Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors.
For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process.
The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money have become the order of the day.
The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:
* Early phase from 1786 to 1969 of Indian Banks
* Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
* New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.
Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in india as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.
Phase II
Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised.
Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership.
The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:
* 1949 : Enactment of Banking Regulation Act.
* 1955 : Nationalisation of State Bank of India.
* 1959 : Nationalisation of SBI subsidiaries.
* 1961 : Insurance cover extended to deposits.
* 1969 : Nationalisation of 14 major banks.
* 1971 : Creation of credit guarantee corporation.
* 1975 : Creation of regional rural banks.
* 1980 : Nationalisation of seven banks with deposits over 200 crore.
After the nationalisation of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.
Phase III
This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money.
The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.
History of Banking in India
History of Banking in India
Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors.
For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process.
The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money have become the order of the day.
The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:
* Early phase from 1786 to 1969 of Indian Banks
* Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
* New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.
Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in india as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.
Phase II
Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised.
Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership.
The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:
* 1949 : Enactment of Banking Regulation Act.
* 1955 : Nationalisation of State Bank of India.
* 1959 : Nationalisation of SBI subsidiaries.
* 1961 : Insurance cover extended to deposits.
* 1969 : Nationalisation of 14 major banks.
* 1971 : Creation of credit guarantee corporation.
* 1975 : Creation of regional rural banks.
* 1980 : Nationalisation of seven banks with deposits over 200 crore.
After the nationalisation of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.
Phase III
This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money.
The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.
History of Banking in India
Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors.
For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process.
The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money have become the order of the day.
The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:
* Early phase from 1786 to 1969 of Indian Banks
* Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
* New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.
Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in india as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.
Phase II
Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised.
Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership.
The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:
* 1949 : Enactment of Banking Regulation Act.
* 1955 : Nationalisation of State Bank of India.
* 1959 : Nationalisation of SBI subsidiaries.
* 1961 : Insurance cover extended to deposits.
* 1969 : Nationalisation of 14 major banks.
* 1971 : Creation of credit guarantee corporation.
* 1975 : Creation of regional rural banks.
* 1980 : Nationalisation of seven banks with deposits over 200 crore.
After the nationalisation of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.
Phase III
This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money.
The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.
No Frills Savings Account
No Frills Savings Account allows you to bank with HSBC with a zero minimum balance requirement i.e. you can maintain this account without any minimum or average balance requirement. The No Frills Savings Account is aimed at making your banking transaction simple and convenient. You don't even need to take the trouble of visiting the branches, you can choose to simply avail of our Internet or Phone Banking facilities and bank from the comforts of your house.
Features & Benefits
The HSBC No Frills Savings Account has no hidden costs
* You can access your account through any VISA ATM in India with your HSBC debit card. One FREE debit card will be available per account
* Internet Banking and Phone Banking facility each available at a nominal annual fee of Rs. 99 only
* 1 FREE branch transaction per month. This transaction should be of the nature of cash deposit only. Additional transactions (over and above the 1 FREE transaction), will be charged a fee of Rs. 50 per transaction
* Keep track of your account with Free quarterly statements. You also have an option to receive E-Statements
TopApply Now for No Frills Savings Account
Note:
The No Frills Savings Account is available only to customers who do not hold a bank account with any bank in India. If the balance in the No Frills Savings Account exceeds Rs. 50,000 or if the cumulative value of credit transactions exceeds Rs. 100,000 in any financial year, such an account will no longer be treated as a No Frills Savings Account and will be required to satisfy the conditions/criteria applicable for a regular Savings Account and be subject to relevant charges thereon. Please refer to the No Frills Savings Account Schedule of charges for details of applicable tariff.
Other Benefits
International debit cardInternational debit card
Use the international debit card to make purchases at 3,50,000 merchant establishments in India and 26 million across the world. Withdraw cash from over 23,500 HSBC / Visa ATM's in India and from over 1 million VISA ATM's across the world (refer section on service charges for applicable transaction charges).
HSBC credit cardHSBC credit card
You can also choose to apply for an HSBC credit card that gives you the freedom from carrying cash and enables you to make purchases at over 18 million merchant establishments in India while enjoying various value-added benefits that enrich your life.
Fremont Investment Bank
Fremont Investment Bank has been providing top class products and services since 1937. It offers competitive interest rates and has an excellent group of customer service representatives. It also provides phone banking and banking through Internet. The information provided by customers is highly safeguarded using a high quality software.
Products and Services offered by Fremont Investment Bank:
Reasons for Transacting with Fremont Investment Bank:
- One need not fear about identity theft while dealing with Fremont Investment Bank. This is because it doesn't solicit personal information through the Internet or over the telephone.
- One will enjoy his experience with Fremont Investment Bank, since the bank has an extensive experience in dealing with investment or loan services.
- Fremont Investment Bank has an extensive branch network in California and there is a telephone banking service center with 24 hour automated information.
- A family can combine accounts with different ownership to insure their investments
Reasons for taking the online route:
- It is justifiable to know more about the firms that choose to distribute a portion of their IPOs through the online investment bank route. Findings show that the online investment banks employed by the Internet IPOs are more reputed than those used by traditional distribution methods. Also their CEOs are significantly younger.
- Internet IPOs have larger market value than those distributed by traditional distribution methods.
- The firms that go public via the traditional distribution methods miss out a lot of money. This is because conventionally the investment banks bought the entire offering and under priced it by 15-20% below the estimated market value. This helped them make a quick profit. Also they had a huge 7% (non-negotiable) fee for carrying out the whole process. Online investment banks have revolutionized the unfair IPO game. They charge a fee of 4-5% as against the egregious 7% and the procedure of selling th IPO is also a lot fairer. A computer ranks the bids submitted by investors for a fixed number of shares and then the shares are allocated to the highest bidders . This helps the market, not the investment banks to set the prices.
- Online investment banking helps to prevent 'spinning' i.e. allocating shares to favored or potential customers thus precluding the average investor from some securities of his interest. Spinning was practiced by traditional investment banks to win future business from large institutional investors.
- It is imperative that firms employ esteemed online investment banks. This is because people have more faith on online IPOs distributed via eminent banks.
- E-auction by online investment banks lowers the cost of investors to obtain information about the reputability of the company issuing shares and the price of shares. Also a tech-savvy investor can go through all the IPOs available in the market and select his preferred mix quickly. Creating an electronic market place has thus reduced the cost and enhanced the quality of information.
Investment banking
Investment banking is a particular form of banking which finances capital requirements of an enterprises. Investment banking assists as it performs IPOs, private placement and bond offerings, acts as broker and carries through mergers and acquisitions.
Functions of Investment Banking:
Investment banks have multilateral functions to perform. Some of the most important functions of investment banking can be jot down as follows:
Derivatives scam: Notices issued to finmin, RBI
The Orissa High Court has issued notices to the Reserve Bank of India (RBI), the Ministry of Home Affairs (MHA), the Ministry of Finance (Finmin) and the Central Bureau of Investigation (CBI) on a petition regarding a derivative scam of Rs 25 lakh crore.
The case involved Indian business houses which suffered huge losses on account of exchange derivative contracts that they entered into a couple of years ago to hedge their foreign exchange risks. The high court ordered issuance of the notices on July 23 and gave the respondents three weeks to file their responses.
When the dollar rose substantially, corporate houses were forced to deal with lower rates because of derivative agreements. For instance, when they were supposed to get Rs 50 against a dollar for the price of goods exported, they were paid much Rs 40 as per their derivative agreements. The dealers were taking the differential Rs 10. However, dealers said that they got only 10 paise per dollar.
The petitioner wanted to know where the rest of the money went and who were the beneficiaries. He alleged that some RBI and other government officials were involved in this scam and the differential money went to foreign countries or to some unknown hands instead of coming to the forex reserves of the country.
Forex derivative contracts worth $3 trillion were traded in India as of December 2007, while the total foreign exposure of India was not more than $500 billion annually. The counsel of the petitioner alleged that the total scam was of around Rs 25 lakh crore and requested the court to hand over the matter to the CBI to ensure that the wrongful gains were deposited in the account of the President of India. The next hearing in the case has been slated for August 17.
Talks are on to set up a non-life venture
JM GargPublic sector lender Corporation Bank is looking to expand its footprint by setting up general insurance and mutual fund ventures. Chairman JM Garg spoke to Abhijit Lele and Sidhartha about the bank’s strategy. Excerpts:
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In the background of high government borrowings, what is your expectation on interest rates?
There is a lot of liquidity in the system, but the demand for credit is still lukewarm. The business community will go for capacity expansion only when they are confident about a rise in demand. It is not that projects are unviable at the moment, but sentiments have to pick up at corporate and retail levels for the demand for funds to start rising again. In the short term, interest rates may not move up. According to my assessment, rates may stay at current levels up to the last quarter of the current financial year. If oil and commodity prices increase, then it is a different story.
So, what has been your experience on the lending front?
On the credit side, the growth has been 24-25 per cent during the first quarter, while deposits have grown by 28 per cent. For us, the credit growth has mainly come from corporate business, which was of the order of 40 per cent, and agriculture. Retail was a little tardy at 11 per cent and small and medium enterprises (SMEs) at 20 per cent. We did quite well on the infrastructure front, especially in the power sector, given the huge deficit. If certain policy decisions are taken, especially regarding roads, then more projects will come up.
What about the delinquency level since there seems to be an improvement for some banks?
There was some pressure in the first quarter. In agriculture, delinquency has gone up because of an expectation that the government will announce another loan waiver scheme. In certain retail sectors, especially home loans, there was some problem. In the second and third quarters, we are focussing more on recovery and we intend to have a one-time settlement scheme for agriculture and SMEs to address the problem. For recovery, we are targeting big-ticket accounts.
LIC is a major shareholder and you had plans to jointly launch a credit card company. What happened to it since the card has already been launched?
Corporation Bank is providing credit card services and the risk is on our books. Ultimately, the understanding is to launch a separate company, but LIC is waiting to reach a base of around 100,000 cards before floating a separate company. We are targeting 50,000 customers in the first year.
What about raising capital since you have the government as well as LIC as shareholders?
We do not need capital at the moment as the present base can support business growth for two years. But if we want to raise capital, we will have to look at a rights issue or a follow-on public offer.
Many banks have set up insurance and mutual fund subsidiaries. What about Corporation Bank?
We cannot get into life insurance because LIC is a shareholder. We are talking to some companies for setting up a non-life insurance joint venture, but these talks are preliminary in nature. Even a mutual fund venture would be beneficial if we do it independently. We are also looking at the wealth management business and are trying to improve our presence in the non-resident Indian market. All these initiatives are important to ramp up our non-interest income.
The government has once again talked about consolidation. So, will you take over some bank or are you willing to be merged with someone else?
Consolidation is a reality. The only question is when will it happen. It will take its own time. At the moment, everyone is watching SBI, which is merging its associate banks. For them, it’s a win-win situation.
In case of others, the employees’ unions will have to be taken into confidence and their concerns sorted out. That will take some time. For us, it is important that we achieve a business of Rs 2,00,000 crore and a net profit of Rs 2,000 crore to be in a position to acquire another bank. That will take at least two years.
Each bank is looking at expanding network. What growth model is Corporation Bank following?
We have applied to the Reserve Bank of India for permission to open 150 new branches. In the North, the focus will be on urban areas, while in the South, the bank will expand in semi-urban and rural areas as it already has a significant presence in the region.