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A bank is an institution that accepts deposits of money from the public, which are repayable on demand and withdrawable by cheque. Such deposits are used for lending to others and not for financing its own business of any kind. The term lending includes both direct lending to borrowers and indirect lending through investment in open market securities. A sound banking system plays a pivotal role in the growth of a nation's economy. In India, the beginning of banking system dates back to 1881, when the first bank called as 'the Oudh Commercial Bank' was established. It was followed by the setting up of the 'Punjab National Bank' in 1894. Subsequently, a number of commercial banks came up in the country. The number of bank offices multiplied from 8,300 in July 1969 to more than 47,000 in June 1995. It substantially improved the overall availability of banking facilities in the country.

The Reserve Bank of India (RBI) is the supreme monetary authority responsible for controlling the banking system in the country. It was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act, 1934. Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India. It was nationalised on the basis of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948. As a result all shares in the capital of the bank were deemed transferred to the Central Government on payment of a suitable compensation.The central office of the Reserve Bank is established at Mumbai and the bank has 22 regional offices ,most of which are in State capitals. The Banking Regulation Act, 1949, provides the legal framework for regulation of the banking sector by the Reserve Bank of India.

The main functions of RBI are:-

  • Formulate, implement and monitor the monetary policy with the objective of maintaining price stability and ensuring adequate flow of credit to productive sectors.

  • Regulate and supervise the financial system by prescribing the broad parameters of banking operations within which the system must function.

  • Manager foreign exchange in order to facilitate external trade and promote orderly development and maintenance of foreign exchange market in India.

  • Issues and exchanges or destroys currency and coins not fit for circulation, so as to give the public adequate quantity of supplies of currency notes and coins and in good quality.

  • Performs a wide range of promotional functions to support national objectives.

  • Banker to the Central and State Governments.

  • Banker to banks by maintaining banking accounts of all scheduled banks.
Composition and current scenario

As per the Reserve Bank of India Act, 1934, banks in India are classified into scheduled and non-scheduled banks. Scheduled banks are those which are entered into the second schedule of the RBI Act, 1934. It includes those banks which have a paid-up capital and reserves of an aggregate value of not less than Rs. 5 lakhs and which satisfy RBI that their affairs are being carried out in the interests of the depositors. While, non-scheduled banks are those which have not been included in the second schedule of the Act. The scheduled banks comprise scheduled commercial banks and scheduled cooperative banks. Further, the scheduled commercial banks in India are categorised into five different groups according to their ownership and/or nature of operation:- (i) Nationalised Banks; (ii) State Bank of India and its associates; (iii) Regional Rural Banks (RRBs); (iv) Foreign banks; and (v) Other Indian private sector banks. Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Co-operative Banks.

At present, there are 170 scheduled commercial banks in the country, which includes 91 regional rural banks (RRBs), 19 nationalised banks, 8 banks in State Bank of India group and the Industrial Development Bank of India Limited (IDBI Ltd).Besides, there are only four non-scheduled commercial banks in the country.


The State Bank of India (SBI) and its associate banks include:-

Regional Rural Banks (RRBs) have been set up in the country on the sponsorship of individual nationalised commercial banks. These banks aim at taking the banking facilities to the doorsteps of rural masses especially in the remote areas. The objective was to provide credit to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs so as to develop productive activities in the rural areas. They have been conceived as institutions that combine the features of both the co-operatives and commercial banks. Initially, five RRBs were set up in 1975, at Moradabad and Gorkhpur in Uttar Pradesh; Bhiwani in Haryana; Jaipur in Rajasthan and Malda in West Bengal. But gradually the spread of these banks has increased and the Government has taken several policy measures for their growth and expansion.

Foreign banks like Citibank , HSBC , Standard Chatered Bank , etc are the branches of those banks which are incorporated in foreign countries. Most of them perform essentially the same range of services as local banks, except that their focus in terms of product and customers may be different due to their limited branch network. They bring in new technology and facilitate in the introduction as well as assimilation of international products into the domestic markets. They help the local banking industry keep pace with developments in the financial centres abroad. They also help provide Indian corporations access to foreign capital markets. In keeping with the general trend towards liberalisation, the Government has introduced several measures for widening the scope for foreign banks to enter and operate in India.

The State Co-operative Banks (SCBs) constitute the apex of the three tier co-operative credit structure, organised at the level of individual States. While, Urban Co-operative Banks (UCBs), refers to the primary cooperative banks located in urban and semi-urban areas. Initially, these banks were allowed to lend money only for non-agricultural purposes and essentially to small borrowers and businesses. Today, their scope of operations has widened considerably. The Urban Banks Department of the Reserve Bank of India is vested with the responsibility of regulating and supervising the urban cooperative banks.

Given this set up, with liberalisation, banks in India are venturing into non-traditional and diversified areas other than the core banking activities. They are facing increased competition both domestically and abroad. Hence, in order to make a benchmark in the changed environment, they need to tackle issues like profitability, efficiency, technological upgradation, customer satisfaction, etc in an effective manner.

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Head Offices of Nationalised Banks
List of non scheduled cooperative banks
List of Primary Dealers in Government Securities Market
Private-Foreign Banks
Private-Indian Banks
Regional Rural Banks
SBI and its Associate Banks
Scheduled Urban Cooperative
State Cooperative Banks
Non Banking Financial Companies
Help Desk of Reserve Bank of India
Websites of Banks in India
National Federation of State Cooperative Banks Ltd. (NAFSCOB)
Draft Vision Document for Urban Co-operative Banks
Indian Coinage Act, 1906
Foreign Exchange Management Act, 1999
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