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8/3/2019 Banking Structure India
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Structure of banks
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Central bank
Commercial banks:-
PrivateIndian
Foreign
Indian banks- old banks , new banks,
local area banks
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Public-
1. SBI group – SBI and its subsidiaries
2. Other nationalized banks
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COOPERATIVE BANKS
Agriculture sector
Three tier
State cooperative banks (SCBs)District central cooperative banks (DCCBs)
Primary Agricultural Credit societies(PACs)
Non- Agricultural Sector-Urban cooperative banks
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DEVELOPMENT BANKS
Give loans for Agricultural purpose
And also for Non-agricultural purpose
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THE DIFFERENCE:-
Functional specialisation-
Principle-
Regulated by-Financial help- by RBI,NABARD, central
government, state government.
-RBI provides contribution to initial capital.Borrowers:-
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No tier versus three tier-
It becomes imp.cos’ no direct contact
between the 1 st and the 3 rd tier
Intra- sectoral funds are greater.e.g.
interbank deposits. Competition versus
cooperation.
CRR, SLR requirements
Scheduled versus non-scheduled banks exist
in both.
Supervision-single,versus dual.-acts that
govern them
RBI is lender of last resort and first resort.
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Commercial banks:-
Private sector banks-old, new banks and local
area banks
Old – Vysya bank,
First FI after 1991 to get approval to function
as a bank is HDFC.
Also InduSind bank .
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Other examples:-
UTI Bank
ICICI Bank
Ratnakar Bank Catholic Syrian Bank
Dhanalakshmi
Centurion Bank
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Foreign banks-
RBI new rules, foreign banks can set up local
subsidiary., not necessarily acquire weak
banks.
Example:-BOA, Bank of Ceylone,
ANZ,HSBC,Duetsch Bank, ABN-AMRO
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BANKS AWAITING:-
Credit Suisse Group
Royal Bank of Scotland
US-based GE capital
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SBI , its subsidiaries
Other nationalised banks.
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Cooperative structure:-
Nearly 28 SCBs at a state level
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DCCBs
Middle tier in the cooperative banking
structure.
Examples:-Pilbhit ,Tehri,Haridwar DCCBs.
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PACs
Acting at the local level
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UCBs
UCBs cater to non-agricultural finance.
Examples are Kurla Nagrik Bank,
Abhyudaya Bank.Mainly working capital loans,term loans.
These days, UCBs are giving home loans.
Rs. 1 lakh to individuals, and Rs. 3 lakhsscheduled UCBs.
Can provide finances against the shares,
debentures.
RRB
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RRBs:-Cater to agro sector,small and marginal farmers.
Banks choose 1 or 2 districts in a state which isrelatively unbanked area and sponser that RRB.
SBI has 30 RRBs in 13 states and its branches
constitute 16% of the total.
NABARD also sets up RRBs.
Can be established with paid up capital of 25 lakhs
of which 50 % comes through CG, 15% through
SG and the rest 35% through the sponsoring bank.CRR, SLR requirements are the minimum.(3%
and 25 % respectively)
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Examples:-
Bijapur Gramin Bank
Surat baruch gramin bank
Faizabad Khetriya Gramin bank.
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Problems of cooperative banks:-
Dual Supervision
Deposit base is small and thereforelikely to fall pray to large banks.
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The difference….
RBI Commercial Banks
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Functions of RBI:-NOTE ISSUE-
All denominations, and CG – coins, one rupeenotes are distributed on behalf of the government.
Issue department and the banking department areseparate , assets and liabilities are separate.
The assets of the issue department:-Gold
Foreign securities
Rupee coins
GOI securities .
It has to keep (since 1957)gold/ foreign securitiesof Rs.200 crs. Of which gold must be Rs. 115 crs.
This is called minimum reserve system.
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FOR THIS PURPOSE..
Issue offices- 10 in major cities
Thousands of Currency chests/receptacles in which
stock of new notes and coins is stored.
To get people’s confidence, India has a public
monopoly of note issue.
Hongkong, HSBC is responsible for the note issue.
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BANKER’S BANK:-
The scheduled banks can borrow from the ReserveBank of India on the basis of eligible securities or getfinancial accommodation in times of need orstringency.
Since commercial banks can always expect theReserve Bank of India to come to their help in times
of banking crisis the Reserve Bank becomes not onlythe banker's bank but also the lender of the last resort.
BANKER TO THE
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BANKER TO THEGOVERNMENT:-
As a banker to the government, the Bank can make
“ways and means advances” to both the central
and state governments.
(ways and means advances :- temporary
advances made in order to bridge the temporary
gap between receipts and payments)
M t it 3 th
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Maturity:-3 months
State governments- limits are fixed.
Three types:-
(a) normal or clean advances i.e., advances
without any collateral security;(b) secured advances, i.e., those which are secured
against the pledge of central government
securities; and
(c) special advances, i.e., those granted by the
Bank at its discretion.
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Overdraft facility:- in excess of the credit (ways and means advances) limits granted by the RBI.
In other words, overdrafts are unauthorised ways
and means advances drawn by the state governmentson the RBI.
Persistently large overdrafts are drawn by the stategovernments which is not a very healthy sign.
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FOREIGN EXCHANGE MANAGEMENTAND CONTROL:-
(a) to administer the Foreign Exchange Control;
(b) to choose the exchange rate system and fix or
manage the exchange rate between the rupee and other
currencies;(c) to manage exchange reserves; and
(d) to interact or negotiate with international financial
institutions such as the IMF, World Bank, and AsianDevelopment Bank.
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Controller of credit:-
Qualitative (selective credit controls)
Quantitative :
1.CRR2.SLR
3.Bank Rate
Supervisory functions
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Supervisory functions
The Reserve Bank Act, 1934,
The Banking Regulation Act, 1949
has given wide powers to RBI relating to :-
licensing and establishments,
branch expansion,
management and methods of working,
amalgamation,
reconstruction,
and liquidation.to carry out periodical inspections
to call for returns and necessary information fromthem.
Promotional functions
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Promotional functions :- A unique function done in India.
The Reserve Bank has helped in thesetting up of the following:-
IFCI
SFC
UTI in 1964,
IDBI in 1964,
Agricultural Refinance Corporation of India,Industrial Reconstruction Corporation ofIndia(1972) provide long-term finance to
farmers.
THE BALANCE SHEET OF A
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THE BALANCE SHEET OF ABANK:-
LIABILITIES:-
Paid up capital andreserves
Deposits-
fixed,savings,currentand others
Borrowings
Bills payable
Other liabilitiesPer contra items
Profits carried to nextyears account
ASSETS:-
Cash in hand and withbanks
Money at call andshort notice
Investments
Loans ,advances, billsdiscounted andpurchased
Other assets
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A SCHEDULED BANK:-
Paid up capital and reserves totaling to
( Rs. 5 Lakhs,) Rs. 100 crs.
Must not be a single owner firm or apartnership and must be a joint stockcompany
Must convince RBI that it is conducting itsaffairs in the interest of the depositors.
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So what?
Privileges:- concessional borrwingfacilities from RBI
Others are not entitled to borrowform RBI for normal bankingpurposes , and only in foraccomodation in abnormal
circumstances.
Obli ti
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Obligations:-
Submit periodical returns to RBI
subject to SLR requirements