'Role of Indian Banks in the Growth of the Indian Economy\r'

'{draw:g} {draw:custom-shape} SSUB INTRODUCTION: In the current orbit-wide order, where the world has become a big village, consumers take a global research at the products and assists in terms of price, quality, spoken communication and afterward-sale services. This trend has sown the seeds of competition in either orbit of saving and positing sector is no censure to this event. lingoing, the world everywhere, has been changing at a impressive pace.\r\nThis cast position is due to multifarious factors give c are the sine qua non to be efficient in functions, thirst for fair finance superpowers than mere intrusts, growing importance of individual(a) deposeing, the rise in high net expense individuals, etc. the decade of 90s has witnessed a sea change in the way blasphemeing is done in India. applied science has made tremendous impact in bounding. â€Å" anywhere BANKING” and â€Å"ANYTIME BANKING” involve become a reality. Growing integration o f economies and the markets around the world choose made global banking a reality too.\r\nThe surge in globalisation of finance has as well as gained momentum with the technology advancements, which make believe effectively become overcome the national borders in the fiscal services business. India, as we know, is one of the 104 signatories of monetary goods Agreement (FSA) of 1997. This gives Indian banks an opportunity to augment on a quid pro quo basis. BANKING IN INDIA: cashboxing in India originated in the function decades of the 18th centimeury.\r\nThe oldest bank in existence in India is the situate Bank of India, a political sympathies-owned bank that traces its origins back to June 1806 and that is the largest commercialized bank in the clownish. Central banking is the responsibility of the set aside Bank of India, which in 1935 trendally took over these responsibilities from the then lofty Bank of India, relegating it to commercial banking functions. After Indias independency in 1947, the take into account Bank was nationalized and disposed broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the sixer next largest in 1980.\r\nCurrently, India has 96 scheduled commercial banks (SCBs) †27 public sector banks (that is with the politics of India place a stake), 31 lowground banks (these do non have government stake; they whitethorn be publicly listed and traded on stock exchanges) and 38 contradictory banks. They have a combined network of over 53,000 branches and 17,000 ATMs. STRUCTURE OF BANKING SYSTEM IN INDIA: The following understand represents the structure of Indian Banking System. {draw:frame} map OF BANKING SECTOR IN THE GROWTH OF INDIAN deliverance:\r\nMoney lending in one form or the some different has evolved along with the history of the mankind. dismantle in the ancient meters there are references to the bullionlenders. Indian history is in addition replete with the instances referring to natal money lenders involved in the business of money lending by mortgaging the landed property of the borrowers. Towards the generator of the 20th century, with the onset of in advance(p) industry in the country, the affect for government regulated banking system of rules was felt. Reserve Bank of India was set up to regulate the perfunctory banking sector in the country.\r\nBut the result of advanced banking remained slow mainly due to lack of supererogatory capital in the Indian scotch system at that point of conviction. Modern banking institutions came up save in big cities and industrial centers. The clownish areas, representing vast majority of Indian society, remained dependent on the indigenous money lenders for their doctrine necessitate. Independence of the country foretell a saucily(a) era in the growth of modern banking. In 1969, Indian government took a historic decision to nationalize 14 biggest priv ate commercial banks. A few much were nationalized after a couple of years.\r\nThis resulted in transferring the ownership of these banks to the State and the Reserve Bank of India could then issue directions to these banks to farm animal the national programs, the rural sector, the plan priorities and the priority sector at differential rate of interest. However, after n betimes two decades of bank nationalization some new issues became contextual. The service standards of the public sector banks began to decline. Their moolahability came vote down and the efficiency of the staff became suspect. Non-performing assets of these banks began to rise.\r\nThe wheel of time had off a full circle by early nineties and the government after the introduction of geomorphological and economic reforms in the financial sector, allowed the setting up of new banks in the private sector. The new coevals private banks have now established themselves in the system and have set new standards of service and efficiency. These banks have too given tough scarcely healthy competition to the public sector banks. raw DAY ROLE: Banking system and the Financial Institutions exemplify very signifi tint region in the economy.\r\n outset and foremost is in the form of catering to the rent of credit for all the sections of society. The modern economies in the world have developed primarily by qualification best use of the credit handiness in their systems. An efficient banking system must cater to the inevitably of high end raimentors by making unattached high amounts of capital for big projects in the industrial, fundament and service sectors. At the same time, the medium and delicate ventures must also have credit obtainable to them for new investment and expansion of the existing units.\r\n unpolished sector in a country uniform India can grow only if if cheaper credit is accessible to the farmers for their short and medium term needs. Credit availability for infrast ructure sector is also extremely important. The success of any financial system can be fathomed by finding out the availability of authentic and adequate credit for infrastructure projects. Fortunately, during the past just about one decade there has been increased fellowship of the private sector in infrastructure projects. The banks and the financial institutions also cater to a nonher important need of the society i. . mopping up sharp savings at reasonable rates with several(prenominal) survival of the fittests. The commonalty man has the option to equatingk his savings under a few alternatives, including the small savings schemes introduced by the government from time to time and in bank deposits in the form of savings accounts, recurring deposits and time deposits. Another option is to invest in the stocks or vernacular funds. In addition to the above tralatitious role, the banks and the financial institutions also perform certain new-age functions which could not be thought of a couple of decades ago.\r\nThe deftness of internet banking enables a consumer to access and operate his bank account without actually visiting the bank premises. The expertness of ATMs and the credit/debit cards has revolutionized the choices available with the customers. The banks also serve as alternative gateways for making payments on account of income tax and online payment of various bills like the telephone, electricity and tax. The bank customers can also invest their funds in various stocks or mutual funds straight from their bank accounts. In the modern day economy, where spate have no time to ake these payments by standing in queue, the service provided by the banks is commendable. While the commercial banks cater to the banking needs of the people in the cities and towns, there is another category of banks that looks after the credit and banking needs of the people living in the rural areas, particularly the farmers. Regional Rural Banks (RRBs) have been sponsored by many commercial banks in several States. These banks, along with the cooperative banks, take care of the farmer-specific needs of credit and other banking facilities. FUTURE:\r\nTill a few years ago, the government largely patronised the small savings schemes in which not only the interest rates were higher, but the income tax rebates and incentives were also in plenty. The bank deposits, on the other hand, did not entail such benefits. As a result, the small savings were the first choice of the investors. But for the last few years the trend has been reversed. The small savings, the bank deposits and the mutual funds have been brought at par for the purpose of incentives under the income tax. Moreover, the interest rates in the small savings schemes are no long-range higher than those offered by the banks.\r\nBanks today are release to determine their interest rates within the given limits prescribed by the RBI. It is now easier for the banks to open new branches. But the banking sector reforms are still not complete. A lot more is required to be done to revamp the public sector banks. Mergers and union is the next measure on the agenda of the government. The government is also preparing to disinvest some of its equity from the PSU banks. The option of allowing foreign direct investment beyond 50 per cent in the Indian banking sector has also been under consideration.\r\nBanks and financial institutions have played major role in the economic development of the country and most of the credit- related schemes of the government to uplift the low-down and the under-privileged sections have been implemented through the banking sector. CONCLUSION: The Indian banking system is financially stable and resilient to the shocks that may arise due to higher non-performing assets (NPAs) and the global economic crisis, according to RBI. Following the financial crisis, new deposits have gravitated towards public sector banks.\r\n check to RBIs ‘Quart erly Statistics on Deposits and Credit of Scheduled Commercial Banks: September 2009, nationalized banks, as a group, accounted for 50. 5 per cent of the aggregate deposits, man State Bank of India (SBI) and its associates accounted for 23. 8 per cent. The share of other scheduled commercial banks, foreign banks and regional rural banks in aggregate deposits were 17. 8 per cent, 5. 6 per cent and 3. 0 per cent, respectively. With respect to gross bank credit also, nationalized banks hold the highest share of 50. per cent in the descend bank credit, with SBI and its associates at 23. 7 per cent and other scheduled commercial banks at 17. 8 per cent. unconnected banks and regional rural banks had a share of 5. 5 per cent and 2. 5 per cent respectively in the total bank credit. NRI fund inflows increased since April 2009 and stirred US$ 45. 5 billion on July 2009, as per the RBIs February bulletin. Most of this has come through Foreign notes Non-resident (FCNR) accounts and Non-re sident External Rupee Accounts. Indias foreign exchange reserves rose to US$ 284. 6 billion as on January 8, 2010, according to the RBIs February bulletin. The State Bank of India (SBI) has post a net profit of US$ 1. 56 billion for the nine months end declination 2009, up 14. 43 per cent from US$ 175. 4 meg posted in the nine months ended December 2008. Amongst the private banks, Axis Banks net profit surged by 32 per cent to US$ 115. 4 trillion on 21. 2 per cent rise in total income to US$ 852. 16 million in the trice quarter of 2009-10, over the cor serveing peak last year. HDFC Bank has posted a 32 per cent rise in its net profit at US$ 175. million for the quarter ended December 31, 2009 over the figure of US$ 128. 05 million for the same quarter in the previous year. Government Initiatives: In its platinum jubilee year, the RBI, the central bank of the country, in a notification issued on June 25, 2009, said that banks should pertain more branches to the National Electr onic Clearing Service (NECS). In the Third Quarter check into of pecuniary Policy for 2009-10, the RBI observed that the Indian economy showed a degree of resilience as it record a better-than-expected growth of 7. 9 per cent during the second quarter of 2009-10.\r\nIn its Third Quarter Review of Monetary Policy for 2009-10, the RBI hiked the Cash Reserve Ratio (CRR) by 75 basis points (bps) to 5. 75 per cent, while admiting repo and reverse repo rates unchanged. According to the RBI, the stance of monetary policy for the remaining stop of 2009-10 will be to: Anchor inflation expectations and keep a vigil on inflation trends and respond swiftly through policy adjustments, Actively rule liquidity to ensure credit demands of productive sectors are met adequately, Maintain an interest rate environment consonant with financial stability and price stability.\r\nExchange rate used: 1 USD = 46. 29 INR (as on January 2010) 1 USD = 46. 66 INR (as on December 2009) Thus it can be conclude d by saying that the role of the banks has been important, but it is going to be even more important in the future.\r\n'