General Awareness - SPLessons
boy2 Chapter 13

Banking System

General Awareness - SPLessons

Banking System

shape Description

A gathering or system of foundations that give financial services to us is known as ‘Banking System’. These establishments are in charge of working a payment system, giving credits, bringing deposits and assisting with investments.
Banking in India has its beginning as right on time as the Vedic period. It is trusted that the transition from cash loaning to Banking probably happened even before Manu, the great Hindu Jurist who has given a segment of his work to deposits and propels and set down principles identifying with rates of premium.
Amid the Moghul time frame, the native bankers assumed an imperative part in loaning cash and financing remote exchange and trade. Amid the times of the East India Company, it was the turn of the office houses to bear on the managing an account business.

shape Concepts

The Reserve Bank which is the Central Bank was made in 1935 by passing the Reserve Bank of India Act 1934. The RBI is the incomparable financial and keeping money power in the nation and controls the managing banking system in India. In the wake of the Swadeshi Movement, various banks with the Indian administration were built up in the nation to be specific, Punjab National Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, the Bank of Baroda Ltd, and Central Bank of India Ltd.

  • On July 19, 1969, 14 major Banks of the nation were nationalized and on fifteenth April 1980 six more business private part Banks were likewise assumed control by the legislature.
  • The General Bank of India was the first joint stock bank to be set up in the year 1786. The others which followed were the Bank of Hindustan and the Bengal Bank.
  • The Bank of Hindustan is accounted to have proceeded till 1906 while the other two failed meanwhile. In the first half of the nineteenth century of the East India Company built up the three banks, the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843.
  • These three banks otherwise called presidency banks, were free units and worked well. These three banks were combined in 1920 and another bank Imperial Bank of India was built up on 27th January 1921. With the passing of the state bank of India Act in 1955 the undertaking of the supreme bank of India was assumed control by the recently constituted State Bank of India.

Today the business managing an account framework in India might be characterized into
Public Sector Banks:

  • State bank of India and it partner banks called the State Bank Group.
  • 21 nationalized Banks.
  • Regional rural banks fundamentally supported by public sector banks.

Private Sector Banks:

  • Old generation private Banks.
  • New generation private Banks.
  • Foreign banks in India.
  • Scheduled co-operative banks.
  • Non-scheduled Banks.

Regional Rural Banks:
The Regional Rural Banks the most up to date type of banks, appeared amidst the 1970’s with the goal of creating country economy by giving credit and deposit facilities to agribusiness and other gainful exercises of various types in rural areas.
Scheduled and Non-Scheduled Banks:
The Scheduled banks are those which are cherished in the second timetable of the RBI Act, 1934. These banks have paid up capital and deposits of a total estimation of not less than 5 lakhs, they need to fulfill the RBI that their undertakings are completed in light of a legitimate concern for their investors.
All the business banks, provincial rural banks, and state helpful banks are scheduled banks. Non-scheduled banks are those which are excluded in the second schedule of the RBI Act, 1934.
Co-operative Banks:
Co-operative Banks are purported in light of the fact that they are sorted out under the arrangements of the Cooperative credit social orders Act of the states.
The cooperative credit establishments working in the nation are primarily of two kinds: agricultural (prevailing) and non-agricultural. There are two separate cooperative organizations for the arrangement of agricultural credit: one for short and medium-term credit, and the other for long term credit. The previous has three level and government structure.
Apex is the state cooperative bank and at the middle level are the central cooperative banks and at the town level are the primary agricultural Credit Societies.
Cooperative banking sector has been produced in the nation to supplement the village money lender. The agreeable banking sector in India is partitioned into 4 segments

  • State Co-operative banks
  • Central Co-operative Banks
  • Primary agricultural Credit Societies
  • Land Development Banks
  • Urban Co-operative Banks
  • Primary agricultural development Banks
  • Primary Land Development Banks
  • State Land Development Banks

Development Banks:

    • Industrial finance corporation of India (IFCI)
    • Industrial bank of India (IDBI)
    • Industrial credit and Investment corporation of India (ICICI)
    • Industrial Investment Bank of India (IIBI)
    • Small Industries Development Bank of India
    • SCICI Ltd
    • National Bank of agriculture and Rural development (NABARD)
    • Export Import Bank of India
    • National Housing Bank

Branch expansion of Public Sector banks and other commercial banks:

All branches as on June 30 Number of Branches Rural Branches % of Rural Branches
2012 2013 2014
1.SBI and its Associates 19,167 20,288 21,684 22,043 7,863 35.7
2.Nationalized banks
Nationalized Banks
Other public sector Banks
49,028

48,063

965

52,975

51,881

1,094

59,270

57,853

1,417

61,164

59,544

1,620

20,802

20,467

335

34.0

34.4

2.7

3.Regional Rural Banks
Total of public sector banks 85,071
16,876

91,022

17,759

99,777

18,823

102,289

19,082

42,907

14,242

41.9

74.6
4.private sector banks 13,721 16,100 18,291 18,859 4,042 21.4
5.Foreign banks
All scheduled commercial banks
Non-Scheduled Commercial Banks
320

99,103

55

332

107,454

60

317

118,385

65

321

121,469

66

7

46,956

20

2.2

38.7

30.

Local Area Banks 55 60 65 66 20 30.3

Banking Services:
According to Census of India, 2011 the data on the percentage of households using banking services. Himachal Pradesh is the top most state with 89.1 percent. Below is the list of percentage of households using banking services.

Households Using Banking Services
Total Households Percentage of households using banking services
All India 24.67 Cr 58.7 Cr
Himachal Pradesh 14.77 Lakh 89.1
Goa 3.23 Lakh 86.8
Uttarakhand 19.97 Lakh 80.7
Tripura 8.43 Lakh 79.2
Delhi 33.41 Lakh 77.7
Kerala 77.16 Lakh 74.2
Uttar Pradesh 3.29 Cr 72.0
J & K 20.15 Lakh 70.0
Maharashtra 2.38 Cr 68.9
Haryana 47.18 Lakh 68.1
Rajasthan 1.26 Cr 68.0
Sikkim 1.28 Lakh 67.5
Punjab 54.10 Lakh 65.2
Karnataka 1.32 Cr 61.1
Gujarat 1.22 Cr 57.9
Mizoram 2.21 Lakh 54.9
Jharkhand 61.82 Lakh 54.0
AP 2.10 Cr 53.1
Arunachal 2.62 Lakh 53.0
Tamil Nadu 1.85 Cr 52.5
Chhattisgarh 56.22 Lakh 48.8
West Bengal 2.01 Cr 48.8
M.P 1.50 Cr 46.6
Bihar 1.89 Cr 44.4
Assam 63.67 Lakh 44.1
Meghalaya 5.38 Lakh 37.5
Nagaland 4 Lakh 34.9
Manipur 5.07 Lakh 29.6

Payment Banks:
Reserve Bank of India on August nineteenth 2015 conceded 11 organizations endorsement to setup payment banks in the plan to push for more prominent financial inclusion.
These candidates will have year and a half to satisfy a rundown of prerequisites set by the RBI, before they can be allowed a full permit. In every one of the 41 firms and people had applied. These payments bank will be permitted to accept deposits of up to 1 lakh, provide payments and remittances services, and distribute third-party financial products.
In India right around half of the general population don’t have bank accounts and just around 30,000 of India’s 5.94 Lakh towns have a business bank branch.
New Payments Bank Licence Holders:

      • Aditya Birla Nuvo Ltd
      • Airtel M Commerce Services Ltd
      • Cholamandalam Distribution Services Ltd
      • Department of Posts
      • Fino PayTech Ltd
      • National Securities Depository Ltd
      • Reliance Industries Ltd
      • Dilip Shantilal Shanghvi
      • Tech Mahindra Ltd
      • Vodafone m-pesa Ltd

Small Finance Banks:
The Reserve Bank of India on sixteenth September 2015 allowed 10 entities in principle to open supposed small finance banks another move towards growing access to financial services in provincial and semi urban regions. Altogether of 72 entities applied for a small finance bank licence. The applications were checked on by a board of trustees headed by previous RBI Deputy Governor Usha Thorat. 8 of 10 allowed endorsement by the central bank are micro finance institutions.
Small Finance Bank Licence Holders:

      • Ujjivan Financial Services Ltd
      • Jana Lakshmi Financial Services Pvt Ltd.
      • Equitas Holdings Ltd
      • Au Financiers Ltd
      • Capital Local Area Bank Ltd
      • Disha Microfin Pvt. Ltd.
      • ESAF Microfinance and Investments Pvt. Ltd.
      • RGVN Microfinance Ltd.
      • Suryoday Micro Finance Pvt. Ltd.
      • Utkarsh Microfinance Pvt Ltd.

Small finance banks will offer basic banking services, accepting deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and entities in the unorganized sector.

      • For Microfinance firms that give modest advances to low-salary workers, the motivation for changing over into small finance banks will be the entrance they pick up to deposits, they will likewise have the capacity to offer a more extensive scope of loan products to clients.
      • Seventy five percent of the credit progressed by the small finance banks should go to divisions that are viewed as the part of the supposed the need areas which incorporates agribusiness, small ventures and low pay workers. Commercial banks need to obligatorily loan 40% of their net bank credit to such sectors.
      • The base paid up value capital for little fund banks was set at 100 Crore and least starting commitment from promoters settled at 40%.

Reserve Bank of India (RBI):
The RBI was set up under the Reserve Bank of India Act (RBI Act), 1934 on April 1 1935 and nationalized on 1 January 1949.

      • The Bank is the sole power for issue of money in India other than one rupee coins and subsidiary coins. As the agent of central government, the reserve bank of India undertakes distribution of one rupee coin and also small coins issued by the government.
      • The Reserve Bank likewise handles the acquiring programme of central and state governments.
      • The RBI assumes a vital part in keeping up orderly conditions in the outside trade market and goes about as an agent of the government in respect of India’s participation of worldwide money related asset.

Pradhan Mantri Jan Dhan Yojana (PMJDY):
The Pradhan Mantri Jan Dhan Yojana launched by the union government to provide access to all the people of India. As of August 12, 2015 more than 17.5 crore bank accounts has been opened across the country under PMJDY. Following the success of PMJDY, the union government introduced the Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyothi Yojana to provide insurance cover to people from all income groups.

Rural(Cr) Urban(Cr) Total(Cr) No.of Rupay debit cards(Cr) Balance in accounts(Cr) % of zero balance accounts
Public sector Banks 7.53 6.19 13.72 12.62 17,556.84 45.26
Regional Rural Banks 2.68 0.46 3.14 2.32 3,748.07 47.77
Private Banks 0.42 0.28 0.70 0.62 1,089.07 45.71
Total 10.63 6.93 17.56 15.56 22,393.98 45.76


shape Model Questions

1. Bank rate is decided by which of the following?
A. Bank of America
B. Government of India
C. Reserve Bank of India
D. State bank of India
Answer-C
2. In which year the Reserve Bank of India established?
A. 1933
B. 1934
C. 1935
D. 1936
Answer-C
3. Where the Reserve Bank of India was Located?
A. Bangalore
B. Chennai
C. New Delhi
D. Mumbai
Answer-D
4. When the Bank of Madras has established?
A. 1843
B. 1845
C. 1846
D. 1850
Answer-A
5. The Imperial Bank of India after its nationalized is known as?
A. Bank of Madras
B. State Bank of India
C. Reserve Bank of India
D. Indian Overseas Bank
Answer-B
6. How much percentage of householders using banking services in India?
A. 45.2
B. 58.7
C. 70.32
D. 62.32
Answer-B
7. Whish state is the top in house holders using banking services in India?
A. Himavhal Pradesh
B. Madhya Pradesh
C. Andhra Pradesh
D. Arunachal Pradesh
Answer-A
8. When the Reserve bank of India granted 11 companies approval to set up payment banks?
A. Aug 19 2015
B. Aug 25 2015
C. Aug 1 2015
D. Aug 5 2015
Answer-A
9. When the Reserve Bank of India granted 10 entities approval to open small finance banks?
A. Mar 10 2015
B. Aug 15 2015
C. Sept 30 2015
D. Sept 16 2015
Answer-D
10. When the Pradhan Mantri Jan Dhan Yojana has launched?
A. 10 Aug 2014
B. 28 Aug 2014
C. 28 Sept 2014
D. 20 Aug 2014
Answer-C