1. COMMERCIAL BANKS & INDUSTRIAL FINANCE:
THE EVOLVING ROLE

2. Financial System in India
Financial Sector includes three main segments viz.,
1) Financial Markets - Money Market, Debt Market, Capital Market, Forex Market
2) Financial Institutions - Banks, Mutual Funds, Insurance Companies etc.
3) Financial Products - Loans, Deposits, Bonds, Equities etc.

3. Financial Sector - Regulators
Reserve Bank of
India
(RBI)
Banks
Securities Exchange
Board of India
(SEBI)
Capital Markets/
Mutual Funds
Insurance Regulatory
and Development
Authority
(IRDA)
Insurance
Companies

4. BANK: Meaning & Definition
Bank is a financial intermediary between Money Savers and Money Seekers.
Bank is engaged in the business of purchasing and selling of MONEY.
Bank is a financial intermediary which accepts/takes deposits from public at large and make loans to different entities.

5. Banking in India
Banking in India is governed by Banking Regulation Act,1949 and RBI Act,1934
Banking in India is controlled /monitored by RBI and Govt. of India

6. Phase – 1: Phase of Banking Consolidation
Three presidency banks were established in Calcutta (1806) in Bombay (1840) and in Madras (1843)
In the early part of 20th century, on account of the Swadeshi movement a number of join stock banks were established by Indians like Bank of India, Bank of Baroda and Central Bank of India.
In 1921 the three presidency banks were merged and the IMPERIAL BANK OF INDIA was created.
The Reserve Bank of India Act was passed in 1934 and the RBI came into existence in 1935 and RBI was nationalized in 1949.

7. Phase – 1: Phase of Banking Consolidation...
The Banking Regulation Act,1949 gave wide powers to RBI to act as the REGULATOR FOR BANKS in India
In 1955, State Bank of India became the successor to the Imperial Bank of India, under the State Bank of India Act, 1955.
Credit Authorization Scheme (CAS) was launched in November 1965.

8. Phase – 2 Phase of Innovative Banking (1964 – 1990)
MAJOR ISSUES:
Social Control and Service
- Banking Coverage and Credit Gaps (Priority Sector Finance)
- Agricultural Finance Corporation Ltd
Organizational Changes
National Credit Council (1968)
To assess the DD of bank credit from various sectors of economy
To decide the priorities for grant of loans for various industries
To coordinate the investment policies of comm. Banks in India
LEAD BANK Scheme (1969)
Various committees were appointed by Govt. to improve the banking sector performance:

9. A. Daheja Committee Report:
Key Findings:
Industries were over – relying on bank credit
Industries using excess credit facilities
Poor Credit Appraisal by Banks
Suggestions:
Effective Credit Appraisal Mechanism
Industries should keep minimum inventories
Availability of Credit to Priority Sector
New Bill Market Scheme (NBMS)

10. B. Tondon Committee Report
Key Findings:
Rationing/Regulating of Bank Credit
Suggestions:
MPBF Mechanisms
Credit Control Standards for Banks
Bank Credit to priority sector
Uniform distribution of credit across industries

11. Nationalization of Banks: (From Private to Govt. Ownership)
In 1969, the Govt. of India NATIONALIZED 14 major commercial banks having deposits of Rs. 50 crore or more.
In 1980, SIX more commercial banks were NATIONALIZED, with a deposit of Rs. 200 crore.
The aim behind nationalization is to safeguard the Public Interest and Social Control.

12. Phase – 3 Phase of Prudential Banking (1991)
Banking Sector Reforms:
Appointed “NARSIMHAM COMMITTEE – I” in 1991
MAJOR RECOMMENDATIONS:
On Directed Investments (CRR & SLR)
SLR and CRR should be reduced to prudent levels
On Directed Credit Programmes
On Interest Rate Structure
On Capital Adequacy Norms
On Income Recognition, Asset Classification and Provisioning Requirements

13. “NARSIMHAM COMMITTEE – I” (1991)
MAJOR RECOMMENDATIONS:
On Organisation Structure
Branch Licensing
Universal Banking Service
International Banking
Expansion of RRBs (Regional Rural Banks)
Banking Orgn. Structure (Thee tire & Four Tire)
Free Entry to Foreign Banks
Free Entry for Private Sector Banks
Supervisory Authority
(Board of Financial Supervision setup under RBI)

14. NARSIMHAM COMMITTEE – II MAJOR RECOMMENDATIONS (1998)
CAPITAL ADEQUACY
Capital Adequacy should include “CREDIT RISK” & “MARKET RISK”
CRAR Should be increased from 8% to 10%.
The capital base of banks should meet International standards
ASSET QUALITY, NPAs AND DIRECTED INVESTMENTS
PRUDENTIAL NORMS AND DISCLOSURE REQUIREMENTS
Banks Should Strictly comply the RBI Prudential Norms
ASSET – LIABILITY MANAGEMENT

15. NARSIMHAM COMMITTEE – II MAJOR RECOMMENDATIONS (1998)…
SYSTEM AND METHODS IN BANKS
More Operational Freedom to Banks
More Concentration on RURAL BANKING
Technology Up-gradation
Human Resource Development
INTERNAL SYSTEMS
Internal Audit and Inspection
Periodical Visits to Branch Offices
Simplification of documents and inter bank communication process

16. NARSIMHAM COMMITTEE – II MAJOR RECOMMENDATIONS (1998)…
HUMAN RESOURCE MANAGEMENT
Free/Decentralized Recruitment
Training and Development Programmes for Employees
Flexibility to decide the “WAGE Structure”
VRS for employees
TECHNOLOGY UPGRADATION
MIS
COMPUTERISATION
TELE BANKING

17. NARSIMHAM COMMITTEE – II MAJOR RECOMMENDATIONS – Contd…
STRUCTURAL ISSUES
No further NATIONALIZATION to be made
No distinction between ‘public’ and ‘private’ sector banks
Control of banking sector to be centralized
Emphasis upon ‘de-regulation’ of INT. RATE
RURAL AND SMALL INDUSTRIAL CREDIT
Development of RRBs and Dist. Credit Co-op Banks
Assigning KEY role to NABARD for AGRI. Finance

18. Classification of Banks
Central
RBI
Bank
Public Sector
Banks
New Private
Sector
Private
Old
Foreign Banks
Co-operative
Regional
Rural

19. Commercial Banks: DEPOSIT PRODUCTS

20. Loan Products

21. Thank You