Banking in India
History: Banking System of India
Bank of Hindustan (1770) first bank to be established in India at Kolkata under European Management.
Bank of Bengal (1806)
Bank of Bombay (1840)
Bank of Madras (1843) called as Presidency Banks
Oudh Commercial Bank(1881): first bank with limited liability managed by an Indian board.
Punjab National Bank (1884): First purely Indian Bank.
The State Bank of India is the largest commercial bank in India.
Reserve Bank of India
Central bank of India.
Established on April 1, 1935 with a capital of 5 crore.
⇒ Nationalized on January 1, 1949 as Government acquired the private share holdings.
⇒ Administration: 14 Directors in Central Board of Directors besides the Governor, 4 Deputy Governors and 1 Government official. The Governor is the Chairman of the Board and Chief Executive of the Bank.
⇒ Governors: 1st Governor – Sir Smith (1935-37); 1st Indian Governor- CD Deshmukh (1948-49).
⇒ RBI follows Minimum Reserve System worth 200 crore (115 crore gold & 85 crore bond).
⇒ All notes except one rupee are issued by the RBI & bear the signature of RBI Governor.
⇒ Where as the one rupee note bears signature of Secretary of Finance.
⇒ No personal accounts are maintained & operated in RBI.
Functions of RBI
⇒ Issuance of note.
⇒ Banker to the Government.
⇒ Banker’s Bank.
⇒ Controller of Credit
⇒ Custodian of Foreign Reserves
⇒ Formulates and administers the monetary policy.
⇒ Acts as the agent of the Government of India in respect to India’s membership of the IMF and the World Bank.
⇒ RBI acts as the central clearing house for the inter bank transactions.
⇒ Credit control means control over the quantity and value of credit in the country. Among the functions of Central Bank, one main function is to control and regulate the credit in the country. In India, this function is performed by the Reserve Bank.
⇒ The measures of credit control can be divided into two types:
- Quantitative Credit Control: Bank Rate, Cash Reserve Ratio (CRR), Open Market Operations (OMO), Statutory Liquidity Ratio (SLR), Repo/Reserve Repo.
- Qualitative Credit Control: Rationing of Credit, Regulation of Credit for Consumption Purpose, Variation of margin requirements, Moral Control, Direct action.The main objective of quantitative credit control is to establish control over the total quantity of credit in the country.
Printing of Securities and Minting in India
⇒ India Security Press (Nashik Road): Postal Material, Postal Stamps, Non-postal Stamps, Judicial and Non-judicial Stamps, Cheques, Bonds, NSC, Kisan Vikas Patra, Securities of State Governments, Public Sector Enterprise and Financial Corporations.
⇒ Currency Notes Press (Nashik Road): Since 1991, this press prints currency notes of Rs. 1, Rs. 2, Rs. 5, Rs. 10, Rs. 50, and Rs. 100.
⇒ Bank Notes Press (Dewas): Currency notes of Rs. 20, Rs. 50, Rs. 100 and Rs. 500 are printed here.
⇒ Modernized Currency Notes Press: Two new modernized currency notes press are under establishment at Mysore (Karnataka) and Salboni (West Bengal).
⇒ Security Paper: Hoshangabad (established in 1967-68) makes production of Bank and Currency notes paper.
⇒ Coins are minted at four places: Mumbai, Kolkata, Hyderabad and Noida.
⇒ Banking, financial sectors and insurance (BFSI), together accounts for 38 per cent of India’s outsourcing industry.
⇒ FDI limit in Private Sector Banks has been raised to 74% under the automatic route including investment by FIIs (Foreign Institutional Investors).