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Session Contents
z z z z z Introduction (Basics) to Banking Features of Banking Classification of Banking Role of Banks in an Economy Importance of Banking and Economic Development
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INTRODUCTORY
z Money is life and blood of banking business. It can be in the form of:
y Legal currency of a country y Precious metals like gold and silver y Precious stones
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z Standard of Deferred Payments -Loans and financial instruments are denominated in terms of money. z Store of Value -- People can use money when they wish.
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Definitions of Money
z M1 = Currency held by the public + Travelers Checks + Checkable Deposits z M2 = M1 + Savings Deposits + Small Time Deposits + Money Market Mutual Funds
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Introduction to Bank
Origin of term Bank is traced as follows:
` German word, Banck (heap or mound or joint stock fund) Italian Word Banco (heap of money). French word bancus or banque which means bench/Chest a place where valuables are kept.
A story follows this :
Story of Jews of Lombardy?
English Word Bank (an institution accepting money as deposit for lending)
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What is Banking?
Section n5(b) of The Banking Regulation Act, 1949 defines banking as
accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawable by chaque, draft , order or otherwise.
Bank is a factory of credit. It is not only trader in money but also manufacturer of money.
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What is Banking?
Bank is one that collects money form those who have it to spare or who are saving it out of their income and lends the money so collected to those who require it. (Crowther) No person or body corporate otherwise can be a banker who does not (i) take deposit accounts, (ii) take current Accounts, (iii) issue and pay chaques and (iv) collects chaque, for his customers. (Sir John Paget) There fore..
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Banks as Financial Intermediaries Financial Intermediary -- An institution that borrows from lenders, then loans to borrowers.
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Features of Banking
The characteristics derived from the definition of banking are as follows:
Deals in money Deposits must be withdraw able Dealing with credit Commercial in nature Nature of agent
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History of Banking
Banking in India is very old. First the East India Company established English Agency Houses.
These were basically trading firms and also carrying banking business as part of their mail business. These failed in 18th Century due to Dual business activities and lack of funds.
History of Banking
In19-20th C, A number of banks with Indian Management were established as a result of Swadeshi Movement.
Punjab National Bank Ltd. 1895. The Bank of India Ltd 1906 The Indian bank Ltd. 1907 The Bank of Baroda Ltd. 1908 The Central Bank of India Ltd. 1911 Imperial Bank of India Act was passed in 1920 to amalgamate presidency Banks and the Imperial Bank of India was established in 1921 after this amalgamation.
History of Banking:
Salient Features of RBI It started as Private shareholders bank with fully paid up capital of Rs 5 Cr. It was constituted to:
Regulate the issue of Bank Notes Secure monetary stability in India Operate the currency and credit system of the country Post independence RBI was nationalized in 1949 As on today there are 80000+ branches in operation in India.
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History of Banking:
Salient Features of RBI
1955, State Bank of India Act was passed and Imperial Bank of India was nationalized. The new name given was State Bank of India. 1959, SBI Subsidiary Act was passed and 8 subsidiary banks of SBI were opened:
SBI of Bikaner SBI of Jaipur SBI of Indore SBI of Mysore SBI of Patiyala SBI of Hyderabad SBI of Saurashtra SBI of Travancore The major nationalization took place in 1969. 14 banks were nationalized.
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Classification of Banks
Exchange Banks (Authorized Dealers in Foreign Exchange)
Cooperative Banks
Savings bank
Commercial bank
Supranation al Bank
Central Bank
The principal banking institutions of a country may be classified into the following types:
International Banks
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financial System.
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Retail banking
Wholesale Banking Private banking
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Zonal Office
Regional Office Divisional (District) Offices Branches
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Regional Offices
Regional offices
Regional offices
Regional offices
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Nationalized Banks
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Advancing loans
Remittance facilities
Allied non banking functions like agency and utility services such as collection of chaques, bills, payment of premia, accepting bill of exchange, provision of safe deposit vaults etc.
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Production
Industrial Development
Banking System
Investments
Consumption
Savings
Income
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