In terms of the recommendations of the National Credit Council, the Banking Regulation Act was amended on February 1, 1969 in order to enable the appointments of directors with specialised knowledge or practical experience in the fields of agriculture, small scale industry, co-operation, rural economy as members of the boards of directors of commercial banks with the approval of the Reserve Bank. According to the Central Banking Enquiry Committee 1931 , money lending activity in India could be traced back to the Vedic period, i. The Reserve Bank made sustained efforts towards adoption of international benchmarks in a gradual manner, as appropriate to the Indian conditions, in various areas such as prudential norms, risk management, supervision, corporate governance and transparency and disclosures. With this grew the requirement for modern banking services, uniform currency to finance foreign trade and remittances by British army personnel and civil servants. Prior to these, changes in interest rates were governed by voluntary inter-bank agreements amongst the important Indian and foreign banks which used to fix ceilings on interest rates. The power to include or exclude banks in or from the Schedule was vested with the Governor General in Council.
Banks were required to make a general provision on standard assets of a minimum of 0. At a broader level, given that the incidence of poverty and lack of access to credit was more in the remote unbanked areas, the branch expansion policy was designed to reduce inter-regional disparities in deployment of credit. The number of subsidiaries set up by banks increased from 37 at end-March 1998 to 131 by end-March 2008. Thus, supervision, now apart from covering the supervisory process of the Reserve Bank also focused on external audit and internal audit. Much of the fear regarding the new legislation arises more of out trust and confidence issues which need to be addressed in right earnestness. They were known as Presidency banks as they were set up in the three Presidencies that were the units of administrative jurisdiction in the country for the East India Company.
The Reserve Bank was empowered to inspect any banking company with the objective of satisfying itself regarding the eligibility for a licence, opening of branches, amalgamation, compliance with the directives issued by the Reserve Bank. Most activity during the war period was concentrated in urban areas. Various initiatives by the Reserve Bank led to qualitative improvement in customer service. The spread of banking and deposit mobilisation were the two most significant achievements of the nationalisation. It was in this context that in the Annual Policy Statement for the year 2005-06, the Reserve Bank stated that there were legitimate concerns with regard to the banking practices that tended to exclude rather than attract vast sections of population, in particular pensioners, self-employed and those employed in the unorganised sector.
April 1992 The ceilings on deposit rates were simplified by replacing the existing maturity-wise ceiling prescriptions by a single ceiling rate of 13 per cent on all deposits above 46 days. Such an allocation of bank credit was not consistent with the goals of achieving equitable allocation of credit and the relative priorities set out in the Five Year Plans. Aggregate domestic non-performing advances of all public sector banks, which constituted 14. The Reserve Bank had two options, viz. Necessary guidelines were issued to nationalised banks in November 2007.
Accordingly, Deposit Insurance Corporation of India was established in January 1962. The number of foreign bank branches increased from 140 at end-March 1993 to 186 at end-March 1998. As compared with the then existing system of eight health codes, banks were required to classify their advances into four broad groups, viz. Their branch offices declined from 1504 in 1951 to 622 in 1961 and to 203 in 1967. In response to these developments, a number of measures were undertaken in the mid 1980s for consolidation and diversification and, to some extent, deregulation of the financial sector. Exchange banks were foreign owned banks that engaged mainly in foreign exchange business in terms of foreign bills of exchange and foreign remittances for travel and trade. Any bank having shareholding in excess of 5 per cent in any other bank in India was required to indicate a time bound plan for reduction of such holding to the permissible limit of 5 per cent.
Therefore, it can be said that Reserve Bank has not succeeded in removing this short-coming in the Indian banking system. While the spread of bank branch network helped to some extent, the deposit interest rate, it was believed, had to be attractive for such effort to be successful. The Lead Bank Scheme provided the blue-print of further bank branch expansion. Deregulation of interest rates was, thus, a major element in the process of infusing competition as detailed earlier. The legislation also enabled amalgamation of more than two banking companies by a single scheme. Just go to and hit the Subscribe button. The member depositors had confidence in the working of cooperatives because of their small size.
The Survey Committee observed that the main deficiency of the rural credit system was its lack of focus. All these banks were founded under private ownership. Even from the point of view of the banking sector, it posed a systemic risk as the bank also held about Rs. The number of branches increased sharply between 1940 and 1945 and most of this branch expansion was accounted for by scheduled commercial banks other than Imperial Bank of India and exchange banks and non-scheduled banks. This, to a large extent was facilitated by improved profitability as it allowed banks to increase their retained earnings see Chapter V for details.
Occasional bank failure is necessary and healthy, but the banking system as a whole should not get into trouble. This is not the genuine financial inclusion that comes from banks obtaining genuine users; this is mechanically chasing a target. The share of agriculture in total bank credit also remained more or less at the same level between 1951 and 1967. As a result, they were not resilient enough. New branches opened helped considerably in deposit mobilisation and the evidence suggested that of the incremental deposits a large proportion was from the branches opened after 1969. . Thus, during this phase, the Imperial Bank of India performed three set of functions, viz.
However, in view of the oversized equity base, as against the projected stream of earnings coming in the way of tapping the capital market by quite a few nationalised banks, the Government allowed the banks to reduce the paid-up capital. For instance, quota and ceilings were relaxed and there was liberalisation of imports. Accordingly, the Banking Companies Amendment Act 1961 was enacted that sought, inter alia, to clarify and supplement the provisions under Section 45 of the Banking Companies Act, which related to compulsory reconstruction or amalgamation of banks. Banks with net worth lower than Rs. But the most important service that banks render the economy is to look at a firm, form a view about its future prospects, and deliver capital to firms with good future prospects. The working capital of 95 banks was less than Rs. The Swadeshi Movement of 1906 provided a great impetus to joint stock banks of Indian ownership and many more Indian commercial banks such as Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were established between 1906 and 1913.
Most banks in the organised sector engaged primarily in extending loans to traders dealing with agricultural produce. The inflation has produced adverse repercussions on the economic situation of the country. By end-March 2007, about 86 per cent branches were fully computerised, of which a little more than half the branches were under core banking solutions. The period after setting up of the Reserve Bank saw increase in the number of reporting banks. The plethora of compulsions on the banking sector translated into a complex set of micro regulations and led to financial repression.