KALYAN CITY BLOG

Nationalisation of Banks in India - Introduction After independence the Government of India (GOI) adopted planned economic development for the country (India). Accordingly, five year plans came into existence since 1951. This economic planning basically aimed at social ownership of the means of production. However, commercial banks were in the private sector those days. In 1950-51 there were 430 commercial banks. The Government of India had some social objectives of planning. These commercial banks failed helping the government in attaining these objectives. Thus, the government decided to nationalize 14 major commercial banks on 19th July, 1969 . All commercial banks with a deposit base over Rs.50 crores were nationalized. It was considered that banks were controlled by business houses and thus failed in catering to the credit needs of poor sections such as cottage industry, village industry, farmers, craft men, etc. The second dose of nationalisation came in April 1980 when banks...

Problems Identified By The Narasimham Committee Directed Investment Programme : The committee objected to the system of maintaining high liquid assets by commercial banks in the form of cash, gold and unencumbered government securities. It is also known as the statutory liquidity Ratio (SLR). In those days, in India, the SLR was as high as 38.5 percent. According to the M. Narasimham's Committee it was one of the reasons for the poor profitability of banks. Similarly, the Cash Reserve Ratio- (CRR) was as high as 15 percent. Taken together, banks needed to maintain 53.5 percent of their resources idle with the RBI. Directed Credit Programme : Since nationalization the government has encouraged the lending to agriculture and small-scale industries at a confessional rate of interest. It is known as the directed credit programme. The committee opined that these sectors have matured and thus do not need such financial support. This directed credit programme was successful from the g...

Economic Reforms of the Banking Sector In India Indian banking sector has undergone major changes and reforms during economic reforms. Though it was a part of overall economic reforms, it has changed the very functioning of Indian banks. This reform have not only influenced the productivity and efficiency of many of the Indian Banks, but has left everlasting footprints on the working of the banking sector in India. Let us get acquainted with some of the important reforms in the banking sector in India. Reduced CRR and SLR : The Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are gradually reduced during the economic reforms period in India. By Law in India the CRR remains between 3-15% of the Net Demand and Time Liabilities. It is reduced from the earlier high level of 15% plus incremental CRR of 10% to current 4% level. Similarly, the SLR Is also reduced from early 38.5% to current minimum of 25% level. This has left more loanable funds with commercial banks, solvin...

Obstacles In Implementation of Monetary Policy ↓ Through the monetary policy is useful in attaining many goals of economic policy, it is not free from certain limitations. Its scope is limited by certain peculiarities, in developing countries such as India. Some of the important limitations of the monetary policy are given below. 1. There exist a Non-Monetized Sector In many developing countries, there is an existence of non-monetized economy in large extent. People live in rural areas where many of the transactions are of the tukar barang type and not monetary type. Similarly, due to non-monetized sector the progress of commercial banks is not up to the mark. This creates a major bottleneck in the implementation of the monetary policy. 2. Excess Non-Banking Financial Institutions (NBFI) As the economy launch itself into a higher orbit of economic growth and development, the financial sector comes up with great speed. As a result many Non-Banking Financial Institutions (N...

Commercial bank's balance sheet has two main sides i.e. the liabilities and the assets. From the study of the balance sheet of a bank we come to know about a system which a bank has followed for raising funds and allocation of these funds in different asset categories. Bank can have others money with it. It can be in terms of shareholders share capita, or depositors deposits. This money is the bank's liabilities. On the other hand bank's own sources of income leads to generation of assets for bank. Balance Sheet of a Commercial Bank Liabilities Assets a. Share Capital a. i. Cash in Hand b. Reserve Funds ii. Cash with the Central Bank (RBI) c. Deposits iii. Cash with the other banks i. Fixed Deposits b. Money at short ii. Saving Deposits c. Bills and securities discounted iii.Current Deposits d. Investment of bank iv. Other Deposits e. Loans and Advances given d. Borrowings f. Other Assets e. Other liabilities Bank's Liabilities Bank's liabilities c...

There are few general principles of good lending which every banker follows when appraising an advance proposal. These general principles of good lending are explained in this article. 1. Safety "Safety first" is the most important principle of good lending . When a banker lends, he must feel certain that the advance is safe; that is, the money will definitely come back. If, for example, the borrower invests the money in an unproductive or speculative venture, or if the borrower himself is dishonest, the advance would be in jeopardy. Similarly, if the borrower suffers losses in his business due to his incompetence, the recovery of the money may become difficult. The banker ensures that the money advanced by him goes to the right type of borrower and is utilized in such a way that it will not only be safe at the time of lending but will remain so throughout, and after serving a useful purpose in the trade or industry where it is employed, is repaid with interest . 2. ...

Advances by commercial banks are made in different forms such as demand loan, term loan, cash credit, overdraft etc. These forms of advances are explained below. 1. Demand Loan In a demand loan account, the entire amount is paid to the debtor at one time, either in cash or by transfer to his savings bank or current account. No subsequent debit is ordinarily allowed except by way of interest, incidental charges, insurance premiums, expenses incurred for the protection of the security etc. Repayment is provided for by instalment without allowing the demand character of the loan to be affected in any way. There is usually a stipulation that in the event of any instalment, remaining unpaid, the entire amount of the loan will become due. Interest is charged on the debit balance, usually with monthly rests unless there is an arrangement to the contrary. No cheque book is issued. The security may be personal or in the form of shares, Govt. paper, fixed deposit receipt, life insurance pol...

Duties of Computer Operator Working in a Bank ↓ Opening / modifying / closing accounts on the system including scanning of signatures duly authorised by competent official. Add / modify / delete records in masters and parameter files jointly with higher authority. Issue / delete cheque books on the system. Accept and post Stop Payment instructions. Accept, modify and delete standing instructions as per customers' instructions. To key in particulars of the vouchers / documents correctly and authenticate the same in token thereof. To compare particulars of the keyed in data with the visual display unit and/or from the printout and ensure that the data is entered correctly into the computer and effect such corrections as may be necessary according to the operational procedures of the system. To maintain / authenticate register/s as notified by the bank from time to time for documenting physical security, access control, breakdowns, corrections etc., on a day to day basis to ...

1. Function ↓ The main function of a Commercial Bank is to accept deposits from public for the purpose of lending to industry and others. The Central Bank regulates money supply in the country. It also acts as a banker to the government and to the other banks operating in a country. 2. Printing of Currency ↓ The Commercial Banks cannot print currency notes and make coins. The Central Bank of India (i.e. RBI ) has the power to print currency notes from Rs.2 and above. 3. Acceptance of Deposit ↓ The Commercial Bank accepts deposits from the public. The Central Bank don't accept any deposit from the public. 4. Provision of Loans ↓ The Commercial Bank provides loans to the industry and to the public. The Central Bank provides loans to scheduled banks and financial institutions. 5. Ownership ↓ Commercial Banks can be owned by private and / or Government agencies. Central Bank of India (RBI) is owned and controlled by Government of India. 6. Tota...