General Awareness about Banking Sector
Banking:
The first bank of limited liability managed by Indians was Oudh Commercial Bank founded in 1881. Subsequently, Punjab National Bank was established in 1894. Swadeshi movement, which began in 1906, encouraged banks. Banking crisis during 1913-1917 and failure of 588 banks in various parts of the country during the decade ended 1949 underlined the need for regulating and controlling commercial banks. The Banking Companies Act was passed in February 1949, which was subsequently amended to read as Banking Regularisation Act, 1949. This Act provided the Banking system in India.
The largest bank- Imperial Bank of India was nationalised in 1955 and renamed as State Bank of India, followed by formation of its 7 Associate Bank in 1959. With a view to bringing commercial banks into the mainstream of economic development with definite social obligations and objectives, the Government of India issued an ordinance on 19 July 1969 acquiring ownership and Control of 14 major banks in the country. Six more commercial banks were nationalised from 15 April 1980.
As certain rigidities and weaknesses were found to have developed in the banking system during the late eighties, the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level Committee on the Financial System (CFS) was set up on 14 August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial systems. Based on the recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of the Banking System was introduced in 1992-93.
To review the record of implementation of financial system reforms recommended in 1991 by the Committee on Financial System and chart the path of reforms in the year ahead, a high-level Committee on Banking Sector Reforms, under the Chairmanship of Shri. M. Narasimham was constituted by the Government of India in December 1997. The Committee submitted its report in April 1998. Some of the recommendations of the Committee, on prudential norms, Capital Adequacy Ratio, classification of Government guaranteed advances, provisioning requirements on standard advances and more disclosures in the Balance Sheet of banks were accepted and implemented. Recent major initiatives undertaken for strengthening the financial sector in pursuance to the recommendations of the above Committee relate to guidelines to banks on Asset-Liability Management and integrated risk management systems, compliance with Accounting Standards, consolidated accounting and supervision, fine-tuning of prudential norms for income recognition, asset classification and provisioning for NPA's, etc., The guidelines on setting-up of Offshore Banking Units in
Special Economic Zones, Fair Practices Code for Lenders, Corporate Governance, Anti-Money Laundering measures, Know your Customer (KYC) norms, Corporate Debt Restructuring (CDR) derivatives, guidance notes on Credit Risk, Market Risk, Operational Risk, etc., are other important development introduced in the banking sector in recent years. RBI has also issued revised guidelines on migration to Basel II Framework on Capital Adequacy. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has facilitated NPS management by banks more effectively.
In 1993, in recognition of the need to introduced greater competition, new private sector banks were allowed to be set up. Licenses were issued to 10 banks which had satisfied the necessary regulatory requirements. Subsequently in 201, fresh guidelines for setting up new private sector were issued and two banks were issued license under those guidelines.
Reserve Bank of India:
The Reserve Bank if India (RBI) was established under the Reserve Bank of India Act, 1934 on 1 April 1935 and nationalised on 1 January 1949. The Bank is the sole authority for issue of currency in India other than one-rupee coins and subsidiary coins. As the agent of the Central Government, the Reserve Bank undertakes distribution of one-rupee coin as well as small coins issued by the Government of India. It acts as banker to the Central Government, and State Governments by virtue of agreements entered with them. It also handles the borrowing programme of the Central and State Governments. It formulates and administers monetary policy with a view to ensuring price stability while promoting growth in the real sector through proper deployment of credit. It plays an important role in maintaining and managing the country's foreign exchange reserves and ensures orderly conditions in the foreign exchange market. It also acts as an agent of the Government of the India in respect of India's membership of International Monetary Fund. It regulates and supervises commercial banks, Urban Co-operative Banks, Non-Banking Financial Companies (NBFCs) and select All Indian Financial Institutions. It also performs a Variety of development and promotional functions. Recently, it has taken a lot of measures/initiatives in promoting financial stability, financial inclusion and financial literacy in the country as a whole.
Composition of Banking System:
The Indian banking system consists of commercial banks both in public a private sector, Regional Rural Banks (RRBs) and corporative banks. As on June 30, 2009, Commercial Banking system in India consisted of 171 Scheduled Commercial Banks out of which 113 were in public sector, including 86 RRBs. The remaining 27 banks, other than RRBs, in the public sector consists of 19 nationalized banks, 7 banks in SBI group and IDBI Bank Ltd. Public sector banks (excluding RRBs) accounted for about 76.6 percent of the deposits of all scheduled commercial banks.
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Banking:
The first bank of limited liability managed by Indians was Oudh Commercial Bank founded in 1881. Subsequently, Punjab National Bank was established in 1894. Swadeshi movement, which began in 1906, encouraged banks. Banking crisis during 1913-1917 and failure of 588 banks in various parts of the country during the decade ended 1949 underlined the need for regulating and controlling commercial banks. The Banking Companies Act was passed in February 1949, which was subsequently amended to read as Banking Regularisation Act, 1949. This Act provided the Banking system in India.
The largest bank- Imperial Bank of India was nationalised in 1955 and renamed as State Bank of India, followed by formation of its 7 Associate Bank in 1959. With a view to bringing commercial banks into the mainstream of economic development with definite social obligations and objectives, the Government of India issued an ordinance on 19 July 1969 acquiring ownership and Control of 14 major banks in the country. Six more commercial banks were nationalised from 15 April 1980.
As certain rigidities and weaknesses were found to have developed in the banking system during the late eighties, the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level Committee on the Financial System (CFS) was set up on 14 August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial systems. Based on the recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of the Banking System was introduced in 1992-93.
To review the record of implementation of financial system reforms recommended in 1991 by the Committee on Financial System and chart the path of reforms in the year ahead, a high-level Committee on Banking Sector Reforms, under the Chairmanship of Shri. M. Narasimham was constituted by the Government of India in December 1997. The Committee submitted its report in April 1998. Some of the recommendations of the Committee, on prudential norms, Capital Adequacy Ratio, classification of Government guaranteed advances, provisioning requirements on standard advances and more disclosures in the Balance Sheet of banks were accepted and implemented. Recent major initiatives undertaken for strengthening the financial sector in pursuance to the recommendations of the above Committee relate to guidelines to banks on Asset-Liability Management and integrated risk management systems, compliance with Accounting Standards, consolidated accounting and supervision, fine-tuning of prudential norms for income recognition, asset classification and provisioning for NPA's, etc., The guidelines on setting-up of Offshore Banking Units in
Special Economic Zones, Fair Practices Code for Lenders, Corporate Governance, Anti-Money Laundering measures, Know your Customer (KYC) norms, Corporate Debt Restructuring (CDR) derivatives, guidance notes on Credit Risk, Market Risk, Operational Risk, etc., are other important development introduced in the banking sector in recent years. RBI has also issued revised guidelines on migration to Basel II Framework on Capital Adequacy. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has facilitated NPS management by banks more effectively.
In 1993, in recognition of the need to introduced greater competition, new private sector banks were allowed to be set up. Licenses were issued to 10 banks which had satisfied the necessary regulatory requirements. Subsequently in 201, fresh guidelines for setting up new private sector were issued and two banks were issued license under those guidelines.
Reserve Bank of India:The Reserve Bank if India (RBI) was established under the Reserve Bank of India Act, 1934 on 1 April 1935 and nationalised on 1 January 1949. The Bank is the sole authority for issue of currency in India other than one-rupee coins and subsidiary coins. As the agent of the Central Government, the Reserve Bank undertakes distribution of one-rupee coin as well as small coins issued by the Government of India. It acts as banker to the Central Government, and State Governments by virtue of agreements entered with them. It also handles the borrowing programme of the Central and State Governments. It formulates and administers monetary policy with a view to ensuring price stability while promoting growth in the real sector through proper deployment of credit. It plays an important role in maintaining and managing the country's foreign exchange reserves and ensures orderly conditions in the foreign exchange market. It also acts as an agent of the Government of the India in respect of India's membership of International Monetary Fund. It regulates and supervises commercial banks, Urban Co-operative Banks, Non-Banking Financial Companies (NBFCs) and select All Indian Financial Institutions. It also performs a Variety of development and promotional functions. Recently, it has taken a lot of measures/initiatives in promoting financial stability, financial inclusion and financial literacy in the country as a whole.
Composition of Banking System:The Indian banking system consists of commercial banks both in public a private sector, Regional Rural Banks (RRBs) and corporative banks. As on June 30, 2009, Commercial Banking system in India consisted of 171 Scheduled Commercial Banks out of which 113 were in public sector, including 86 RRBs. The remaining 27 banks, other than RRBs, in the public sector consists of 19 nationalized banks, 7 banks in SBI group and IDBI Bank Ltd. Public sector banks (excluding RRBs) accounted for about 76.6 percent of the deposits of all scheduled commercial banks.
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