INTRODUCTION

Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company.

CONTD.

For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955.

ERA OF NATIONALISATION AND AFTER(1969 TO 1991)

The Indian banking scene underwent significant changes, during the period 1969 to 1990. The social control measures of not less than 51% of the directors of the board of a banking company had to consist of Persons with special knowledge or practical experiences in respect of accountancy,agriculture,rural economy, banking, cooperation,economics,finance,law and SSIs,were not considered adequate to achieve the desired social and economic objectives . The government of India,therefore on 19th july,1969 nationalised 14major indian commercial banks,by an ordinance,having deposit of rs 50 crore 7 above.

OBJCTIVES OF NATIONALISATION

An institute such as the banking system, which touches and should touch lives of millions, has to be inspired by a larger social purpose and has to subserve national priorities and objectives , such as

rapid growth in agriculture , small industry and exports, raising employments levels, encouragement of new entrepreneur And the development of the backward areas

THE BANK NATIONALISED IN 1969 AND 1980

Central bank of India Bank of India Punjab national bank Bank of baroda United commercial bank Dena bank Syndicate bank Union bank of india

CONTD

Allahabad bank Indian overseas bank Indian bank Bank of Maharashtra bank (nationalized in 1980) Andhra bank Corporation bank Oriented bank of commerce Punjab and sindh bank Vijaya bank New bank of India(merged with PNB in 1990)

ERA OF ECONOMIC REFORMS(1992-2002)

In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.

CONTD

The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just demanded more from their banks but also received more. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sale

BEYOND 2002 TO TILL DATE

The commercial banking sector plays an important role in the mobilization of deposits and disbursement of credit to various sector of the economy. Technology,deregulation,disintermediation and securitization are the major forces that are producing ripples in the industry. Supported by the latest technology going for core banking, solution banks are working to identify new business niches ,to develop customized services ,to implement innovative strategies and to capture mew market opportunities.

CONTD

In march 2005 and again in march 2007 the finance minister ,put forth a new agenda for seven leading nationalized banks, asking them to draw up proposals for consolation through the acquisition of smaller government banks or other private banks. The seven leading nationalized banks that have assets ,worth more than rs 50,000 crore each are SBI,Canara Bank,Bank Of India,Bank Of Baroda,Union bank Of India and Central Bank OF India. Another change in the RBI policy is in respect of branches and ATM openings on annual basis. The opening will be given through a consultative and interactive procss and would be valid for one year from the date of communication.

ADOPTION OF BANKING TECHNOLOGY

The IT revolution had a great impact in the Indian banking system. The use of computers had led to introduction of online banking in India. The use of the modern innovation and computerisation of the banking sector of India has increased many fold after the economic liberalisation of 1991 as the country's banking sector has been exposed to the world's market. The Indian banks were finding it difficult to compete with the international banks in terms of the customer service without the use of the information technology and computers. The RBI in 1984 formed Committee on Mechanisation in the Banking Industry (1984) whose chairman was Dr C Rangarajan, Deputy Governor, Reserve Bank of India. The major recommendations of this committee was introducing MICR Technology in all the banks in the metropolis in India. This provided use of standardized cheque forms and encoders.

CONTD

In 1988, the RBI set up Committee on Computerisation in Banks (1988) headed by Dr. C.R. Rangarajan which emphasized that settlement operation must be computerized in the clearing houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and Thiruvananthapuram.It further stated that there should be National Clearing of inter-city cheques at Kolkata,Mumbai,Delhi,Chennai and MICR should be made Operational.It also focused on computerisation of branches and increasing connectivity among branches through computers. It also suggested modalities for implementing online banking. The committee submitted its reports in 1989 and computerisation began form 1993 with the settlement between IBA and bank employees' association. In 1994, Committee on Technology Issues relating to Payments System, Cheque Clearing and Securities Settlement in the Banking Industry (1994) was set up with chairman Shri WS Saraf, Executive Director, Reserve Bank of India. It emphasized on Electronic Funds Transfer (EFT) system, with the BANKNET

CONTD

communications network as its carrier. It also said that MICR clearing should be set up in all branches of all banks with more than 100 branches. Committee for proposing Legislation On Electronic Funds Transfer and other Electronic Payments (1995)emphasized on EFT system. Electronic banking refers to DOING BANKING by using technologies like computers, internet and networking,MICR,EFT so as to increase efficiency, quick service, productivity and transparency in the transaction. Apart from the above mentioned innovations the banks have been selling the third party products like Mutual Funds, insurances to its clients.Total numbers of ATMs installed in India by various banks as on end March 2005 is 17,642.[10]The New Private Sector Banks in India is having the largest numbers of ATMs which is fol off site ATM is highest for the SBI and its subsidiaries and then it is followed by New Private Banks, Nationalised banks and Foreign banks. While on site is highest for the Nationalised banks of India.

SELECTED DATA ON COMMERCIAL BANKS

Period ending Number of branches Population served by branch Deposits(rs crore) Credit(rs crore) Non performing asssets of public sector bank(rs crore) Capital-to-risk weigted asset ratio(%) March 07 73836 16000 3192141(march 08)3308225(july4-08) 2348493(march 08)2408579(july4-08) 38602 12.3

CLASSIFICATION OF BANKS

COMMERCIAL BANKS

SCHEDULED

SBI(1) ASSOCIATE BANKS(5) REGIONAL RURAL BANKS(86) URBAN COOPERATIVE BANKS(31 STATE COP.) LOCAL AREA BANKS(4) NATIONALISED BANKS(19+IDBI BANKS) PRIVATE BANKS(22) FOREIGN BANKS(31)

NON-SCHEDULED(4)