Report on Overview of Indian Banking Sector Essay Example

and supervises the financial system by setting up comprehensive guidelines for banking operations which is crucial for maintaining public confidence while safeguarding depositors' interests.

The Foreign Exchange Management Act is managed to ease external trade and ensure a well-ordered growth and sustainability of the foreign exchange market. In addition to acting as the Indian government's banker, it also performs the role of merchant banking for both the central and state governments. Furthermore, it keeps deposit accounts of all other banks and offers loans to them as required.

The Reserve Bank of India aims to reduce asset price inflation in real estate and property by implementing monetary policies that benefit the Indian economy. India has three types of commercial banks: public sector banks, private banks, and foreign banks. Currently, there are a total of 88 scheduled commercial banks in India - comprising 28 public sector banks, 29 private banks, and 31 foreign banks.

India's commercial banks are divided into three categories: Public sector banks, with majority stake held by the government of India or Reserve Bank of India; Private Banks, where most share capital is held by private individuals; and Foreign Banks, which operate branches in India but are registered and headquartered in foreign countries. The State Bank of India is currently the largest public sector bank. Despite differences in ownership structures, all three types function similarly as commercial banks with primary functions that include:

Financial institutions receive deposits from the public as their main function, which they use for lending and investing. They offer loans and advances to help businesses manage their consumption and investment cycles. Along with these primary functions, there are also secondary functions that

financial institutions perform.

Services offered by banks include the issuance of letters of credit and travellers cheques, providing safe deposit vaults or lockers, and offering facilities for foreign exchange transactions.

In India, commercial banks offer a range of supplementary services. These include transferring funds between accounts, collecting and disseminating business information, creating credit assessments to determine customers' trustworthiness, providing low-cost educational loans for higher education, and giving consumer finance with convenient loan terms for purchasing durable goods. The latter two services are specifically tailored to meet the needs of the local community.

India has 68 cooperative banks that function as cooperatives and need to acquire a banking license from the Reserve Bank of India prior to commencing operations. These banks are required to follow the guidelines established by the Reserve Bank of India.

There are three types of cooperative banks that serve different purposes. Primary Credit Societies operate in villages or towns where borrower and non-borrower members reside together, while Central Cooperative Banks make up the second type at the district level, with some primary credit societies as their members within the same district. The third type is not mentioned. Primary Credit Societies' activities are limited to a small area for close relationships between members and easy monitoring of transactions to prevent fraud, whereas Central Cooperative Banks provide loans to their members.

Co-operative banks operate at various levels in India. At the lowest level are primary credit societies, which cater to the needs of rural communities. Central co-operative banks serve as intermediaries between primary credit societies and state co-operative banks. At the highest level are state co-operative banks, which mobilize funds and ensure proper channelization of funds among different sectors.

The funds finally reach individual borrowers through a chain: from state co-operative banks through central co-operative banks and primary credit societies.

There are 196 regional rural banks in India that were established to enhance credit access for smaller borrowers in rural areas. These banks were founded due to a realization that co-operative banking did not reach all rural farmers. The primary functions of regional rural banks involve providing loans and advances to agricultural workers, co-operative societies, and small and marginal farmers for agriculture-related purposes.

Development Banks, which provide financial assistance for medium and long-term capital needs such as the purchase of machinery, technology, and business expansion, also undertake development measures such as subscribing to shares and debentures. Specialized Banks in India support the establishment of businesses in specific areas of activity. They offer loans and advances to artisans, small entrepreneurs engaged in trade, commerce or industry, or other productive activities.

There are three main types of specialized banks that focus on particular areas or activities. The first is the Export Import Bank of India (EXIM Bank), which offers loans to exporters and importers, along with information about international markets, export/import opportunities, potential risks, competition, and more. The second type of specialized bank...

The main objective of the Small Industries Development Bank of India is to assist small-scale industries in financing, promoting and developing their businesses. This includes granting loans for the creation of new business units or industries, as well as upgrading existing ones by introducing innovative technology and market initiatives.

The National Bank for Agricultural and Rural Development offers financing to the agricultural and rural sectors through regional rural banks. They provide both short-term and long-term credit

mainly focused on co-operative credit, small-scale industries, cottage and village industries, handicrafts etc., in rural regions. In addition to this, there are several bank-like financial institutions in India that offer financial services including Microfinance Institutions which function like banks providing microcredit, microsavings, and microinsurance to impoverished individuals.

Moreover, they also carry out essential tasks, namely:
1. Granting financial facilities, both secured and unsecured, in cash or kind, for the duration and under the conditions stipulated, to impoverished individuals for all sorts of economic ventures except those related to foreign exchange transactions.
2. Purchasing, selling, and providing goods on credit such as agricultural and industrial inputs, machinery, raw materials, and livestock to destitute individuals.
3. Offering expert guidance to indigent persons on investing in small businesses and specific cottage industries recommended by the institution.

2Development financial institutions (DFIs) are specialized financial institutions established by the Government to promote investments in the manufacturing and agricultural sectors. Their functions include extending financial assistance in the form of medium- and long-term loans, participating in equity capital, underwriting, acting as an issuing house for public shares issues, and providing guarantees for loans. DFIs specialize in medium- and long-term financing and supplying financial services not usually offered by commercial banks and finance companies.

India's banking industry is dependable for expansion strategies due to its adherence to global norms. In fact, the industry provides assistance in discovering new initiatives, promoting them, and even offering additional financial, technical, and managerial support. The banking setup in India is illustrated in the appendices, which can be referenced through sources such as i)http://finance.indiamart.com/investment_in_india/banks.html ii)economics.about.

The HTML paragraph includes two links pertaining to banking in India:

com/cs/finance/a/india_banking.htm and

iii) www.bankreport.bi.org.

The text includes links to two websites related to money: iv)www.rediff.com/money/2007/nov/21bspec.htm and v)www.giichinese.The following links relate to the banking sector:

com.tw/chinese/rnc41934-banking-sector.html
vi)www.thokalath.com/banks
vii)www.qualisteam.

The subsequent HTML links contain details about banking in India:
viii) http://economist.com/Banks/Asia/India/
ix) http://economics.about.com/b/2005/11/24/banking-in-india.htm

An HTML paragraph tag contains links to different websites related to banks in India, including: mapsofindia.com/banks-in-india, iloveindia.com/finance/bank/foreign-banks/index.html, and bestindiansites.com.The following links provide information on banks:

com/banks

http://explore.oneindia.in/finance/banks

www.economywatch.com/business-and-economy/banks.

The contain a hyperlink to the Wikipedia page on banking in India, which is labeled as "xiv)http://en.wikipedia.org/wiki/Banking_in_India".