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Banking in India

Banking in India


  • The origin of modern banking in India dates back to 1770, named Hindustan Bank was started by the English agency house of Alexander & co in Kolkata. The bank was however closed up in 1832


➡Presidency banks


Year

Name of the Bank

1806

Bank of Bengal

1840

Bank of Bombay

1843

Bank of Madras


  • These three presidency banks continued till 1920
  • In 1921 they were amalgamated into the Imperial Bank of India

Note: the combination of 1 hour companies into a new entity is called as amalgamation

  • Allahabad Bank 1865 Allahabad Bank was established in 1865 and working even today it is the oldest public sector bank in India
  • Oudh commercial bank (1881): the first limited liability Bank managed by Indians was oudh commercial Bank. It was liquidated in 1958

Note: limited liability is a corporate structure where by the members of the company cannot be held personally liable for the companies debts or liabilities

  • Punjab National Bank: Punjab National Bank was established at Lahore (presently in Pakistan) in 1894. It was first bank purely managed by Indians

➡Definition of a BANK

  • Section 5(B) of the banking regulation act 1949, defined the term "banking"  is as follows: accepting, for the purpose of landing or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order of otherwise

➡Reserve Bank of India (RBI)



  • Reserve Bank of India is India's Central banking institution, which controls the monetary policy of the Indian rupee 
  • It was established under the recommendations of Hilton - young commission (Royal commission) on Indian currency and finance
  • It was established on 1st April 1935 in accordance with the provisions of The Reserve Bank of India act 1934
  • The headquarters of RBI was initially established in Calcutta (West Bengal) was permanently mode to Mumbai (Maharashtra) in 1937
  • RBI was nationalized on 1st January 1947
  • The banking regulation act 1949, provides the legal framework for regulation of the banking system in India

➡MILESTONES BANKING IN INDIAN INDUSTRY

  • Major steps taken by government of India to regulate banking sector in the country after independence


Year

Milestone

1949

Enactment of Banking Regulation Act (also known as BR Act)

1949

Nationalization of reserve Bank of India (RBI) on 1st January & empowered RBI to regulate banking sector in India

1955

Nationalization Of State Bank Of India

1959

Nationalization Of SBI Subsidiaries

1961

Providing insurance cover to bank deposits, under DICGC Act 1961

1964

Establishment of industrial development bank of India (IDBI)

1969

Nationalization of 14 major banks with NDTL over Rs.50 crore 

1969

Introduction of Lead Bank Scheme (LBS)

1975

Establishment of  Regional Rural Banks

1978

Creation of Deposit Insurance Credit Guarantee Corporation (DICGC)

1980

Nationalization of 6 more banks with NDTL over Rs.200 crore

1982

Establishment of National Bank for Agriculture and Rural Development (NABARD)

1982

Creation Of Export Import Bank (EXIM Bank)

1988

Establishment of National Housing Bank (NHB)

1990

Establishment of Small Industries Development Bank of India (SIDBI)

1993

RBI permitted to establish new private sector banks in India

2013

Creation of Bharatiya Mahila Bank (BMB), India's first bank exclusively for women

2015

Establishment of MUDRA Bank

2015

In principle approval issued by RBI for 11 payment banks and 10 small finance banks


➡ROLL OF BANKING IN INDIA

  • It encourages savings habit amongst people and thereby makes funds available for productive use
  • It acts as intermediatory but when people having surplus money and those requiring money for various business activities
  • It helps in national development by providing credit to formers, small scale industries and self-employed people as well as to large business houses which leads to balance economic development in the country
  • It helps in raising the standards of living of people in general by providing loans for purchase consumer durables, houses, automobiles etc

➡BANKS IN INDIA

Banking in India
Banking in India



Public Sector Bank(27)


  • SBI Group(SBI & 5 Associates)
  • Nationalized Banks(1969-14banks+1980-5banks)
  • Other Public Sector Bank(BMB+IDBI Bank)


Private Sector Bank(22)


  • Old Private Sector Bank
  • New Private Sector Bank


Foreign Banks


Regional Rural Banks (RRB's)


Local Area Banks


Payment Banks


Small Finance Banks


State Co-operative Banks


Urban Co-operative Banks


➡Scheduled Commercial Bank (SCB)


  • All banks which are mentioned in the 2nd schedule of RBI Act, 1934 are known as scheduled banks


➡Public sector banks(12)


  • Finance Minister Nirmala Sitharaman announced on 30th August 2019 to merge multiple series of government banks of India. Thus, after this announcement, many banks joined, and now India consists of 12 public sector banks.



12 Public Sector Banks

Anchor banks

Est

Tagline / Slogan

Headquarters

PSB's to be merged

1.State Bank of India (SBI)

1955


Nationalized

 2 June 1956

-The banker to every Indian

-Pure banking, nothing else

-With you - All the way

-A bank of the common man

-The nation banks on us



Mumbai

The merger with its 5 associates banks and Bharatiya Mahila Bank(BMB)

-State Bank of Bikaner and Jaipur

-State Bank of Hyderabad

-State Bank of Mysore

-State Bank of Patiala

-State Bank of Travancore

(The merger took effect on 2017)

2.Punjab National Bank

1894

The name you can Bank upon!

New Delhi

Oriental Bank of Commerce and United Bank of India

3.Bank Of Baroda

1908

India's international Bank

Vadodara

Dena Bank and Vijaya Bank(The merger took effect on 1 April 2019)

4. Bank of Maharashtra

1935

Ek Parivar, Ek Bank

Pune

-

5. Bank of India

1906

Relationship beyond banking

Mumbai

-

6. Union Bank of India

1919

Good people to bank with

Mumbai

Corporation Bank and Andhra Bank

7. Canara Bank

1906

Together we can

Bengaluru

Syndicate Bank

8. Central Bank of India

1911

Central to you since 1911

Mumbai

-

9. Indian Bank

1907

Your own Bank

Chennai

Allahabad Bank

10.Indian overseas Bank

1937

Good people to grow with

Chennai

-

11. UCO Bank

1943

Honours you trust

Kolkata

-

12. Punjab and Sind Bank

1908

Where service is a way of life

New Delhi

-

  • The “strategic disinvestment” of the government stake in IDBI Bank is a long-standing issue. The government had announced its plan to privatise the bank in February 2021.

➡STATE BANK OF INDIA (SBI) GROUP



  • SBI was established on 1st July 1955
  • It was set up under the recommendations of "All India Rural Credit Survey Committee"  also known as Gorwala Committee
  • State Bank of India was nationalised on 2nd June 1956
  • It is the largest bank in India
  • State Bank of India was previously called imperial Bank of India in 1921 which was created by amalgamation of 3 presidency banks Bank Of Bengal, Bank of Bombay and Bank of Madras
  • Logo: Logo of the State Bank of India is a blue circle with a small cut in the bottom that depicts perfection and the small man. The common man being the centre of the bank's business
  • SBI headquarters located at Mumbai (Maharashtra)
  • SBI acts as an agent of RBI in those places were RBI has no branch office

➡Tagline / slogans of State Bank of India (SBI):



The banker to every Indian

Pure banking, nothing else

With you - All the way

A bank of the common man

The nation banks on us


➡ASSOCIATES OF SBI

  • SBI group consist of 5 associate banks
  • Number of associates down from the 8 that it originally acquired in 1959


Name of the Associate

Year

Tagline / slogan

State Bank of Bikaner & Jaipur

1963

The bank with a vision

State Bank of Hyderabad 

1941

Modern, Innovate, Dependable

State Bank of Mysore

1913

Working for a better tomorrow

State Bank of Patiala

1917

Blending modernity with tradition

State Bank of Travancore

1945

A long tradition of trust


  • State Bank of Bikaner and Jaipur (SBBJ) came into existence in 1963 went to banks namely State Bank of Bikaner 1944 and State Bank of Jaipur 1943 were merged
  • In 2008 State Bank of Saurashtra got merged with State Bank of India
  • In 2010 State Bank of indoor also merged with State Bank of India
  • Note: combining of two or more companies in to single entity is called merger. This decision is usually mutual between both firms.

➡MAJOR SUBSIDIARIES OF SBI

1. SBI Capital Markets Limited

2. SBI Cards

3. SBI Life Insurance

4. SBI General Insurance

5. SBI Mutual Fund

6. SBI DFHI Ltd.


1.SBI Capital Markets Limited


  • SBI capital markets limited was established in 1986
  • It is India's largest domestic investment bank offering the entire range of investment banking and corporate advisory services

2.SBI Cards


  • SBI cards was established in 1998
  • It deals with State Bank of India credit card space
  • SBI cards is a joint venture between "SBI and GE Capital"  (US)
  • Tagline / slogan of SBI cards is "make  life simple" 


3.SBI Life Insurance


  • SBI Life Insurance was established in 2001
  • SBI Life Insurance is a joint venture between "SBI and BNP Paribas Cardiff"  (France)


4.SBI General Insurance


  • SBI General Insurance is a joint venture between the "SBI and insurance Australia group"  (IAG)


5.SBI Mutual Fund


  • SBI Mutual Fund is a joint venture between "SBI and amundi asset management"  (France)
  • Tagline / slogan of SBI Mutual Fund is "a partner for life" 


6.SBI DFHI Limited


  • SBI DFHI Limited is a primary dealer. An institution created by RBI to support primary auctions of government securities and provide necessary depth and liquidity to secondary market in government securities


NATIONALISED BANKS

  • Nationalization of banks in India was done in two phases


➡1st phase of nationalization

  • On 19th July 1969, the banking companies (acquisition and transfer of undertaking) ordinance resulted in the ownership of 14 banks being transferred to the Government of India
  • 14 major banks having deposits of more than 50 crore were nationalised in first phase


➡2nd phase of nationalization

  • On 15th August 1980 6 more banks having Net Demand And Time Liabilities (NDTL) of more than 200 crore were nationalized


➡List of nationalized Bank 1st phase(14)


Name of the Bank

Est

Headquarters

Tagline / Slogan

Bank of India 

1906

Mumbai

Relationship beyond banking

Central Bank of India

1911

Mumbai

Central to you since 1911

Dena Bank

1938

Mumbai

Trusted family Bank

Union Bank of India

1919

Mumbai

Good people to bank with

Bank of Maharashtra

1935

Pune

Ek Parivar, Ek Bank

Canara Bank

1906

Bengaluru

Together we can

Syndicate Bank

1925

Manipal

Faithful and friendly

Punjab National Bank

1894

New Delhi

The name you can Bank upon!

Indian overseas Bank

1937

Chennai

Good people to grow with

Indian Bank

1907

Chennai

Your own Bank

Allahabad Bank

1865

Kolkata

A tradition of trust

UCO Bank

1943

Kolkata

Honours your trust

United Bank of India

1950

Kolkata

The bank that begins with "U" 

Bank of Baroda

1908

Vadodara

India's international Bank


➡List of nationalised banks 2nd phase (5)



Name of the bank

Est

Headquarters

Tagline / Slogan

Vijaya Bank

1931

Bengaluru

A friend you can Bank upon

Corporation Bank

1906

Mangalore

A premier public Sector Bank

Punjab & Sind bank

1908

New Delhi

Where service is a way of life

Andhra Bank

1923

Hyderabad

Where India banks

Oriental Bank of commerce

1943

Gurgaon

Where every individual is committed


  • In 1993 the Government of India merged new Bank of India with Punjab National Bank (PNB). It was the only major between nationalised banks and resulted in the reduction of the number of nationalised Bank from 20 to 19


➡Objective of banks nationalization


  • To raise public confidence in banking system
  • Expansion of banking activities in rural and semi urban areas
  • To reduce / break the Monopoly of large industrial houses on the banking system
  • To increase credit flow to the priority sectors like agriculture, small scale industries and small traders



India First Life Insurance

Bank of Baroda

Andhra Bank

UK's Legal & General Group



Star union dai - ichi Life Insurance (SUD Life)

Bank of India

Union Bank of India

Japan's Dai - ichi Life



PNB Met Life India Insurance

Punjab National Bank

MetLife insurance (US)

Jammu & Kashmir Bank



Canara HSBC Oriental Bank of commerce Life Insurance

Canara Bank

Oriental Bank of commerce 

HSBC insurance holdings


➡MUTUAL FUND JOINT VENTURES OF NATIONALISED BANKS



MUTUAL FUND

JOINT VENTURE BETWEEN

Baroda Pioneer Mutual Fund

Bank of Baroda 

Pioneer investments (US)

Principal Mutual Fund

Punjab National Bank

principal group(US)

BOI AXA Mutual Fund

Bank of India

AXA Investment managers (France)

Canara Robeco Mutual Fund

Canara Bank

Robeco (Netherlands)

Union KBC Mutual Fund

Union Bank of India

KBC asset management (Belgium)


➡OTHER PUBLIC SECTOR BANKS



Name of the bank

Est 

Headquarters

Tagline / slogan

IDBI Bank

1964

Mumbai

Bank Aisa, dost jaisa

Bhartiya mahila Bank

2013

New Delhi

Empowering women, empowering India


➡PRIVATE SECTOR BANKS


  • Those banks having greater part of states or equity held by the private shareholders are called  Private Sector banks. In 1993 RBI started issuing new private sector banks
  • HDFC Bank got the first new private sector banking licence from RBI in the year 1993.



➡IN INDIA PRIVATE SECTOR BANKS 


Name of the bank

Est 

Headquarters

Tagline / slogan

City union Bank

1904

Kumbakonam

Trust and excellence since 1904

Karur Vysya Bank

1916

Karur

Smart way to bank

Tamilnad mercantile Bank

1921

Tuticorin

Be a step ahead of life

Catholic Syrian Bank

1920

Thrissur

Support All The way

South Indian Bank

1929

Thrissur

Experience next generation banking

Dhanalakshmi Bank

1927

Thrissur

Tann mann dhan

Federal Bank

1945

Kochi

Your perfect banking partner

Karnataka Bank

1924

Mangalore

Your family Bank across India

Jammu and Kashmir Bank

1938

Srinagar

Serving to empower

Nainital bank

1922

Nainital

-

Ratnakar Bank Ltd  (RBL)

1943

Kolhapur

Apno ka Bank

Axis Bank

1994

Mumbai

Badhti ka naam zindagi

ICICI Bank

1994

Mumbai

Hum hai na! / Khayal aapka

HDFC Bank

1994

Mumbai

We understand your world / Bank aapki mutthi mein

Kotak Mahindra Bank

2003

Mumbai

Let's make money simple

IndusInd Bank

1994

Mumbai

We make you feel richer

Yes Bank

2004

Mumbai

Experience our expertise

DCB bank

1995

Mumbai

We value you

Bandhan Bank

2015

Kolkata

Aapka Bhala sabki bhalai

IDFC bank

2015

Mumbai

Banking hatke

IDBI Bank

1964

Mumbai

Bank Aisha dost jaisa


  • As per RBI norms, minimum Capital requirement to set up a private sector bank is 500 crore


ICICI Bank joint Ventures

Life Insurance business

ICICI bank and prudential Plc. (UK)

General Insurance business

ICICI Bank & FAIRFAX financial holdings (Canada)

Mutual fund business

ICICI Bank & prudential Plc. (UK)

HDFC joint ventures

Life Insurance business

HDFC & standard life Plc.(UK(

General Insurance business

HDFC & ERGO International AG (Germany)

Mutual fund business

HDFC & standard life investments (UK)

Kotak Mahindra Bank

Life Insurance business

Kotak Mahindra Bank & old mutual (South Africa)

Federal Bank

Life Insurance business

IDBI, Bank federal Bank & Ageas (Belgium)

Axis Bank

Mutual fund

Axis Bank & Schroder Singapore holdings Pvt Ltd


➡Foreign banks

  • A foreign bank is one whose head office is located outside the geographical boundaries of India in another country. They are governed by the rules and regulations prevalent in their parent country. However their branch operating in India would be mandatorily required to follow the rule of RBI
  • These are mainly concerned with financing foreign trade
  • Foreign banks are allowed to operate in India through branches and representative offices

5 Major Foreign Banks
5 Major Foreign Banks


➡Functions


  • Following are the various functions of foreign banks:
  • Remitting money from one country to another country
  • Discounting of foreign bills
  • Helping import and export trade


➡Numbers about foreign banks


  • An international bank is a financial institution that provides financial services to international consumers from outside of its native country. There are now 46 foreign banks in India, according to the Reserve Bank of India (As of July 14, 2020).

  • Standard chartered Bank (United Kingdom) is one of the oldest foreign banks that comes to India i.e. 150 years ago, now operates the maximum number of branches in India

➡REGIONAL RURAL BANKS


  • The Narasimham committee on rural credit recommended the establishment of regional rural banks to meet the needs of rural areas
  • The equity of RRB is contributed by the central government concerned state government and the sponsor Bank in the proportion of 50:15:35 respectively
  • The area of operations of the RRB is limited to a specified region relating to one or more districts in the concerned state
  • Authorized capital of RRB is 2000 crore

  • Prathama Bank is the first RRB of India's sponsored by Syndicate bank established on 2nd October 1975 with its head office at Moradabad, Uttar Pradesh
  • Sikkim and Goa States have not at established RRB's
  • Regulatory authority for regional rural banks is NABARD. For opening a new branch a RRB requires RBI licence
  • RRB are managed by a board of directors. This banks are refined at 2% below bank rate
  • At present total number of regional rural banks stands at 56


State

Name of RRB

Sponsor Bank

Head office

Andhra Pradesh

Andhra Pragathi Grameena Bank

Syndicate Bank

Kadapa

Chaitanya Godavari Grameena Bank

Andhra Bank

Guntur

Andhra Pradesh Grameena Vikas Bank

State Bank of India

Kadapa

Saptagiri Grameena Bank

Indian Bank

Chittor

Arunachal Pradesh

Arunachal Pradesh Rural Bank

State Bank of India

Naharlagun

Assam

Assam Gramin Vikash Bank

United Bank of India

Guwahati

Langpi Dehangi Rural Bank

State Bank of India

Diphu

Bihar

Uttar Bihar Gramin Bank

Central Bank of India

Muzaffarpur

Bihar Gramin Bank

UCO Bank

Patna

Madhya Bihar Gramin Bank

Punjab National Bank   

Patna

Chattisgarh

Chhattisgarh Rajya Gramin Bank

State Bank of India

Raipur

Gujarat

Baroda Gujarat Gramin Bank

Bank of Baroda

Bharuch

Dena Gujarat Gramin Bank

Dena Bank

Gandhinagar

Saurashtra Gramin Bank

State Bank of India

Rajkot

Haryana

Sarva Haryana Gramin Bank

Punjab National Bank

Rohtak

Himachal Pradesh

Himachal Pradesh Gramin Bank

Punjab National Bank

Mandi

Jammu and Kashmir

Ellaquai Dehati Bank

State Bank of India

Srinagar

J&K Grameen Bank

J&K Bank Ltd.

Jammu

Jharkhand

Vananchal Gramin Bank

State Bank of India

Ranchi

Jharkhand Gramin Bank

Bank of India

Ranchi

Karnataka

Pragathi Krishna Gramin Bank

Canara Bank

Ballari

Kaveri Gramin Bank

State Bank of India

Mysuru

Karnataka Vikas Grameena Bank

Syndicate Bank

Dharwad

Kerala

Kerala Gramin Bank

Canara Bank

Mallapuram

Madhyapradesh

Narmada Jhabua Gramin Bank

Bank of India

Indore

Central Madhya Pradesh Gramin Bank

Central Bank of India

Indore

Madhyanchal Gramin Bank

State Bank of India

Sagar

Maharashtra

Vidarbha Konkan Gramin Bank

Bank of India

Nagpur

Maharashtra Gramin Bank

Bank of Maharashtra

Aurangabad

Manipur

Manipur Rural Bank

United Bank of India

Imphal

Meghalaya

Meghalaya Rural Bank

State Bank of India

Shillong

Mizoram

Mizoram Rural Bank

State Bank of India

Aizawl

Nagaland

Nagaland Rural Bank

State Bank of India

Kohima

Odisha

Odisha Gramya Bank

Indian overseas Bank

Bhubaneshwar

Utkal Grameen Bank

State Bank of India

Bolangir

Puducherry

Puduvai Bharathiar Grama Bank

Indian Bank

Puducherry

Punjab

Punjab Gramin Bank

Punjab National Bank

Kapurthala

Malwa Gramin Bank

State Bank of India

Sangrur

Also read :Banking in India

Sutlej Gramin Bank


Bhatinda

Rajasthan

Baroda Rajasthan Kshetriya Gramin Bank

Bank of Baroda

Ajmer

Rajasthan Marudhara Gramin Bank

State Bank of India

Jodhpur

Tamilnadu

Pallavan Grama Bank

Indian Bank

Salem

Pandyan Grama Bank

Indian Overseas Bank

Virudhunagar

Telangana

Telangana Grameena Bank

State Bank of India

Hyderabad

Tripura

Tripura Gramin Bank

United Bank of India

Agartala

Uttar Pradesh

Gramin Bank of Aryavart

Bank of India

Lucknow

Allahabad UP Gramin Bank

Allahabad Bank

Banda

Baroda Uttar Pradesh Gramin Bank

Bank of Baroda

Raebareli

Kashi Gomti Samyut Gramin Bank

Union Bank of India

Varanasi

Sarva UP Gramin Bank

Punjab National Bank

Meerut

Prathama UP Gramin Bank

Syndicate Bank

Moradabad

Purvanchal Bank

State Bank of India

Gorakhpur

Uttarakhand

Uttarakhand Gramin Bank

State Bank of India

Dehradun

West Bengal

Bangiya Gramin Vikash Bank

United Bank of India

Murshidabad

Paschim Banga Gramin Bank

UCO Bank

Howrah

Uttarbanga Kshetriya Gramin Bank

Central Bank of India

Coochbehar


➡Objective

  • The objective of the RRB's is to develop the rural economy by providing credit and other facilities for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas

➡Resources


Share Capital

Deposits from public

Borrowings from sponsored banks

Refinance from NABARD


➡SHAREHOLDING PATTERN OF RRB


Central Government

50%

Sponsor Bank

35%

State Government

15%


➡CO-OPERATIVE BANKS


  • People who come together to jointly serve their common interest often from a Co-operative society under the co-operative society act
  • Rural co-operative banks primarily meet financial needs of agriculture and allied activities in the rural areas; whereas urban Co-operative banks made financial needs of small size trade and commerce activities operating in the urban areas
  • The size of assets / liabilities of co-operative banks are much smaller in comparison to commercial banks
  • Cooperative Bank operator on "no-profit no-loss"  participle


➡State Co-operative Banks

  • State Co-operative Bank means the principal cooperative society in a state the primary objective of which is the financing of other co-operative societies in the state


➡Urban Cooperative Banks

  • Urban cooperative banks are registered under the cooperative societies act of the respective state governments. Urban Cooperative Banks having multi-state presents are resisted under multi-state cooperative societies act and regulated by the central government


➡LOCAL AREA BANKS

  • Local area banks were introduced in 1996 to setting up new private local banks with jurisdiction over three contiguous districts
  • Total for local area banks are functioning at present

Local Area Banks


Bank name

Est

Headquarter

Coastal local area Bank

1999

Vijayawada, Andhra Pradesh

Capital local area Bank

2000

Phagwara, Punjab

South Gujarat local area Bank

2000

Navsari, Gujarat

Krishna Bhima samruddhi local area Bank

2001

Mahabubnagar, Telangana


➡SMALL AND PAYMENT BANKS

  • The reserve Bank of India is your guidelines for small and payment banks that aim to take banking services to more people and small business. RBA community headed by three nachiket mor, If Armor executed director at ICICI Bank that started ways to promote financial inclusion


➡PAYMENT BANKS

  • The central bank defines a payment bank as one that will be allowed to take deposits, issue debit cards, offer a remittances up to a small limit (1 lack) and distribute financial products such as insurance and mutual funds to its customers but cannot lend money
  • In case of payments banks, entities ranking from telecom companies prepaid payment instrument (PPI) is yours supermarket chains and non-banking finance companies NVFCs Etc. can apply
  • Payments banks can accept deposits current and savings bank from individuals small business and other entities. However, they cannot accept non-resident Indian deposits
  • If prompter can also choose to have a giant adventure with an existing scheduled commercial bank to set up a payments bank
  • The minimum paid up equity capital for these banks will be 100 crore
  • The prompter contribution has been set at a minimum of 40% at the start
  • Famous bank will initially be respected to holding a maximum balance 1,00,000 per individual customer
  • They can offer payments and remittance services and issues ATM cards, but not credit cards
  • It can contract outside liabilities (deposits) but not exceeding 33.33 times its net worth
  • As per final guidelines, apart from amounts maintained as cash with the central bank (define it by the cash reserve ratio or CRR), payments banks will be required to invest at least 75% of their demand deposits in statutory liquidity ratio (SLR)-eligible government securities or treasury bills with maturity up to 1 year
  • The remaining 25% of their fixed deposits can be parked with other scheduled commercial banks for operational purposes and liquidity management


➡SMALL BANKS

  • Is small finance bank will operate in similar fashion to a normal bank (by taking deposits offering withdrawals as well as offering loans) but with a focus on small un-servered and under-served areas of the country
  • The small banks are intended to provide savings products and credit to small businesses and small and marginal farmers
  • Small banks will be required to maintain a minimum capital adequacy ratio (CAR) off 15% of loans on a continuous basis
  • RBA has Saturday 75% of loans must be to the so called priority sector which includes agriculture and small businesses
  • Individual with 10 years of experience in banking and finance and companies and societies controlled by Indian residence together with NBFCs microphones institutions and local area banks (LABs) can op t for conversion into small banks
  • The minimum paid up equity capital for small banks is 100 crore lower than the 500 crore far new full-fledged private banks
  • Foreign shareholding in these banks has been capital at 74% just like in existing private banks
  • The validity of the in principle approval issued by the Reserve Bank will be 18 months
  • On 19th April 2015 RBI grants in principles approval to 11 companies for payment banks
  • RV had received 51 applications for payment bank licenses, out of which 11 have been accepted


Aditya Birla Nuvo limited

Airtel M commerce services Ltd

Cholamandalam distribution services Ltd

Department of posts

FINO Pay tech Ltd

National securities depositories Ltd

Reliance industries Limited

Dilip shantilal sanghavi (Sun Pharma)

Vijay shekhar Sharma (Paytm)

Tech Mahindra Ltd

Vodafone M-pesa Ltd


The following is the list of those who surrendered their license:

1.Cholamandalam Distribution Services

2.Sun Pharmaceuticals

3.Tech Mahindra

The following is the list of Active Payments Banks:

1.Airtel Payments Bank

2.India Post Payments Bank

3.Fino Payments Bank

4.Jio Payments Bank

5.Paytm Payments Bank

6.NSDL Payments Bank

Payments banks
Active Payments Banks


The following is the list of defunct payments banks:

1. Aditya Birla Payments Bank(26 July 2019)

2.Vodafone m-pesa Limited


  • RBI grants Small Finance Banks licenses to 10 entities. Total 72 entities are applied for a small finance bank license.10 granted approval by RBI are micro finance institutions

Small Finance Banks
Small Banks


Ujjivan Financial Services Pvt. Ltd

Janalakshmi Financial services Pvt Ltd

Equitas holdings Ltd

Au Financiers (India) Ltd

Capital local area Bank

Disha Microfin Pvt Ltd

ESAF microfinance & investment Pvt Ltd

RGVN Micro Finance Pvt Ltd

Suryoday Micro Finance Pvt Ltd

Utkarsh Micro Finance Pvt Ltd


Small and payment banks comparison
Small and payment banks comparison




➡LEAD BANK SCHEME

  • After the nationalization of 14 banks in 1969, government initiated steps to extend banks reach to the rural areas
  • "National Credit council" study group headed by prof. D.R. Gadgil first recommended "Area"  approach
  • The committee of bankers (Nariman committee) appointed by RBI accepted the "Area"  approach and gave the name Lead Bank Scheme
  • Under the Lead Bank scheme, each district had been assigned to different commercial banks to act as a consortium leader


➡POINTS TO REMEMBER

  • 20% is the maximum ceiling on foreign direct investment (FDI) in the equity of public sector banks. 74% is the maximum ceiling on FDI in equity of private sector bank
  • The 7th schedule of the India's constitution deals with banking
  • The definition of term "Bank"  is given in the banking regulation Act 1949
  • In banking sector the 15th day of a month is known as "customer day" 
  • Central Government shareholding in equity of nationalized banks does not fall below 51%
  • Indian banks have the maximum foreign branches in United Kingdom (UK)


➡What is the difference between Bank and NBFC

  • Banks are incorporated under banking regulation Act 1949, while non banking Finance company incorporated under companies Act 1956
  • In India both are regulated by RBI 500 core is the minimum capital required for set up a new private sector bank in India, while 2 core is the minimum capital required for set up a NBFC
  • NBFC's cannot accept demand deposits (CASA deposits). They can accept public deposits for a minimum period of 12 months and maximum period of 60 months
  • The deposits with NBFC's are not insurance while Bank deposits are insured by deposit insurance credit guarantee corporation of India (DICGC)
  • NBFC's cannot issue checks drawn on itself

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