INDIAN BANKING SYSTEM:
Banking system is the pillar of an economic system. India's banking system is a stable one, under the supervision and regulatory framework of the Reserve Bank of India (RBI). In more than six decades of India's independence, the Indian Banking sector has expanded and developed in multifarious dimensions.
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| INDIAN BANKING SYSTEM |
DEVELOPMENT OF BANKING SYSTEM:
Banking, is defined as the acceptance of deposits of money from the public for the purpose of lending and/or investment. These deposits are re-payable on demand, or otherwise, withdrawals by cheque, draft, order or otherwise. Deposits are accepted from individuals as well as from firms.
In sum, the nature of banking business can be summarised in two words i.e. financial intermediation, which needs to be carried out efficiently for stimulating the real sectors of the economy. Another essential characteristic of banks is that they are highly leveraged and hence, need to be regulated for protecting the interest of depositors.
As banks are institutions with legal banking, and work under a banking regulator to oversee their financial solvency and soundness, banks earn the tikt and confidence of the public.
Banking in India, as elsewhere, takes diverse forms viz, banks formed under special statutes, companies registered under the Companies Act,
1956 or foreign companies and cooperative societies registered under the Cooperative Societies Act. Banks are classified on their ownership pattern such as Public Sector Banks, Private Sector Banks and Foreign Banks.
TYPES OF BANKING:
There are three types of banking, which are as follows
1. CORE BANKING
It is a banking service provided by a group of networked bank branches where customers may access their bank account and perform basic transactions from any of the member branch offices. It is popularly known as Core Banking Solution (CBS) System as well.
There are two types of major banking services under core banking facilities
I. NATIONAL ELECTRONIC FUND TRANSFER (NEFT)
The objective of the NEFT system is to establish an electronic funds transfer system to facilitate an efficient, secure, economical, reliable and expeditious system of funds transfer and clearing in the banking sector throughout India and to relieve the stress on the existing paper based Funds Transfer Clearing System.
II.Real Time Gross Settlement (RTGS)
It can be defined as the continuous (real time)
settlement of funds transfers individually on an
order basis (without netting).
'Real Time' means the processing of instructions
at the time they are received, rather than at
some later time. 'Gross Settlement' means, the
settlement of funds transfer instructions occurs
individually (on an instruction basis).
Considering that the funds settlement takes
place in the book of the Reserve Bank of India,
the payments are final and irrevocable.
(2) RETAIL BANKING
It is when a bank executes transactions directly with consumers, rather than corporations or other banks.
Services offered include savings and transactional accounts, mortgages, personal loans, debit cards and credit cards.
The term is generally used to distinguish these Banking services from investment banking,
commercial banking or wholesale banking. It
may also be used to refer to a division of a bank
dealing with retail customers and can also be
termed as Personal Banking Services.
(3) NARROW BANKING
It is also called a Safe Bank. Narrow banking
restricts banks to hold liquid and safe
government bonds. Loans would be made by
other financial intermediaries. Thus, the deposit taking and payment activities would be separated from financial activities.
MONEY:
It plays an important role in our life. Modern
form of money includes paper notes and coins. In India, the Reserve Bank of India (RBI) is
authorised to issue currency notes, on behalf of
the Government of India.
Further, there is legal sanction behind every
currency, that implies that a rupee cannot be
refused as a means of settling transactions in
India. Thus, rupee is the universally accepted
means of exchange in India.
TYPES OF MONEY:
There are two types of money
(i) Legal Money The issuance of legal
currency always does under legislation by
the Government or the Reserve Bank. The
Reserve Bank would undertake to pay the
holder an equal amount.
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