Introduction to banking system

(brief history)
 Learning outcome
• Familiarity with Indian banking
• Origination of banking
• Exploring different phases of banking
 News
• https://bfsi.economictimes.indiatimes.com/ne
ws/banking/citi-icici-bank-lower-indias-
growth-projections-on-virus-surge/88808417
 Video
• https://www.youtube.com/watch?v=VksG_1r-
gH8
Transfer of money from those who save it to those who need it.

Banks are playing role of mediocre between people who save money and people
who need money
Money is transferred as per the need of the
person which include Total amount, Time,
Repayment conditions
 Do you have bank account?
• Yes
• No
 MCQs
What type of bank account you have?
A Saving account
B Current account
C Recurring account
D Fixed account
 How much do you save per annum?
A <10,000
B 10,000- 50,000 p.a
C 50,000-2,00,000 p.a
D 2,00,000-5,00,000 p.a
E More than 5,00,000 p.a
Why you have chosen this type of bank
account?
A Comfortable access
B Money multiplication and savings
C As guided by the concerned persons
 Learning outcomes
• Functions of Bank
 What is bank
• A financial institution whose primary activity is to
act as a payment agent for customers and to
borrow and lend agent for customers.

• An institution where one can place and borrow

money and take care of financial affairs

• In simple terms, a bank is an institution that

accepts various types of deposits and then
advances money in form of loans to people
requiring it.
 NEWS
• https://bfsi.economictimes.indiatimes.com/ne
ws/banking/sfbs-nii-to-improve-in-q4-but-
may-face-higher-credit-cost/88896621
 Live sites for functions of banks
• https://www.icicibank.com/

• https://www.onlinesbi.com/
 MCQ
• An institution where one can place and
borrow money and take care of_____
A financial affairs
B non-financial affairs
C both
D None
 Videos
• https://youtu.be/52uwiPT0eu8?t=36
 Learning outcome
• Main functions of bank
 Main Functions of Bank
• Acceptance of deposits and advancing of loans
• Agency functions
• Instructions for customers
• Undertake govt. payments
• Collections and payments on behalf of
customers
• Merchant banking and clearing services etc.
• Safety custody
 MCQ
• The main functions of Bank does not include
• 1. Acceptance of deposits and advancing of
loans
• 2. Agency functions
• 3. Instructions for customers
• 4. Foreign exchange direct dealings
 MCQ
• Which body is responsible to regulate the
functioning of all Banks in India?
• Government of India
• State Bank of India
• Reserve Bank of India
• Ministry of Finance
• Bank Unions
 Important link -RBI
• https://www.rbi.org.in/Scripts/Data_MSupply.
aspx
 What is your bank?
???????

• Why you have chosen this bank?

• How your bank is different from other banks?
• What type of relationship you have with your
bank?
 Banker?
• Employees working on behalf of the banking
organisation or bank

• Dealing with customer who demand banking

products and services

• Handling all issues and provides support to

the bank customers
 Customer?
• Any person, organisation or professionals who
is using banking products or availing banking
services is known as customer of the bank.
 ICICI Bank video
• https://www.youtube.com/watch?v=rYyVhLuT
uGA
Types of Banker Customer Relation
A. General Relationship
Debtor and creditor or Creditor and debtor

B. Special relationship
1.Trustee and beneficiary
2. Advisor and advisee
3. Principle and agent
4. Bailor and Bailee
5. Pledger and Pledgee or Pawner or Pawnee
6. Mortgager and Mortgagee
 MCQ
• Abhinav net income is Rs.2 Lakh per annum
out of which he deposited Rs.80,000 in Axis
bank term deposit plan. What type of relation
he has with his bank here
a. Debtor
b. Creditor
c. Both
d. None
 MCQ
• Abhinav net income is Rs.2 Lakh per annum
out of which he deposited Rs.80,000 in Axis
bank term deposit plan. What type of relation
he has with his bank here
a. Debtor
b. Creditor
c. Both
d. None
 MCQ
• Rohan’s income is Rs.10 Lakh per annum but
he took a personal loan of Rs. 2Lakh from ICICI
bank. What type of relation bank has with his
Rohan here
a. Debtor
b. Creditor
c. Both
d. None
 2. Advisor and advisee
• In case of investments in any type of products
like bank deposits, insurance or stock market
products, Banks plays role of an advisor to the
customer.

• The advise can be officially or unofficially

• Preferable professional are deputed for

advise.
 Test yourself
• What is my relationship with my bank?
• My bank provides me professional advice or
not?
• What other benefits i can take from my bank
services?
 Online links
• https://www.youtube.com/watch?v=E12kxsHx
Rr4
 Brief History- World banking
• Formal bank was established in 1157 named
Bank of Venice
• 1st public sector bank was established in 1336
in Barcelona, Florance.
• Bank of Amsterdam in 1609
• Bank of England 1694
 Brief History- Indian banking
• Bank of Hindustan, established in 1770 and
liquidated in 1829-32; and the General Bank
of India, established 1786 but failed in 1791.

• PNB was the 1st bank managed by Indians and

established in 1895.
 Evolution of banking in India
Phase I
Pre-Independence Stage – Before 1947

• The first bank of India was established in 1770 with the name of
Bank of Hindustan.

• Top three banks were merge during this phase – Bank of Bengal,
Bank of Bombay & Bank of Madras and came into being as Imperial
Bank, which was later taken over by SBI in 1955

• Some other banks were also established during this period like
Allahabad Bank 1865, Punjab National Bank 1894, Bank of India
1906, Bank of Baroda 1908, Central Bank of India 1911
 Phase II – 1947 to 1991

• Nationalization of 14 Banks took place in 1969

and 6 more banks nationalized in 1980 during this
period.

• Central bank of India was also nationalised during

this period on 1st January 1949.

• Regional Rural Banks were formed on 2nd

October 1975.
14 Banks nationalised in 1969 and 6 were
nationlised 1980
State Bank of India Bank of India
Allahabad Bank

Bank of Maharashtra Canara Bank Indian Overseas Bank

Punjab & Sind Bank

Punjab National Bank Syndicate Bank

Corporation Bank Andhra Bank UCO Bank

Union Bank of India

Bank of Baroda United Bank of India

Vijaya Bank Dena Bank Indian Bank

Oriental Bank of Commerce Central Bank of India

 Phase III – 1991 onwards
• Liberalized economic policies were in the year
1991 to develop banking

• This phase was of expansion, consolidation,

and increment in many ways in the banking
sector.

• RBI also gave license to 10 private entities

which include – ICICI, Axis Bank, HDFC, DCB,
Indusland Bank.
 Indian Banking System- Important
• First bank in India was Bank of Hindustan (1770)
• First Bank managed by Indians was Oudh Commercial Bank
• First Bank with Indian Capital was Punjab National Bank (Founder
of the Bank is Lala Lajpat Rai)
• First Foreign Bank in India is HSBC
• First bank to get ISO certificate is Canara Bank
• First Indian bank outside India is Bank of India
• First Bank to introduce ATM is HSBC (1987, Mumbai)
• First Bank to have a joint-stock public bank (Oldest) is Allahabad
Bank
• First Universal bank is ICICI (Industrial Credit and Investment
Corporation of India)
• First bank to introduce saving account is Presidency Bank (1833)
• First Bank to Introduce Cheque system is Bengal Bank (1833)
• First bank to give internet banking facility is ICICI
• First bank to sell mutual funds is State Bank of India
• First bank to issue credit cards is Central Bank of India
• First Digital Bank is Digibank
• First Rural Regional Bank (Grameen Bank) is Prathama
Bank (sponsored by Syndicate Bank)
• First bank to get ‘in principle’ banking license is IDFC and
Bandhan Bank
• First Bank to introduce merchant banking in India is Grind
lays bank
• First bank to introduce blockchain technology is ICICI
• First bank to introduce voice biometric is Citi Bank
• First bank to introduce robot in banking service is HDFC
• Which was the first bank to be established in
India?
• 1.Bank of Bharat
• 2. Indian National Bank
• 3. Central Bank
• 4. State Bank of India
• 5. Bank of Hindustan
• Answer: (5) Bank of Hindustan
 Self test questions
• What is Bank?
• What was the first bank in the world?
• Name the first bank established in India?
• How many banks were nationalised in 1969?
• How many phases of banking growth in India?
Any doubts

• ?
Indian Banking Structure
 Difference between Scheduled and
Non-scheduled banks
1. Scheduled banks follow the rules made by the RBI while Non-scheduled
banks do not follow the rules made by the RBI.
2. Scheduled banks are eligible for inclusion in the second schedule to the
Reserve Bank of India Act, 1934
a. The paid up capital and collected fund of the bank should not be less than
Rs. 5 lacs,
b. Any activity of the bank will not adversely affect the interests of the
depositors)
while Non-scheduled banks are not included in the second schedule.
3. Scheduled banks are allowed to borrow money from RBI for regular
banking purposes while Non-scheduled banks are not allowed.
4. Scheduled banks can become a member of clearing house while Non-
scheduled banks can't.
5. Scheduled banks and Non-scheduled banks both need to maintain the Cash
Reserve Ratio but Scheduled banks have to deposit this amount in the RBI
while Non-scheduled banks can deposit this amount with themselves.
 MCQ
Difference between Scheduled and Non-scheduled banks
does not include

A Scheduled banks follow the rules made by the RBI and

non-scheduled banks do not follow the rules made by
the RBI.
B Scheduled banks are allowed to borrow money from
RBI for regular banking purposes while Non-scheduled
banks are not allowed.
C Scheduled banks can not become a member of clearing
house while Non-scheduled banks can.
D None of the above
 MCQ
Difference between Scheduled and Non-scheduled banks
does not include

A Scheduled banks follow the rules made by the RBI and

non-scheduled banks do not follow the rules made by
the RBI.
B Scheduled banks are allowed to borrow money from
RBI for regular banking purposes while Non-scheduled
banks are not allowed.
C Scheduled banks can not become a member of
clearing house while Non-scheduled banks can.
D None of the above
 Privileges to the scheduled banks
1. Scheduled Banks are eligible for obtaining
debts/loans on bank rate from the RBI.
2. Scheduled Banks automatically acquires the
membership of the clearing house.
3. Scheduled Banks get the facility of the rediscount
of first class exchange bills from RBI. This facility
is provided by the RBI only if the Scheduled Banks
deposit average daily cash with the RBI which is
decided by the RBI itself and presents the
recurring statements under the provision of RBI
Act, 1934 and Banking Regulation Act, 1949.