Structure of Indian Banking:

Reserve Bank of India: The Reserve Bank of India (RBI) is India's central banking institution, which
controls the monetary policy of the Indian rupee. It was established on 1 April 1935 during the British
Raj in accordance with the provisions of the Reserve Bank of India Act, 1934.[3] The share capital
was divided into shares of 100 each fully paid, which was entirely owned by private shareholders in
the beginning.[4] Following India's independence in 1947, the RBI was nationalised in the year 1949.
The RBI plays an important part in the development strategy of the Government of India. It is a
member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is
entrusted with the 21-member- Central Board of Directorsthe Governor (currently Raghuram
Rajan), four Deputy Governors, two Finance Ministry representative, ten government-nominated
directors to represent important elements from India's economy, and four directors to represent local
boards headquartered at Mumbai, Kolkata, Chennai and New Delhi. Each of these local boards
consists of five members who represent regional interests, as well as the interests of co-operative and
indigenous banks.
Scheduled and Non-Scheduled Banks:
Scheduled Banks in India are those banks which have been included in the Second Schedule of
Reserve Bank of India (RBI) Act, 1934.[1] RBI in turn includes only those banks in this schedule
which satisfy the criteria laid down vide section 42 (6) (a) of the Act.
As on 30 June 1999, there were 300 scheduled banks in India having a total network of 64,918
branches. Scheduled commercial banks in India include State Bank of India and its associates (5),
nationalised banks (20), foreign banks (45), private sector banks (32), co-operative banks and regional
rural banks.
"Scheduled banks in India" means the State Bank of India constituted under the State Bank of India
Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks)
Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of
the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any
other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of
1934), but does not include a co-operative bank".
Scheduled Commercial Banks: are divided into 4 types:
1. Public Sector Banks
2. Private Sector Banks
3. Foreign Banks
4. Regional Rural Banks

1. Public Sector Banks: Public Sector Banks (PSBs) are banks where a majority stake (i.e. more
than 50%) is held by a government. The shares of these banks are listed on stock exchanges.
There are a total of 21 PSBs in India..
Emergence of public sector banks
The Central Government entered the banking business with the nationalization of the Imperial Bank
Of India in 1955. A 60% stake was taken by the Reserve Bank of India and the new bank was named
as the State Bank of India. The seven other state banks became the subsidiaries of the new bank when
nationalised on 19 July 1960.
[2]
The next major nationalisation of banks took place in 1969 when the
government of India, under prime minister Indira Gandhi, nationalised an additional 14 major banks.
The total deposits in the banks nationalised in 1969 amounted to 50 crores. This move increased the
presence of nationalised banks in India, with 84% of the total branches coming under government
control.
[3]

The next round of nationalisation took place in April 1980. The government nationalised six banks.
The total deposits of these banks amounted to around 200 crores. This move led to a further increase
in the number of branches in the market, increasing to 91% of the total branch network of the country.
The objectives behind nationalisation where:
To break the ownership and control of banks by a few business families,
To prevent the concentration of wealth and economic power,
To mobilize savings from masses from all parts of the country,
To cater to the needs of the priority sectors.....
Public sector banks before the economic liberalisation
The share of the banking sector held by the public banks continued to grow through the 1980s, and by
1991 the public sector banks accounted for 90% of the banking sector. A year later, in March, 1992,
the combined total of branches held by public sector banks was 60,646 across India, and deposits
accounted for Rs. 1,10,000 crore. The majority of these banks were profitable, with only one out of
the 27 public sector banks reporting a loss.
[4]

Problem, with nationalised banks reporting a combined loss of Rs. 1160 crores. However, the early
2000s saw a reversal of this trend, such that in 2002-03 a profit of Rs. 7780 crores by the public sector
banks: a trend that continued throughout the decade, with a Rs. 16856 crore profit in 2008-2009.
Presently the public sector banks in India are: Allahabad Bank ,Andhra Bank, Bank of Baroda ,Bank
of India, Bank of Maharashtra,Canara Bank, Central Bank of India, Corporation Bank, Dena
Bank,IDBI Bank (Industrial Development Bank of India),Indian Bank, Indian Overseas Bank,
Oriental Bank of Commerce, Punjab and Sindh Bank, Punjab National Bank, State Bank of Bikaner
and Jaipur, State Bank of Hyderabad, State Bank of India, State Bank of Mysore, State Bank of
Patiala, State Bank of Travancore, Syndicate Bank,UCO Bank, Union Bank of India, United Bank of
India, Vijaya Bank, The Karad Urban Bank,Ramakant Hirakan Bank India.
2. Private Sector Banks: The "private-sector banks" are banks where a greater part of
stake or equity is held by the private shareholders and not by government. Banking in
India has been dominated by public sector banks since the 1969 when all major banks
were nationalised by the Indian government. However since liberalisation in
government banking policy in 1990s, old and new private sector banks have re-
emerged. They have grown faster and bigger over the two decades since liberalisation
using the latest technology, providing contemporary innovations and monetary tools
and techniques.
The private sector banks are split into two groups by financial regulators in India, old and
new. The old private sector banks existed prior to the nationalisation in 1969 and kept
their independence because they were either too small or specialist to be included in
nationalisation. The new private sector banks are those that have gained their banking
license since the liberalisation in the 1990s.
3. Foreign Banks: These are the banks whose main headquarters are in foreign countries
and they have setup their branched in India. Foreign banks are present in the country
either through complete branch/subsidiary route presence or through their
representative offices. At end-June 2009, 32 foreign banks were operating in India
with 293 branches. Besides, 43 foreign banks were also operating in India through
representative offices. These banks function like the other commercial banks.
Additionally they help the traders and individuals in foreign currency exchange.
4. Regional Rural Banks: Regional Rural Banks are the banking organizations being
operated in different states of India. They have been created to serve the rural areas
with banking and financial services. However, RRB's may have branches set up for
urban operations and there area of operation may include urban areas too. Regional
Rural Banks were established under the provisions of an Ordinance passed on 26
September 1975 and the RRB Act. 1976 to provide sufficient banking and credit
facility for agriculture and other rural sectors. These were set up on the
recommendations of The Narasimham Working Group
[1]
during the tenure of Indira
Gandhi's government with a view to include rural areas into economic mainstream
since that time about 70% of the Indian Population was of Rural Orientation. The
development process of RRBs started on 2 October 1975 with the with forming the
first RRB, the Prathama Bank. Also on 2 October 1976 five regional rural banks were
set up on with a total authorised capital of Rs. 100 crore ($ 10 Million) which later
augmented to 500 crore ($ 50 Million). There were five commercial banks, Punjab
National Bank, State Bank of India, Syndicate Bank, United Bank of India and United
Commercial Bank, which sponsored the regional rural banks. Earlier Reserve Bank of
India had laid down ceilings on the rate of interest to be charged by these RRBs.
However from August 1996 the RRBs have been granted freedom to fix rates of
interest, which is usually in the range of 14-18% for advances.
The main purpose of RRB's is to mobilize financial resources from rural / semi-urban
areas and grant loans and advances mostly to small and marginal farmers, agricultural
laborers and rural artisans. The area of operation of RRBs is limited to the area as
notified by Government of India covering one or more districts in the State. RRB's
also perform a variety of different functions. RRB's perform various functions in
following heads Providing banking facilities to rural and semi-urban areas. Carrying
out government operations like disbursement of wages of MGNREGA workers,
distribution of pensions etc. Providing Para-Banking facilities like locker facilities,
debit and credit cards.