INDIAN BANKING SYSTEM

Introduction
Need of the Banks
Structure of Indian Banking system
Functions of Bank
What is Bank ?

A bank is a financial institution that

provides banking and other financial
services to their customers such as
accepting deposits and providing
loans.
What is Banking system ?
A banking system also referred as a
system provided by the bank which
offers cash management services for
Indian Banking System customers,
reporting the transactions of their
accounts and portfolios, through out
the day.
Need of the Banks

To provide the security to the

savings of customers.
 To control the supply of money and
credit.
To set equal norms and conditions
(i.e. rate of interest, period of
lending etc.) to all types of
customers.
FUNCTIONS OF BANK
Primary Functions of Banks
Accepting Deposits

The bank collects deposits from the

public. These deposits can be of
different types, such as :-
 Saving Deposits
 Fixed Deposits
 Current Deposits
 Recurring Deposits
Saving Deposits
• This type of deposits encourages saving
habit among the public.
• The rate of interest is low.
• Withdrawals of deposits are allowed
subject to certain restrictions.
• This account is suitable to salary and
wage earners.
Fixed Deposits
• Lump sum amount is deposited at
one time for a specific period.
• Higher rate of interest is paid, which
varies with the period of deposit.
• Withdrawals are not allowed before
the expiry of the period.
Current Deposits

• This type of account is operated by

businessmen.
• Withdrawals are freely allowed.
• No interest is paid.
• The account holders can get the
benefit of overdraft facility.
Recurring Deposits

• This type of account is operated by

salaried persons and petty traders.
• A certain sum of money is
periodically deposited into the bank.
• Withdrawals are permitted only
after the expiry of certain period.
• A higher rate of interest is paid.
 Granting of Loans and Advances

The bank advances loans to the

business community and other
members of the public. The rate
charged is higher than what it pays on
deposits. The types of bank loans and
advances are :-
 Overdraft
 Cash Credits
 Loans
Secondary Functions of Banks
 Agency Functions

The bank acts as an agent of its

customers. The bank performs a
number of agency functions which
includes :-
 Transfer of Funds
 Collection of Cheques
 Periodic Payments
 Portfolio Management
 General Utility Functions

The bank also performs general utility

functions, such as :-
 Locker Facility
 Underwriting of Shares
 Dealing in Foreign Exchange
 Project Reports
 Social Welfare Programmes
STRUCTURE OF INDIAN
BANKING SYSTEM
RBI- Reserve Bank Of India
 Reserve Bank of India is the
Central Bank of our country. It was
established on 1 st April 1935
 RBI performs various
developmental and promotional
functions.
 It has given wide powers to
supervise and control the banking
structure.
Scheduled banks
 Banks that are included in the
second schedule of the Reserve
Bank of India Act,
o Such a bank becomes eligible for
debts/loans on bank rate from the
RBI
Non-scheduled banks

All banks which are not included in

the second section of the Reserve
Bank of India Act, 1934 are Non-
scheduled Banks
 Commercial Banks
 Commercial bank is an institution
that accepts deposit, makes
business loans and offer other
financial services to the customers

 These institutions run to make

profit.
Public Sector Banks:
 In Public Sector Banks the
majority stake is held by the
government.
 After the recent amalgamation of
smaller banks with larger banks,
there are 12 public sector banks in
India as of now.
 An example of Public Sector Bank
is State Bank of India.
Private Sector Banks

 Private Sector Banks are banks

where the major stakes in the
equity are owned by private
stakeholders or business houses.

 A few major private sector banks in

India are HDFC Bank, Kotak
Mahindra Bank, ICICI Bank etc.
Foreign Bank
 A Foreign Bank is a bank that has
its headquarters outside the country
but runs its offices as a private
entity at any other location outside
the country.
 An example of Foreign Bank in
India is Citi Bank.
Regional Rural Banks

 The aim of ensuring sufficient

institutional credit for agriculture
and other rural sectors.
 RRBs are owned jointly by the
Government of India, the State
Government and Sponsor Banks.
 An example of RRB in India is
Arunachal Pradesh Rural Bank.
Cooperative Bank
 A Cooperative Bank is a financial
entity that belongs to its members,
who are also the owners as well as
the customers of their bank.

 Cooperative banks are the primary

supporters of agricultural activities,
some small-scale industries and
self-employed workers.