MODERNIZATION IN BANKING SCNERIO

BACHELOR OF COMMERCE
BANKING & INSURANCE
SEMESTER V
(2015-2016)
SUBMITTED BY:
ADSULE SEEMA GANESH
ROLL NO: 41
GUIDE NAME
MISS. DEVKI SHETTY
SHREE NARAYANA GURU
COLLEGE OF ARTS &COMMERCE

MODERNIZATION IN BANKING SCNERIO

BACHELOR OF COMMERCE
BANKING & INSURANCE
SEMESTER V

Submitted
In Partial Fulfilment of the requirements
For the Award of the Degree of
Bachelor of Commerce Banking & Insurance
By
ADSULE SEEMA GANESH
ROLL NO

RESEARCH DESIGN
The purpose of the study is to understand the facilities provided by and the innovative
techniques used by banks which benefit the customer and save their precious time.
OBJECTIVE OF THE STUDY
1. To understand differences between traditional banking and modern banking.
2. To understand new banking product and services.
3. To know that how modern banking services saves our time.
4. To predict the future of modern banking.
RESEARCH ETHOLOGY
Data Collection :
PRIMARY DATA
Primary visit to a bank:
State Bank of India
Janakalyan Sahakari Bank Limited

SECONDARY DATA
Websites
Books

CONTENT
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CHAPTER

Introduction
Banking System In India
Modernization In Banking Sector
Various Schemes In Banking Sector
Banking Tecnologies
Indian Banking Industry 2015
Visiting Report Of SBI
Visiting Report Of Janakalyan Sahakari Bank
Limited

PAGE
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A BRIEF INTRODUCTION
A bank is a financial institution that provides banking and other financial services to
their customers. A bank is generally understood as an institution which provides
fundamental banking services such as accepting deposits and providing loans. There
are also non-banking institutions that provide certain banking services without
meeting the legal definition of the bank. Banks are a subset of the financial services
industry.
A banking system also referred as a system provided by the bank which offers cash
management services for customers, reporting the transactions of their accounts and
portfolios, throughout the day. The banking system in India should not only be hassle
free but it should be able to meet the new challenges posed by the technology and any
other external and internal factors. For the past three decades, Indias banking system
has several outstanding achievements to its credit. The Banks are the main participants
of the financial system in India. The Banking sector offers several facilities and
opportunities to their customers. All the banks safeguards the money and valuables
and provide Loans, credit, and payment services, such as checking accounts, money
orders, and cashiers cheques. The banks also offer investment and insurance products.
As a variety of models for cooperation and integration among finance industries have
emerged, some of the traditional distinctions between banks, insurance companies,
and securities firms have diminished. In spite of these changes, banks continue to
maintain and perform their primary role accepting deposits and lending funds form
these deposits.

Need Of The Banks

Before the establishment of banks, the financial activities were handled by money
lenders and individuals. At that time the interest relates were very high. Again there
were no security of public savings and no uniformity regarding loans. So as to
overcome such problems the organised banking sector was established, which was
fully regulated by the Government. The organised banking sector works within the
financial system to provide loans, accept deposits and provide other services to their
customers.
The following Functions of the bank explain the need of the bank and its importance:
To provide the security to the savings of customers.
To control the supply of money and credit.
To avoid focus of financial powers in the hands of new individuals and
institutions.
To encourage public confidence in the working of the financial system,
increase savings speedily and efficiently.
To set equal norms and conditions to all type of customers.

DEVELOPMENT OF BANKING IN INDIA

Banking in India is indeed as old as Himalayas. But, the banking functio0ns became
an effective force only after the Decade of 20t Century. To understand the history of
modern banking in India, one has to refer to the English Agency Houses established
by East India Company. These agency houses, were basically trading firms and
carrying on banking business as part of their main business. Because of this dual
functions and lack of their own capital they failed and vanished from the scene during
the third of 18th century.
The East India Company laid the foundations for modern banking in the first half of
the 19th century with the establishment of the following three banks:
Bank of Bangal in 1809
Bank of Bombay in 1840
Bank of Madras in 1843
These banks are also known as Presidency Banks and they functioned well as
independent units. During the last part of 19th century and early phase of 20th century,
the Swedish Movement introduced the establishment of a number of banks with
India Management. For example, Punjab National Bank Limited in 1895, The Bank
og India Limited in 1906, The Canara Bank in 1906, The Indian Bank in 1907, The
Bank of Baroda in 1908, The Central Bank of India Limited in 1911 and many other
banks were established in the same line. But the most of the weak banks went
bankrupts due to wrong policy decisions taken by the management sand due to severe
banking crises during 1913-1918. The period of World War I. However, the stronger
and well managed banks like those mentioned above survive the crises. In 1920, the
Imperial Bank of India Act was passed for incorporate the three Presidency Banks.
As such, the Imperial Bank of India Act was established in 1921. It was given
power to hold Government funds and manage the Public Debt. The branches of the
bank were functioning as clearing houses. However, it was not authorised to issue
currency. In 1955, the State Bank of India act was passed. Accordingly the Imperial
Bank was nationalised and State Bank of India was emerged with the objective of
extension of banking facilities on a large scale, especially in the rural and semi-urban
areas and for various other sectors.
In 1959, the State Bank of India Act was passed by which the public sector banking
was furthered extended. The following banks were made the subsidiaries of State
Bank of India:
1. The State Bank of Bikaner
2. The State Bank of Jaipur
3. The State Bank of Indore
4. The State Bank of Mysore
5. The State Bank of Patiala

6. The State Bank of Hyderabad

7. The State Bank of Saurashtra
8. The State Bank of Trevancore

OBJECTIVE BEHIND NATIONALIZATION OF BANKS OF INDIA

The nationalisation of commercial banks took place with an aim to achieve
following major objectives:
Social welfare
It was the need of the hour to direct the funds for the needy and required sectors of the
Indian Economy. Sector such as agriculture, small and village industries were in need
of funds for their expansion and further economic development.
Controlling private monopolies:
Prior to nationalisation many banks were controlled by private business houses and
corporate families. It was necessary to check these monopolies in order to ensure a
smooth supply of credit to socially desirable sections.
Expansion of Banking:
In a large country like India the numbers of banks existing those days were certainly
inadequate. It was necessary to spread banking across the country. It could be done
through expanding banking network in the un-banked areas.
Priority Sector Lending:
In India, the agriculture sector and its allied activities were the largest contributor to
the national income. Thus these were labelled as the priority sectors. But
unfortunately they were deprived of their due share in the credit. Nationalisation was
urgently needed for catering funds to them.
Developing Banking Habits:
In India more than 70% population used to stay in rural areas. It was necessary to
develop the banking habit among such a large population.

Demerits/Limitations of Bank Nationalisation in India

Though the nationalisation of commercial banks was undertaken with tall objectives,
in many senses it failed in attaining them. In fact it converted many of the banking
institutions in the loss making entities. The reasons were obvious apathetic working,
lack of accountability, lack of profit motive, political interface, etc. Under this
backdrops it is necessary to have a critical look to the whole process of nationalisation
in the period after bank nationalisation.

The major limitations of the bank nationalisation in India are:Limited sources mobilized and allocated: The resources mobilized after the
nationalization is not sufficient if we consider the needs of the Indian Economy.
Sometimes the deposits mobilised are enough but the resource allocation is not as per
the expansions.
Inadequate Banking Facilities: Even though banks have spread across the country,
still many parts of the country are unbanked. Especially in the backward states such
as the Utter Pradesh, Madhya Pradesh, Chhattisgarh and north-eastern states of India.
Lower Efficiency and Profit: After nationalisation banks went in the Government
sector. Many times political forces pressured them. Banking was nit done on
professional and ethical grounds. It resulted into lower efficiency and poor
profitability of banks.
Increased Expenditure : Due to huge expansion in a branch network, large staff
administrative expenditure, trade union struggle, etc. Banks expenditure increased to
dangerous levels.
Political and Administrative Interference : Many public sector banks badly suffered
due to the political interference. It ultimately resulted in huge non-performing assets
(NPA) of these banks and inefficiency. These are several limitations faced by the
banks nationalisation in India. Apart from this there are certain other limitations as
well, such as weak infrastructure, poor competitiveness etc. But after Economic
Reform of 1991, the Indian Banking industry has entered in to the new horizons of
competitiveness, efficiency and productivity. It has made Indian banks more vibrant
and professional organisations, removing the bad days of bank nationalisation.

FUNCTIONS OF BANKS
Trough borrowings and lending the main function of banking, yet they are not only
function as commercial banks. Commercial banks are involved in diversified
activities and perform varieties of functions. The functions of a modern bank are
classified under the following heads:

The Functions of Banks are as follows: