Modern Banking Part-I.pptx

Orates the types and functions of banks

1. Modern Banking (Part-I) Compiled by Dr.S.Vigneswaran., M.A.,Ph.D .,(NET, SET) Assistant Professor of Economics, Mannar Thirumalai Naicker College, Madurai-04.

2. Topics Covered Introduction Bank: Definition – Origin and Development of Modern Banking Types of Banks: Commercial Vs Investment Bank – Universal Banking – Unit Banking – Branch Banking - Scheduled Vs Non Scheduled Banks – Public Vs Private Sector Banks –– Retail Banking and Chain Banking – Functions of a Modern Commercial banks.

3. Bank Meaning: A bank is a financial institution licensed to receive deposits, make loans and other financial services. Definitions: “Bank is an institution whose debts are widely accepted in settlement of other people’s debts to each other” – Sayers “The banker’s business is then, to take debts of other people, to offer his own in exchange and thereby to create money” – Crowther

4. Origin and Development of Modern Banking The work “Bank” is derived from the words “ bancus ” or “ banqee ,” that is, a bench. The word “bank” is originally derived from the German word “back” meaning a joint stock fund, which was Italianised into “ banco ” when the Germans were masters of a great part of Italy. As early as 2000 B.C., the Babylonians had developed a banking system. There is evidence to show that the temples of Babylon were used as banks. in the middle of the 12th century, and banks were established at Venice and Genoa

5. The origin of modern banking may be traced to the money dealers in Florence, who received money on deposit, and were lenders of money in the 14th century, and the names of the Bardi , Acciajuoli , Peruzzi, Pitti and Medici soon became famous throughout Europe, as bankers.

6. Modern Banking Royal Exchangers: Exchanged the various foreign coins, tendered to travelers and merchants entering the kingdom, into British money. The Goldsmiths: It is probably true to say that the ground was prepared for modern banking in England.

7. Evolution of Banking in India The Hindustan Bank (1770) was started by the English Agency house of Alexander & Co, in Calcutta. 1806 with the establishment of the first Presidency Bank, called the Bank of Bengal, in Calcutta. Bank of Bombay in 1840 and the Bank of Madras in 1843. These Presidency Banks enjoyed the monopoly of government banking and had the right of note-issue from 1823 to1862. In 1921 they were amalgamated into the Imperial Bank of India.

8. Types of Banks BASIS FOR COMPARISON INVESTMENT BANK COMMERCIAL BANK Meaning A financial institution, that offers services like underwriting of securities, brokerage services and so on. A bank that provides services like accepting deposits, lending money, payment on standing order and many more. Offers Customer specific service Standardized service Associated with Performance of financial market. Nation's economic growth and demand for credit Customer base Few hundreds only Millions Banker to Individuals, government and corporations. All citizens Income Fees, commissions or profit on trading activities. Fees and interest income

9. BASIS FOR COMPARISON UNIT BANKING BRANCH BANKING Meaning A single small banking company, that provides financial services to the local community. A bank operates in more than one place to provide banking services to customers, through its branches. Local economy Affected by the ups and downs of the local economy. It is not affected by the ups and downs of the local economy. Independence of operations More Comparatively less Supervision Cost Low Comparatively high Financial Resources Limited financial resources Large pool of financial resources Competition No or little within the bank Exist between the bank branches Rate of interest Not fixed, as the bank has its own policies and norms. Fixed by the head office, and directed by the central bank. Decision making Quick Time Consuming

10. BASIS FOR COMPARISON SCHEDULED BANKS NON-SCHEDULED BANKS Meaning A banking corporation whose minimum paid up capital is Rs. 5 lakhs and does not harm the interest of the depositors. Banks which do not comply with the rules specified by the Reserve Bank of India. Second Schedule Listed in the second schedule. Not-listed in the second schedule. Cash Reserve Ratio Maintained with RBI. Maintained with themselves. Borrowing Scheduled banks are allowed to borrow money from RBI for regular banking purposes. Non-Scheduled banks are not allowed to borrow money from RBI for regular banking purposes. Returns To be submitted periodically. No such provision of submitting periodic returns.

11. BASIS FOR COMPARISON PUBLIC SECTOR BANK PRIVATE SECTOR BANK Meaning Public Sector Banks are the banks whose complete or maximum ownership lies with the government. Private Sector Banks refers to the banks whose majority of stake is held by the individuals and corporations. Share in banking industry 72.9% 19.7% Customer Base Large Relatively small Interest rate on deposits High Marginally lower Promotion Based on seniority Based on merit Growth opportunities Low Comparatively high Job security Always present Purely based on performance.

12. List of Public Sector Banks in India 2022 Bank Name Establishment Headquarter 1.  Bank of Baroda 1908 Vadodara, Gujarat 2.  Bank of India 1906 Mumbai, Maharashtra 3 . Bank of Maharashtra 1935 Pune, Maharashtra 4.  Canara Bank 1906 Bengaluru, Karnataka 5.  Central Bank of India 1911 Mumbai, Maharashtra 6.  Indian Bank 1907 Chennai, Tamil Nadu 7 . Indian Overseas Bank 1937 Chennai, Tamil Nadu 8.  Punjab and Sind Bank 1908 New Delhi, Delhi 9.  Punjab National Bank 1894 New Delhi, Delhi 10 . State Bank of India 1955 Mumbai, Maharashtra 11.  UCO Bank 1943 Kolkata, West Bengal 12.  Union Bank of India 1919 Mumbai, Maharashtra Punjab National Bank (With Merger of Oriental Bank of Commerce and United Bank of India) Canara Bank (With Merger of Syndicate Bank) Union Bank of India (With Merger of Andhra Bank and Corporation Bank) Indian Bank (With Merger of Allahabad Bank)

13. Bank name Establishment Headquarter 1.  Axis Bank 1993 Mumbai, Maharashtra 2.  Bandhan Bank 2015 Kolkata, West Bengal 3.  CSB Bank 1920 Thrissur, Kerala 4.  City Union Bank 1904 Thanjavur, Tamil Nadu 5 . DCB Bank 1930 Mumbai, Maharashtra 6 . Dhanlaxmi Bank 1927 Thrissur, Kerala 7.  Federal Bank 1931 Aluva , Kerala 8.  HDFC Bank 1994 Mumbai, Maharashtra 9.  ICICI Bank 1994 Mumbai, Maharashtra 10.  IndusInd Bank 1964 Mumbai, Maharashtra 11.  IDFC FIRST Bank 2015 Mumbai, Maharashtra 12.  Jammu & Kashmir Bank 1938 Srinagar, Jammu and Kashmir 13 . Karnataka Bank 1924 Mangaluru , Karnataka 14.  Karur Vysya Bank 1916 Karur , Tamil Nadu 15 . Kotak Mahindra Bank 2003 Mumbai, Maharashtra

14. 16 .  IDBI Bank 1964 Mumbai, Maharashtra 17 .  Nainital bank 1922 Nainital , Uttarakhand 18 . RBL Bank 1943 Mumbai, Maharashtra 19.  South Indian Bank 1929 Thrissur , Kerala 20.  Tamilnad Mercantile Bank 1921 Thoothukudi , Tamil Nadu 21 . YES Bank 2004 Mumbai, Maharashtra

15. Universal Banking Banks provide a wide variety of comprehensive financial services like retail, commercial, and investment services. Universal banking is common in some European countries, including Switzerland. Universal banking combines the services of a commercial bank and an investment bank, providing all services from within one entity.

16. Retail banking Retail banking means banking where transactions are held directly with customers and there are no transactions with other banks or corporations. The retail banking is characterized by multiple products, multiple delivery channels and multiple customer segments.

17. Chain banking Chain banking system involved when a group of persons came together to own and control 3 or more independently chartered banks. Features: A small group of persons own and control a number of independent banks Each bank carries its operations independently without any external interference by any holding company. Every member of the chain retains its independent identity.

18. Functions of Modern Commercial Bank: The functions of commercial banks are classified into two main divisions. (a) Primary functions  1.  Accepts deposit :  The bank takes deposits in the form of saving, current, and fixed deposits. 2. Provides loan and advances :  Bank is to offer loans and advances to the entrepreneurs and business people, and collect interest. 3. Credit Creation:  Credit or loan is not provided with liquid cash, but granted through bank account. This process allows the bank to create money.

19. Functions of Modern Commercial Bank (b) Secondary functions  1.Paying and Collecting the Credit The commercial banks use various instruments like a bill of exchange, cheques , promissory notes and many more. 2.Purchasing and Selling of the Securities Banks give a facility for purchasing and selling the securities. 3.Bullion Trading Banks trade in gold and silver and provides the same facility for their customers. 4. Money Remittance Commercial banks remit the funds on behalf of their customers from one place to another. 

20. 5. Information Banks Commercial banks are primarily an information bureau, that collects the economic, statistical, and financial data related to the trade, commerce, and industry. 6. Locker Facilities Lockers are provided to the customers by banks at a nominal fee. 7. Dealings in Foreign Exchange Commercial banks are the main dealers of foreign exchange in the country.

21. Thank You