Role Of Commercial Banks In India PDF

INSTITUTE: USB DEPARTMENT: BBA Bachelor of Business Administration Business Environment BBO-305 Mr. Kapil Sharma Unit 2 : Chapter 2.2 Role of Commercial Banks...

INSTITUTE: USB DEPARTMENT: BBA Bachelor of Business Administration Business Environment BBO-305 Mr. Kapil Sharma Unit 2 : Chapter 2.2 Role of Commercial Banks in India DISCOVER. LEARN. EMPOWER  Space for visual (size ROLE OF COMMERCIAL BANKS INDIA 24) Course Outcome CO No Statement Level To understand the basic components CO1 of business environment for growth Remember and survival of businesses. To apply environmental analysis Will be covered in CO2 techniques for smooth functioning of Understand businesses. thislecture To analyze the impact of continuously changing government CO3 Apply regulations on business and its profitability. To assess the legal, social, financial and global environmental factors CO4 Analyse impacting businesses and their growth To create an entrepreneurial venture CO5 Apply plan. 2  ROLE OF COMMERCIAL BANKS IN INDIA Trade Development: The commercial banks provide capital, technical assistance and other facilities to businessmen according to their need, which leads to development in trade. Supports to Agriculture Development Supports to Industrial Development Capital Formation (Capital formation means increase in number of production units, technology, plant and machinery) Development of Foreign Trade: Letter of credit is issued by the importer’s bank to the exporters to ensure the payment. The banks also arrange foreign exchange. Transfer of Money Supports to more Production (Agriculture & Industry) Development of Transport (banks financed the transport sector) 3  IMPORTANCE OF BANKS Accelerating the Rate of Capital Formation: They encourage the habit of savings among people and mobilize idle resources for production purpose. Provision of Finance and Credit: Banks are instruments for developing internal as well as external trade. Monetization of Economy: Banks are opening branches in rural areas that can promote the process of the monetization in the economy. Innovations: Innovations are an essential prerequisite for economic development. These innovations are mostly financed by bank credit in the developed countries. Implementation of Monetary Policy Encouragement to Right Type of Industries Regional Development Promote Industrial Development Fulfillment of Socio-economic Objectives 4 NATIONALIZATION OF COMMERCIAL BANKS IN INDIA AND FUNCTIONS OF THE COMMERCIAL BANKS 5  NATIONALIZATION OF BANKS Nationalization: The act of taking an industry or assets into the public ownership of a national government or state. Nationalization took place in two phases, with a first round in 1969 covering 14 banks followed by another in 1980 covering six banks. REASONS Private commercial banks were not fulfilling the social and developmental goals of banking The developmental goals of financial intermediation were not being achieved other than for some favored large industries and established business houses. To ensure that credit allocation occur in accordance with plan priorities. 6 Reduce the hold of moneylenders and make more funds available for agricultural 7  STRUCTURE OF INDIAN COMMERCIAL BANKING SYSTEM SBI & its Associate Banks Public Nationali Sector sed Banks Banks Regional Indian Rural Banks Banks Commerc New ial Banks Private Foreign Private Banks Sector Banks Banks Old Private Banks 8 COMMERCIAL BANKS : MEANING A commercial bank is owned by stockholders and operated for profit. Its primary functions are to receive, transfer, and lend money to individuals, businesses, and governments. Indian banks consist mostly of Scheduled Commercial Banks (SCBs), which includes both Public Sector Banks, and the Private Sector Banks. In Public Sector Banks, the government must retain a 51% stake. 9  SCHEDULED COMMERCIAL BANKS : DEFINITION Scheduled Commercial Banks in India are categorized into five different groups according to their ownership and / or nature of operation. These bank groups are State Bank of India and its Associates Nationalized Banks Private Sector Banks Foreign Banks and Regional Rural Banks In the bank group-wise classification, IDBI Bank Ltd. has been included in Nationalized Banks. 10  ROLE OF COMMERCIAL BANKS Accelerating the Rate of Capital Formation Provision of Finance and Credit Monetization of Economy (support to rural areas) Innovations Implementation of Monetary Policy Encouragement to Right Type of Industries Development of Agriculture Regional Development Fulfillment of socio-economic objectives 11  FUNCTIONS OF COMMERCIAL BANKS Accepting deposits Advancing Loans Discounting Bills of exchange Agency services and General services 12  DEPOSITS : TYPES Demand or Current Account Deposits A depositor can withdraw it in part or in full at any time he/she likes without notice It carries no interest Cheque facility is available Fixed Deposits or Time Deposits Fixed deposits for 15 days to few years Withdrawn at expiry of term High rate of interest Risk less investment Saving Bank Deposits Small saving deposits Less rate of interest Money can be withdrawn through cheques /ATM/by demanding 13  ADVANCING LOANS This is the most important means of earnings for the banks. Giving loans to businessmen. But it keeps a fine balance between deposits and loans. Banks profitability depends on this as well By allowing an over draft facility, cheques are honored even if deposits are less. This facility is for businessmen only and interest on overdraft amount is charged. Loans by creating a deposit Banks give loans to people by charging interest Bank asks for security Simply opens an account in name of needy person and issues a cheque book to transact Loans granted mostly for business 14  DISCOUNTING BILLS OF EXCHANGE If a seller sells some goods to a buyer who does not pay in cash. But the seller draws a bill of exchange which is signed by buyer. There is maturity or payment period, say one month. Now the seller can give this hundy to a bank which will give him/her cash against it. Bank charges interest on it till one month. 15  AGENCY SERVICES Collection of bills and cheques. Collection of dividends, interest, and premium. Purchase and sale of shares and debentures. Payment of insurance premium. Acts as trustee when nominated. 16  GENERAL SERVICES Traveler's cheques, bank draft. Safe vaults for valuables Supplying trade information Economic surveys Projects report preparation 17 18  REFERENCES Reference Books- K. Aswathappa, Essentials of Business environment. Francis Cherrunilam, International Trade and Export Management, Himalaya Publications. References of websites- google.com https://www.toppr.com/guides/business-studies/business-environment/indian-industrial-policies/ https://study.com/academy/lesson/what-is-business-environment-definition-factors-quiz.html 19 THANK YOU