Banking: Comparative Analysis Essay

The economic re constructs in India started in early nineties, but their outcome is visible now. major(ip) changes took place in the functioning of banking companying companys in India only later on liberalization, globalisation and privatisation. It has become very required to study and to make a comparative analysis of operate of Public sector Banks and underground sphere banks. Increased competition, new information technologies and thereby declining processing costs, the erosion of product and geographic boundaries, and less suppressive politicsal regulations have all played a major role for Public Sector Banks in India to forcefully compete with Private and Foreign Banks. this paper an attempt to analyze how efficiently Public and Private sector banks have been managing NPA. The last decade has seen many positive developments in the Indian banking sector.The policy makers, which nominate the Reserve Bank of India (RBI), Ministry of Finance and related establishment a nd financial sector regulatory entities, have make several notable efforts to improve regulation in the sector. The sector now compargons preferably with banking sectors in the parting on metrics like growth, profitability and non-performing assets (NPAs). A a couple of(prenominal) banks have established an outstanding embrace record of innovation, growth and value creation.Banking in India was defined under Section 5(A) as any beau monde which transacts banking, business and the project of banking business defined under Section 5(B),accepting deposits of money from in the public eye(predicate) for the purpose of lending or investing, repayable on demand through cheque/draft or other. In the process of doing the above-mentioned primary functions, they are also permitted to do other types of business referred to as Utility Services for their customers (Banking Regulation Act, 1949). During Bruisers time, three Presidencies Banks were opened in Bengal (1809), Bombay (1840) and Madras (1843) with powers to isue Notes.Thus the quality and quantity of services provided by the Private Sector Banks is much better than that provided by Public Sector Banks. In the sexual climax age, the deposit ratio will be 80% in secret banks and 20% in public sector banks which is a reverse of a decade before. Banking is and for the time to come, will remain customer lie business. If one can satisfy the customers effectively, then customer becomes client. Thus to be successful, the banks should satisfy their customers qualitatively as well as quantitatively. They should .put the customers first because .Customer is the king .for the proper functioning of the Indian Banks today.BANKING SCENARIO IN INDIAN brassThe Indian banking system is significantly different from those prevalent in other countries due to its unique geographic, kindly and economic characteristics. India has a large macrocosm, different cultures in different part of the country and also disparities i n income. Also in India the population spread among rural and urban areas is also skewed in the favour of urban areas. All these features reflect in the size and structure of the Indian banking system. Further in set up to fulfil the needs to the government policy it has been subjected to various nationalization schemes at different times. RBI reference work policies form the guidelines for banks in India. Since they had to satisfy the domestic obligations, the banks have so far been confined within the Indian borders. Banking in India originated in the last decades of the 18th century.The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both(prenominal) of which are now defunct. The oldest bank in existence in India is the soil Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two creation the Bank of Bombay a nd the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon Indias independence, became the State Bank of India. The Reserve Bank of India is the central bank of India and controls the fiscal policy.The institution was established on 1 April 1935 .The main functions of RBI are 1. Monetary Authority The Reserve Bank of India is the main monetary authority of the country and beside that the central bank acts as the bank of the national and fix governments. It formulates, implements and monitors the monetary policy as well as it has to ensure an adequate flow of credit to productive sectors. Its objectives are keep an eye oning toll stability and ensuring adequate flow of credit to productive sectors 2. Manager of Exchange Control The central bank manages to reach the goals of the Foreign Exchange Management Act, 1999. Objective to facilitate external trade and payment and feign on orderly development and maintenance of foreign exchange market in India. 3. Issuer of Currency The bank afterwardsmaths and exchanges or destroys currency and coins not fit for circulation.The Objectives are giving the public adequate supply of currency of candid quality and to provide loans to commercial banks to maintain or improve the GDP. The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves 4. Regulator Central Bank is also responsible for making policy to be followed by the banking system of the country. Around 90% of the banking system is under the government control and the rest are with the buck private and the foreign banks. The public sector banks can be categorized into a) State Bank Group It comprises of State Bank of India an d its 5 associate banks.Previously there were 7 associate but after the uniting of 2 of them with the parent bank only 5 of them remain. The government of India is the majority stakeholder in the largest bank the country. b) Nationalized Banks at that place are 19 nationalized banks in the country. The process of nationalization in 1969 resulted in creation of 14 government owned banks which were followed by the nationalization of 6 more banks. in time upon a merger the list keep down of banks in the country stands at 19 as of today. All the banks are majority owned by the government of India. c) Regional Rural Banks The regional rural banks were setup to provide low cost funding and credit facilities to rural people. The nationalized banks were required to setup RRBs in partnership with the individual states.The foreign and private banks form a miniscule part of the Indian banking system which is dominated by the government owned banks. However the superior offering of the pr ivate sector banks aided by the growth in the IT has resulted in the population of the country being attracted towards these banks. This has made the public sector banks recognize the threat from these banks and improve on their services. They have given the PSBs stiff competition and this augurs well for the future of the Indian banking system.HISTORYPrivate-sector banks have been functioning in India since the very beginning of the banking system. Initially, during 1921, the private banks like bank of Bengal, bank of Bombay and bank of Madras were in service, which all unitedly formed Imperial Bank of India. Reserve Bank of India(RBI) came in get wind in 1935 and became the centre of both other bank taking away all the responsibilities and functions of Imperial bank. Between 1969 and 1980 there was rapid add in the number of branches of the private banks. In April 1980, they accounted for well-nigh 17.5 percent of bank branches in India. In 1980, after 6 more banks were nation alised, about 10 percent of the bank branches were those of private-sector banks. The share of the private bank branches stayed nearly same between 1980 and 2000. Then from the early 1990s, RBIs liberalization policy came in picture and with this the government gave licences to a few private banks, which came to be known as new private-sector banks. There are two categories of the private-sector banks old and new.The old private-sector banks have been operating since a long time and whitethorn be referred to those banks, which are in operation from before 1991 and all those banks that have commenced there business after 1991 are called as new private-sector banks. Housing Development Finance Corporation Limited was the first private bank in India to receive license from RBI as a part of the RBIs liberalization policy of the banking sector, to set up a bank in the private-sector banks in India. The Central governing body entered the banking business with the nationalization of the I mperial Bank Of India in 1955. A 60% stake was taken by the Reserve Bank of India and the new bank was named as the State Bank of India. The seven other state banks became the subsidiaries of the new bank when nationalized on 19 July 1960. The bordering major nationalization of banks took place in 1969 when the government of India, under prime minister Indira Gandhi, nationalised an additional 14 major banks.The total deposits in the banks nationalised in 1969 amounted to 50 crores. This move increased the presence of nationalised banks in India, with 84% of the total branches coming under government control. The next round of nationalisation took place in April 1980. The government nationalised six banks. The total deposits of these banks amounted to around 200 crores. This move led to a further increase in the number of branches in the market, increasing to 91% of the total branch network of the country. The objectives behind nationalisation where * To break the ownership and con trol of banks by a few business families, * To prevent the concentration of wealth and economic power, * To mobilize savings from masses from all parts of the country, * To cater to the needs of the priority sectors.