BANKING SYSTEM IN INDIA

Presented By -Pooja Singh

Prabeen Singh

Pratyush Devrani

Mubashir Hassan

Mukesh Tiwari

BBA Sec- B IVth Term

Introduction about BankingTraditional Banking SystemFunctions of Banking IndustryObjectives of Banking IndustryServices offered by Banking IndustryConclusionReferences

CONTENTS

“A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital market. A bank connects customers with capital deficits to customers with capital surpluses.”

INTRODUCTION

Section 5 (b) of the Banking Regulation Act 1949 defines “Banking” as

“Accepting for the purpose of lending and investment, deposits of money from the public

repayable on demand or otherwise and withdrawable by cheque, draft, order or

otherwise”

DEFINITION OF BANKING

Basic Introduction:

In traditional banking system, a customer can open any bank account in banks, take the facility of saving his money by depositing money in local bank. He can withdraw his money through check, counter payment and through bank draft. He can meet the bank manager and ask his problem. He can take the physical help for getting loan from bank. 

TRADITIONAL BANKING SYSTEM

HISTORY OF BANKING IN INDIA

The first bank in India was established in 1786. From 1786 till today it has gone through three distinct phases.

PHASE 1

Early phase from 1786 to 1969 of Indian banks.

PHASE 2

Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

PHASE 3

New phase of Indian Banking system with the advent of Indian Financial & Banking Sector Reforms after 1991.

FUNCTIONING OF TRADITIONAL BANKS

Accepting deposits.

Issual of demand drafts.

Granting loans & advances.Undertaking safe custody of

valuables,important documents & securities by providing safe deposit vaults or lockers.

Documentation is maintained through ledgers only.

Minimum balance for opening an account was more during this period.

Credits were granted at very high rate of interest.

Token system for withdrawal of cash from the account.

Possibility of human errors . Time constraint. Customer relationship was limited. Over draft was not available. Processing fees was charged for all the transactions . Passing of cheques was delayed. Limited use of technology.

DISADVANTAGES

FUNCTIONS AND OBJECTIVES OF

BANKING SYSTEM

PRIMARY FUNCTIONSThe main functions of banks are accepting deposit and lending

loans:

Accepting Deposits

1. Fixed deposits - These deposits mature after a considerable long period like 1 year or more than that the rate of interest is fixed the amount deposited cannot be withdrawn before maturity date.

2. Current A/C deposit - These are mainly maintain by business community to facilitate frequent transaction with big amounts. Generally no rate of interest or very low rate of interest is paid on this account.

3. Savings bank A/C - It is kind of demand deposits which is generally kept by the people for the sake of safety. These facility is given for small saver and normally a small rate of interest is paid.

4. Recurring deposit A/C - In case of recurring deposit the fixed amount is deposited in a bank every month for a fixed period of time.

Lending loans

1. Call loans - These loan are called back at any time. Normally, this loans are taken by bill brokers or stock brokers.

2. Short term loans - These are sanctioned for a period up to 1 year.

3. Medium term loans - These are sanctioned for the period varying between 1 and 5 years.

Credit Creation Wealth Function Liquidity Function Payment Function Risk Protection Function Transferring Money From One Place To

Another

OTHER FUNCTIONS

To maintain higher profitability by maintaining circular and efficient flow of amount of money deposited by the customers and the lenders.

To lower transaction costs, lower information costs, create liquidity, and to diversify people's money in a way they could not do on their own.

OBJECTIVES

SERVICES OFFERED BY BANKS

EASY BANKINGA mobile hand set with a connection is the only

instrument needed to make a gateway to your banking transaction, the latest innovation of technology.

Mobile Banking, SMS Banking, Net Banking and ATMs are the major services by

the banks in India.

MOBILE BANKING

With mobile banking facilities, one can bank from anywhere, at anytime and in any condition or anyhow. The system is either through SMS or through WAP.

Services offered on Mobile:• Bill payments • Fund transfers • Check balances

SMS BANKING• Balance enquiry • Last three transactions • Cheque payment status • Cheque book request • Statement request • Bill Payment

SMS banking is also very much safe. First, one authenticates the mobile number with the authentications key. Second, the customer uses secret Mobile Personal Identification Number (MPIN).

INTERNET BANKING/E-BANKING

Online banking/Internet banking/E-banking allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or building society.

Under this service, lockers are provided to the public in various sizes on payment of fixed rent. Customers can deposit their valuables, documents, jewellery, securities, etc. in these lockers.

LOCKER SERVICE

Credit cards allow a person to buy goods and services up to a certain limit without immediate payment. The amount is paid to the shops, hotel, etc. by the commercial banks.

Customer gets some time to make payment to the bank and gets interest free credit for upto 50 days

CREDIT CARDS

A substitute for chequesCan be used for withdrawing cash from ATM as well

as making payments to third parties through POSAccount of the customer is debited instantlyAdd-on facilities24 X 365 days banking

DEBIT CARDS

“The reforms to the old Banking system with the advent of technology has bought in a dramatic change in its functioning and has increased customer relationship.”

CONCLUSION

Technology in Indian Banking[Commercial Banking].

Traditional Banking System in India.Trend & progress of Banking in India, RBI

2006Google search. www.antiphishing.com

REFERENCES