Ppt On Banking Sector For Presentation.pptx

Group no.- 20 Vaishali harit( 162379) Divita bhargava(162243)

Content  Introduction  History of banking system  Structure of banking system  Functioning of old banking system  Disadvantages of old banking system  Focus aspects of new banking system  Issues and challenges related of banking system

 Conclusion

Banking – Introduction  Banking Regulation Act, 1949, define banking as the

acceptance of deposits of money from the public for the purpose of lending or investment.  Banking is commercial institution. In India first bank was estabilished in 1779 by Britishers for availability of funds and finance for the port to carry the goods (stuff) from India to British countries.

History of Indian banking system  The bank of Hindustan was the first bank to be

established in India in 1770.  PRESISENCY BANKS  Bank of Bengal : 1809 ( bank of calcutta : 1806)  Bank of Bombay : 1840  Bank of Madras : 1843  In 1921, Presidency banks were merged to form Imperial bank of India, it was private entity.  In 1955, Imperial bank of India was nationalised and renamed as State bank of India, on the recommendation of “ A.D. GOREWALA COMMITTEE”.

 8 banks were attached with SBI in 1959. name as the associate bank of SBI.  They were, I. STATE BANK OF BIKANER II. STATE BANK OF JAIPUR III. STATE BANK OF SAURASHTRA IV. STATE BANK OF INDORE V. STATE BANK OF HYFDERBAD VI. STATE BANK OF PATIALA VII. STATE BANK OF MYSORE VIII. STATE BANK OF TRAVANCORE  1st bank with limited liability was Oudh Commerical bank. This was

established in 1881 at faizabad, failed in 1958.  The first bank purely managed by Indians was Punjab National bank established in Lahore in 1894.  1st Indian Commercial which was onwed and managed by Indians was Central bank of India which was established in 1911.

 Central bank of India is called India’s first truly

swadeshi bank.  Bank of India was the 1st Indian bank to open A branch outside India in London in 1946.  i) India’s oldest joint stock bank (multiple shareholder)is Allahabad bank which is still working established in 1865.  ii) It is also known as India’s oldest public sector bank.

RESERVE BANK OF INDIA

SCHEDULE BANKS

COMMERCIAL BANKS 1. PUBLIC SECTOR BANKS PNB,SBI 2. PRIVATE SECTOR BANKS ICICI, HDFC, AXIS Bank 3. FOREIGN BANK HSBC, CITI bank 4. REGIONAL RURAL BANK PYRATHMA BANK IN U.P.

NON SCHEDULE BANKS

COOPERATIVE BANKS 1. URBAN COOPERATIVE BANKS eg. SURAT COOPERATIVE BANKS 2. STATE COOPERATIVE BANKS eg. RAJ STATE COOPERTIVE BANKS

The RBI is india’s central and apex banking institution, which controls the monetary policy of Indian rupee. RBI regulates: SCHEDULE BANK:- Registered in the 2 schedule of RBI   



Act,1935. banks paid up capital and reserves of an aggregate value of not less than Rs. 5 Lakhs. NON SCHEDULE BANK:- not registered in the 2 schedule of RBI Act, 1935. Reserve capital less than 5 Lakhs and not governed by RBI. SCHEDULE BANK HAS THESE :COMMERICAL BANKING :- commerical banks are established with an objective to help businessmen. Collects money from the general public and give short term loans to businessmen. COOPERATIVE BANKING:- registered under cooperative societies act. People who come togther to jointly serve their common interest often from a cooperative society under the cooperative societies act.

Commercial banking  PUBLIC SECTORS BANKS:- banks which govt. has major

shareholding. Public sector banks comprise 19 nationalised banks and SBI and its 7 associate banks. Eg. SBI , PNB.  PRIVATE SCTORS BANKS :- banks which does not have a major shareholders of govt. eg. Are ICICI, HDFC, and AXIS BANK.  FOREIGN BANKS:- banks which, incorporated in a foreigh country and set up their branches in India. Like HSBC , CITI BANK.  REGIONAL RURAL BANKS:-For the country progress, govt. promulgated many rural banks to liquidate rural indebtedness by stages and to dispense institutional credit facilities to farmers and artisans in rural areas.

Cooperative banks  URBAN COOPERATIVE BANKS:- The URBAN

COPERATIVE BANKS (UCBS), though not formally defined, refers to primary cooperative banks located in urban and semi urban areas. These banks , till 1996 were, allowed to lend money only for non-agriculture purposes. Like Surat urban cooperative.  STATE COOPERATIVE BANKS:- These banks are small financial institutions which are governed by regulations like banking regulations act, 1949 and banking laws cooperative societies act, 1965. They operate both in urban and rural areas under different structural organisations. Like Raj state cooperative banks.

Some of the functions of old banks    

Accepting deposits Issual of demand drafts Granting loans & Advances Undertaking safe custody of valuables, important documents & securities by providing safe deposit values or lockers  Documentation is maintained through ledgers only  Minimum balance for opening an account was more during this interest.  Token system for withdrawal of cash from the account.

Disadvantages of old banking system  Possibility of human errors  Time constraint  Customer relationship was limited

 Overdraft was not available  Processsing fees was charged for all the transactions  Passing of cheques was delayed

 Limited use of technology

Focus aspects of new banking system  Customer relationship management (CRM)  Electronic fund transfer (EFT):- It is a system where make cash



  

payment or give instruction to transfer funds directly from his own a/c to the bank of the receiver /beneficiary. Electronic clearing system (ECS):- It is meant for companies and govt. department to make/ receive large volumes of payments rather than of funds tranfers by individuals. Risk management ATM’s :- enables the customer to withdraw their money 24 hours a day 7 days a week. Mobile banking:- Do entire non- cash related banking on telephone, under this device automatic voice recorder is used for simpler queries and transaction.

1. NPA (non performing asset) The biggest risk to India's banks is the rise in bad loans. The slowdown in the economy in the last few years led to a rise in bad loans or non-performing assets (NPAs). These are loans which are not repaid back by the borrower. They are, thus, a loss for the bank. Net NPAs amount to only 2.36% of the total loans in the banking system. This may not seem like an alarming figure. However, it does not take into restructured assets - when a borrower is unable to pay back and the bank makes the loan more flexible to be paid back over a longer period of time. Restructured assets too put pressure on a bank's profitability

Measures to reduce NPA    

One time settlement or compromise scheme Lok adalats (same as panchayat) Debt recovery tribunals CIBIL (2000):- Credit information company licensed by the reverse bank of India. CIBIL collects and maintains records of an individuals’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by banks and other lenders, on monthly basis.  Securitization & reconstruction of financial assests & inforcement of security interest act 2002.  Asset reconstruction companies:- is a specialized financial institution buys that NPAs or bad assets from banks and financial institutions so that the latter can clean up their balance sheets.

3.Problem of infrastructure In the age of computerization, although the banks have started computerization process, this has provided little comforts to the customers. Still the customer has to wait for some time in long queues. Further, the operation by computer is delayed by the fact that some operating staff is not very skilled and thus it takes more time. The problem of breakdowns of electricity and even of the computers is so usual that the whole work comes to a halt and no work is performed. It takes hours to get it rectified i.e., even the smaller problems take time as most of the branches do not have system specialist who can look after the system and other operational problems. An inexperienced person means more time and more delays in providing services of the customers.

3. Large over-dues  The small branches of commercial banks are now

faced with a new problem—a large amount of overdue advances to farmers. The decision of the former National Front Government to waive all loans to farmers up to the value of Rs. 10,000 crores has added to the plight of such banks.  Most of the rural branches are running at a loss because of high overheads and prevalence of the barter system in most parts of rural India.

4. POLITICAL PRESSURES The smooth working of nationalised banks has also been hampered by growing political pressures from the Centre and the States. Nationalised banks often face lots of difficulties due to various political pressures. Such pressures are created in the selection of personnel and grant of loans to particular parties without considering their creditworthiness.

5. FRAUD  Another pressing concern for the banking regulator is the increased

number of fraudulent transactions at Indian banks. We see by the nirav modi scam.  It has come to light that the company, in connivance with retired employees of PNB, got at least 150 letter of undertakings(LOUS), allowing Nirav modi group to defraud the bank and many other banks who gave banks to him. An Indian express report says that in addition to the Rs. 11,450 crore, modi also defrauded 17 other banks of Rs. 3,000 crore. In this case, however, fake LOUS were recycled by the diamond jewellery group and illegally issued to other banks for borrowing money. Nirav modi, his family and partners have fled the country and an exclusive report by TIMES NOW reveals that he is currently in the united states.

Conclusion Indian banking system will further grow in size and complexity while acting as important agent of economic growth and intermingling different segments of the financial sector. It automatically follows that the future of indian banking depends not only in internal dynamics unleashed by ongoing returns but also on global trends in the financial sectors.