In certain geographies
this ratio is much worse.

(Source: Indian Banking 2020 by IBA and FICCI)

Mergers and
Acquisitions of Indian
Commercial Banks

Mergers & Acquisitions of Indian

SCBs

Some consolidations in the last few years are:

Bank of Madura merged with ICICI Bank in March

2001.
Bank of Baroda acquired Benares State Bank in
2002.
Global Trust Bank was merged with Oriental Bank
of Commerce in August 2004.
The United Western Bank Ltd was amalgamated
with IDBI Ltd. in Oct, 2006.

Mergers & Acquisitions of Indian

SCBs (contd.)

In April 2007, Bharat Overseas Bank and Sangli

Bank, old private sector banks were taken over by
Indian Overseas Bank and ICICI Bank
respectively.
Centurion Bank of Punjab Ltd. was amalgamated
with HDFC Bank Ltd in May, 2008.
State Bank of Saurashtra was merged with State
Bank of India in August, 2008.

Mergers & Acquisitions of Indian

SCBs (contd.)

Bank of Rajasthan was merged with ICICI Bank

in August 2010.
State Bank of India acquired business of State
Bank of Indore in August 2010.