Role of banks

Basic Roles banks in Indian Economy

1. SubjectExpert
Ms.AnamikaJaiswal
Role of Banks on economy

2. Objective of the Study
TheconceptandimportanceofBanks
TheRoleofBanksoneconomy

3. Definition of Bank
Bankisalawfulorganization,whichaccepts
depositsthatcanbewithdrawnondemand.It
alsolendsmoneytoindividualsandbusiness
housesthatneedit.

4. Nationalization of Banks
The act of taking an industry or assets into
the public ownership of a national
government or state.
Nationalization took place in two phases,
with a first round in 1969 covering 14
banks followed by another in 1980
covering six banks.

5. Reasons for Nationalization
Private commercial banks were not fulfilling the social and
developmental goals of banking
The developmental goals of financial intermediation were not being
achieved other than for some favored large industries and
established business houses.
To ensure that credit allocation occur in accordance with plan
priorities.
Reduce the hold of moneylenders and make more funds available
for agricultural development. Nationalization of bank was to actively
involve in poverty alleviation and employment generation programs.

6. Importance of Banking
It encourages savings habit amongst people and thereby makes funds available for productive
use.
It acts as an intermediary between people having surplus money and those requiring money for
various business activities.
It facilitates business transactions through receipts and payments by chequesinstead of currency.
It provides loans and advances to businessmen for short term and long-term purposes.
It also facilitates import export transactions.
It helps in national development by providing credit to farmers, small-scale industries and self-
employed people as well as to large business houses which lead to balanced economic
development in the country.
It helps in raising the standard of living of people in general by providing loans for purchase of
consumer durable goods, houses, automobiles, etc.

7. Functions of Banks
PrimaryFunctions:includeacceptingdeposits,granting
loans,advances,cash,credit,overdraftanddiscounting
ofbills.
Secondaryfunctions:includeissuingletterofcredit,
undertakingsafecustodyofvaluables,providing
consumerfinance,educationalloans,etc.

8. Challenges faced by the banking
sector
Customer satisfaction
To provide several personnel services
Competition
Managing Technology
Market Discipline and Transparency
Development of skill of bank personnel
Changing needs of customers
Manpower planning

9. Opportunities for Banking Industry
Rural area customers
Good customer services
Internet Banking
Offering various channels
Product Differentiation
Expansion

10. Growth of Indian Banking
ThebankingsysteminIndiaisthemost
extensive.Thetotalassetvalueoftheentire
bankingsectorinIndiaisnearlyUS$270billion.
ThetotaldepositsisnearlyUS$220billion.
BankingsectorinIndiahasbeentransformed
completely.Presentlythelatestinclusionssuch
asInternetbankingandCorebankinghave
madebankingoperationsmoreuserfriendlyand
easy.

11. TYPES OF BANK
SAVINGSBANK
COMMERCIAL BANKS
INDUSTRIALBANKSORDEVELOPMENT BANKS
LANDDEVELOPMENT BANKSORAGRICULTURAL
BANKS
INDIGENOUSBANKS
CENTRAL/FEDERAL/ NATIONALBANKS
COOPERATIVEBANKS
EXCHANGEBANK

12. SAVINGS BANK
Saving Banks are established to create
saving habit among the people.
These banks are helpful for salaried
people and low income groups.
The deposits collected from customers are
invested in bonds, securities etc.

13. COMMERCIAL BANKS
Commercialbanksareestablishedwithan
objectivetohelpbusinessman.
Thesebankscollectmoneyfromgeneralpublic.
•Itgiveshort-termloanstobusinessmenbyway
ofcash-credits,overdraftsetc.
Itprovidevariousserviceslikecollecting
cheques,billofexchange,remittancemoney
fromoneplacetoanotherplace.

14. INDUSTRIAL BANKS /
DEVELOPMENT BANKS
These banks collect cash by issuing shares
and debentures.
It provide long-term loans to industries.
The main objective of these banks is to
provide
Long-term loans for expansion and •
modernization of industries.

15. LAND DEVELOPMENT BANKS /
AGRICULTURAL BANKS
Landmortgageoflanddevelopmentbanks
arealsoknownasAgriculturalBanks.
Theseareformedtofinanceagricultural
sector.•Italsohelpinlanddevelopment.

16. INDIGENOUS BANKS
It means ‘Money Lenders’.
They collect deposits from general public and
grant loans to the needy persons out of their
own funds as well as from deposits.
These indigenous banks are popular in villages
and small towns.
It perform combined functions of trading and
banking activities.

17. CENTRAL/FEDERAL/ NATIONAL
BANKS
Every country of the world has a Central bank.
In India, RBI ,In USA, Federal Reserve ,In UK, Bank of
England .
These central banks are the bankers of the other banks.
It provide specialized functions i.e. Issue of paper
currency, Working as bankers of government,
Supervising and controlling foreign exchange.
A Central Bank is a non-profit making institution. • It
does not deal with the public, it deals with other banks.

18. COOPERATIVE BANKS
Cooperative Banks are registered under
the Cooperative Societies Act, 1912.
Itgivecreditfacilitiestosmallframers,
salariedemployees,small-scaleindustries
etc.
These banks are available in rural as well
as urban areas.

19. EXCHANGE BANK
These banks are mainly concerned with
financing foreign trade.
Hong Kong Bank, Bank of Tokyo, Bank of
America are the examples of Foreign
Banks working in India.

20. ROLE OF BANKS IN THE ECONOMIC
GROWTH
Capital Formation
Monetization of Debts
Regional Balance
Consultancy Services
Modernization of Business
Regulation of Economic Activity
Influence on Interest Rates
Elastic Money Supply
Promotion of Enterprise
Development of Trade and Commerce

21. Banks are Entrepreneurs
Inrecentdays,bankshaveassumedtheroleofdeveloping
entrepreneurshipparticularlyindevelopingcountrieslikeIndia.
Itincludestheformationofprojectideas,identificationofspecific
projectssuitabletolocalconditions,inducingnewentrepreneursto
takeupthesewell-formulatedprojectsandprovisionofcounseling
servicesliketechnicalandmanagerialguidance.
Banksprovide100%creditforworthwhileprojects,whichisalso
technicallyfeasibleandeconomicallyviable.Thuscommercial
bankshelpforthedevelopmentofentrepreneurshipinthecountry.

22. Banks as Employers
After the nationalization of big banks, banking
industry has grown to a great extent.
Bank’s branches are opened in almost all the
villages, which leads to the creation of new
employment opportunities.
Banks are also improving people for occupying
various posts in their office.

23. Encouraging Right Type of
Industries
The banks help in the development of the right
type of industries by extending loan to right type
of persons.
They help not only for industrialization of the
country but also for the economic development
of the country.
They grant loans and advances to
manufacturers whose products are in great
demand.

24. Recent Trends in Banking Sector
Digitization
Enhanced MobileBanking
UPI (Unified Payments Interface
Block Chain
Artificial Intelligence Robots
The rise of FintechCompanies
Digital-OnlyBanks
CloudBanking
Biometrics
Wearables

25. THANK YOU