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6-1: Financial Institutions and Introduction to Banking sector
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Concepts Covered: Financial Institutions:Banks and NBFIs. Useful for UPSC CSE/ Group-1 and Group-2 of APPSC, TSPSC and all State level PSC exams, RBI G-B, BANK and SSC exams

Mahesh M
Qualifications: MCA, MCJ(electronic media) and MA(ECONOMICS). Teaching for the last 8 years. I teach Indian Economy, Current Affairs, Polity

Unacademy user
Hello sir!! Sir I have not been able to attempt more than 30-40 questions in mocks for tier 2.While I know that my basic is not that bad and wven the questions which are left unattempted by me i know how to solve well, but still whatever strategy i try i fail badly. Please suggest some thing seeing my condition and less time to go for mains. I had done good in maths in Pre but this time I am only getting 60-70 marks in maths in mocks of tier 2. Please help asap!! Thanks in advance!!

  2. FINANCIAL INSTITUTIONS INCLUDING BANKING Financial Institution is any institution or company which raises funds from the public and other sources to lend and invest. O FIs are classified in three broad categories: 1. Banks 2. Non-Banking Financial Institutions (NBFIs) o Insurance companies, chit funds...etc. 3. Development Finance Institutions (DFI) O NABARD, SIDB1, IDBI...etc.

  3. BANK &NON-BANK INSTITUTIONS o Bank is a financial institution which accepts deposits and lends them to the borrowers as well as allows the depositors to withdraw their money from the accounts on regular basis. O Non-bank financial institution(NBFC): the financial institution which has all the same functions but does not allow depositors to withdraw their money on regular basis. NBFC cannot accept demand deposits (which are payable on demand) However withdrawal can be allowed after maturity of deposi

  4. DEVELOPMENT OF BANKING IN INDIA o Bank of Hindustan in 1779- 1st bank in India by Europeans. o 1st Bank by East India Company was Presidency Bank of Bengal in 1806 Presidency Bank of Bombay in 1840 Presidency Bank of Madras in 1843 Punjab National Bank in 1894 was the 2nd bank by Indians. Imperial Bank of India. Again in 1955 it was restructured as o 1st bank by Indians was Awadh Commercial Bank in 1881 In 1921, all Presidency banks were merged and named as State Bank of India (1st Public sector bank) o In 1959 Central Government took over banks from states/princely states and associated them with State Bank o India

  5. NATIONALIZATION OF BANKS o In 1969, 14 banks whose deposits were more than 50 crore were nationalised. They were: Central Bank of India, Bank of Maharashtra, Dena Bank, Punjab National Bank, Syndicate Bank, Canara Bank, Indian Bank, Indian Overseas Bank, Bank of Baroda, Union Bank, Allahabad Bank, United Bank of India, UCO Bank, Bank of India. o In 1980, 6 more banks were nationalised. Those were - Punjab & Sindh Bank, Andhra Bank, Oriental Bank of Commerce, Corporation Bank, Vijaya Bank and New Bank of India. o Public Sector Banks (owned by Central government by 2016) - The State Bank Group, 19 Nationalised Banks and IDBI Bank. Total number of public sector banks is 27. Thus PSBs reduced to @ 21. Further proposed: VB+DB > BoB. country. The first private bank of the reform era was the UTI Bank. o In 2017, All SBI associated banks including Mahila bank were merged in SBI o In 1994 the government allowed the opening of private banks in the

  6. o Objective of Nationalisation: o To reduce economic inequalities in society. O To attain financial inclusion o To build Confidence of Public in Banking Sector and in Govt. Assessment of Nationalisation Achievements: Most of the social objectives were achieved. Bank deposits increased significantly. Bank branches in rural areas increased substantially. Loans to priority sector increased. Failure: Efficiency and profitability of Banks declined drastically immediately after nationalization NPAs are increasing now.

  7. BANKS o Based on law, they are two types : Scheduled and Non-Scheduled banks. o Based on objectives and ownership, they can be classified into 6 types 1. Commercial Banks 2. Cooperative Banks 3. Regional Rural Banks (RRB) 4. Local Area Banks (LAB) 5. Small financial banks 6. Payment banks.

  8. SCHEDULED AND NON-SCHEDULED BANKS IN INDIA o Scheduled bank a bank which is listed in the 2nd Schedule of the Reserve Bank of India Act, 1934 Usually private, foreign and n ationalised banks operating in India. Ex: All major banks in India. Non-scheduled banks: Banks not under 2nd Schedule of RBI act-1934 are called as non- scheduled banks. Ex LABs