Annex III

Existing Banking Structure in India*

Commercial Banks Public Sector Banks
(26)
State Bank of India
Associate Banks()
!ationali"ed Banks(#$)
%t&er Public Sector Bank(#)
Pri'ate Sector Banks
(2()
%ld Pri'ate Sector Banks(#))
!e* Pri'ate Sector Banks(+)
,oreign Banks (-)) Branc& mode of .resence ())# branc&es)
/egional /ural Banks
(6-)
0imited area of o.eration
0ocal Area Banks (-) 0imited area of o.eration
*Position as on 1arc& )#2 2(#) 3 http://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=713
COP!RISIO" O$ %!"&S
Structure o' %an(ing S)ste*
At .resent2 t&e organi"ed banking s4stem in India can be broadl4 di'ided
into t&ree categories3
i) 5&e Central Bank of t&e countr42 t&e /eser'e Bank of India
ii) 5&e Commercial Banks
iii) 5&e Coo.erati'e Banks6
5&e /BI is t&e a.ex monetar4 and banking aut&orit4 in t&e countr4
and &as t&e res.onsibilit4 to control t&e banking s4stem in India6
Co**ercial ban(s .la4 a ma7or role in t&e gro*t& and de'elo.ment
of t&e countr46 5&e4 mobili"e sa'ings and make t&em a'ailable to large and
small industrial enter.rise and traders for *orking ca.ital re8uirements6
After #$6$2 commercial banks are broadl4 classified into nationali"ed or
.ublic sector banks and .ri'ate sector banks6 5&e SBI and its associate banks
along *it& anot&er 2( banks are t&e .ublic sector banks6 5&e .ri'ate sector
banks include Indian sc&eduled banks *&ic& &a'e not been nationali"ed and
branc&es of foreign banks o.erating in India6 5&e /egional /ural Banks
came into existence since t&e middle of #$+(s *it& t&e s.ecific ob7ecti'e of
.ro'iding credit and de.osits facilities to t&e small and marginal farmers2
agricultural labourers and artisans and small entre.reneurs6
%an(ing in In+ia
Banking in India act as a connected link bet*een t&e borro*ers and lenders
of mone46 5&e banks main acti'it4 s&ould be to do t&e business of banking
*&ic& s&ould not be subsidiar4 to an4 ot&er business6 5&us2 a bank s&ould
al*a4s add t&e *ord 9Bank: to its name to enable .eo.le to kno* t&at it is a
bank and is dealing in mone46
Meaning of CB- commercial banking refers to that banking which is concerned with the
acceptance of deposits from the public repayable on demand or after the expiry of a
short period and the granting of mainly short term credit to trade, commerce and industry
through wide networking of branches throughout the country.

Functions of commercial banks- the functions of CB are numerous. They can be
broadly diided into two categories. They are-

1) Primary or basic functions
a! Receiving of deposits- deposits constitute the main source of funds for
commercial banks. CBs receie deposits from the public on arious accounts.
The main types of accounts are- fixed, current, saings, recurring "explain lil!.
b! Issuing notes/ce!ues- this function once considered to be the most
paying part of banker#s business is in modern times performed generally by
the central bank. Its importance has dwindles to a large extent in some
deeloped countries where che$ue currency has replaced bank notes to a
large extent.
c! "ending of funds# it is the main business of CB. Adances form the chief
source of profit for CB. Banks lend funds by way of loans, oer-drafts, cash
credit, discounting of bills.
"i! "oan# it is a financial arrangement under which an adance is
granted by a bank to a borrower on a separate account called the loan
account. A loan may short, medium or long term. It is granted either
against collateral securities or against personal security of the
borrower.
"ii! $ver#draft# it is a financial arrangement where a current account
holder is permitted by a bank to oerdraw his account that is to draw
more than the amount standing to his credit upon an agreed limit.
"iii! Cas credit# it is a financial arrangement under which a borrower
is allowed an adance under a separate account called cash credit
limit. %ere the borrower can withdraw the amount in installments as
and when he needs.
"i! %iscounting of bills of e&cange# here the bank takes a B&'
maturing from an approed customer and pays him and credits his
account immediately with the present alue of the bill.
d! Investment of funds on security- it is one of the imp functions of comm.
Banks. They inest a considerable amount of their funds in got and industrial
securities. In India it is re$uired by statute for CB to inest a considerable
amount of their funds in securities.
e! Creation of money- the arious ways of creation of money are-
"i! By adancing loans
"ii! By allowing oer draft
"iii! By proiding cash credit
"i! By discounting B&'
"! By purchasing securities
"i! By purchasing fixed assets
The commercial banks are prominent in today#s world because they manufacture or
create money. The bank deposits are regarded as money co( they perform the same
function as money that is they increase the purchasing power of the community and
sere as medium f exchange in purchase of goods and serices and settlement of debts.

') (econdary or subsidiary functions- apart from performing the main function the
comm. banks also perform a num of secondary functions which may be diided into
the following two heads-
a) )gency services- the serices rendered by a bank as the agent of his
customer are called agency serices. The imp agency serices are-
"i! Collection of money on behalf of customers.
"ii! )aking payments on behalf of customers.
"iii! *urchase and sale of securities on behalf of customers.
"i! Adising customers regarding inestments.
"! Acting as trustee, executor, and administrator of customers.
"i! +endering of merchant banking serices.
b) Miscellaneous or general utility services- serices rendered by banker is
not confined only to his customers but also to general public called such as-
"i! ,afe custody of aluables
"ii! -ealing in foreign exchange business
"iii! Issuing of traeler#s che$ue, traeler#s letter of credit and circular
notes.
"i! Collecting information bout other businessmen for customers.
"! Collection of statistics and data.
"i! .ease financing.
; <eneral Bank of India#+=6 ; Estb in >olkatta ; ) Presidenc4 Banks
establis&ed#=($?#=-) ; Banks of3 Bengal2 Bomba42 1adras ; ) Presidenc4 Banks
amalgamated#$2# ; Im.erial Bank of India @ Euro.ean control6
; Alla&abad Bank#=6 ; Estb .urel4 b4 Indians ; Pun7ab !ational Bank#=$- ;
Estb in 0a&ore ; B%I2 CBI2 B%B2 Can Bank2 Indian Bank#$(6? establis&ed#$#)
; /BI establis&ed#$) ; Banking Com.anies Act 3 c&anged to Banking /eg#$-$
Act ; SBI formed#$? ; SBI Act .assed enabling SBI takeo'er =#$$
subsidiaries
; #- banks nationali"ed#$6$ ; 6 more banks nationali"ed ; %b7ecti'e3 Social A
rural im.etus better control#$=( ; !arasim&an Committee /eforms#$$(Bs ; Entr4
of ne* P't sector2 ,oreign banks
,inancial S4stem Ca.ital 1arkets Insurance and Central Banking /egulator4
Pension Aut&orit4 Aut&orit4 /egulators /BI SEBI I/CA
/BI Small !ational ICBI Industries Ce' !ABA/C Exim Bank Dousing Bank
Bank of India
/BI Co?%.erati'e Commercial Banks Banks Sc&ld !on State ,oreign Public
Pri'ate //BBs Cistrict Sector Banks Sector Primar4 Credit Soc !ationali"ed SBI
A %t&er PSE %ld Age !e* Age Banks AssocSc&eduled Banks 3 5&ose listed in
2nd Sc&edule of /BI Act #$)-6Banks need to fulfill Sec -2 (6)(a) to be incld in
sc&edule
PSE Banks3 <%I is t&e ma7orit4 stake&older 2+ PSE banks (#$ F SBI A 6
subsidiaries) Da'e taken a lead role in branc& ex.ansion @ rural areas SBI 3
9Banker to e'er4 Indian:
/egional /ural Banks(//BBs)3 Establis&ed #$+6?#$=+3 Ce'elo. rural
econom46 Gointl4 o*ned b4 Central <o't F State <o't Fs.onsor PSE 5arget
customers 3 ,armers2 artisans etc Cecline in numbers 3 #$6 in 1arc& 2(( =# as
on date6 Exam.les3 1a&aras&ra <ramin Bank2 Sa.tagiri <rameena Bank
Pri'ate Sector Banks 1a7orit4 s&are ca.ital is &eld b4 cor.oratesH.'t .arties
Banks not nationali"ed #$6$H#$=( 3 9%ld age?P't sector: Post #$$2?$) reforms
(!arasim&an Committee) entr4 .ermitted + 9!e* age: banks A # 9%ld age:
banks 3 1arc& 2(($ Exam.les3 Ies Bank2 Gammu A>as&mir Bank
,oreign Banks3 D%3 outside India but o.erate t&roug& branc&es or re.
offices As on Gune )( 2(($3 2= foreign banks o.erating in India6 5arget
customers 3 Cor.orates2 D!IBs2 urban middle class Exam.les 3 Standard
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