Uzair Project.docx

Chapter 1 INTRODUCTION: The Indian economy is emerging as a one of the strongest economy of the world with the GDP growth of more than 8 % every year. A strongest banking industry is important in every country and can have a significant affect in supporting economic development through efficient financial services. Banking sector play a vital role in growth and development of Indian economy. After liberalization the banking industry in India under gone major changes. The process of liberalization and globalization has strongly influenced the Indian banking sector. A stable and efficient banking sector is an essential precondition to increase the economic level of a country. Liberalization policy introduced in the banking sector in India led to consolidated competition, efficient allocation of resources and introducing innovative methods for mobilizing of saving. The ability of banks to analyze its financial position for improving its competitive position in the market place. Most banks in India are currently focusing an expanding their service network. A growing Indian economy, expanding their various segments. After the recommendations of Narshinham Committee report with the entry of many private players. Indian banking industry has transformed into a customer oriented market. It now consists of multiple products and customer groups and various channels of distribution. It is well known fact that an effective and efficient banking system is important for the long-run growth and development of the economy. So, there is needed to make a comprehensive study into performance of banks in India. A Banking Sector performs three primary functions in economy, the operation of the payment system, the mobilization of savings and the allocation of saving to investment products.1 Banking industry has been changed after reforms process.

The Government has taken this sector in a basic priority and this service sector has been changed according to the need of present days. Banking sector reforms in India Strive to Banking industry has been changed after reforms process. The Government has taken this sector in a basic priority and this service sector has been India Strive to Banking industry has been changed after reforms process. The Government has taken this sector in a basic priority and this service sector has been changed according to the need of present days. Banking sector reforms in India Strive to increase efficiency and profitability of the banking institutions as well as brought the existing banking institutions face to face with global competition in globalization process. Different type of banks differs from each other in terms of operations, efficiency, productivity,

profitability and credit efficiency. Indian banking sector is an important constituent of the Indian Financial System. The banking sector plays a vital role through promoting business in urban as well as rural area in recent year, without a sound and effective banking system, India can not be considered as a healthy economy. The main objective of this study to understand of how a bank is able to use the available resources to increase the profitability and performance of banks and banks in India are performed well or not. Meaning of Bank: A Bank is an institution which accepts deposits from the general public and extends loans to the households, the firms and the government. Banks are those institutions which operate in money. Thus, they are money traders, with the process of development functions of banks are also increasing and diversifying now, the banks are not nearly the traders of money, they also create credit. Their activities are increasing and diversifying. Hence it is very difficult to give a universally acceptable definition of bank. "Banking business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act. Definitions of Bank: Indian Banking Regulation act 1949 section 5 (1) (b) of the banking Regulation Act 1949 Banking is defined as. ―Accepting for the purpose of the landing of investment of deposits of money from public repayable on demand or other wise and withdraw able by cheques, draft, order or otherwise. ―Bank means a bench or table for changing money. -Greek History Bank is an establishment for custody of money received from or on Behalf of its customers. Its essential duty is to pay their drafts unit. Its profits arise from the use of the money left employed them. -Oxford Dictionary Bank is an institution which traders in money, establishment for money, as also for making loans and discounts and facilitating the transmission of remittances from one place to another. -Western‘s Dictionary

Bank means the place when money is kept safely, open an account with any bank and make transaction with that bank is simply called as bank - Dictionary ―A bank is an establishment which makes to individuals such advances of money or other means of payment as may be required and safely made and to which individuals entrust money or means of payment when not required by them for use. - Pro. Kinely A banker is defined as a person who carries on the business of banking, which is specified as conducting current accounts for his customers, paying cheques drawn on him, and collecting cheques for his customers. - English common law ―Bank as institutions which collects money from those who it to spare or who are saving it out of their income and lends out to those who required it. -Prof. Crowthers ―A Bankers is one who is the ordinary course of his business honors drawn upon him by person from and for whom he receives money on current account. - Dr H. L. Hert History of Bank: The first banks were probably the religious temples of the ancient world, and were probably established sometime during the third millennium B.C. Banks probably predated the invention of money. Deposits initially consisted of grain and later other goods including cattle, agricultural implements , and eventually Precious metals such as gold, in the form of easy-tocarry compressed plates. Temples and palaces were the safest places to store gold as they were constantly attended and well built. As sacred places, temples presented an extra deterrent to would-be thieves. There are extant records of loans from the 18th century BC in Babylon that were made by temple priests/monks to merchants. By the time of Hammurabi`s Code ,banking was well enough developed to justify the promulgation of laws governing banking operations. Ancient Greece holds further evidence of banking. Greek temples, as well as private and civic entities, conducted financial transactions such as loans, deposits, currency exchange, and validation of coinage. There is evidence too of credit, whereby in return for a payment from a client, a moneylender in one Greek port would write a credit note for the client who could "cash" the note in another City, saving the client the danger of

carting coinage with him on his journey. Pythius, who operated as a merchant banker throughout Asia Minor at the beginning of the 5th century B.C., is the first individual banker of whom we have records. Many of the early bankers in Greek city-states were ―metics or foreign residents. The fourth century B.C. saw increased use of credit-based banking in the Mediterranean world. In Egypt, from early times, grain had been used as a form Money in addition to precious metals, and state granaries functioned as banks. When Egypt fell under the rule of a Greek dynasty, the Ptolemies (332-30 B.C.), the numerous scattered government granaries were transformed into a network of grain banks, centralized in Alexandria where the main accounts from all the state granary banks were recorded. This banking network functioned as a trade credit system in which payments were affected by transfer from one account to another without money passing. 12 In the late third century B.C., the barren Aegean island of Delos, known for its magnificent harbor and famous temple of Apollo, became a prominent banking center. As in Egypt, cash transactions were replaced by real credit receipts and payments were made based on simple instructions with accounts kept for each client. With the defeat of its main rivals, Carthage and Corinth,by the Romans, the importance of Delos increased. Consequently it was natural that the bank of Delos should become the model most closely imitated by the banks of Rome .Ancient Rome perfected the administrative aspect of banking and saw greater regulation of financial institutions and financial practices. Charging interest on loans and paying interest on deposits became more highly developed and competitive. The development of Roman banks was limited, however, by the Roman preference for cash transactions. History of Banking in India: Today, the banking industry in our country is stronger and capable of withstanding the pressures of competition. It withstood Global Financial Crisis (2008). In the era of Globalization Banking Sector in India is rapidly changing since 1990s due to technological innovation, financial liberalization with entry of new private and foreign banks, and regulatory changes in the corporate sector. Indian banking industry is gradually moving towards adopting the best practices in accounting, internationally accepted prudential norms, with higher disclosures and transparency, corporate governance and risk management, interest rates have been deregulated, while the rigour of directed lending is being progressively reduced. In our country, currently we are having a fairly well developed banking system with different classes of banks – public sector banks, foreign banks, private sector banks – both old and new generation, regional rural banks and co-operative banks with the Reserve Bank of India as the leader of the system. In the banking field, there has been an unprecedented growth and diversification of banking industry and our banks are now utilizing the latest

technologies like internet and mobile devices to carry out transactions and communicate with the masses. The history of Indian banking can be divided into three main phases:Phase I (1786- 1969) - Initial phase of banking in India. Phase II (1969- 1991) - Nationalization, regularization and growth. Phase III (1991 onwards) - Liberalization and its aftermath. 1)Phase I (1786- 1969) Initial phase of banking in India:The first banks were The General Bank of India, which started in 1786, and 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 “The Bank of Bengal" in Calcutta in June 1806. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras. The presidency banks were established under charters from the British East India Company. The three banks merged in 1921 to form the Imperial Bank of India. For many years the Presidency banks acted as quasi-central banks, as did their successors. The first fully Indian owned bank was the Allahabad Bank, established in 1865. However, at the end of late 18th century, there were hardly any banks in India in the modern sense of the term. Banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta in the 1860s. The Comptoire d Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony followed. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence the Reserve Bank was nationalized on 1st January 1949 under the RBI Act 1948 and given broader powers. Before 1969, State Bank of India (SBI) was the only public sector bank in India. Under the first phase of nationalization of banks, it was nationalized in 1955 under the SBI Act of 1955. Phase II (1969- 1991) Nationalization, Regularization and Growth:After India's independence, the Imperial Bank of India became the State Bank of India in 1955. The second phase of nationalization of banks took place in 1969. Fourteen banks were nationalized in this year by the then Prime Minister of India Mrs. Indira Gandhi. In the year 1980, six more banks were nationalized with deposits over 200 crores. The major objective behind nationalization was to spread banking net work in the rural areas and make available cheap finance to Indian farmers. Until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. Phase III (1991 onwards) Liberalization and its Aftermath:Today, Indian banking sector is mature with banks having strong and transparent balance sheets. The major growth drivers are increase in retail credit demand, proliferation of ATMs and debit-cards, decreasing NPAs due to securitization, improved macroeconomic

conditions, diversification, interest rates, regulatory and policy changes (e.g. amendments to the Banking Regulation Act). Certain trends like growing competition, product innovation and branding, focus on strengthening risk management systems, emphasis on technology have emerged in the recent past. Larger banks would have a relatively advantages, hence recently the Union Cabinet on 15-02-2017 approved the merger of State Bank of India with five of its associate banks including State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, and State Bank of Travancore. The merger is likely to result in recurring savings, estimated at more than Rs 1,000 crore in the first year, through a combination of enhanced operational efficiency and reduced cost of funds. Existing customers of subsidiary banks will benefit from access to SBI’s global network. There are currently 27 public sector banks in India out of which 19 are nationalized banks and 6 are SBI and its associate banks, and rest two are IDBI Bank and Bharatiya Mahila Bank, which are categorised as other public sector banks, 23 private sector banks and 46 foreign banks with 325 branches (as on 31st Dec. 2015), 61 regional rural banks (RRBs) and more than 90,000 credit cooperatives. Needs and Importance:The banking sector was always deemed to be one of the most vital sectors for the economy to be able to function. Its importance as the “lifeblood” of economic activity, in collecting deposits and providing credits to states and people, households and businesses is undisputable. In all economic systems, banks have the leading role in planning and implementing financial policy. The difference lies with prioritizing goals and their way of achievement. Based on the neo-liberal model, achieving greater profits by using all means is an end in itself, while in the socialistic systems bank operations also aim at improving economy in general and at satisfying social needs. The financial crisis of 2008, and the way the governments chose to save the banks by laying the burden on taxpayer shoulders while exercising austerity policies, triggered a cycle of discussion over many crucial issues. One of the basic questions was bank ownership, especially since banks were recapitalized using state money. The Indian leaders and institutional bodies have been promoting the idea of total privatization of the production means and state owned enterprises, among which the bank sector, especially in the countries under memorandum obligations, because, as they claim, the state cannot be a businessman and privatization will contribute in reducing the national debt. There is however a strong opposition claiming that state owned enterprises – particularly those whose character is monopolistic – and among these the banks that were recapitalized using taxpayer money, must remain under state control because that is the only way for the economy to really recover, and for the social interest to be placed over the pursuit of profitability.

In the following lines I will try to prove that there is indeed need for at least one state bank, especially in the current demanding environment, and I will address the creation of a proper institutional framework to avoid phenomena similar to those of the recent past. THE NECESSITY OF A PUBLIC BANK There could only be one answer to the question of what should happen to the banks that have been recapitalized with tax payer’s money: they should be placed under state control. Banks were under state ownership and control in Sweden during the 1990's, while bank shares came to the hands of the state also in the USA, England, Spain, France, Belgium, Germany, and other countries. A state must have a say on whether or not banks should be under its ownership; it should not be forced into selling its banks by foreign factors. Government should base their decisions on the interests of their economy and society, rather than obeying the neo-liberal directions of the Commission officials or the leaders of the powerful countries. Let it be noted that the powerful countries chose for themselves different policies than those they impose, especially when it comes to reducing social expenses, controlling banks and other state enterprises, labour market, taxation, etc. But what the experience from managing problems during a crisis such as the one we live for the last four years in Greece has show, is that there must be at least one public bank, and much more so, a very well organized and capital-strong bank. Greece and other countries with similar banking problems have been engaged in serious public debate on finding alternative tools to fund economy in order to restore its positive growth rate. However, as the world experience and respective literature have shown, only 25% of the economic recovery is credit-less. Moreover, it has been proven that without adequate bank participation, growth's momentum will decrease after the first three years. In today’s uncertain situation, banks choose to deleverage balance sheets and manage bad loans over offering new loans, which results in less liquidity for the real economy, which, in its turn has serious economic and social effects: businesses keep closing, private citizens fall bankrupt, unemployment increases and social problems intensify Instead of wishing for and prompting the domestic banks or supra-national organizations such as the ECB and the Indian Bank etc. to offer more grants, the solution bears only one name: Public bank. ADVANTAGES OF BANKS:SAFETY OF PUBLIC WEALTH:Before the introduction of the modernized banking system, people used to save their money in hard cash. They stored this cash in lockers, underground, with the grains, etc. There were so many instances when the money got stolen, eaten by the rats or simply rot through

the years. However, the modern banking system completely eliminated the need to store hard cash. It actually helps save a huge proportion of public wealth that used to get spoiled in storage. AVAILABILITY OF CHEAP LOANS:Before modern banks were established, people would borrow money from local money lenders, landlords, merchants or other wealthy individuals. These loans were given at exorbitant interest rates that most people couldn’t afford to pay, in the process the borrower would always remain in debt. It was a vicious cycle. Modern banks started providing cheaper loans to the underprivileged section of the society, breaking the whole expensive loans system. PROPELLANT OF ECONOMY:Banks create money with a system called credit creation. With the help of credit creation, banks can lend a lot more money than the deposits that it holds. When banks lend this money to agriculture, industries, small businesses, and service providers, they are actually helping the economy grow exponentially. This, in turn, creates employment and spending power. Overall this one function of the bank is so powerful that the entire economy of any country relies on it. ECONOMIES OF LARGE SCALE:An extremely important benefit of any bank is its deep and wide reach through the branch banking system and the benefits of large scale operations. The wider the bank can reach the better services it can provide. Now a day’s banks provide services of net banking, card payments, ATM’s, etc. at even the most far-fetched and backward areas. Due to these large scale operations, the services have become extremely cheap, or sometimes even free. DEVELOPMENT IN RURAL AREAS:Banks aid rural development in more than one way. Firstly, the government makes it mandatory for the banks to lend to specialized sectors such as agriculture, rural infrastructure, etc. This leads to the development of modern infrastructure and methods in rural areas, thereby bringing in growth. Secondly, with the banks opening their branches in the backward areas, the rural population has benefits of modern bank facilities such as checkin accounts, ATM’s, locker facility, etc. Furthermore, when a new bank branch opens in a village, it needs facilities such as 24-hour electricity supply, internet connection, new staff etc. This creates employment and the villagers can also benefit from facilities of electricity and internet.

GLOBAL REACH:Many banks operate at the multinational level, this has helped people and businesses in a way that was not possible before the establishment of modern banks. Multinational banks aids in remittance of cash, exchanging one currency for another; aids in export by transferring

documents and payments; lend money to government, institutions and other world organizations. The reach of the banks is unlimited and it has helped in making the world a global village. Though there are many benefits of the modern banks, it comes with its fair share of flaws. Let’s discuss the disadvantages of banks to understand it better. DISADVANTAGES OF BANKS:CHANCES OF BANK GOING BANKRUPT:The world economy goes through turbulent times every few years. Events such as great depression of 1929, World War I & II, dot com bubble of 2000, or great recession of 2008, etc. expose banks to unnatural risks. During delicate periods, if all the people decide to withdraw their money from the bank, all at once, the bank will become bankrupt. Due to the function of credit creation, banks never have enough money to pay all its customers at the same time. People, without a doubt, will lose their money if the bank goes bankrupt. RISK OF FRAUD AND ROBBERIES:The rise in internet banking has given rise in cybercrime as well. Now more people are exposed to the risk of credit card thefts, stolen passwords, net banking frauds, etc. There have been robberies where robbers have stolen millions of dollars through the internet, without entering the bank premises physically. With the rise in internet banking, there will be a more innovative way for conmen and robbers to cheat people. This leaves the public vulnerable. This also increases the expenses that banks have to incur to safeguard their systems, which are eventually charged from the customers. RISK OF PUBLIC DEBT:This is not the risk of the bank per se, but this is the risk that people take on themselves while dealing with a bank. Say a person is in the habit of maxing out his credit card every month and repays the bare minimum then he will spiral into debt very fast. The habit of borrowing more than a person can afford to repay is actually a personal bad habit, however, the easy lending policies of banks add fuel to the fire. This can be damaging to people’s personal finances. It even affects businesses that take term loans and working capital loans from the banks and cannot repay it. Comparatively fewer businesses are affected by debt epidemic, but it still exists. This brings us to the conclusion that modern banks have benefited society in many ways, and its drawbacks are such that can be easily overcome by proper policies and due diligence efforts. Thus overall the rise of banks has been a blessing for the economy and the society. Types of Banks: In 1935, The State Bank of India Act, was passed, accordingly, The Imperial Bank of India‘ was nationalized and State Bank of India emerged with the objective of extension of banking facilities on a large scale, specifically rural and semi – urban area and for various of the public purposes. In 1969,fourteen major Indian Commercial Banks were nationalized and in 1980,

six more were added on to constitute the public sector banks. Commercial Banks in India are classified in Scheduled Bank and Non Scheduled Banks. Scheduled Banks are including nationalized Bank, SBI and its subsidiaries, private sector banks and foreign banks. Non Scheduled Banks are those included in the second Scheduled of the RBI Act, 1934.Scheduled Banks The second scheduled of RBI act, create a list of banks which are described as ―Scheduled Banks In the terms of section 42 (6) of RBI act,1934, the required amount is only Rs. 5 Lakh. The Scheduled Banks enjoy several privileges. It means that scheduled banks carries safety and prestige value compared to non scheduled banks. It is entailed to receive refinance facility as applicable. Nationalized Banks The nationalized banks include 14 banks nationalized on 19th July,1969 and the 6 more nationalized on 15th April, 1980. They are also scheduled banks, after this nationalization the governments try to implement various welfare schemes. Non Scheduled Banks The commercial banks not included in the 2nd schedule of the RBI actare known as non scheduled banks. They are not entitled to facilities like refinance and rediscounting of bills etc, from RBI. They are engaged in lending money discounting and collection bills and various agency services. They insist higher security for loans. 24 Old Private Bank These banks all registered under Companies Act, 1956. Basic difference between Co-operative bank and Private Banks is its aim. Co-operative banks work for its member and private banks are work for own profit. New Private Banks These banks lead the market of Indian banking business in very short period because of its variety of services and approach to handle customer and also because of long working hours and speed of services. This is also registered under the Company Act 1956. Between old and new private banks there is wide difference. Foreign Banks Foreign Banks mean multi-countries bank. In case of Indian foreign banks are such banks which open its branch office in India and their head office are outside of India. E.g. HSBC Bank, City Bank, Standard Chartered Bank etc. Co-operative Banks Co-operative Banks another component of the Indian bank with the enactment of the Co-operative Credit Societies were sated owing to the increasing demand of Co-operative Credit, a new Act of the 1994, which provide for the increasing demand of Co-operative Central banks by a union of primary credit societies or by a union of primary credit socialites and individuals. Features of banking in India:BANKING Sector plays an important role in every country for there economic growth as well as currency factor. Majority Development for a country depends on the banking sector as banks maintain the competition between the currency of many developed and developing countries and there work is always attached directly with people as they store their hard core money in there hands for saving as well as they borrow money from banks which are known as LOAN. This Scheme helps people building there HOMES & business As well as there general requirement like CARs, LCDs, home decoration or maintenance Etc. DEALING IN MONEY:All banks basically deal with money as they are financial institute where we do the money exchanges we will either gave or deposit money in banks or will lend/borrow money from banks for our requirement as per we need.

ACCEPTANCE OF MONEY DEPOSITS:All banks always work for there consumer satisfaction, as a result, they accept money from all their customers in a way there they also gave an Interest on deposit with the duration passed to money in the bank. Banks deposit money from peoples & after that, the protection of money is the responsibility of banks any misfortune happens to the consumer’s money will be returned by banks to the customer within a given period of time. PAYMENT AND WITHDRAWS:A person who has deposit their money into a bank can able to withdraw it at any time of instance. A customer can also able to easy payment & withdraw their money with the facilities of ATM, DRAFTS, MONEY ORDERS, CHEQUES etc. INDIVIDUAL OR COMPANIES:Bank can be of any type it can be a company or firm or also a person who is involved in the business of money. This is also how banks are defined. VARIOUS BRANCHES:A bank can also have multiple branches for the facility of there customers as every person cannot be able to go to the main branch of the Bank so banks further grow there own branches so that they can reach to each n every person. FUNCTIONS INCREASING:BANKS always believe in developing of facilities for the customers so that they always increase there functions for working like developing latest ATM machines for the transactions of money and also net banking by which will be able to buy & sell any item from the sitting in our comfort zone. BUSINESS IN BANKING:BANKS do the business of money without any subsidiary business. Their only responsibility is to satisfy their customers. this is also how banks define as they do the business of money interchanging from 1 hand to other. IDENTIFICATION:Each bank has a unique name but having BANK name as common in all. which identifies the bank’s existence. people deals with different banks having different names but bank word in common in all of them. FACILITY OF ADVANCE:BANKS ALSO LED/GAVE money to the people in a form of LOAN with a minimum amount of interest. people which are not able to full fill their requirements at an instance of time which required a large amount of money at that time banks lend money to them so that they full fill their requirements and returns back in small installment which are known as EMIs.

Function of Reserve Bank of India: As a central bank, the Reserve Bank has significant powers and duties to perform. For smooth and speedy progress of the Indian Financial System, it has to perform some important tasks. Among others it includes maintaining monetary and financial stability, to develop and maintain stable payment system, to promote and develop financial infrastructure and to regulate or control the financial institutions. [A] Traditional Function ; Traditional functions are those functions which every central bank of each nation performs all over the world. Basically these functions are in line with the objectives with which the bank is set up. It includes fundamental functions of the Central Bank. They comprise the following tasks Issue of the Currency Note:The RBI has the sole right or authority or monopoly of issuing currency notes except one rupee note and coins of smaller denomination. These currency notes are legal tender issued by the RBI. Currently it is in denominations of Rs. 2, 5, 10, 20, 50, 100, 500, and 1,000. The RBI has powers not only to issue and withdraw but even to exchange these currency notes for other denominations. It issues these notes against the security of gold bullion, foreign securities, rupee coins, exchange bills and promissory notes and government of India bonds. Banker to the Banks:The RBI being an apex monitory institution has obligatory powers to guide, help and direct other commercial banks in the country. The RBI can control the volumes of banks reserves and allow other banks to create credit in that proportion. Every commercial bank has to maintain a part of their reserves with its parent's viz. the RBI. Similarly in need or in urgency these banks approach the RBI for fund. Thus it is called as the lender of the last resort. Banker to the Government:The RBI being the apex monitory body has to work as an agent of the central and state governments. It performs various banking function such as to accept deposits, taxes and make payments on behalf of the government. It works as a representative of the government even at the international level. It maintains government accounts, provides financial advice to the government. It manages government public debts and maintains foreign exchange reserves on behalf of the government. It provides overdraft facility to the government when it faces financial crunch. Exchange Rate Management:It is an essential function of the RBI. In order to maintain stability in the external value of rupee, it has to prepare domestic policies in that direction. Also it needs to prepare and implement the foreign exchange rate policy which will help in attaining the exchange rate stability. In order to maintain the exchange rate stability it has to bring demand and supply of the foreign currency (U.S Dollar) close to each other.

Credit Control Function:Commercial bank in the country creates credit according to the demand in the economy. But if this credit creation is unchecked or unregulated then it leads the economy into inflationary cycles. On the other credit creation is below the required limit then it harms the growth of the economy. As a central bank of the nation the RBI has to look for growth with price stability. Supervisory Function:The RBI has been endowed with vast powers for supervising the banking system in the country. It has powers to issue license for setting up new banks, to open new branches, to decide reserves, to inspect functioning of commercial banks in India and abroad, and to guide and direct the commercial banks in India.

[B] Developmental Function ; Along with the routine traditional functions, central banks especially in the developing country like India have to perform numerous functions. These functions are country specific functions and can change according to there quirements of that country. The RBI has been performing as a promoter of the financial system since its inception. Some of the major development functions of the RBI are maintained below. Development of the financial System; The financial system comprises the financial institutions, financial markets and financial instruments. The sound and efficient financial system isa precondition of the rapid economic development of the nation. The RBI has encouraged establishment of main banking and nonbanking institutions to cater to the credit requirements of diverse sectors of the economy. Development of Agriculture; In an agrarian economy like ours, the RBI has to provide special attention for the credit need of agriculture and allied activities. It has successfully rendered service in this direction by increasing the flow of credit to this sector. It has earlier the Agriculture Refinance and Development Corporation (ARDC) to look after the credit, National Bank for Agriculture and Rural Development (NABARD) and Regional Rural Banks (RRBs). Provision of Industrial Finance; Rapid industrial growth is the key to faster economic development. In this regard, the adequate and timely availability of credit to small, medium and large industry is very significant. In this regard the RBI has always been instrumental in setting up special financial institutions such as ICICI Ltd. IDBI,SIDBI and EXIM BANK etc. Provision of Training ; The RBI has always tried to provide essential training to the staff of the banking industry. The RBI has set up the bankers' training colleges at several places. National Institute of Bank

Management i.e NIBM, Bankers Staff College i.e BSC and College of Agriculture Banking i.e CAB are few to mention. Collection of Data; Being the apex monetary authority of the country, the RBI collects process and disseminates statistical data on several topics. It includes interest rate, inflation, savings and investments etc. This data proves to be quite useful for researchers and policy makers. Publication of the Reports; The Reserve Bank has its separate publication division. This division collects and publishes data on several sectors of the economy. The reports and bulletins are regularly published by the RBI. It includes RBI weekly reports, RBI Annual Report, Report on Trend and Progress of Commercial Banks India., etc. This information is made available to the public also atcheaper rates. Promotion of the Banking Habits; As an apex organization, the RBI always tries to promote the banking habits in the country. It institutionalizes savings and takes measures for an expansion of the banking network. It has set up many institutions such as the Deposit Insurance Corporation-1962, UTI-1964, IDBI1964, NABARD-1982,NHB-1988, etc. These organizations develop and promote banking habits among the people. During economic reforms it has taken many initiatives forencouraging and promoting banking in India. Promotion of Export through Re-Finance; The RBI always tries to encourage the facilities for providing finance for foreign trade especially exports from India. The Export-Import Bank of India(EXIM Bank India) and the Export Credit Guarantee Corporation of India(ECGC) are supported by refinancing their lending for export purpose. [C] Supervisory Function; The reserve bank also performs many supervisory functions. It has authority to regulate and administer the entire banking and financial system. Some of its supervisory funtions are given below. Granting Licenses to the Banks; The RBI grants license to banks for carrying its business. License is also given for opening extension counters, new branches, even to close downexisting branches. Bank Inspection ; The RBI grants license to banks working as per the directives and in aprudent manner without undue risk. In addition to this it can ask for periodical information from banks on various components of assets and liabilities.

Control over NBFIS; The Non-Bank Financial Institutions are not influenced by the working of a monitory policy. However RBI has a right to issue directives to the NBFIs from time to time regarding their functioning. Through periodic inspection, it can control the NBFIs. Implementation of the Deposit Insurance System; The RBI has set up the Deposit Insurance Guarantee Corporation in order to protect the deposits of small depositors. All bank deposits below Rs. One lakh are insured with this corporation. The RBI work to implement the Deposit Insurance Scheme in case of a bank failure. [D] Traditional Banking Functions: In very general terms, the traditional functions of a commercial bank can be classified under following main heads: Receiving of Money on Deposit :This is the most important function of banks, as it is largely by means of deposits that a bank prepares the basis for several other activities. The money power of a bank, by which it helps largely the business community and other customers, depends considerably upon the amounts it can borrow byway of deposits. The deposits of a bank can take the form of fixed, savings or current deposits. Lending of Money:This function is not only very important but is the chief source of profit for banks. By lending money banks place funds at the disposal of the borrower, in exchange for a promise of payment at a future date, enabling the borrowers to carry on their Business/productive activities and meet their other requirements. Banks thus, help their clients to meet their needs with the money lent to them and return the money with interest as per agreed terms. The advances of a bank can take the form of loans, cash, credits, bills purchase / discount facilities. Transferring Money From Place to Place:This function is also one of the important functions of banks. Banks allow the facilities of transfer of funds by issuing demand drafts, Telegraphic /Telephonic Transfers, Mail Transfer etc. Miscellaneous Functions:Safe custody of valuables, issue of various forms of credits e.g. letters of credit, traveller‘s cheques and furnishing guarantees on behalf of customers and providing fee based services are also important functions performed by banks. Functions of Commercial Banks:-

Acceptance of deposits:An important function of commercial banks is to attract deposit from the public. Those people who have cash account and want their safety; they deposit that amount of banks. Commercial banks accept deposits every class and source and take responsibility to repay the deposit in the same currency whenever they are demanded by depositors. Lending:Another function of commercial banks is to make loans and advance out of the deposit receive in various forms. Bank Apply the accumulated public deposits to productive uses by way of loans and advances, overdraft and cash credits against approved securities. Investments:Now-a-days commercial banks are also involved in Investment. Generally investment means long term and medium term investments. Importance of banking:Banks are one of the most important economic wing of any country. In this modern time, money and its necessity is very important. A developed financial system of the country ensures to attain development. A bank provides valuable services to a country. To attain development there should be a good developed financial system to support not only the economic but also the society. So, a bank plays a vital role in the socio economic matters of the country. Some of the important role of banks in the development of a country is briefly showing below. 1:- PROMOTE SAVING HABITS OF THE PEOPLE: Bank attracts depositors by introducing attractive deposit schemes and providing rewards or return in the form of interest. Banks provide different kinds of deposit schemes to its customers. It enable to create banking habits or saving habits among people. 2:- CAPITAL FORMATION AND PROMOTE INDUSTRY: Capital is one of the most important part of any business or industry. It is the life blood of business. Banks increase capital formation by collecting deposits from depositors and convert these deposits in to loans advances to industries. 3 :-SMOOTHING OF TRADE AND COMMERCE FUNCTIONS: In this modern era trade and commerce plays vital role between any countries. So, the money transaction should be user friendly. A bank helps its customers to sent funds to anywhere and receive funds from anywhere of the world. A well developed banking system provides various attractive services like mobile banking, internet banking, debit cards, credit cards etc. these kinds of services fast and smooth the transactions. So, bank helps to develop trade and commerce 4 GENERATE EMPLOYMENT OPPORTUNITY:

Since a bank promote industry and investment, they automatically generate employment opportunity. So, a bank enables an economy to generate employment opportunity. 5 SUPPORT AGRICULTURAL DEVELOPMENT: Agricultural sector is one of the integral part of any economy. Food self sufficiency is the major challenge and goal of any country. Bank promote agricultural sector by providing loans and advances with low rate of interest compared to other loans and advances schemes. 6 APPLYING OF MONITORY POLICY: Monitory policy is an important policy of any government. The major aim of monitory policy is to stabilize financial system of the country from the dangerous of inflation, deflation, crisis etc. The recent increase in repo rate to 6.5% is just an example of the same. 7 BALANCED DEVELOPMENT: Modern banks are spreading its operations throughout the world. We can see number of big banks like citi bank ,Baroda bank etc. It helps a country to spread banking activities in rural and semi urban areas. With the spread of banking operations around the country,bank helps to attain balanced development by promoting rural areas. It plays vital role in the socioeconomic development of the country. A developed banking system enables the country to attain balanced development without any special consideration of rich and poor, cities and rural areas etc. So in a developing country like India, banking sector holds a major responsibility towards stabilising the socio-economic conditions of the country. Chapter 2:-

The term job satisfaction has been conceptualized in many ways. Job satisfaction focuses on all the feelings that an individual has about his/her job. Some researcher believe that it is simply how content an individual is with his or her job and other believe that it is multidimensional psychological response to ones job. In this study Job means the total relationship between the individual employees and their employer and with the work for which he gets compensated. The term satisfaction refers to the simple feeling accompanying the attainment by an impulse of his/her objectives. Job satisfaction refers to the favorable with which employees view their work and the term Job satisfaction to the unfavourableness with which they take their work. Robert dictionary of Industrial defines job satisfaction as /those outward or inner manifestations which give the individuals a sense of accomplishment or enjoyment in the performance of his/her works.