Dear Readers,

We are presenting you series of articles on Banking titled Banking in a Nutshell. This series
will try to include all the participants involved in a Banking sector and their influence on a
Sector as whole and also the individual banks. The approach used in these articles will be figure
based and each participant will be explained in subsequent articles. Also, specific topics in each
category will be taken.
The figure shown below is made through my own assessment of the Banking sector which was
posted in the forum.

Figure 1 Banking as a Whole

This figure represents the participants in an Economy from a view of the Banking Sector. The
participants mentioned are
1.
2.
3.
4.
5.
6.
7.
8.

Government
Reserve Bank of India (RBI) and its Wholly Owned Subsidiaries (WHO)
Bank
Depositors
Borrowers
Various Channels of Banking
Investment Avenues
Economy

Let us explain each block briefly

Government: Government frames the fiscal policy which provides a framework for allocation of
budget to various sectors of the economy. Moreover Government is a stakeholder in the Banking
business with majority stake in all nationalized bank, commonly grouped as Public sector Banks.
Reserve Bank of India: RBI is the Central Bank for India and it regulates the Banking sector in
India. RBI governs through the RBI Act, 1934. Reserve bank of India frames the monetary

policy and review and makes necessary corrections to fulfill their main objective. The main
objective of the reserve bank of India is to Control inflation and spur growth in the economy.
Bank: The centerpiece of the industry is the individual banks which are governed through the
Banking Regulation Act, 1949. The major function of the Bank is to accept deposit and lend to
borrowers. The main profit for the bank is generated from the interest it earns on the Loans given
to the Borrowers.
Depositors: Those who want their money to safe and also to earn interest on the money kept
with bank. Banks provide many services to depositors for which generally there is a service
charge applied.
Borrowers: Those who need capital to invest or individuals who need loans to carry out their
personal needs. They pay interest to the Bank on the loaned amount.
Channels of Banking: This will elaborate on the various methods of accessing banking facility
available to the consumers of the Bank
Investment Avenues: Bank invests in various Investment projects across the country in an
individual capacity or in a consortium. This usually depends on the earning potential of the
project.
Economy: Banking is a part of the Economy. If the economy is not performing well and up to
the mark with respect to the international standards then banks business suffer. Inversely, if
banks are not careful in their approach towards best practices, thereby effecting the economy,
All these will be explained in a more detailed manner in subsequent articles.