Download - coml banks
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Commercial Banks
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Banks Credit creation depends on the excessreserves.
Excess reserves = actual reserves required
reserves. If reserves required ratio is 10%, banks can
create a loan of 9000 on 1000 deposits.
The total money supply in the economy is10000.
The Creation of Money
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Bank position deposits loans reserves
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Original bank 1000 900 1002nd bank 900 810 90
3d bank 810 729 81
4th Bank 729 656 72.9
5th Bank 656 590.49 65.61
6th Bank 590.49 531.44 59.057th Bank 531.44 478.30 53.14
8th Bank 478.30 430.47 47.80
9th Bank 430.47 387.42 43.05
10th Bank 387.42 348.68 38.04
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Sum 10,000 9,000 1,000
Process of credit creation
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Origin of commercial bank can be traced back in vedic
period( use of hundi)
Middle of 19th century Indigenous banking
First bank Bank of Hindustan
(1770)
Later we had Presidency Bank in Calcutta Bombay &
Madras
1919 Imperial Bank of India
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Growth and Structure of commercial bank
Importance of Indian commercial Banks in National Economy
YearYear Deposit/N.I.Deposit/N.I. Deposit /Deposit /
SavingSaving
Share inShare in
financialfinancial
assetasset
19511951--5656 1010 16.616.6
19601960--6161 1313 14.214.2
19751975--7676 2424 41.841.8
19801980--8181 35.935.9 45.845.8 73.873.8
19901990--9191 48.148.1 31.831.8 65.565.519941994--9595 5252 40.240.2 64.864.8
19951995--9696 44.8244.82 28.228.2 64.764.7
20012001--0202 61.561.5 37.8337.83 72.272.2
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Indian Banking system
RBI
Schedule BanksNon Scheduled Bank
State Coop. Commercial
Bank
BanksIndian Foreign
PSU Pvt. Sector
BankBanks
SBI & its
subsidaries
Other nationalized
bank
Regional rural
bank
Central Coop. bank
Bank and Primary Credit
Societies
Commercial
Bank
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Apart from usual function, foreign bank are now playing a special
role in shaping the attitude ,perceptions and policies of foreign
government, corporate, and other clients towards India
(a)Structuring and syndicating project finance for crucial sector
(b)Advising and introducing overseas companies in joint venture
and collaboration with Indian Companies
Helping to bring the FII and Indian companies(d) Managing and syndicating the euro issue of debt and equity
(e) Introducing new technology in data management and
information system
The Indian Banks include 27 PSU banks ,196 RRB,30 private
sector bank and 44 Foreign banks in 2001-02
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Liabilities of Banks
Demand deposit
Current deposit
Call deposit
Term deposit
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Banking Assets
Investment:
1.Cash in hand and balance with RBI
2.A
sset with banking system3.Investment in government and other approved
securities
4.Bank credit among these assets, and is
influence by the RBI policy, quantitatively, bankcredit and investment in government securities.
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Govt. of India securities
Other approved Securities
Non approved securities
Commercial Banks Investment
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Increase in National Income
Expansion of banking facilities in new area & for
new class of people Increase in banking habit
Increase in relative rate of return
Increase in deficit financing Increase in bank credit
Inflow of deposit by NRIs
Growth in substitutes
Factor affecting Composition of Bank
Deposit
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Banking Innovations
I) Retail Banking
II) Bank as authorized dealerIII) Customer service
IV) Lead Bank scheme
V) Service area approach
VI) Action plans
VII)Micro finance
VIII)Banking Advisory services
IX) Participation Certificate and inter bank deposit
X) Consortium approach
XI) Credit cardsXII)New technology in Banking
XIII)Local Area Banks
XIV)Asset Liability Management
XV)Other diversification in Banking