Description
The presentation describes commercial banking in India.
? Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks (situated in Kolkata) are now defunct. In early nineteenth century when the Bank of Calcutta was established in June 1806, banking business became steady. ? This bank was renamed as Bank of Bengal in January 1809 – mainly to fund General Wellesley’s wars. ? Four Banks merged to form the Bank of Madras in July 1843, as a joint stock company. ? This was a landmark incident in banking in India because this bank brought about major innovations in banking such as use of joint stock system, conferring of limited liability on shareholders, acceptance of deposits from the general public, etc. ? Bank of Bombay, the last bank to be set up under the British Raj pursuant to the Charter of the East India Company, was established in 1868.
The 3 Presidency Banks (Bengal, Madras & Bombay), as these were then known, were amalgamated in Jan 1921 to form the Imperial Bank of India.
In 1921 immediately after the first World War, Imperial Bank acquired the three-fold role:
? Being of a commercial bank.
? That of a banker’s bank and
? Banker to the government. Reserve Bank of India was formed in 1935 and the last role as above was transferred to RBI. Government has, through RBI, taken over the controlling interest in Imperial Bank in July 1955 and it was renamed as State Bank of India with formulation of SBI Act 1955.
SCEDULED
UNSCEDULED
Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act.
The banks which do not fulfill those criteria. The most important criteria related to reserve requirements in terms of CRR and SLR. Also they don’t get the benefit of RBI cover in monetary crisis. ? ? ? ?
? Other cooperative ? Rural Banks
Public sector Private sector Co-operative banks Foreign banks.
Customer Service Department
? Dissemination of instructions/information relating to customer service ? Overseeing the grievance redressed mechanism in respect of services rendered by banking fraternity including RBI. ? Administering the Banking Ombudsman [dictionary meaning : a government official who hears and investigates complaints by private citizens against other officials or government agencies]. ? Liaison between banks, Indian Banks Association, BCSBI, Banking Ombudsman offices and the RBI's regulatory departments on matters relating to customer services and grievance redressal.
BCSBI – Banking Codes and Standards Board of India
? In November 2003, RBI constituted the Committee on Procedures and Performance Audit of Public Services under the Chairmanship of S.S.Tarapore (former Deputy Governor) to address the issues relating to availability of adequate Banking Services to common man. ? The Committee concluded that there was an institutional gap for measuring the performance of banks against a benchmark reflecting the best practices (Code and Standards). Therefore, the Committee recommended setting up of the Banking Codes and Standards Board of India. ?BCSBI is not a Department of the RBI. RBI has agreed to lend it financial support for a limited period (first 5 years). It is an independent banking industry watch dog to ensure that the consumer of banking services get what they are promised by the banks. ? It is treated as a society having its registered office at C/O. RBI, C- 8/9, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.
Department of Banking Operations and Development DBOD ? Licensing of new banks, ? Expansion of foreign and domestic banks,
? Approval for setting up of subsidiaries and undertaking new activities by commercial banks
? Follow-up for rehabilitation of weak banks. ? Maintaining the prescribed cash and statutory liquidity reserves,
? Appointment of chief executive officers
Department of Banking Operations and Development - DBOD
Instructions on Priority Sector Lending
Category of advances Domestic banks Foreign banks in India (i) Aggregate advances 40 per cent of net bank 32 per cent of net bank to priority sector credit credit (ii) Advances to agriculture 18 per cent of net bank No target credit
(iii) Advances to weaker 10 per cent of net bank No target sections credit (iv) Advances to SSI (vi) Export Finance No target 10 per cent of net bank credit
Export finance does not 12 per cent of net bank form part of priority credit sector for domestic banks
Department of Banking Operations and Development - DBOD Who are Priority Sector
1.Agriculture 2.Small scale industry 3.Small road and water transport operators 4.Retail traders and small business operators 5.State-sponsored organizations for Scheduled Caste/Scheduled Tribe, 6.Educational loans, unto Rs. 0.75 million for studies within the country and Rs. 1.5 million for studies abroad. 7. Housing up to Rs. 1.5 million in all areas for acquisition by individual. Rs. 0.1 million in rural/semi urban areas and Rs. 0.2 million in urban/metropolitan areas for repairing of existing unit). 8. Consumption Loan for weaker section. 9. Self Help Groups/ Non Governmental Organizations, 10. Software industry (having credit limits up to Rs 10 million from the banking system) Food and agro based processing sector 11. Professional and self-employed persons
Department of Banking Operations and Development - DBOD Who are Weaker Section 1. Small and marginal farmers with land holdings of five acres and less, landless labourers, tenant farmers and sharecroppers; 2. Artisans, village and cottage industries where individual credit requirements do not exceed Rs. 50,000 ;
3. Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY), Swarna Jayanti Shahari Rozgar Yojana (SJSRY) and Scheme for Liberation and Rehabilitation of Scavangers (SLRS);
4. Scheduled castes and scheduled tribes; 5. Beneficiaries under the Differential Rate of Interest (DRI) scheme; 6. Self Help Groups.
? Department of Banking Supervision ?Till 1993, regulatory as well as supervisory functions over commercial banks were performed by DBOD. Subsequently, a new Department of Banking Supervision (DBS) was set up to take over. ?It mainly performs: ? Scheduled and special on & off site inspections of banks, as also post inspection follow-up of compliance. ? Determining the criteria for the appointment of statutory auditors and special auditors and assessing audit performance and disclosure standards. ? Dealing with financial sector frauds and attending to the complaints received against the banks and FIs from public, banks, Government, etc.
Department of Currency Management
It used to be called as the issue department. Its Major Functions:
? Note and coin issue and currency management. ? Forecasting the demand for fresh banknotes and coins. ? Placing the indent with four printing presses and mints. ? Receiving supplies against those indents and distributing them through its 18 Issue Offices and one Sub office, one Currency Chest and a wide network of currency chests, (4428 as on June 30, 2006) and small coin depots (4102 as on June 30, 2006). ? Keeps an account of banknotes in circulation and also the stocks at RBI offices and currency chests. ? Allows the commercial banks to withdraw cash for its requirements and deposit its excess cash. ? Destroying soiled/mutilated notes with proper records.
Department of Economic Analysis and Policy
This is an important section which provides all sorts basic statistical data of the economy of the country. Its functions are: ? Studies and analyses the basic issues and problems (both domestic
and international) affecting the Indian economy; ? Serves as a primary source of data and information relating to aspects of the Indian economy, such as, ? Prepares monetary and credit aggregates, balance of payments and external debt statistics, internal debt and government finance statistics, and flow-of-funds and financial saving. ? Renders advice/assistance and offer its views in the realm of economic policy formulation and in shaping monetary, banking and financial policies; and ? Prepares the Bank's economic publications.
Department of Government and Bank Accounts
DGBA is acting as bankers to the banks and governments and administering public debt of both, central and state governments. It is also responsible for maintenance of the Reserve Bank's internal accounts and compilation of its weekly statement of affairs and annual balance sheets. Management of public debt of the central and state governments [devolved on the RBI by virtue of the provisions of RBI Act, 1934]
Public Accounts Dept Deposit Accounts Dept Public Debt Offices
The principal deposit accounts of central and state governments are maintained at central accounts section of the Reserve Bank at Nagpur which also attends to granting of ways and means advances to central and state governments.
Department of Payment and Settlement Systems ?What is settlement?
Various kinds of payments are routed through the RBI controlled systems is called the settlement systems. These include: ? Settlement of payment between two or more banks or between RBI and bank/s. ? The payment of the cheques drawn by the banks’ account holders through their accounts. ? Payment of periodic interest, pension, matured value of deposits or instruments ? Salary, payment of bills so on and so forth.
Clearing Houses play vital role in carrying on the system. There are over 1047 clearing houses in the country today. RBI themselves manage 16 such clearing houses, SBI Group manages the bulk of the clearing houses numbering about 1000 and a few other public sector banks, manage the remaining clearing houses.
Department of Payment and Settlement Systems
Its main functions: ? Formulation of Payment and Settlement Systems policies. ? Regulation of Payment and Settlement Systems. ? Supervision of Payment and Settlement Systems. ? Implementation of the Core Principles relating to payment systems (as enunciated by the Bank for International Settlements). ?Monitoring the operations of payment and settlement systems.
Foreign Exchange Department
With the introduction of FEMA 1999, with effect from June 1, 2000, the objective of the Foreign Exchange Department has shifted from conservation of foreign exchange to "facilitating external trade and payment and promoting the orderly development and maintenance of foreign exchange market in India". ? Publication of Exchange Control Manual ? Updating of Exchange Control Manual by issuing (AD/MA) circulars ? Receive, follow up non submission of various statements and returns to be submitted by the Authorized Dealers as per the Act. The main returns are: R-Return – fortnightly statistical statement of the foreign exchange operations of all the banks who are Authorized Dealers. XOS statement – half yearly : Non realisation of export proceeds BEF statement – half yearly : Non- submission of proof of import –
Foreign Exchange Department
? Granting license to banks to act as Authorized Dealers: ? In terms of dealing in foreign currency there are three categories of branches: ? “A” CATEGORY BRANCH : the branch (or head office) which can deal in foreign currency and also can maintain Nostro Account. ? “B” CATEGORY BRANCH : the branch which can deal in foreign currency, but is not allowed to maintain Nostro Account ? “C” CATEGORY BRANCH : the branch which canNOT deal in foreign currency. If this branch happens to get some foreign exchange transaction, it has forward it to a A or B category branch. ? Conduct periodic inspection of all “A” and “B” category branches of all the branches across India independent of Department of Banking
Supervision
doc_676910064.ppt
The presentation describes commercial banking in India.
? Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks (situated in Kolkata) are now defunct. In early nineteenth century when the Bank of Calcutta was established in June 1806, banking business became steady. ? This bank was renamed as Bank of Bengal in January 1809 – mainly to fund General Wellesley’s wars. ? Four Banks merged to form the Bank of Madras in July 1843, as a joint stock company. ? This was a landmark incident in banking in India because this bank brought about major innovations in banking such as use of joint stock system, conferring of limited liability on shareholders, acceptance of deposits from the general public, etc. ? Bank of Bombay, the last bank to be set up under the British Raj pursuant to the Charter of the East India Company, was established in 1868.
The 3 Presidency Banks (Bengal, Madras & Bombay), as these were then known, were amalgamated in Jan 1921 to form the Imperial Bank of India.
In 1921 immediately after the first World War, Imperial Bank acquired the three-fold role:
? Being of a commercial bank.
? That of a banker’s bank and
? Banker to the government. Reserve Bank of India was formed in 1935 and the last role as above was transferred to RBI. Government has, through RBI, taken over the controlling interest in Imperial Bank in July 1955 and it was renamed as State Bank of India with formulation of SBI Act 1955.
SCEDULED
UNSCEDULED
Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act.
The banks which do not fulfill those criteria. The most important criteria related to reserve requirements in terms of CRR and SLR. Also they don’t get the benefit of RBI cover in monetary crisis. ? ? ? ?
? Other cooperative ? Rural Banks
Public sector Private sector Co-operative banks Foreign banks.
Customer Service Department
? Dissemination of instructions/information relating to customer service ? Overseeing the grievance redressed mechanism in respect of services rendered by banking fraternity including RBI. ? Administering the Banking Ombudsman [dictionary meaning : a government official who hears and investigates complaints by private citizens against other officials or government agencies]. ? Liaison between banks, Indian Banks Association, BCSBI, Banking Ombudsman offices and the RBI's regulatory departments on matters relating to customer services and grievance redressal.
BCSBI – Banking Codes and Standards Board of India
? In November 2003, RBI constituted the Committee on Procedures and Performance Audit of Public Services under the Chairmanship of S.S.Tarapore (former Deputy Governor) to address the issues relating to availability of adequate Banking Services to common man. ? The Committee concluded that there was an institutional gap for measuring the performance of banks against a benchmark reflecting the best practices (Code and Standards). Therefore, the Committee recommended setting up of the Banking Codes and Standards Board of India. ?BCSBI is not a Department of the RBI. RBI has agreed to lend it financial support for a limited period (first 5 years). It is an independent banking industry watch dog to ensure that the consumer of banking services get what they are promised by the banks. ? It is treated as a society having its registered office at C/O. RBI, C- 8/9, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.
Department of Banking Operations and Development DBOD ? Licensing of new banks, ? Expansion of foreign and domestic banks,
? Approval for setting up of subsidiaries and undertaking new activities by commercial banks
? Follow-up for rehabilitation of weak banks. ? Maintaining the prescribed cash and statutory liquidity reserves,
? Appointment of chief executive officers
Department of Banking Operations and Development - DBOD
Instructions on Priority Sector Lending
Category of advances Domestic banks Foreign banks in India (i) Aggregate advances 40 per cent of net bank 32 per cent of net bank to priority sector credit credit (ii) Advances to agriculture 18 per cent of net bank No target credit
(iii) Advances to weaker 10 per cent of net bank No target sections credit (iv) Advances to SSI (vi) Export Finance No target 10 per cent of net bank credit
Export finance does not 12 per cent of net bank form part of priority credit sector for domestic banks
Department of Banking Operations and Development - DBOD Who are Priority Sector
1.Agriculture 2.Small scale industry 3.Small road and water transport operators 4.Retail traders and small business operators 5.State-sponsored organizations for Scheduled Caste/Scheduled Tribe, 6.Educational loans, unto Rs. 0.75 million for studies within the country and Rs. 1.5 million for studies abroad. 7. Housing up to Rs. 1.5 million in all areas for acquisition by individual. Rs. 0.1 million in rural/semi urban areas and Rs. 0.2 million in urban/metropolitan areas for repairing of existing unit). 8. Consumption Loan for weaker section. 9. Self Help Groups/ Non Governmental Organizations, 10. Software industry (having credit limits up to Rs 10 million from the banking system) Food and agro based processing sector 11. Professional and self-employed persons
Department of Banking Operations and Development - DBOD Who are Weaker Section 1. Small and marginal farmers with land holdings of five acres and less, landless labourers, tenant farmers and sharecroppers; 2. Artisans, village and cottage industries where individual credit requirements do not exceed Rs. 50,000 ;
3. Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY), Swarna Jayanti Shahari Rozgar Yojana (SJSRY) and Scheme for Liberation and Rehabilitation of Scavangers (SLRS);
4. Scheduled castes and scheduled tribes; 5. Beneficiaries under the Differential Rate of Interest (DRI) scheme; 6. Self Help Groups.
? Department of Banking Supervision ?Till 1993, regulatory as well as supervisory functions over commercial banks were performed by DBOD. Subsequently, a new Department of Banking Supervision (DBS) was set up to take over. ?It mainly performs: ? Scheduled and special on & off site inspections of banks, as also post inspection follow-up of compliance. ? Determining the criteria for the appointment of statutory auditors and special auditors and assessing audit performance and disclosure standards. ? Dealing with financial sector frauds and attending to the complaints received against the banks and FIs from public, banks, Government, etc.
Department of Currency Management
It used to be called as the issue department. Its Major Functions:
? Note and coin issue and currency management. ? Forecasting the demand for fresh banknotes and coins. ? Placing the indent with four printing presses and mints. ? Receiving supplies against those indents and distributing them through its 18 Issue Offices and one Sub office, one Currency Chest and a wide network of currency chests, (4428 as on June 30, 2006) and small coin depots (4102 as on June 30, 2006). ? Keeps an account of banknotes in circulation and also the stocks at RBI offices and currency chests. ? Allows the commercial banks to withdraw cash for its requirements and deposit its excess cash. ? Destroying soiled/mutilated notes with proper records.
Department of Economic Analysis and Policy
This is an important section which provides all sorts basic statistical data of the economy of the country. Its functions are: ? Studies and analyses the basic issues and problems (both domestic
and international) affecting the Indian economy; ? Serves as a primary source of data and information relating to aspects of the Indian economy, such as, ? Prepares monetary and credit aggregates, balance of payments and external debt statistics, internal debt and government finance statistics, and flow-of-funds and financial saving. ? Renders advice/assistance and offer its views in the realm of economic policy formulation and in shaping monetary, banking and financial policies; and ? Prepares the Bank's economic publications.
Department of Government and Bank Accounts
DGBA is acting as bankers to the banks and governments and administering public debt of both, central and state governments. It is also responsible for maintenance of the Reserve Bank's internal accounts and compilation of its weekly statement of affairs and annual balance sheets. Management of public debt of the central and state governments [devolved on the RBI by virtue of the provisions of RBI Act, 1934]
Public Accounts Dept Deposit Accounts Dept Public Debt Offices
The principal deposit accounts of central and state governments are maintained at central accounts section of the Reserve Bank at Nagpur which also attends to granting of ways and means advances to central and state governments.
Department of Payment and Settlement Systems ?What is settlement?
Various kinds of payments are routed through the RBI controlled systems is called the settlement systems. These include: ? Settlement of payment between two or more banks or between RBI and bank/s. ? The payment of the cheques drawn by the banks’ account holders through their accounts. ? Payment of periodic interest, pension, matured value of deposits or instruments ? Salary, payment of bills so on and so forth.
Clearing Houses play vital role in carrying on the system. There are over 1047 clearing houses in the country today. RBI themselves manage 16 such clearing houses, SBI Group manages the bulk of the clearing houses numbering about 1000 and a few other public sector banks, manage the remaining clearing houses.
Department of Payment and Settlement Systems
Its main functions: ? Formulation of Payment and Settlement Systems policies. ? Regulation of Payment and Settlement Systems. ? Supervision of Payment and Settlement Systems. ? Implementation of the Core Principles relating to payment systems (as enunciated by the Bank for International Settlements). ?Monitoring the operations of payment and settlement systems.
Foreign Exchange Department
With the introduction of FEMA 1999, with effect from June 1, 2000, the objective of the Foreign Exchange Department has shifted from conservation of foreign exchange to "facilitating external trade and payment and promoting the orderly development and maintenance of foreign exchange market in India". ? Publication of Exchange Control Manual ? Updating of Exchange Control Manual by issuing (AD/MA) circulars ? Receive, follow up non submission of various statements and returns to be submitted by the Authorized Dealers as per the Act. The main returns are: R-Return – fortnightly statistical statement of the foreign exchange operations of all the banks who are Authorized Dealers. XOS statement – half yearly : Non realisation of export proceeds BEF statement – half yearly : Non- submission of proof of import –
Foreign Exchange Department
? Granting license to banks to act as Authorized Dealers: ? In terms of dealing in foreign currency there are three categories of branches: ? “A” CATEGORY BRANCH : the branch (or head office) which can deal in foreign currency and also can maintain Nostro Account. ? “B” CATEGORY BRANCH : the branch which can deal in foreign currency, but is not allowed to maintain Nostro Account ? “C” CATEGORY BRANCH : the branch which canNOT deal in foreign currency. If this branch happens to get some foreign exchange transaction, it has forward it to a A or B category branch. ? Conduct periodic inspection of all “A” and “B” category branches of all the branches across India independent of Department of Banking
Supervision
doc_676910064.ppt