HISTORY OF BANKING IN INDIA

Without a sound and effective banking system in India it cannot have a healthy economy.
The banking system of India should not only be hassle free but it should be able to meet
new challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements
to its credit. The most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even
to the remote corners of the country. This is one of the main reasons of India's growth
process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with
the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a
draft or for withdrawing his own money. Today, he has a choice. Gone are days when the
most efficient bank transferred money from one branch to other in two days. Now it is
simple as instant messaging or dials a pizza. Money has become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct phases.
They are as mentioned below:

©. Early phase from 1786 to 1969 of Indian Banks

©.Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms

©. New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991To make this write-up more explanatory, we
divide scenario in Phase I, Phase II and Phase III
RESERVE BANK OF INDIA (RBI)

The central bank of the country is the Reserve Bank of India (RBI). It was established in
April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the
Hilton Young Commission. The share capital was divided into shares of Rs. 100 each
fully paid which was entirely owned by private shareholders in the beginning. The
Government held shares of nominal value of Rs. 2, 20,000

Reserve Bank of India was nationalized in the year 1949. The general superintendence
and direction of the Bank is entrusted to Central Board of Directors of 20 members, the
Governor and four Deputy Governors, one Government official from the Ministry of
Finance, ten nominated Directors by the Government to give representation to important
elements in the economic life of the country, and four nominated Directors by the Central
Government to represent the four local Boards with the headquarters at Mumbai, Kolkata,
Chennai and New Delhi. Local Boards consist of five members each Central Government
appointed for a term of four years to represent territorial and economic interests and the
interests of co-operative and indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934
(II of 1934) provides the statutory basis of the functioning of the Bank.

The Bank was constituted for the need of following:

©. To regulate the issue of banknotes to maintain reserves with a view to securing

monetary stability and

©. To operate the credit and currency system of the country to its advantage
THE BANKING SYSTEM

Almost 80% of the business is still controlled by Public Sector Banks (PSBs). PSBs are
still dominating the commercial banking system. Shares of the leading PSBs are already
listed on the stock exchanges.

The RBI has given licenses to new private sector banks as part of the liberalization
process. The RBI has also been granting licenses to industrial houses. Many banks are
successfully running in the retail and consumer segments but are yet to deliver services to
industrial finance, retail trade, small business and agricultural finance.

The PSBs will play an important role in the industry due to its number of branches and
foreign banks facing the constraint of limited number of branches. Hence, in order to
achieve an efficient banking system, the onus is on the Government to encourage the
PSBs to be run on professional lines.

BANKING SECTORS IN INDIA

BANKS

Public Private Co-operative Regional Rural Foreign

Sector bank sector bank bank bank bank

Introduction to Punjab National Bank

Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the
distinction of being the first bank to have been started solely with Indian capital.
However, due to its inherent strengths and resilience, the bank not only withstood such
adversities but established itself still firmly on the Indian subcontinent. The bank was
nationalized in July 1969 along with 13 other banks. The bank's strength lies in its
corporate belief of growth with stability.

With its presence in virtually in all the important centers of the country, Punjab National
Bank offers a wide variety of banking services which include corporate and personal
banking, industrial finance, agricultural finance, financing of trade and international
banking. Among the clients of the bank are multinational companies, Indian
conglomerates, medium and small industrial units, exporters and non-resident Indians-
The large presence and vast resource base have helped the bank to build strong links with
trade and industry.

At the same time, the bank has been conscious of its social responsibilities by financing
agriculture and allied activities and small scale industries (SSI). Considering the
importance of small scale industries bank has established 16 specialized branches to
finance exclusively such industries. With its long tradition or sound banking and in-
depth knowledge of Indian economy, the bank has been able to help its clients, in their
projects. Punjab National Bank is ranked 416 among the biggest banks in the world by
Bankers' Almanac (July 2002) London.

Strong correspondent banking relationship which Punjab National Bank maintains with
200 leading international banks all over the world ,enhances its capabilities to handle
transactions world-wide. Besides, bank has Rupee Drawing arrangement, with exchange
companies in the Gulf. Bank is a member of the SWIFT and 85 branches of the bank are
connected through its computer-based terminal at Bombay. With its state- of-art dealing
rooms and well-trained dealers, the bank offers efficient FOREX dealing operations in
India. The bank has been

focusing on expanding its operations outside India and has identified some of the
emerging economies which offer large business potential. Bank has set up a
representative office at Almaty, Kazakhstan w.e.f. 23rd October 1998.

Heritage of Punjab National Bank

Established in 1895 at Lahore , undivided India, Punjab National Bank has the distinction
of being the first Indian Bank to have been started solely with Indian capital. The bank
was nationalized in July 1969 along with 13 other banks. From its modest beginning , the
bank has grown in size and nature to become a front line banking istitution in India at
present.
 A professionally managed bank with a successful track record of over 110
years.
 Largest branch network in India -4525 offices including 432 Extension
Counters spread through out the country.
 Strategic business area covers the large Indo Gangetic belt and the metropolitan
centers.
 Ranked 248th biggest bank in the world by Bankers Almanac , London.
 Strong Correspondent banking relationships with more than 217 international
banks of the world.
 More than 50 renowned international banks maintain their Rupee Accounts
with PNB.
 Well equipped dealings rooms; 20 different foreign currency accounts are
maintained at major centers all over the globe.
Vision of Punjab National Bank
To evolve and position the Bank as a world class progressive, cost effective and customer
friendly institution providing comprehensive financial and related services; integrating
frontiers of technology and serving various Segments of society especially the weaker
sections; committed to excellence in serving the public and also excelling in corporate
values.

Mission of Punjab National Bank

To provide excellent professional services and improve its position as a leader in the field
of financial and related services; build and maintain a team of motivated and committed
workforce with high work ethos; use latest technology aimed at customer satisfaction and
act as effective catalyst for socio-economic development.

Awards And Achievements

 At the IDRBT Banking
Technology awards for the year
"Best IT Team of the Year Award"
2005-06.
for Change Management for the
SKOTCH Challenger Award
year 2005-06
Best IT User in Banking & Financial Services Industry - by NASSCOM in partnership
2004 with Economic Times
for Excellence in Corporate
Golden Peacock Award Governance - 2005 by Institute
of Directors