- S.Y.

BFM

FINANCIAL SYSTEM
Existence of a well organized financial system. Promotes the well being and the standard of living of the people in a country. Money and monetary assets. Mobilize the saving. Promotes investment.

Financial system of any country consists of financial markets ,financial intermediaries ,financial instruments and financial products.
Seeker of funds (mainly business firms and government)
Flow of funds (savings) Flow of financial services , Income ,and financial claims

Supplier of funds (mainly households)

FINANCIAL SYSTEM

INDIAN FINANCIAL SYSTEM

ORGANISED
oRegulators oFinancial markets oFinancial institutions oFinancial services

NON ORGANISED

oMoney lenders oLocal bankers oTraders oLandlords oChit funds oPawn brokers

EVOLUTION OF FINANCIAL SYSTEM

BARTER

MONEY LENDER

NIDHIS/CHIT FUNDS INDNIGENOUS BANKERS

COOPERATIVE MOVEMENT

SOCIETIES

BANKS

JOINT STOCK BANKS CONSOLIDATION

COMMERCIAL BANK

NATIONALISATION

INVESTMENT BANKS DEVELOPMENT FINANCIAL INSTITUTIONS

INVESTMENT INSURANCE COMPANIES

STOCK EXCHANGE

MARKET OPERATION

SPECIALISED FINANCIAL INSTITUTIONS

MERCHANT BANKING

UNIVERSAL BANKING

INTERRELATION-financial system and economy

Financial system

Savers/lenders

Households/forei gn sectors

Investors/borrowers

Corporate sector/governme nt sector

Unorganized sector

Economy

The Banking Companies Act of 1949, define

Banking Company as a company which transacts the business of banking in India. It defines banking as, accepting for the purpose of lending or investment of deposit money from the public, repayable on demand or otherwise and withdraw able by cheque draft , order or otherwise A bank as an institution dealing in money and credit. It safeguard of the savings of the public and gives loans and advances.

 ORIGIN OF BANKING SYSTEM

PRE-INDEPENDENCE SYSTEM

 POST-INDEPENDENCE PERIOD

POLICIES OF INDIAN BANKING SYSTEM DURING

1991

1) 2) 3) 4)

Central Bank Commercial Banks Cooperative Banks Private sector Banks

5)

Public Sector Banks

 6)Industrial/Development Banks

7)Land Development /Land Mortgage Banks

8)Saving Banks

9)Consumer Banks

Indian marched towards the establishment of public sector banking through The progressive nationalisation of commercial banks. There were three phases of bank nationalisation:

Nationalistion of Imperial Bank of India in1955 and its seven associate banks in 1959-60. Nationlisation of the 14 major commercial banks in 1969. Nationlisation of 6 more commercial banks in 1980.

On July 1, 1955 the government of India nationlised the Imperial Bank of India and converted it into the State Bank of India. The establishment of the State Bank of India was a pioneering attempt in public introducing sector banking in the country. Later on in 1959-60, seven subsidiary State Banks were also nationalised to form the SBI Group. For a short period during December 1967 to June 1969, the Government of India pursued the banking of policy control of banks, aiming at an equitable and purposeful distribution of credit towards developmenta -l needs. A such over 90 percent of the banking activity in the country is brought under into the public sector. In short, nationalization of banks implied a bold and major economic step in the process of banking reforms in the country. It has resulted in the evolution of public sector banking.

Banking sector in India is expanding at an incredibly faster pace, with more and more banks reliazing the benefits offered by globalization. Publicly owned banks handle more than 80% of the banking business in India and the rest is in the hands of private sector banks. However, banking in both the government and private sector is being revolutionized by this latest phenomenon called globalization. As per the latest market research report named, Indian Banking Sector Analysis (2006-2007),published, by RNCOSThe banking sector in India is heading towards consolidation. There are about 90 players in .the banking sector in India, with 30competitors from each of the public, private and foreign sectors With so many players present in the banking sector in India, a few of them will emerge as global competitors in the near future. The report highlights: 1) An overview of the current trends in banking sector in India to enable the clients Profiles of 5 prominent players, from each of the public, private and foreign segment, in the banking sector. 2) Discussion of the opportunities and challenges faced by the banking sector in India. 3) Future forecast of the banking industry in India till the year 2010.