Evolution of banking

Origin of Banking

1. Babylonians developed banking systems

during 2000 B C
2. Credit delivery were prevalent in ancient
Greece and Rome
3. References are found in the old sanskrit
texts of Manu about Deposits,Pledges,loans
etc
 Categories of Banks
• Branch Banking
• Unit Banking
• Investment Banking
• Universal banking
• Merchant Banking
• Virtual Banking
Evolution of Banking –In India
• Presidency Banks
• Bank of Bengal -1809
• Bank of Bombay -1840
• Bank of Madras -1843
• Imperial Bank of India _1920
• Reserve Bank Of India _ 1935
• State Bank of India _ 1955
Evolution of Banking –In India
• Social control of Banks - 1968
• Nationalisation of 14 major banks -19th
July 1969
• Nationalisation of 6 Banks -15th April 1980
Functions of the Central Bank
• Monopoly of note issue
• Banker to the government
• Banker’s Banker and lender of the last
resort
• Monetary Control and managing public
debt
• Supervision of Banks and financial
Institutions
Functions of the Central Bank
• Management of Forex reserves and
exchange control authority
• Managing public debt
• Discretionary control of refinance and
rediscounting
 Monetary control by RBI
Purpose
• Controlling inflation
• Encouraging growth
• Financial stability
 Monetary control by RBI
Tools of monetary control
• Bank rate
• Cash reserve rate (CRR)
• Statutory liquidity ratio (SLR)
• Open market operations
• Selective credit control
• Moral suasion
 Exercises

• State Bank of India : Head office in Mumbai and

have 9000 branches spread throughout the
country
• Pune people’s co-operative bank, Pune, the only
branch of the bank has a deposit base of Rs 200
crores
• Goldman Sach arranges a foreign currency
sydicated loan of USD 500 million in acquisition
of a British steel co, by Tata Steel.
 Exercises
• Standard Chartered Bank, New Delhi
accepts foreign currency deposits,
arranges sydicated loans and external
commercial borrowings to corporates,
provides working capital finance to
industries, sells various insurance
products of Max Newyork, sells the
balanced fund of stanchart mutual fund
etc.
 Exercises
• Indbank merchant banking services,
Chennai manages the share issue of
Tamilnadu cements of Rs 120 crores, lead
managers.
• HDFC Bank provides faster transfer of
funds of Rs 5 lakhs from Pune to Jodhpur,
through RTGS ( real time gross settlement
system ).
 Exercises
• A minor approaches his Bank, along with
another minor to open a savings bank
account, jointly. Their ages are 14 and 12,
respectively. What should the Bank
manager do?
• As per Indian Contract Act, 1872, a
contract entered with a minor is void.
 Exercises
• A married woman opens a SB account
with Cosmos bank, Pune. An inadvertant
overdraft is allowed in the account.The
lady argues that the amount was
withdrawn to meet the household
expenses and hence should be recovered
from the husband, since she is a
homemaker only. Discuss the remedy
available to the banker.