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A bank as an institution dealing in money and credit. It safeguard of the savings of the public and gives loans and advances.
The word of Bank is said to be of Germanic origin , cognate with the French wordBanque and the Italian word Banca , both meaning bench. Banking is as old as the authentic history and origins of modern Commercial banking tare traceable to ancient times. The New Testament mention about activities of the money changers in the temple of Jerusalem. In ancient Greece around 2000 B.C . The famous temples of Ephesus, Delphi and Olympia were used as depositories for peoples surplus funds and these temples were the centers of Money lending transaction.
Origin of Banking
In, India the ancient Hindu scriptures refer to money lending activities in the Vedic period. In India The Ramayana and Mahabharata eras, banking had become a full fledged activity and during the Smriti period which followed the Vedic period and Epic age the business of banking was carried on by the members of the Vaish community.
There were two nationalizations of banks in India, one in 1969 and the other in 1980. The entry activities of private sector and foreign banks were restricted through branch licensing and regulation norms.
The over regulated and over administered polices eroded the capital base of most of the public Sector banks and recapitalization of 19 nationalized banks was made by government through of budgetary provision Nevertheless, acute problem arises in productivity, efficiency and profitability front of the commercial banks. The policy of directed investment in the form high SLR and CRR, directed credit programs, extra administrative interference in credit decision making, high operating costs, regulated interest rates, non-transparent accounting system coupled Non existence of operational flexibility, internal autonomy and absence of competition contaminated the health of the commercial banks and threatened their future survival.
Liberal policies facilitate to increase market competition among banks to augment efficiency and by productivity by the management to choose independent decisions about input-output and their prices individual banks. The Committee on Financial Systems (GOI, 1998) suggested the road map for second -generation reform to keep pace with liberalization of financial sector in other parts of the world. The other remarkable developments to enhance competition in banking sector reforms 1) It abolished administered interest rate regime by allowing banks to determine lending and deposit rates. 2) Competition has infused by allowing the operation of new private sector banks and more liberal entry of foreign banks. 3) Measures to broaden the ownership base of PSBs have also taken. 4) The system has also observed greater levels of transparency and standards of disclosure. 5) It introduced ratification of the legal structure to strengthen banks position in the areas of loan and default loan.
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.
Types of Banks
1) Central Bank
A bank which is entrusted with the functions of guiding and regulating the banking system of a country is known as its Central bank.
2)
Commercial Banks
Commercial banks are of three types (i) Public Sector Banks (ii) Private Sectors Banks (iii) Foreign Banks
3) Development Banks
Business often requires medium and long-term capital for purchase of machinery and equipment, for using latest technology, or for expansion and modernization. Such financial assistance is provided by Development banks. 4)
Co-operative Banks
(i) Primary Credit Societies
5) Specialised Banks
There are some banks, which cater to the requirements and provide overall support for setting are examples of such banks. They engage themselves in some specific area or activity and thus, are called Specialised banks. Let us know about them. (i) Export Import Bank of India (EXIM Bank) (ii) Small Industries Development Bank of India (SIDBI) (iii) National Bank for Agricultural and Rural Development (NABARD)
2) The supervisory functions over banks and financial institutions can be assigned to aquasi autonomous body sponsored by RBI.
3) Phased achievement of 8 % capital adequacy ratio. Abolition of branch licensing policy. Phased reduction in Statutory Liquidity Ratio. Deregulation of interest rates which are related to the bank rateCompetition among financial institutions on a syndicating or participating approach . 4) Delegation of direct lending activity of the IDBI to a separate corporatebody . Proper classification of assets and full disclosure and transparency of of accounts of banks and other financial institutions. 5) Setting up Asset Reconstruction Fund to make over a portion of the loan portfolio of banks whose recovery has become difficulty
Bank of India
Bank of India, founded on 7th September in the year 1906 was nationalised along with 13 other banks in July 1969. Then its paid-up capital was Rs.50 lakh with only 50 employees and the only office in Mumbai The promoters incorporated the Bank of India on 7 September, 1906 under Act VI of 1882 with an authorized capital of Rs. 1 crore divided into 100,000 shares each of Rs. 100. The promoters placed 55,000 shares privately, and issued 45,000 to the public by way of IPO on 3 October, 1906; the bank commenced operations on 1 November, 1906. Today Bank of India has been spread with 2594 branches including 93 specialised branches controlled by 48 Zonal Offices. Bank of India came up with its maiden public issue in the year 1997 and the total number of shareholders stands to 3,17,890 as on 30/06/2004.