Description
The PPT explaining about origin and growth of the Indian Banking System
Origin and Growth of Banking
CONTENTS • History of Banking • Origin of Banking in India • Indian Banking System • Commercial Banking in India
• US Banking System
History
• The word bank is derived from the Greek word „banque? or the Italian word „banco? . In its simple from, it originated from temples and royal palaces around 1000 B.C. in Babylon. When coins made of precious metals like gold and silver emerged as commonly accepted forms of wealth, lending activity at an interest began. Goldsmiths were the initial bankers and their receipts for money received – “guaranteed payments” or “goldsmith?s receipts” were the earliest forms of “bank instruments”.
•
•
•
•
In the Middle Ages, the first bank in Italy called the “Bank of Venice” was established in 1157.
History Contd…
• Commercial Banking started only after 1640. The goldsmiths received deposits from the public for safe custody and issued receipts as acknowledgements, which were later demanded as bearer demanded notes. There are 3 ancestors of the modern commercial banking
» The merchants or the traders issued documents like „hundi? to remit the funds, which took the form of cheques or demand drafts in the modern day banking. » Moneylenders gave loans » Goldsmiths received deposits and created credit.
•
ORIGIN OF BANKING IN INDIA
• A money economy existed in India since the days of Buddha, but banking in India flourished in the ancient Vedic times The emergence of Vaishyas as indigenous bankers and hundi as the earliest form of Indian bill of exchange were two important landmarks in the history of Indian banking.
•
•
The handling of banking gradually transcended from individuals to groups and later to companies.
With the Industrial Revolution of the 18th and 19th centuries, it attained a more significant place in the area of lending. . The Hindustan Bank was the first bank to be established in 1779 and later the General Bank of India was established in 1786.
•
•
ORIGIN OF BANKING IN INDIA CONTD….
• In the first half of the 19th century the East India Company established three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843, which were known as “Presidency Banks.” These three banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established on 27th January 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken over by the newly constituted State Bank of India. The Reserve Bank, which acts as the Central Bank was created in 1935 by passing of The Reserve Bank of India Act 1934.
•
•
•
INDIAN BANKING SYSTEM
• There are 3 tiers in the Indian banking system
» Scheduled Commercial Banks (which have been included in the Second Schedule of the Reserve Bank of India (RBI) Act, 1934 ) » Regional Rural Banks
» Cooperative and special purpose rural banks.
INDIAN BANKING SYSTEM CONTD…
At present the banking system can be classified into following 4 categories: • Public Sector Banks State Bank of India and its 7 associate banks called the State Bank Group Twenty nationalized banks (now 19) Regional Rural Banks sponsored by public sector banks • • Private Sector Banks Co-operative Sector Banks The co-operative banking sector was developed in the country to supplement the village moneylender. Development Banks Development Banks are those financial institutions, which provide longterm capital for industries and agriculture.
•
COMMERCIAL BANKING IN INDIA
•
The Indian banking history can be divided into the following three distinct phases: » Early phase from 1786 to 1969 » From 1969 i.e., nationalization to 1991- Prior to banking sector reforms. » Post 1991 with the advent of Financial and Banking Sector Reforms.
POST 1991
• Bank norms were liberalized and banks were given the freedom to decide levels of holding of individual items of inventories and receivables. Ceiling on term loans was raised to Rs 10,000 million for projects involving expansion/modernization of power generation capacities.
•
•
Banks were allowed to set their own interest rate on post-shipment export credit (in Rupees) for over 90 days.
Banks were allowed to fix their own foreign exchange open position limit subject to RBI approval. Deregulation of interest rates on loans over Rs 200,000 against term deposits and on domestic deposits with maturity periods over two years.
•
•
POST 1991
• • Loan system introduced for delivery of bank credit The liberalization policy of the Government of India also permitted the entry of private sector into the Indian banking industry.
US BANKING SYSTEM
• 1791 TO 1832 (The first banks): » a central bank founded in 1791 » Its Congressional charter expired in 1811. A second Bank of the United States was created in 1816 and operated until 1832. 1832 to 1864( Free Banking Era): » the second Bank of the United States went out of business in 1832 » state governments took over the job of supervising banks. » banks made loans by issuing their own currency. These bank notes were supposed to be convertible, on demand, to cash i.e. to gold or silver. » By 1860, more than 10,000 different bank notes circulated throughout the country. » In response, Congress passed the National Currency Act in 1863. In 1864, President Lincoln signed a revision of that law, the National Bank Act.
•
US BANKING SYSTEM CONTD….
• 1865 To 1914: » Banks bought U.S. government securities, deposited them with the Controller, and received national bank notes in return. » The 1907 crisis, also called the Wall Street Panic, was severe. » The Federal Reserve System was created in 1913. » A system of eight to twelve mostly autonomous regional Reserve Banks that would be owned by commercial banks and whose actions would be coordinated by a committee appointed by the President. • 1929 To 1933: » The onset of the worldwide depression in 1929 was a disaster for the banking system. » In June 1933, Federal Deposit Insurance Act was enacted. Accounts were covered up to $2,500 per depositor (now $100,000).
US BANKING SYSTEM CONTD….
• Banking has undergone a revolution. Technology has revolutionized the financial services industry. Telephone banking, debit and credit cards, and automatic teller machines are commonplace, and electronic money and banking are evolving.
•
•
Computers and technology are used ensure that the banks they supervise understand and control the risks of the complex new world of financial services.
doc_428384306.ppt
The PPT explaining about origin and growth of the Indian Banking System
Origin and Growth of Banking
CONTENTS • History of Banking • Origin of Banking in India • Indian Banking System • Commercial Banking in India
• US Banking System
History
• The word bank is derived from the Greek word „banque? or the Italian word „banco? . In its simple from, it originated from temples and royal palaces around 1000 B.C. in Babylon. When coins made of precious metals like gold and silver emerged as commonly accepted forms of wealth, lending activity at an interest began. Goldsmiths were the initial bankers and their receipts for money received – “guaranteed payments” or “goldsmith?s receipts” were the earliest forms of “bank instruments”.
•
•
•
•
In the Middle Ages, the first bank in Italy called the “Bank of Venice” was established in 1157.
History Contd…
• Commercial Banking started only after 1640. The goldsmiths received deposits from the public for safe custody and issued receipts as acknowledgements, which were later demanded as bearer demanded notes. There are 3 ancestors of the modern commercial banking
» The merchants or the traders issued documents like „hundi? to remit the funds, which took the form of cheques or demand drafts in the modern day banking. » Moneylenders gave loans » Goldsmiths received deposits and created credit.
•
ORIGIN OF BANKING IN INDIA
• A money economy existed in India since the days of Buddha, but banking in India flourished in the ancient Vedic times The emergence of Vaishyas as indigenous bankers and hundi as the earliest form of Indian bill of exchange were two important landmarks in the history of Indian banking.
•
•
The handling of banking gradually transcended from individuals to groups and later to companies.
With the Industrial Revolution of the 18th and 19th centuries, it attained a more significant place in the area of lending. . The Hindustan Bank was the first bank to be established in 1779 and later the General Bank of India was established in 1786.
•
•
ORIGIN OF BANKING IN INDIA CONTD….
• In the first half of the 19th century the East India Company established three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843, which were known as “Presidency Banks.” These three banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established on 27th January 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken over by the newly constituted State Bank of India. The Reserve Bank, which acts as the Central Bank was created in 1935 by passing of The Reserve Bank of India Act 1934.
•
•
•
INDIAN BANKING SYSTEM
• There are 3 tiers in the Indian banking system
» Scheduled Commercial Banks (which have been included in the Second Schedule of the Reserve Bank of India (RBI) Act, 1934 ) » Regional Rural Banks
» Cooperative and special purpose rural banks.
INDIAN BANKING SYSTEM CONTD…
At present the banking system can be classified into following 4 categories: • Public Sector Banks State Bank of India and its 7 associate banks called the State Bank Group Twenty nationalized banks (now 19) Regional Rural Banks sponsored by public sector banks • • Private Sector Banks Co-operative Sector Banks The co-operative banking sector was developed in the country to supplement the village moneylender. Development Banks Development Banks are those financial institutions, which provide longterm capital for industries and agriculture.
•
COMMERCIAL BANKING IN INDIA
•
The Indian banking history can be divided into the following three distinct phases: » Early phase from 1786 to 1969 » From 1969 i.e., nationalization to 1991- Prior to banking sector reforms. » Post 1991 with the advent of Financial and Banking Sector Reforms.
POST 1991
• Bank norms were liberalized and banks were given the freedom to decide levels of holding of individual items of inventories and receivables. Ceiling on term loans was raised to Rs 10,000 million for projects involving expansion/modernization of power generation capacities.
•
•
Banks were allowed to set their own interest rate on post-shipment export credit (in Rupees) for over 90 days.
Banks were allowed to fix their own foreign exchange open position limit subject to RBI approval. Deregulation of interest rates on loans over Rs 200,000 against term deposits and on domestic deposits with maturity periods over two years.
•
•
POST 1991
• • Loan system introduced for delivery of bank credit The liberalization policy of the Government of India also permitted the entry of private sector into the Indian banking industry.
US BANKING SYSTEM
• 1791 TO 1832 (The first banks): » a central bank founded in 1791 » Its Congressional charter expired in 1811. A second Bank of the United States was created in 1816 and operated until 1832. 1832 to 1864( Free Banking Era): » the second Bank of the United States went out of business in 1832 » state governments took over the job of supervising banks. » banks made loans by issuing their own currency. These bank notes were supposed to be convertible, on demand, to cash i.e. to gold or silver. » By 1860, more than 10,000 different bank notes circulated throughout the country. » In response, Congress passed the National Currency Act in 1863. In 1864, President Lincoln signed a revision of that law, the National Bank Act.
•
US BANKING SYSTEM CONTD….
• 1865 To 1914: » Banks bought U.S. government securities, deposited them with the Controller, and received national bank notes in return. » The 1907 crisis, also called the Wall Street Panic, was severe. » The Federal Reserve System was created in 1913. » A system of eight to twelve mostly autonomous regional Reserve Banks that would be owned by commercial banks and whose actions would be coordinated by a committee appointed by the President. • 1929 To 1933: » The onset of the worldwide depression in 1929 was a disaster for the banking system. » In June 1933, Federal Deposit Insurance Act was enacted. Accounts were covered up to $2,500 per depositor (now $100,000).
US BANKING SYSTEM CONTD….
• Banking has undergone a revolution. Technology has revolutionized the financial services industry. Telephone banking, debit and credit cards, and automatic teller machines are commonplace, and electronic money and banking are evolving.
•
•
Computers and technology are used ensure that the banks they supervise understand and control the risks of the complex new world of financial services.
doc_428384306.ppt