1. BANKS IN INDIA

3. INDIA
 All banks which are included in the Second
Schedule to the Reserve Bank of India Act,
1934 are Scheduled Banks.
 These banks comprise Scheduled Commercial
Banks and Scheduled Co-operative Banks.

4. Scheduled
Commercial
Banks
State Bank of
India and its
Associates
Nationalized
Banks
Foreign
Banks
Private
Sector
Banks,
Regional
Rural Banks
Scheduled
Co-operative
Banks
Regional
Rural
bank
Scheduled State
Co-operative
Banks
Scheduled Urban Co
operative Banks

5. Section 42(6) The Reserve Bank Of India Act,
1934 Scheduled Bank
 The Bank shall, save as hereinafter provided, by
notification in the Gazette of India,- (a) direct the inclusion in the Second Schedule of any
bank not already so included which carries on the
business banking 3[ in India] and which–
 (i) has a paid- up capital and reserves of an aggregate
value of not less than five lakhs of rupees, and
 (ii) satisfies the Bank that its affairs are not being
conducted in a manner detrimental to the interest of its
depositors, and
 (iii) 4[ is a State co- operative bank or a company] as
defined in 5[ section 3 of the Companies Act, 1956 (1 of
1956 ), or an institution notified by the Central
Government in this behalf] or a corporation or a
company incorporated by or under any law in force in
any place 6[ outside India];

6. EVOLUTION OF BANKING
 Prior to 1950
 Some schedule banks after RBI founded in 1935
were PNB, Allahabad Bank, Oudh Commercial
bank
 Total around 58 banks existed

7. Foundation Phase 1948-1967
 1949 Banking Regulation Act
 Imperial Bank Of India converted into State bank
of India
 Institutional frame work for long term financing to
agri and industry
 By 1968 there were 281 banks 71 scheduled and
210 non scheduled
 Till 1968 RBI and SBI with associates were under
the govt control

8. Expansion Phase 1968-1984
Socialization of Banking started in 1968
.Commercial banks were viewed as agents of
change
14 banks were nationalized in 1969 6 in 1980
Birth of RRB in 1975 and NABARD in 1982
By 1984 scheduled banks 264 and non scheduled
banks reduced to 268

9. Consolidation Phase( 1985-1990)
 Consolidation of exiting banks
 Focus on credit management , staff productivity
 Assest liabilities priced by Rbi
 High CRR and SLR
 Consolidation of losses because of farmer debt
relief schemes

10. Reformatory Phase
 NARASIMHAM COMMITTEE REPORT PHASE 1 – report
submitted – 1991
 Recommended CRR reduction to 10% and SLR to 25%
 Interest payment of 3% on cash balances above minimum









CRR balances
Interest rate deregulation
Minimum of 4% CAR capital adequacy ratio
Income recognition ,assets classification and provisioning
norms
Restructure to create 3or 4 large banks – gave the concept
of universal banks
Entry of Pvt. Banks with level playing field
Abolishment of branch licensing
Opening for foreign banks
Supervision of banks rather than regulation
Elimination of duality of control on banking sector

11. ACTION ON
RECOMMENDATION
 CRR brought down from 15% to 5% in 2004
 SLR from 38.5% to 25%
 Inclusion in other areas in priority sector lending




of 40%
Bank to have PLR
Capital adequacy norms of 8%
Creation of Assets reconstruction fund
Restructuring new India bank merged with PNB

12. CRR AND SLR DYNAMICS

13. Pvt banks
 Banking regulation Amendment Act 1994
permited entry of pvt sector banks 30
 Allowed entry of foreign banks currently 33

14. (Narasimham Committee IIBanking Sector Reforms
 RECOMMENDATIONS
 The Committee suggests that pending the emergence of markets in
India where market risks can be covered, it would be desirable that
capital adequacy requirements take into account market risks in
addition to the credit risks.
 In the next three years, the entire portfolio of
Government securities should be marked to market
and this schedule of adjustment should be announced
at the earliest. It would be appropriate that there
should be a 5% weight for market risk for Govt. and
approved securities.

15. CENTRAL BANK RBI
 CENTRAL BANK OF INDIA
 UNDER RBI ACT 1934
 FUNCTIONAL SINCE 1935

42. REGULATION OF MONEY AND
CREDIT
 MONETARY TECHNIQUES
 CRR AND SLR
 OMO
 REPO AND REVERSE REPO THROUGH LAF

43. REGULATION OF MONEY AND
CREDIT CONDITIONS
 NON- MONETARY TECHNIQUES
 DIRECT CREDIT ALLOCATION
 CREDIT RATIONING
 REPO AND REVERSE REPO