Structure of commercial banking in India

INTRODUCTION
Commercial banks are type of financial institutions that lends money and provides transactional, savings, and money market accounts and that accepts time deposits. Commercial banking play very important role in economy by mobilising savings from various sectors.

INDIAN BANKING SYSTEM

Organized Sector Unorganized Sector

Reserve Bank Commercial of India Banks

Co-operative Banks

Specialized Institutions
IDBI, NABARD, EXIM Bank, etc

Indigenous Bankers

Money Lenders

Scheduled NonState Co-operative Banks Co-operative Banks Banks (as apex body) Public Sector Banks Private Sector Bank Foreign Banks

Direct Co-operative Banks

State Bank Nationalized Of India & Banks Its Subsidiaries

Regional Rural Banks

Primary Co-operative Banks and societies

Reserve bank of India

Reserve bank of India was established on 1 April 1935. As the central bank of the country it is the apex institution of financial system.

Organised sector
In the organised sector the main constituents are commercial banks. The commercial banks may be scheduled the banks or non-scheduled banks.

Public Sector Banks

A Public Sector bank is one in which, the Government of India holds a majority stake. It is as good as the government running the bank. Since the public decide on who runs the government, these banks that are fully/partially owned by the government are called public sector banks. The public sector commercial banking started with setting up of State bank of India in 1955.

List of public sector bank (as on 11-Jan-2011)

Public Sector Banks (Nationalised banks): 1. State Bank of India (SBI) 2. State Bank of Bikaner & Jaipur 3. State Bank of Hyderabad 4. State Bank of Indore 5. State Bank of Mysore 6. State Bank of Patiala 7. State Bank of Saurashtra 8. State Bank of Travancore 9. Bank of India 10. Canara Bank 11. Central Bank of India 12. Corporation bank 13. Indian Bank 14. Indian overseas bank 15. Syndicate Bank 16. UCO Bank 17. Allahabad Bank 18. Andhra Bank 19. Bank of Baroda 20. Bank of Maharashtra 21. Dena Bank 22. Oriental Bank of Commerce 23. Punjab & Sind Bank 24. Union Bank of India 25. United Bank of India 26. Vijaya Bank 27. IDBI Bank

Top 10 public banks(as on April 18, 2012)

Out of all the public banks mentioned in previous slide the top 10 public banks are as follows: State Bank of India (SBI) Punjab National Bank (PNB) Bank of Baroda (BoB) IDBI Bank Syndicate Bank Bank of India (BoI) Canara Bank Union Bank of India (UBI) Corporation Bank Bank of Maharashtra

Private sector banks

Banks which are owned by individuals corporations and not by government or cooperative societies fall into this category. Private banks use the word limited after their names.

List of private sector bank(as on 11-Jan-2011)

Private Sector Banks: 1. HDFC Bank 2. ICICI Bank 3. Federal Bank 4. ING Vysya Bank 1. Axis Bank (formerly UTI Bank) 5. Yes Bank 6. Bank of Rajasthan 7. Bharat Overseas Bank 8. Catholic Syrian Bank 9. Bassein Catholic Bank 10. City Union Bank 11. Development Credit Bank 12. Dhanalakshmi Bank 13. Ganesh Bank of Kurundwad

14. IndusInd Bank 15. Jammu & Kashmir Bank 16. Karnataka Bank Limited 17. Karur Vysya Bank 18. Kotak Mahindra Bank 19. Lakshmi Vilas Bank 20. Nainital Bank 21. Ratnakar Bank 22. SBI Commercial and International Bank 23. South Indian Bank 24. Amazing Mercantile Bank 25. Punjab National Bank 26. Rupee Bank 27. Saraswat Bank 28. Tamilnad Mercantile Bank 29. Thane Janata Sahakari Bank

Top 10 private banks(as on January 27, 2012)

Out of all the private banks mentioned in previous slide the top 10 private banks are as follows: HDFC Bank ICICI Bank Axis Bank Kotak Mahindra Bank Yes Bank ING Vysya Bank IndusInd Bank Dhanalakshmi Bank Federal Bank Jammu and Kashmir Bank

Regional rural banks(RRBs)

The Government of India set up Regional Rural Banks (RRBs) on October 2, 1975 which were sponsored by Syndicate Bank, State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of India. Capital share being 50% by the central government, 15% by the state government and 35% by the scheduled bank. The objective was to provide credit and other facilities to small and marginal farmers and agricultural labourers.

RRBS
All the RRB'S reported to

COMMERCIAL BANKS

All commercial banks reported NABARD and all policy for RRB's to RBI and it makes all policy to commercial banks. made by NABARD. RRB is limited to only a region, Commercial banks provide its comprising of some districts of a services all over the country. state. These banks grant loan only to Loans granted by commercial banks are not limited to the rural agriculture sector. agriculture sector , instead it grants loans to all the sectors. Lending rates are higher as Lending rates are lower. compared to RRBs.

E-banking
Internet banking or e-banking means any user with personal computer and a browser can get connected to his banks website to perform any of the virtual banking function. The term e-banking covers both computer and telephone banking. 1996 to 1998 marked the adoption phase for e-banking while usage increased in 1999. ICICI bank started online banking in 1996

Tools of E-banking
A.t.m: ATM is an abbreviation of "Automated Teller
Machine" its a machine used by the banks all over the world. This machine allows the account holder to have transactions with their own accounts without allowing them to access the entire bank's database. You can use the ATM of a bank in which you do not have an account by paying some charges. John Shepherd-Barron is said to be the inventor of ATM machine.

Debit card: Seattle First National Bank was the first to offer the
debit card in 1978 to business executives .An electronic card issued by a bank which allows bank clients access to their account to withdraw cash or pay for goods and services. This type of card, as a form of payment, also removes the need for cheques as the debit card immediately transfers money from the client's account to the business account. Credit card: Ralph Schneider invented in 1950. A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are used for short-term financing.

New phase in private sector banking

The process of reforming the banking industry was started in 1991 with the setting up of Narasimham Committee which focused on ways to improve the structure of financial sector. In January 1993 RBI framed a policy for entry of new commercial banks in private sector. As the result of this policy the following private banks started their working: 1. Indus ind bank ltd. 2. The UTI bank ltd. 3. HDFC bank ltd. 4. ICICI bank ltd. 5. Global trust bank ltd. 6. Cebturian bank ltd. 7. The times bank ltd. 8. IDBI bank ltd. 9. The development co-operative bank ltd. 10. The bank of Punjab ltd.

 As compared to old banks these new banks are showing better performance. They are introducing superior level of customer care and satisfaction. These new banks are strategic in their thinking and operations. These banks are customer oriented. Within a short period of time the results have been excellent. The role of private banks have become more important these days.

CO-OPERATIVE BANKS
A co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks are playing an important role in small towns and villages.

 Cooperative societies may be credit societies or non-credit societies. Problem of rural credit i.e. agricultural credit has been a matter of concern for a very long time. Till the 1920s the progress of development was very slow. The Bombay committee and the Agricultural finance sub- committee showed the way for further development and by 1949 a system of agricultural cooperative credit was brought into being. RBI made specific provisions for providing credit to agriculture but there was only a little progress in this direction. In 1951 RBI appointed the All India rural credit survey committee. The committee observed that the rural credits were dominated by money lenders. It was observed that the credit fell short of the right quantity, was not of right type, did not serve the right purpose and often failed to go to the right people. So, RBI was assigned an important role to make a scheme and plan to make societies strong.

Some facts about Cooperative banks in India

Some cooperative banks in India are more forward than many of the state and private sector banks. According to NAFCOB the total deposits & lending of Cooperative Banks in India is much more than Old Private Sector Banks & also the New Private Sector Banks. This exponential growth of Co-operative banks in India is attributed mainly to their much better local reach, personal interaction with customers, and their ability to catch the nerve of the local clientele.

List of Co-operative bank (as on 11-september-2011)

Ahmedabad Mercantile Co-Op Bank Ltd. Kalupur Commercial Coop.Bank Ltd. Madhavpura Mercantile Co-Op Bank Ltd. Mehsana Urban Co-Op Bank Ltd. Nutan Nagarik Sahakari Bank Ltd., Rajkot Nagrik Sahakari Bank Ltd. Sardar Bhiladwala Pardi Peoples Coop Bank Ltd. Surat Peoples Coop Bank Ltd. Amanath Co-operative Bank Ltd. Andhra Pradesh Mahesh Co-Op Urban Bank Ltd. Charminar Co-operative Urban Bank Ltd. Vasavi Coop Urban Bank Limited. Indian Mercantile Co-operative Bank Ltd., Abhyudaya Co-operative Bank Ltd.,

Bassein Catholic Co-operative Bank Ltd. Bharat Co-operative Bank (Mumbai) Ltd. Bharati Sahakari Bank Limited. Bombay Mercantile Co-operative Bank Limited Citizen Credit Co-operative Bank Ltd., Cosmos Co-operative Urban Bank Ltd. Dombivli Nagari Sahakari Bank Ltd. Goa Urban Co-operative Bank Limited. Gopinath Patil Parsik Janata Sahakari Bank Ltd., Greater Bombay Co-operative Bank Limited Jalgaon Janata Sahakari Bank Ltd. Janakalyan Sahakari Bank Ltd., Janalaxmi Co-operative Bank Ltd., Janata Sahakari Bank Ltd., Kallappanna Awade Ichalkaranji Janata Sahakari Bank Ltd. Kalyan Janata Sahakari Bank Ltd.,

Karad Urban Co-operative Bank Ltd. Mahanagar Co-operative Bank Ltd., Mapusa Urban Co-operative Bank of Goa Ltd., Nagar Urban Co-operative Bank Ltd., Nasik Merchants Co-operative Bank Ltd. New India Co-operative Bank Ltd., NKGSB Co-operative Bank Ltd., Pravara Sahakari Bank Ltd. Punjab & Maharashtra Co-operative Bank Ltd. Rupee Co-operative Bank Ltd. Sangli Urban Co-operative Bank Ltd., Saraswat Co-operative Bank Ltd., Shamrao Vithal Co-operative Bank Ltd. Solapur Janata Sahakari Bank Ltd. Thane Bharat Sahakari Bank Ltd. Thane Janata Sahakari Bank Ltd. The Kapol Co-operative Bank Ltd.,

Co-operative banking structure

The co-operative credit societies can be classified broadly into two categories: a) Rural credit societies b) Urban credit societies For the purpose of agricultural credit there are different co-operative credit institutions to meet different kinds of needs. At top is the apex body i.e. state co-operative bank, in the middle is district cooperative banks or central co-operative banks , at the gross root level i.e. the village level there are primary agricultural credit societies. For medium to short term loans agricultural co-operative societies have been formed. These are known as LAND DEVELOPMENT BANKS. These were started in 1929. These land development banks deal with agriculturists directly .

Co-operative credit structure

Agricultural Credit Non-Agricultural Credit

Short term and Medium term Credit State Co-operative Banks

Long term Credit

State Co-operative Banks

State Industrial Banks

Central Land Development Banks

Central Co-operative Banks

Central Industrial

Central Co-operative Primary Land Banks Development Banks Primary Agricultural Credit Societies Grain Banks

Primary Non-Agricultural Societies

Employees Co-operative Urban Credit Societies Co-operative Banks

State co-operative bank

almost all the states and many union territories have state co-operative banks. In 2012 the number of state cooperative banks in India is 31. State co-operative banks are those banks which provide funds to primary credit societies . If there is need of transfer funds from a district co-operative bank to another district co-operative bank it can be done only through the agency of the state co-operative bank. The main source of their deposits are the member societies and the central co-operative banks. State co-operative societies are important link between primary credit societies, district co-operative banks and RBI.

State Co-operative Banks in India(30-june-2010)

1.The Andaman and Nicobar State Co-operative Bank Ltd. 2.The Andhra Pradesh State Co-operative Bank Ltd. 3. The Arunachal Pradesh State co-operative Apex Bank Ltd. 4. The Assam Co-operative Apex Bank Ltd. 5. The Bihar State Co-operative Bank Ltd.. 6. The Chandigarh State Co-operative Bank Ltd. 7. The Delhi State Co-operative Bank Ltd. 8. The Goa State Co-operative Bank Ltd. 9. The Gujarat State Co-operative Bank Ltd. 10. The Haryana State Co-operative Apex Bank Ltd. 11. The Himachal Pradesh State Co-operative Bank Ltd. 12. The Jammu and Kashmir State Co-operative Bank Ltd. 13. The Karnataka State Co-operative Apex Bank Ltd. 14. The Kerala State Co-operative Bank Ltd. 15. The Madhya Pradesh Rajya Sahakari Bank

16. The Maharashtra State Co-operative Bank Ltd. 17. The Manipur State Co-operative Bank Ltd. 18. The Meghalaya Co-operative Apex Bank Ltd.. 19. The Mizoram Co-operative Apex Bank Ltd. 20. The Nagaland State Co-operative Bank Ltd. 21. The Orissa State Co-operative Bank Ltd. 22. The Pondicherry State Co-operative Bank Ltd. 23. The Punjab State Co-operative Bank Ltd. 24. The Rajasthan State Co-operative Bank Ltd 25. The Sikkim State Co-operative Bank Ltd. 26. The Tamil Nadu State Apex Co-operative Bank Ltd. 27. The Tripura State Co-operative Bank Ltd. 28. The Uttar Pradesh Co-operative Bank Ltd. 29 The West Bengal State Co-operative Bank Ltd. 30 The Chhattisgarh Rajya Sahakari Bank Maryadit 31. The Uttaranchal Rajya Sahakari Bank Ltd.

E.g.- Goa state co-operative bank

On 7th, November 1963, "The Goa State Co-operative Bank Ltd" was founded as Apex financing agency in the co-operative sectors in the then Union territory of Goa, Daman and Diu with Shri. S. Khushaldas as its first Chairman. The Bank was initially set up to help the members in distress. Its objective was to provide finance to the needy members in the Union territory of Goa, Daman & Diu and bring up their financial standards. The Bank provides more interest on deposits and loans to agriculture and allied activities. The Bank also provides all types of loan schemes.

Central (District) Co-operative Banks

No central cooperative bank can borrow fund from, or lend to any other central cooperative bank. On the basis of their membership these banks can be classified into two categories, i.e. a) Federation of co-operative societies b) Co-operative societies whose membership may be acquired by the co-operative societies or individuals. Main function is to provide credit to the members of primary cooperative societies. However they are free to make loan to individual as well. Primary credit societies are the main borrowers from central cooperative banks. Disappointing feature of the performance of central cooperative bank is that a large portion of their advances is overdue.

 It is a village level institution which directly deals with rural people. It provides short term credit to the agricultural sector. Minimum 10 people of a village can form a primary credit society. The management of the society is under the control of an elected body. The working capital of these societies come from their own funds, deposits and borrowings and other sources. Borrowings come mainly from central co-operative banks. The interest rates of these societies are very low. These societies provide cheapest possible credit to the members.

Primary credit societies

Land development banks

The special banks providing long term loan are called Land Development Banks(LDB). The first LDB was started at Jhang in Punjab in 1920. But the real impetus to these banks was received after passing the Land Mortgage Banks Act 1930.

 Institutions which provide long-term credit to agriculturists at moderate rates of interest and the repayment of loans can be made in easy annual or semiannual installments. These institutions are the Land Development Banks. These banks provide loans for period upto 20 years. These banks are also known as land mortgage banks. Like Cooperative credit societies these banks are also registered as cooperative institution but with limited liability only.

 These Banks have two-tier structure 1. Primary Land Development Bank at district level with branches at taluka level. 2. State Land Development Bank. All primary Land Development Banks are federated into Central Land Development Bank at the State Level. The main function of raising funds is carried out be the Central or State Land Development Bank which can really deal with the money market of the country effectively and advance loans to primary LDBs. The sources of funds of State LDBs are:1. Share capital. 2. Issue of debentures 3. Loans from NABARD 4. Reimbursements of subsidies from the Govt. 5. Other funds.

National Bank For agricultural and rural development (NABARD)

NABARD was set up through an Act of the Indian Parliament on 12 July 1982 as an apex development bank for agriculture and rural development. NABARD is an apex Development Bank that facilitates credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.

Indigenous bankers
An indigenous banker or bank is defined as an individual or
private firm which receives deposits, deals in hundies or engages itself in lending money. The indigenous banker, lends and accepts funds from public. The indigenous bankers indulge in all types of malpractices and exploit their customers in many ways: (a) They make unauthorised deductions from the loans, (b) They overstate the amount of loans in the document, (c) They do not give receipt against payments received. The indigenous banking business is unregulated. The Reserve Bank of India has not control over these bankers and cannot regulate their activities.

The popularity of indigenous bankers is mainly due to the following reasons: (a) They provide prompt and flexible credit, (b) They give loans to the small productive units not fully catered by the commercial banks, (c) They have cordial relationship with the customers, (d) They keep close contact with their customers and remain fully acquainted with their problems and financial requirements; (e) They are not merely bankers to their customers, but are also their friends and advisers.

Money lenders
A money lender is a person or group who offers small personal loans at high rates of interest. Money lender may be rural or urban, professional or nonprofessional. their main clients belong to the weaker section and they are able to exploit the weaker sections easily. They lend money to people from their own funds. They enjoy monopoly in their area.

Foreign banks
Foreign banks are those banks which are registered or incorporated outside India. They have their office or branch in India. The globalisation of Indian economy will encourage the presence of more foreign banks. Some of the foreign banks have successfully introduced latest technologies in the banking practices in India. This has made the banking business in the country more smooth and interesting for the customers.

List of foreign banks in India(as on 31st march 2010)

1. ABN AMRO 2. BNP Paribas 3. Citibank India 4. HSBC (Hongkong & Shanghai Banking Corporation) 5. JPMorgan Chase Bank 6. Bank of America 7. Standard Chartered Bank 8. Barclays Bank 9. Deutsche Bank 10. Royal Bank of Scotland 11. Abu Dhabi Commercial Bank Ltd 12. American Express Bank 13. Antwerp Diamond Bank 14. Arab Bangladesh Bank 15. Bank International Indonesia 16. Bank of Bahrain & Kuwait 17. Bank of Ceylon 18. Bank of Nova Scotia 19. Bank of Tokyo Mitsubishi UFJ

20. Calyon Bank 21. ChinaTrust Commercial Bank 22. Cho Hung Bank 23. DBS Bank 24. Krung Thai Bank 25. Mashreq Bank 26. Mizuho Corporate Bank 27. Oman International Bank 28. Socit Gnrale 29. State Bank of Mauritius 30. Scotia 31. Taib Bank 32. Commonwealth Bank of Australia 33. Standard Chartered Bank 34. BNP Paribas

Top 10 foreign banks(July 4, 2012)

CITI Bank Standard Chartered Bank HSBC Bank Royal Bank of Scotland BNP Paribas JPMorgan Chase Bank Deutsche Bank Scotia Bank American Express Bank Barclays Bank