Banking

Chapter 9

 

BANKING FEDERATIONS AND ASSOCIATIONS IN INDIA
Indian Institute of Banking and Finance:-

  • Established in 1928 as a Company under Section 25 of the Indian Companies Act, 1913, Indian Institute of Banking & Finance (IIBF), formerly known as The Indian Institute of Bankers (IIB) is a professional body of banks, financial institutions and their employees in India.
  • With its membership of over 700 banks and financial institutions as institutional members and about 3,00,000 of their employees as individual members, IIBF is the largest Institute of its kind in the world and is working with a Mission “to develop professionally qualified and competent bankers and finance professionals primarily through a process of education, training, examination, consultancy/counseling and continuing professional development programmes”.

Indian Banks Association:-
The Indian Banks‘ Association (IBA) was formed on the 26th September 1946with 22 members. As on31st December 201 l IBA has 166 members. The members comprise of
I. Public Sector Banks
II. Private Sector Banks
III. Foreign Banks having offices in India and
IV. Urban Co-operative Banks.

Institute for Development and Research in Banking Technology:-

  • Institute for Development and Research in Banking Technology (IDRBT) was established by the Reserve Bank of India. During the first phase of reforms in the Indian Financial Sector, a need was felt to develop an Institute of Higher Learning, which would also provide the operational service support in Information Technology to Banks and Financial Institutions.
  • The foundation for induction of Computer Technology in the Indian Banking Sector was laid by Dr. Rangarajan Committee’s two reports in the year’s 1984 andl989. Both the reports strongly recommended computerization of banking operations at various levels while suggesting the appropriate architecture.
  • In the year 1993, the Employees‘ Unions of Banks signed an agreement with Bank Managements under the auspices of Indian Banks‘ Association [IBA]. This agreement was a major breakthrough in the introduction of computerized applications and development of communication networks in Banks.
  • In the following two years, substantial work was done and the top managements realised the urgent need for training, research and development activities in the area of Banking Technology. Banks and Financial Institutions started setting up Technology-based training centers and colleges.
  • However, a need was felt for an Apex Level Institute, which would be the Brain Trust for Banking Technology and Spearhead Technology Absorption in the Indian Banking and Financial Sector.
  • In the year 1994, the Reserve Bank of India formed a committee on “Technology Upgradation in the Payment Systems”. The committee recommended a variety of payment applications which can be implemented with appropriate technology up gradation and development of a reliable communication network.
  • The committee also suggested setting up of an Information Technology Institute for the purpose of Research and Development as well as Consultancy in the application of technology to the Banking and Financial sector of the country.
  • As recommended by the Committee, the Institute for Development & Research in Banking
    Technology [IDRBT] was established by the Reserve Bank of India inl996 as an Autonomous Centre for Development and Research in Banking Technology.

Asset Reconstruction Company India Limited (ARCIL):-

  • The genesis of asset reconstruction business in India owes its origin to enactment of the
    Securitisation Act, 2002. Prior to promulgation of the Securitisation Act,2002 banks and financial institutions had no option but to enforce their security interests through the court process, Which was extremely time consuming.
  • There was also no provision in any other law in respect of enforcement of hypothecation, though hypothecation was one of the major security interest taken by the banks and financial Institutions in India.
  • It was in this backdrop that the Securitisation and Reconstruction of Financial Assets and
    Enforcement of Security Interest Ordinance, 2002 was passed on June 21, 2002 which was enacted by the parliament in December 2002 and became the Securitisation Act, 2002. The Securitisation Act principally provides for the following:
  1. Enforcement of Security Interests by secured creditors
  2. Transfer of NPLs to asset reconstruction companies (ARCs), which can then take measures for recovery as prescribed under the Securitisation Act, 2002.
  3. A legal framework for securitization of assets.
  • This empowerment encouraged the three major players in Indian banking system, namely, State Bank of India (SBI), ICICI Bank Limited (ICICI) and IDBI Bank Limited (IDBI) to come together to set-up the first ARC. Punjab National Bank (PNB) became Sponsor in October 2004 by virtue of its shareholding of10%. Other shareholders predominantly comprise private sector banks.
  • ARCIL was incorporated as a public limited company on February 11, 2002 and obtained its certificate of commencement of business on May 7, 2003.
  • In pursuance of Section 3 of the Securitisation Act 2002, it holds a certificate of registration dated August 29, 2003, issued by the Reserve Bank of India (RBI) and operates under powers conferred under the Securitisation Act, 2002.
  • ARCIL is also a “financial institution“ within the meaning of Section 2 (h) (ia) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (the “DRT Act”).
  • ARCIL is the first ARC in the country to commence business of resolution of NPLs upon
    acquisition from Indian banks and financial institutions. As the first ARC, ARCIL has played a pioneering role in setting standards for the industry in India.

 

Chapter 10

 

BANKING FEDERATIONS AND ASSOCIATIONS WORLDWIDE

The World Bank:-

  • The World Bank is one of the world’s largest sources of funding and knowledge to support governments of member countries in their efforts to invest in schools and health centers, provide water and electricity, fight disease, and protect the environment.
  • The World Bank is not a “bank” in the common sense. The World Bank is an International organization owned by the 188 countries (both developed and developing) that are its members.
  • Since it was set up in 1944 as the International Bank for Reconstruction and Development. The number of member countries increased sharply in the l950sand 1960s, when many countries became independent nations. As membership grew and their needs changed, the World Bank expanded and is currently made up of five different agencies.
  • All support to borrowing countries is guided by a single strategy that the country itself designs with help from the World Bank and many other donors, aid groups, and civil society organizations.

Bank for International Settlements and Basel Accords:-

  • The Bank for International Settlements (BIS) is an international organisation. The mission of the Bank for International Settlements (BIS) is to serve central banks in their pursuit of monetary and financial stability, to foster International cooperation in those areas and to act as a bank for central banks.
  • The head office is in Basel, Switzerland and there are two representative offices in the Hong Kong Special Administrative Region of the People‘s Republic of China and in Mexico City. Established on 17 May 1930, the BIS is the world’s oldest International financial organization.
  • As its customers are central banks and International organisations, the BIS do not accept deposits from, or provide financial services to, private individuals or corporate entities.
  • The Basel Accords refer to the banking supervision Accords (recommendations on banking regulations)—Basel I, Basel II and Basel III—issued by the Basel Committee on Banking Supervision (BCBS). They are called the Basel Accords as the BCBS maintains its secretariat at the Bank for International Settlements (BIS) in Basel, Switzerland and the committee normally meets there.

International Banking Federation:-

  • The International Banking Federation (IBFed) is the representative body for a group of key national banking associations. Its main objective is to increase the effectiveness of the financial services industry’s response to multilateral and national government issues affecting their common interests.
  • The International Banking Federation founding members are:
    1. The American Bankers Association
    2. The Australian Bankers‘ Association
    3. The Canadian Bankers Association
    4. The European Banking Federation
    5. Japanese Bankers Association

 

  • Associate members are:
    1. China Banking Association
    2. Indian Banks Association
    3. Korea Federation of Banks
    4. The Association of Russian Banks
    5. The Banking Association of South Africa

 

  • The International Banking Federation was formed in March 2004 to represent the combined views of a group of national banking associations.

 

  • The countries represented by the Federation collectively represent more than 18,000 banks with 275,000 branches, including around 700 of the World’s top 1000 banks which alone manage worldwide assets of over $31 trillion.

 

  • The Federation represents every major financial centre and functions as the key international forum for considering legislative, regulatory and other issues of interest to the global banking industry.

 

Chapter 11

 

HISTORY OF INDIAN BANKING SYSTEM

  • The first bank in India, called The General Bank of India was established in the year1786. The East India Company established The Bank of Bengal/Calcutta (1809), Bank of Bombay (1840) and Bank of Madras (1843).
  • The next bank was Bank of Hindustan which was established in 1870. These three individual units (Bank of Calcutta, Bank of Bombay and Bank of Madras) were called as Presidency Banks.
  • Allahabad Bank which was established in l865Was for the first time completely run by Indians.
  • Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. It is the old bank which exists till now in India.
  • Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up.
  • In 1921, all presidency banks were amalgamated to22forms the Imperial Bank of India which was run by European Shareholders.
  • After that the Reserve Bank of India was established in April 1935.
  • At the time of first phase the growth of banking sector was very slow. Between 1913 and 1948 there were approximately 1100 small banks in India.
  • To streamline the functioning and activities of commercial banks, the Government of India came up with the Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No.23 of 1965).
  • Reserve Bank of India was vested with extensive powers for the supervision of banking in India as Central Banking Authority After independence Government has taken most important steps in regard of Indian Banking Sector reforms.
  • In 1955, the Imperial Bank of India was nationalized and was renamed as “State Bank of India”, to act as the principal agent of RBI and to handle banking transactions all over the country. It was established under State Bank of India Act, 1955.
  • On 19th July, 1969, major process of nationalization was carried out. At the same time 14 major Indian commercial banks of the country were nationalized. In 1980, another six banks were nationalized, and thus raising the number of nationalized banks to20.
  • On the suggestions of Narsimhan Committee, the Banking Regulation Act was amended in 1993 and thus the gates for the new private sector banks were opened.
    The following are the major steps taken by the Government of India to Regulate Banking
    Institutions in the country:-
    a.) 1949: Enactment of Banking Regulation Act.
    b.) 1955: Nationalisation of State Bank of India.
    c.) 1959: Nationalization of SBI subsidiaries.
    d.) 1961: Insurance cover extended to deposits.
    e.) 1969: Nationalisation of 14 major Banks.
    f.) 1971: Creation of credit guarantee corporation.
    g.) 1975: Creation of regional rural banks.
    h.) 1980: Nationalisation of seven banks with deposits over 200 Crores.

 

Chapter 12

 

CLASSIFICATION OF BANKING INDUSTRY IN INDIA
An outline of the Indian Banking structure may be presented as follows:-
1. Reserve banks of India.
2. Indian Scheduled Commercial Banks.
a) State Bank of India and its associate banks.
b) Twenty nationalized banks.
c) Regional rural banks.
d) Other scheduled commercial banks.
3. Foreign Banks
4. Non-scheduled banks.
5. Co-operative banks.

 

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