FUNCTIONAL MANAGEMENT

BANK MANAGEMENT
PRESENTED BY
KIRITHIGA. S
Bank:-
The word of bank is derived from the Italian banca, which is
derived from German and mean bench.

The term bankrupt and broke is similarly derived from banca
rotta. Which refers to an out of business bank, having its
bench physically broken.

Money lenders in Northern Italy originally did business in
open areas or big open rooms with each lender working from
his own bench or table.

World History of Banks:-
Banking in the modern sense of the word can be traced to
medieval and early Renaissance Italy, to the rich cities in the
north like Florence, Venice and Genoa.

The Bardi and Peruzzi families dominated banking in 14th
century Florence, establishing branches in many other parts of
Europe. Perhaps the most famous Italian bank was the Medici
bank, set up by Giovanni Medici in 1397.

The earliest known state deposit bank, Banco di San Giorgio
(Bank of St. George), was founded in 1407 at Genoa, Italy.

Indian History of banking:-

The first bank in India, though conservative, was established in 1786.

From 1786 till today, the journey of Indian Banking System can be
segregated into three distinct phases.

They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalization of Indian Banks and up to 1991 prior to Indian
banking sector Reforms.

New phase of Indian Banking System with the advent of Indian
Financial & Banking Sector Reforms after 1991

Pre Independence banking system
of India
Banking in India originated in the last decades of the 18th century.
The first banks were The General Bank of India which started in 1786,
and the Bank of Hindustan, both of which are now defunct.
The oldest bank in existence in India is the State Bank of India, which
originated in the Bank of Calcutta in June 1806, which almost
immediately became the Bank of Bengal.
This was one of the three presidency banks, the other two being the
Bank of Bombay and the Bank of Madras, all three of which were
established under charters from the British East India Company.
Indian merchants in Calcutta established the Union Bank in 1839, but
it failed in 1848 as consequence of the economic crisis of 1848 1849.
The Allahabad Bank, established in 1865 and still functioning today, is
the oldest Joint Stock bank in India.
The presidency banks dominated banking in India but there were
also some exchange banks and a number of Indian joint stock banks.
All these banks operated in different segments of the economy.
The exchange banks, mostly owned by Europeans, concentrated on
financing foreign trade.
Indian joint stock banks were generally under capitalized and lacked
the experience and maturity to compete with the presidency and
exchange banks.
The first entirely Indian joint stock bank was the Oudh Commercial
Bank, established in 1881 in Faizabad, but It failed in 1958.
The next was the Punjab National Bank, established in Lahore in
1895, which has survived to the present and is now one of the
largest banks in India.
Cont
Post Independence Banking
system of India
In the post-independence period, India observed the emergence of large number of
institutions for providing finance to different sectors of the economy.
There were two nationalizations of banks in India, one in 1969 and the other in 1980.
The entry activities of private sector and foreign banks were restricted through
branch licensing and regulation norms.
The over regulated and over administered polices eroded the capital base of most of
the public sector banks and recapitalization of 19 nationalized banks was made by
government through of budgetary provision nevertheless, acute problem arises in
productivity, efficiency and profitability front of the commercial banks.
The policy of directed investment in the form high SLR and CRR, directed credit
programs, extra administrative interference in credit decision making, high
operating costs, regulated interest rates, non-transparent accounting system
coupled Non existence of operational flexibility, internal autonomy and absence of
competition contaminated the health of the commercial banks and threatened their
future survival.



Liberal policies facilitate to increase market competition among banks to
augment efficiency and by productivity by the management to choose independent
decisions about input-output and their prices of individual banks.
The Committee on Financial Systems (GOI, 1998) suggested the road map for second-
generation reform to keep pace with liberalization of financial sector in other parts
of the world.

The other remarkable developments to enhance competition in banking sector
reforms
It abolished administered interest rate regime by allowing banks to determine lending and
deposit rates.
Competition has infused by allowing the operation of new private sector banks and more
liberal entry of foreign banks.
Measures to broaden the ownership base of PSBs have also taken.
The system has also observed greater levels of transparency and standards of disclosure.
It introduced ratification of the legal structure to strengthen banks position in the areas of
loan and default loan.
Cont
Nationalisation of Indian banking
system
India marched towards the establishment of public sector banking
through The progressive nationalisation of commercial banks.
There were three phases of bank nationalisation:
Nationalistion of Imperial Bank of India in1955 and its seven
associate banks in 1959-60.
Nationalisation of the 14 major commercial banks in 1969.
Nationalisation of 6 more commercial banks in 1980.

On July 1, 1955 the government of India nationlised the Imperial
Bank of India and converted it into the State Bank of India.
The establishment of the State Bank of India was a pioneering
attempt in public introducing sector banking in the country.
Later on in 1959 1960, seven subsidiary State Banks were also
nationalised to form the SBI Group.

For a short period during December 1967 to June 1969, the
Government of India pursued the banking of policy control of
banks, aiming at an equitable and purposeful distribution of
credit towards developmental needs.

A such over 90 percent of the banking activity in the country
is brought under into the public sector.

In short, nationalization of banks implied a bold and major
economic step in the process of banking reforms in the
country. It has resulted in the evolution of public sector
banking.

Cont
The Banking companies act, presently known as banking regulation
act was enacted owing to safeguard the interest of depositors,
control abuse of power by some bank personnel controlling the banks
in particular and to the interest of Indian economy in general.

The Banking Regulation Act was passed as the Banking Companies
Act 1949 and came into force w.e.f 16.3.49. Subsequently it was
changed to Banking Regulations Act 1949 wef 01.03.66.

However, it should be remembered that this act does not supersede
the provision of companies act or any other law for the time being in
force in respect of banking business.

Banking Regulation Act:-
In India, the definition of the business of banking has been given in the
Banking Regulation Act, 1949.

According to Section 5(c) of the BR Act, 'a banking company is a company
which transacts the business of banking in India.

Section 5(b) of the BR Act defines banking as, 'accepting, for the purpose of
lending or investment, of deposits of money from the public, repayable on
demand or otherwise, and withdrawal, by cheque, draft, order or otherwise.'

This definition points to the three primary activities of a commercial bank
which distinguish it from the other financial institutions. These are:
(i) maintaining deposit accounts including current accounts,
(ii) issue and pay cheques, and
(iii) collect cheques for the bank's customer.
Definition:-

Different provisions of Banking
regulations Act
S. No. Parts Topics Sections covered
1. I Preliminary 1 to 5A
2. II Business of Banking Companies 6 to 36 A
3. IIA Control over management 36AA to 36AC
4. IIB Prohibition of certain activities in relation to banking
Companies
36AD
5. IIC Acquisition of the undertakings of Banking Companies in
certain cases
36AE to 36AJ
6. III Suspension of business and winding up of Banking
Companies
36B to 45
7. IIIA Speedy provision for speedy disposal of winding up
proceedings
45A to 45X
8. IIIB Provision relating to certain operation of Banking
Companies
45Y to 45ZF
9. IV Miscellaneous 46 to 55A
10. V Application of the Act to cooperative Banks 56
This Act applies to following categories of Banks:
Nationalized Banks
Non-Nationalized Banks
Cooperative Banks

Applicability of the Banking
Regulation Act, 1949
The following are the steps taken by the Government of India
to Regulate Banking Institutions in the Country:

1949: Enactment of Banking Regulation Act.

1955: Nationalization of State Bank of India.

1959: Nationalization of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalization of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalization of seven banks with deposits over 200 crore.

Different groups:-
Banks in India are categorized in five different groups
according to their ownership and/or nature of operation.

These bank groups are
(i) State Bank of India and its associates,
(ii) Nationalized Banks,
(iii) Regional Rural Banks,
(iv) Foreign Banks and
(v) Other Indian Scheduled Commercial Banks
Public sector banks
Private sector banks

Scheduled Banks in India constitute those banks which have
been included in the Second Schedule of Reserve Bank of
India(RBI) Act, 1934.

RBI includes only those banks in this schedule which satisfy the
criteria laid down vide section 42 (6) (a) of the Act.
Introduction:-
Classification:-
SCHEDULED BANKS
PUBLIC SECTOR
SCHEDULED BANKS
STATE BANK OF INDIA
BANK OF BARODA
BANK OF INDIA
CORPORATION BANK
PRIVATE SECTOR
SCHEDULED BANKS
AXIS BANK, HDFC BANK,
ICICI BANK, KOTAK
MAHINDRA BANK
SCHEDULED
FOREIGN BANKS
CITI BANK, N.C. BANK OF
TOKYO LTD., BARCLAYS
BANK PLC, DRESDNER
BANK
Transfer of funds
Acceptance of deposits
Offering those deposits as loans for various purpose
Purchase of houses, equipments, capital investment purposes
The Indian Government presently hires the scheduled banks for
various purposes like tax collection and refunds, payment of
pensions etc.

Functions:-
A co-operative bank is a financial entity which belongs to its
members, who are at the same time the owners and the customers
of their bank.

Co-operative banks are often created by persons belonging to the
same local or professional community or sharing a common interest.

Co-operative banks generally provide their members with a wide
range of banking and financial services (loans, deposits, banking
accounts).

In India co-operative banks are regulated with the RBI and governed
by Banking Regulations Act 1949 and Co-operative Societies Act,
1965.
Introduction:-
The Co-operative Banks Act, of 2007 (the Act) defines a co-
operative bank as a co-operative registered as a co-operative
bank in terms of the Act whose members


Are of similar occupation or profession or who are employed by a
common employer or who are employed within the same business
district.

Have common membership in an association or organisation,
including a business, religious, social, co-operative, labour
or educational group.

Have common membership in an association or organisation,
including a business, religious, social, co-operative, labour
or educational group.

Reside within the same defined community or geographical area.

Co-operative bank performs all the main banking functions of deposit
mobilisation, supply of credit and provision of remittance facilities.

Co-operative Banks belong to the money market as well as to the
capital market.

Co-operative Banks provide limited banking products and are
functionally specialists in agriculture related products. However, co-
operative banks now provide housing loans also.

Urban Co-operative Banks (UCBs) provide working capital loans and
term loan as well.


Establishments:-

To attract deposit from non-agriculturist.

To use excess funds of some societies temporarily to make up
for shortage in another.

To supervise and guide affiliated societies.
The chief functions of Co-operative
banks are :-
Cooperative banks in India
finance rural areas under:

Farming
Cattle
Milk
Personal
Finance
Finance Function:-
Cooperative banks in India
finance urban areas under:

Self-employment
Industries
Small scale units
Home finance
Consumer finance
Personal finance
Types of co-operative banks:-
The Co-operative banking structure in India comprises of:
Urban Co-operative Banks
Rural Co-operative Banks

Some co-operative banks are scheduled banks, while others are non-scheduled
banks.
For instance, State Co-operative banks and some Urban Co-operative banks are
scheduled banks but other co-operative banks are non-scheduled banks.
Scheduled banks are those banks which have been included in the second
schedule of the Reserve bank of India act of 1934.

The banks included in this schedule list should fulfil two conditions.
The paid up capital and collected funds of bank should not be less than Rs. 5
lakhs.
Any activity of the bank will not adversely affect the interests of depositors.

Classification of co-operative banks:-
The Maharashtra State Co-Operative Bank Ltd.
National Co-operative Bank Ltd
Surat Peoples Co-operative Bank
Abhyudaya Co-operative Bank Ltd
Akola Urban Co-operative Bank Ltd
Andhra Pradesh State Co-operative Bank Ltd

Examples:-
A foreign bank is a bank that was established in a different
country and is also serving customers of another country.

Foreign banks operate in India, just the way the local banks do.

They are bound by all the rules and regulations that are
applicable to banks based out of India and they are governed by
the Reserve Bank of India that controls/governs all banks
operating in India.


What is Foreign Bank ????

Citibank
HSBC
Standard Chartered
Barclays
Some of the foreign banks that
operate in India are:-
Banks often open a foreign branch in order to provide more
services to their multinational corporation customers.

However, operating a foreign branch bank may
be considerably complicated because of the dual banking
regulations that the foreign branch needs to follow.

Suppose the Bank of America opens a foreign branch bank in
Canada. The branch would be legally obligated to follow both
Canadian and American banking regulations.




Foreign Branch Bank:-

They tend to increase the efficiency of the local banking
system, bring in more sophisticated financial services and have
the ability to nurse weak banks back to health.

It plays a great role in boosting Indian economy and also lends
to those who needs it.

It also bought latest techniques to serve the customers in the
most effective manner and known for introducing several
banking practices.
Characteristics Of Foreign Banks:-
Foreign banks are also known for uprooting the
unemployment in India by offering lots of job opportunities .

It offers good packages and tantalizes the sense of youngsters
by offerings several other job facilities.

Besides, it also contributed its tremendous effort to improve
Indian foreign exchange market.
Contd
Public Sector Banks in India:-
Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than
50%) is held by a government.

The shares of these banks are listed on stock exchanges.

There are a total of 26 PSBs in India

Public sector Banks are also called Nationalised banks. These banks are
whollely owned by the Government of India.

Public sector is an economy is owned and controlled by a government . It
consist of government businesses and firms, and goods and services
provided by the government, such as the national health service,
education, jobs, roads, public parks and law and order.
List of public sector banks:-
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
IDBI Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab National Bank
Punjab and Sind Bank
State Bank of India
State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
The "private-sector banks" are banks where greater parts of stake or
equity are held by the private shareholders and not by government.

Private banking in India was practiced since the beginning of banking
system in India.

The private sector banks are split into two groups by financial
regulators in India, old and new.
The old private sector banks existed prior to the nationalisation
in 1969 and kept their independence because they were either
too small or specialist to be included in nationalisation.
The new private sector banks are those that have gained their
banking license since the liberalisation in the 1990s.

The first private bank in India to be set up in India was IndusInd Bank.
Private Sector Banks:-
Axis Bank Ltd.
Bank of Rajasthan Ltd
The Catholic Syrian Bank
The Dhanalakshmi Bank Ltd
Federal Bank
ING Vysya Bank Ltd
The Karnataka Bank Ltd.
The Karur Vysya Bank Ltd.
The Nainital Bank Ltd.
The South Indian Bank Ltd.
Tamilnad Mercantile Bank Ltd
List of private sector banks:-
DIFFERENCES BETWEEN PUBLIC
& PRIVATE SECTOR BANKS

Public Sector bank means any Government Sector Bank/Institute that
goes public... means that issues it share to general public.. It also has a
greater share of government(more than 50%) so that the main motto
of social welfare other than Maximising Profit remains.

Where as Private Sector Banks are those Banks where the
management is controlled by Private individuals and Government
does not have any say in the management of these banks. Maximising
profit is the basic motto.

Regional Rural Bank:-
Rural banking in India started since the establishment of banking sector in India.
Rural Banks in these days mainly focussed upon the agro sector.

They are oriented towards meeting the needs of the weaker section of the rural
population consisting of small and marginal farmers, agricultural laborer, small
entrepreneurs. These banks were set up after the nationalization of banks in 1969.

The Haryana State Cooperative Apex Bank Ltd. commonly called as HARCOBANK
plays a vital role in rural banking in the economy of Haryana State and has been
providing aids and financing farmers, rural artisans, agricultural labourers,
entrepreneurs, etc. in the state and giving service to its depositors.

National Bank for Agriculture and Rural Development (NABARD) is a development
bank in the sector of Regional Rural Banks in India. It provides and regulates credit
and gives service for the promotion and development of rural sectors mainly
agriculture, small scale industries, cottage and village industries, handicrafts.
REGIONAL RURAL BANKS ACT, 1976 Act No. 21 of 1976 [9th February,
1976.]

An Act to provide for the incorporation, regulation and winding up of
Regional Rural Banks with a view to developing the rural economy by
providing, for the purpose of development of agriculture, trade,
commerce, industry and other productive activities in the rural areas,
credit and other facilities, particularly to the small and marginal
farmers, agricultural laborers, artisans and small entrepreneurs, and
for matters connected therewith and incidental thereto.
Regional Rural Banks Act, 1976:-