Banking Law: Historical Development

• These notes provide an in-depth explanation of banking law
• Focus on the important entities, key points, and relevant legislation for deeper insight.

Historical Development of Banking

• Banking has evolved significantly from simple money lending to complex financial intermediation.
• Ancient Mesopotamia saw temples and palaces functioning as secure depositories
• Babylonian temples offered loans secured by land
• The Code of Hammurabi offers proof of interest-based lending (around 1750 BCE)
• Ancient Greece: Bankers (trapezitai) handled deposits, currency exchange, and loans
• Ancient Rome: Banking became formalized, with moneylenders (argentarii) conducting transactions under banking regulations
• Medieval Europe: Banking grew alongside trade, with Italian cities like Venice and Florence becoming banking centers
• The Medici family in Florence pioneered a sophisticated banking network
• Bills of exchange streamlined international trade
• Early versions of checks and promissory notes were introduced
• Jewish moneylenders were significant in Europe due to exclusion from other sectors.
• The Lombards in Italy gained prominence in lending.
• Renaissance merchant banks financed trade alongside exploration
• Banks like Banca Monte dei Paschi di Siena (founded 1472) emerged.
• 1609: The Bank of Amsterdam, an early public bank, offered secure deposits and currency standardization
• Fractional reserve banking was pioneered, which allowed for banks to loan reserves
• 1694: The Bank of England marked the start of central banking
• Gave the government loans, regulated currency, and acted as a template for national banks
• The Industrial Revolution boosted commercial banking due to increased industry
• Commercial banks began credit lending industries, projects, and entrepreneurs
• Joint-stock companies allowed shareholders to invest, which increased capital
• 18th century: Cheques were introduced, which simplified banking transactions
• Savings banks promoted savings habits
• Central banking was common through central banks which managed inflation
• The USA established the Federal Reserve System in 1913
• Post World War II: Global bodies like the International Monetary Fund (IMF) and World Bank were founded
• Electronic Funds Transfer (EFT), ATMs, and Credit Cards transformed banking
• Banks began online services improving access
• Banks extended services to include investment, banking, insurance, funds and derivatives
• Banks entered the era of digital fintech through mobile apps
• Digital wallets and cryptocurrencies were popularized
• Globalization has enabled international trade
• Banks are now focusing on sustainable finance and environmental projects

Types of Banks

• Banks play a key role financial intermediation
• They channel savings for productive activities
• Banks are classified based on target audience
• Central Banks control banking structures
• Reserve bank of India is the central bank for India
• Commercial Banks offer a wide range of service to businesses and individuals
• SBI is the main commercial bank in India
• Cooperative banks are controlled by members for support
• Urban commercial banks are an example of cooperative banks
• Rural Banks serve rural areas and promote financial inclusion
• Developmental banks support long-term industrial financing
• IDBI is an example of a long term development bank
• Investment banks focus on capital acquisition
• Specialized banks support areas like export and import financing
• Indian EXIM bank is an example of specialized bank
• Payments banks facilitate transfers but do not give loans
• Foreign banks are headquartered in foreign nations but operate in other countries
• Islamic banks prohibit interest
• Dubai Islamic Bank is an example of this
• Digital banks operate completely online

Functions of Banks

• Banks mobilize savings through various types of deposits
• Savings Accounts help people save
• Current Accounts are important for business transactions
• Fixed Deposits offer higher interest for longer terms
• Banks lend money such as term loans
• Overdrafts give customer more access to money
• Cash credits offer facilities to businesses
• Personal loans cater to individuals needs
• banks facilitate a small portion of credit of their depositor
• Agency functions provides as an agent to customers
• Transfer funds are done with methods like RTGS
• Utility payments
• Check and bills
• Managing Portfolio
• Banks provide general utility functions
• Locker facilities
• Foreign exchange
• Credit and Debit card issuing
• Online banking
• Financial inclusion that supports banks
• Agriculture is offered through development through credit funds
• Industrial through industrial projects

Social Control

• Social control provides regulatory mechanisms that help serve the public interest
• It aims to align a broader group while curbing fraud
• Protect the interest of depositors
• Channel into growth sectors in industry
• Prevent market monopoly
• Public confidence through timely intervention
• Indian Banks were nationalized in 1969 and 1980
• Sector Lending requires banks to meet criteria for the poor
• 40% of adjusted credit is necessary for domestic banks
• Credit programs include assisting weaker people
• Social objectives give structure specific tasks
• NABARD is a focus on agricultural banking in specific regions
• Prevents exploitation from unregulated sectors
• The banking act has no fill accounts to help income groups
• The Ratio helps ensure stability
• Regulation Ethics prevent money laundering

Protections

• DICGC offers protections to depositors
• The Companies act makes sure a portions are for profits
• The banking scheme gives complaints

Controls

• Banks cannot distribute their faith from credit service based on their faith.
• The Banking act gives activities
• 1984 empowers the action
• A money laundering attempts to stop the money
• Banks often focus on profit over social impact

Nationalization vs Privatization

• Nationalization gives a transfer of entities
• The largest nationalization happened in 1969 for a total of 14 banks
• The objective involves financial structure
• 1980 saw more structures
• A parliamentary review
• This leads to oversite of structure
• Enhanced economic factors
• Bureaucratic control can delay
• Private structure offer the chance of ownership
• The control involves a smaller amount of structure
• Reduced work offer a chance for smaller focus

Regulatory Banking

• The Powers and Function is based on powers on authority
• Financial Stability plays a role in managing Indian Banks
• The RBI give authority to make a policy on currency

Implementation

• Bank control supplies with adjustment
• Controlling the Indian Bank
• Operations give a regulated amount
• Banks require a license to give business
• Circulation make sure to prevent issues
• The system makes sure to prevent
• Systems make the transactions flow

Developmental Functions

• The access makes sure support the banks
• Innovation support the banks
• The agent gives them policy structure

System Overview

• The banking sector is a vital role
• It maintains the monetary tools
• Its stability creates a growth

Objectives

• Maintain the price through stability
• Facilitate economic flow
• Offer the proper stability
• Supply the growth
• Monitor supply and demand

Money Policy

• Money policy manage the supply and money rates

Types

• They aim to see credit growth
• Decreasing the rates
• They reduce money control
• It leads to more sales

Policy Tools

• The rate to give the loans is lowered on banks
• The banks need more revenue
• Banks can use their system to get loans

B Credit Policy

• It involves the regulation of banks
• It ensures a proper distribution
• it is not allowed unless by banking policy

Key Aspects

• Control inflation to reduce the amount of rates
• Proper control
• This is based around inclusion

Power Listing

• They help small systems
• They help other agencies
• It is the process in operation

Licensing

• This includes sector and banks
• Including existing banks
• The structure is on what they obtain
• It helps to give a structure
• The amount needed is 300 to 500 core.
• The ratio makes sure that no bad groups are involved
• They show the amount need
• It shows the amount for standard
• They show the structure
• There is guidelines for structure
• The application must have a good background

Compliant Structure

• The compliance must be great
• Banking Types show several types

Process

• They have a system
• The RBI gives the support
• Approval helps with compliance
• The rbi checks licensed banks
• They look for a good base
• This is for smaller entities
• The support is for different demographics

Company Aspects

• The banks lead out the sectors
• They make the rules
• It is in the banks best interest

Regulation

• This acts as a safeguard

Reasons

• The banks work hard
• They have a good system

Consolidation

• Banks work with other groups
• The Banks have to come to a agreement with them
• The banks look better on paper

Termination

• Termination is important with companies
• The system is important to uphold

Authority

• The RBI makes sure the Banks follow suit
• The Banks go and help with people need
• There are rules to oversee

Instruments

• This means that instruments allow money to work
• The promise creates a good loan
• Cheques and similar payments
• There has to have an amount

Presume

• Instrument prevent the sales
• The instrument acts in a safe manner

banking

• All trade shows a source of income
• They provides trust to the party

Due Course

• Acts as a contract point
• Entitled to be safe

Key aspect

• Transferring is in different ways

Rights and Defenses

• Transfer is necessary
• Payments and legal

Liabilities

• The group work together
• There is a legal way to move the system
• Cancelation allow the structure

Type

• What it can affect
• Where something happens

Overview of the Sector

• Overview is a section
• The code states everything you need

Structure review

• This the review on the banking amount
• How often this appears

Summary of banks

• The banking system is like this
• All steps and systems play a role
• Each person can be impacted to different roles
• This acts in a secure manner
• It helps support a good structure to the group

Provisions

• There is a proper code with all the steps down
• There could be reasons

Difference

• There has to be an agreement
• The banks play there part