introduction to bkg

8/2/2019 Introduction to Bkg

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ByV.N.KULKARNI

WELCOME TO

PRESENTATION ONBANKING SCENARIO


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Topics To be Covered Today

How banking has evolved in India

Features of Banking

Classification of Banks in India

Central bank of the country -Role &

Functions


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EVOLUTION BANKING


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Evolution

Commercial banking started in 2nd half of

19th century prior to this 3 banks -

Bank of Bengal-1809, Bank ofBombay1840,& Bank of Madras1843, set

up by British Govt.

All three amalgamated & called as ImperialBank of India in 1920

Reserve Bank Of India set up in 1935


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Second half of 19th century a number of Pvt

sector banks were establishedPunjab National Bank Ltd. in1895 ,Bank Of

India Ltd.. in 1906,Canara Bank Ltd.. in

1906Indian Bank Ltd.. in 1907, Bank ofBaroda Ltd.. in1908.etc

There was also growth of many small

Pvt.sector Banks by Merchants & Traders

Many such banks failed

This triggered for strengthening of banking

system


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A Banking regulator was born in 1935

The Reserve bank of India was established

A Central Bank Of the Country empoweredto -

Regulate,Issue directives, mergers ,

amalgamations etc


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BANKING COMPANY

The Banking Regulation Act 1949 defines abanking Co, as a company which transactsthebusiness of banking in India [

Section 5 ( c) ]


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BANKING

Section 5 ( b ) defines banking as -

accepting for the purpose of lending or

investment of deposits of money from thepublic,repayable on demand or otherwise

and withdrawable by cheque,draft ,order or

otherwise.


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FEATURES OF BANKING


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Essential features

Dealing in Money

Deposits must be withdrawable

Dealing with credit

Commercial in nature

Nature of agent


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CLASSIFICATION OFBANKS


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Imperial Bank emerged as SBI

State Bank of India Act -1955

Imperial Bank of India - nationalised

SBI emerged

State Bank Of India ( Subsidiary Banks )

Act passed - 1959

8 banks taken over by SBI


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Nationalisation of Banks

1969 - 14 major Commercial banks

nationalised

1980 - 6 more were added to constitutepublic sector banks

Now 19 PSBs excluding SBI & its 7

associate banks formerly calledsubsidiaries


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RRBs have

been merged

and now

there are 82

RRBs
http://en.wikipedia.org/wiki/Image:Scheduled_banking_structure_in_India.png


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RRBs

There are 82 RRBs with a

network of 15,475

branches.17 of which are

sponsored by SBI

As of now only 3 of the

RRBs are in the Red with

aggregate losses of mereRs 6 crores

ET 14-08-10


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Scheduled and non Scheduled banks

A scheduled bank should have paid up

capital & reserve as prescribed by RBI Act

RBI Act 1934 , as per sec42 ( 6 ) requiredamount is Rs 5 lakhs only

Presently to start a Bank min capital

required is Rs 100 croreThe 2nd schedule of RBI Act contains list

of Banks designated as Scheduled Banks.


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Non - Scheduled Banks

Commercial banks not included in the 2nd

schedule of RBI

For these banks facilities like rediscountingof bills ,refinance etc not available

Mainly engaged in lending,collecting of

bills and agency servicesGenerally insist on higher security for loans


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Structure of Banking Industry

Public Sector Banks, Pvt. sector

Banks,Foreign Banks

Regional Rural banksFinancial Institutions --NABARD,

SIDBI,IFCI.

Primary Urban co-op Banks,Dist central Co-op Banks,State co-op Banks,State Co-op

Agri& rural Dev Banks

Primary Agri Credit Soc..


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Capital Structure of Banks

20 out of 27 public sector banks raised capital frommarket

2

7.7

20

23.2

25

25

25

26.5

26.8

28.8

29

30.5

33.2

33.5

37.5

38.839.2

40.3

42.8

46.1

0 10 20 30 40 50

State Bank of Indore

State Bank of Mysore

Punjab National Bank

Bank of Maharashtra

UCO Bank

State Bank of Bikaner & Jaipur

State Bank of Travancore

Syndicate Bank

Canara Bank

Allahabad Bank

Dena Bank

Bank of India

Bank of Baroda

Oriental Bank of Commerce

Andhra Bank

Indian Overseas BankUnion Bank of India

State Bank of India

Corporation Bank

Vijaya Bank

(per cent)Share of Private Sector


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Top tenBanks by

ForeignHolding

DNA 12-08-10


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The Central Govt. has since takenover the stake in SBI.

After the RBI stake sale the Govt.

Of India holds 59.73 % in SBI


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Indian Banking Sector:

Overview 222 commercial banks in India (of which 96 RRBs) Operating with 68,681 branches (March 06)

RRBs have 14,494 branches in 525 districts

Nearly 70% of branches are in rural/semi-urban areas

Bulk of commercial bank finance is for short-termworking capital needs of industry, trade, agriculture &personal segment. Foray into project finance also.

Banks are supporting growth in the economy by

financing productive sectors CD Ratio increased to 72.5% against benchmark 60%.

Incremental CD Ratio of over 100% reflecting thestrong underlying credit momentum.


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Although there is

shift in pattern of

household savings

like MF,Equity,bonds,Small

savings etcBank

deposits still is a

favorite as 47.4%of household

savings is with

Banks

Source-

Economic Times

19th March 2007

24.423


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SourceEconomicTimes

9th April 2007

23.6

59.816.6 4.4

19.56.8


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5/8/2012 27Source Times of India 15- 01 2007


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All Scheduled Commercial Banks

Public Sector Banks 88.41 87.23 75.24 73.25 73.62

Private Sector Banks 11.33 10.76 19.42 20.24 16.95

Foreign Banks 0.26 2.01 5.44 6.51 9.43

ASCB Total Banks 100.00 100.00 100.00 100.00 100.00

Branches Staff Deposits Advances Net Profit

% Share in the Total


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Changing Market Share of

Banks (%)

Advances

2006

Advances

1995

Deposits 2006

Deposits 1995

6.5120.2473.25

7.536.8185.66

5.3419.4275.24

7.546.9585.51

Foreign

Banks

OSCBPublic

Sector


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Performance AnalysisBanking

Competition

Asset shares of public sectorbanks have fallen afterreforms and those of Indianprivate sector banks haveincreased

Public sector banks stilldominant accounting forthree-fourths of industry assets

In recent years, considerableincrease in the share of publicsector banks in the industry-

wide profit

Share in Assets

9.4 9.1 7.0

82.578.4

74.5

8.212.6

18.5

0.0

20.0

40.0

60.0

80.0

100.0

1995-96 2000-01 2002-03

Percent

Foreign Banks Private Sector Banks Public Sector Banks


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Co-op Banks

OF THE 40,000 centres covered by

banking services, scheduled

commercial banks (both private

and public sector) manage to cover

over 34,500 centres.

But there are close to 2,500

centres that are served only by

co-operative banks.

Co operative Banks in India are

registered under the Co-

operative Societies Act. Thecooperative bank is also

regulated by the RBI. They are

governed by the Banking

Regulations Act 1949 and

Banking Laws (Co-operative

Societies) Act, 1965.

ET19-03-08


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Indias Top ten banks

HDFC&CBOP merger is

biggest consolidation seen in

pvt sector in recent times.

It helps HDFC to augment br

network by 50%Larger networkhelps distribute more products

which in turn will add to fee

based income such asMutual

Funds,Insurance etc.The latter

afford as much as 30 %commission on premiums

DNA23-02-08

As on date PNB has over taken

ICICI Bank andis now No2 in the rank


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HT 21-06-10


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The worlds biggest banks

Tier-one capital, December 31st 2009, $bn

FE 03-07-10


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Source Economic Times 23-01-2007


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Banking Sectorafter reforms

13 years of economic and financial sector reforms havestrengthened the banking sector:

Widespread branch network, varied client base

Recapitalisation has bolstered bank balance sheets

Public confidence in PSBs

Risk averseness: limited exposure to risky sectors

Investment in retail branches in an earlier era has givenPSBs competitive advantage of access to stable, low costdeposits

But the large staff strength, age profile, Governmentregulations (on loss making branches, CVC) and slowpace of change in PSBs could be a hindrance to dynamic

growth in todays fast paced world.


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New Initiatives by PSBs

Technology savvy: SBGroup daily 11 lakh ATMtransactions amounting to Rs 140 crore per day

Specialised branches

New products targeted at specific groups

Change in structure, systems and procedures involvingquick turnaround time to meet world standards

Marketing orientation

Change in ambience

Recruitment of specialists

Tie-ups, sharing networks, and strategic alliances


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Product Innovation

Banks moving away from plain vanilla lending to

commerce and industry.

More options for customers: cash management,channel financing, foreign currency loans.

New innovative products being introduced and fee

based income increased to meet the challenges ahead.

Bancassurance and other products, outsourcing ofsome products, technology-based payment systems.

Product innovations and process re-engineering to

meet customer requirements, reduce cost, improve

efficiency.


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Banks deliver cash at your home

nowAT YOUR SERVICE

Banks could deliver

money against

cheques received at the

counter or

through other channels

Banks have been offering

these services

to corporate customers


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International Competitiveness

According to Moodys Investor Services:

Average gross bad loans as share of total loans: India(8.18%), Phillipines (15.05%), Thailand (13.08%),China(11.80%) and Malaysia (9.73%). Improvement in

asset quality.

Cost to Income ratio in India is 44.56% with banks ofonly three countries with better ratio:Singapore(44.15%), Taiwan (42.61%) and Hong Kong

(40.05%)


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CASA

ET 14-01-2010


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Technology in Banking

IT spend by banking and financial services industryin USA is 7% of the revenue as against around 1% byIndian Banks.

Shared ATM network to reduce costs, increase reach.

SBI: Branch networking (CBS), ATM network,Internet banking and other facilities introduced inshortest time frame (Hewlett Packard)

Cheque truncation system to change the speed ofbanking transactions

RTGS system running since 2004 and covers 15,000branches

Adoption of Technology to lead to businesstransformation and cost advantage in the long term.


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ATM Network

ET14-01-2010


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Though electronic

settlements of

Cash transactions

are picking up

bulk of the settlementstill are through

cheques

Source

Economic Times

17th March 2007


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Scenario Beyond 2009

Foreign Banks allowed to set up fully owned

subsidiaries

Foreign banks to be treated on par with Indian banksafter 2009to the extent appropriate

Competition to intensify

To achieve critical mass and long term profitability

consolidation will be the trend


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5/8/2012 47Source Economic Times 16 - 01 - 2007


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Source Economic Times 21st March 2007


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Break?


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CENTRAL BANK OF THECOUNTRY - THE RBI


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Functions of Reserve Bank of India

The Preamble of the Reserve Bankdescribes the basic functions as

'to regulate the issue of Bank notes andkeeping of reserves

with a view to securing monetary

stability in India and generally, to operate the currency and credit

system of the country to its advantage'.


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Role & Functions of Reserve Bank Of India

Traditional functions ------

Note issue

Banker to Govt.. of India

Advisor to Govt.

Banker to Banks

Custodian of Forex ReservesExchange Control

Publish statistical & other information

Reserve Bank Of India Act 1934


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Reserve Bank Of India Act 1934Guidelines for issue of currency notes

33. (1) The assets of the Issue Department shall consist

of gold coin,gold bullion, 3[foreign securities],rupee coinand rupee securities to such aggregate amount as is notless than the total of the liabilitiesof the IssueDepartment as hereinafter defined.

4[(2) The aggregate value of the gold coin, gold bullionand foreign securities held as assets and the aggregatevalue of the gold coin and gold bullion so held shall not atany time be less than two hundred crores of rupees andone hundred and fifteen crores of rupees, respectively.]

Short fall will be made up of Rupee Coins & Rupee Govt.

Securities


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E.T.04-08-07


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Repo,Reverse Repo & CRR rates

DNA 21-04-10

Present Rates Repo 5.75 % & Reverse Repo 4.50%


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Functions of RBI

Promotional Functions

Promotion of Banking Habits

Providing Refinance for Export PromotionPrescribing Min Statutory Requirements for

Banks

Facilities to Agriculture

Facilities to Small Scale Industries


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Functions of RBI

Supervisory Powers

Granting Licenses to Banks

Inspection & EnquiryAdministers Deposit Insurance Scheme

Periodic Review of working of commercial

Banks

Control over Non-Banking Financial

Companies


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In case of a bank failure there is protection for depositorsin the form of a Deposit Insurance Scheme (DIS) by

the Deposit Insurance and Credit Guarantee Corporation (DICGC)

The insurance scheme is binding on all banks

operating in India, who must pay the premium for this insurance,and no bank can voluntarily withdraw from it.

The DICGC insures principal and accumulated interest

up to a maximum amount of Rs 1 lakh.

In case of liquidation of your bank, the DICGC repays

every depositor the amount of their deposits, up to

the limit of Rs 1 lakh, within 2 months of the receipt of claim

by the concerned bank.

Safety of Bank Deposits


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Thank You

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