commercialbanks-090522060202-phpapp02

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Commercial Banks


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Commercial banks are the oldest, biggest and fastest growing financialintermediaries They are important depositories of public saving and most

important disburser of finance.

Management of Reserve

Creation of Credit


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The Creation of Money

Banks Credit creation depends on theexcess reserves.

Excess reserves = actual reserves

required reserves.If reserves required ratio is 10%, bankscan create a loan of 9000 on 1000

deposits.The total money supply in the economy is10000.


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Process of credit creationBank position deposits loans reserves

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Original bank 1000 900 1002nd bank 900 810 90

3d bank 810 729 81

4th Bank 729 656 72.9

5th Bank 656 590.49 65.61

6th Bank 590.49 531.44 59.05

7th Bank 531.44 478.30 53.14

8th Bank 478.30 430.47 47.80

9th Bank 430.47 387.42 43.05

10th Bank 387.42 348.68 38.04_____________________________________________________

Sum 10,000 9,000 1,000


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Origin of commercial bank can be traced back in vedic

period( use of hundi)

Middle of 19th century Indigenous banking

First bank Bank of Hindustan

(1770)

Later we had Presidency Bank in Calcutta Bombay &Madras

1919 Imperial Bank of India


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Growth and Structure of commercial bank

Importance of Indian commercial Banks in National Economy

Year Deposit/N.I. Deposit /Saving

Share infinancialasset

1951-56 10 16.6

1960-61 13 14.21975-76 24 41.8

1980-81 35.9 45.8 73.8

1990-91 48.1 31.8 65.51994-95 52 40.2 64.8

1995-96 44.82 28.2 64.7

2001-02 61.5 37.83 72.2


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Indian Banking system

RBI

Schedule BanksNon Scheduled Bank

State Coop. CommercialBank

BanksIndian Foreign

PSU Pvt. SectorBank

Banks

SBI & its

subsidaries

Other nationalized

bank

Regional rural

bank

Central Coop. bankBank and Primary CreditSocieties

CommercialBank


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Apart from usual function, foreign bank are now playing a specialrole in shaping the attitude ,perceptions and policies of foreigngovernment, corporate, and other clients towards India

(a)Structuring and syndicating project finance for crucial sector(b)Advising and introducing overseas companies in joint venture

and collaboration with Indian Companies

Helping to bring the FII and Indian companies(d) Managing and syndicating the euro issue of debt and equity(e) Introducing new technology in data management and

information system

The Indian Banks include 27 PSU banks ,196 RRB,30 privatesector bank and 44 Foreign banks in 2001-02


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Liabilities of Banks

Demand deposit

Current deposit

Call deposit

Term deposit


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Banking Assets

Investment:

1.Cash in hand and balance with RBI2.Asset with banking system3.Investment in government and other approved

securities4.Bank credit among these assets, and is

influence by the RBI policy, quantitatively, bankcredit and investment in government securities.


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Commercial Banks Investment

Govt. of India securities

Other approved Securities

Non approved securities


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Factor affecting Composition of

Bank Deposit

Increase in National Income

Expansion of banking facilities in new area & fornew class of people

Increase in banking habit

Increase in relative rate of return

Increase in deficit financingIncrease in bank credit

Inflow of deposit by NRIs

Growth in substitutes


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Banking Innovations

I) Retail Banking

II) Bank as authorized dealerIII) Customer serviceIV) Lead Bank schemeV) Service area approachVI) Action plans

VII)Micro financeVIII)Banking Advisory servicesIX) Participation Certificate and inter bank depositX) Consortium approach

XI) Credit cardsXII)New technology in BankingXIII)Local Area BanksXIV)Asset Liability ManagementXV)Other diversification in Banking

commercialbanks-090522060202-phpapp02

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