[BES171] Banking-Classification: RBI Structure Functions, Nationalization, Scheduled Banks, Merger of SBI Associate Banks & BMB, Private Banks, SFB & Payment Banks

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UPSC Paperset
  1. Banking Classification #1: RBI Structure, Functions, NPA Ordinance, Enforcement Department
  2. Banking Classification #2: Nationalized PSBs, Merger of SBI Associate Banks & (BMB)
  3. Banking Classification #3: India Postal Payment Bank (IPPB), On-Tap License, RRB, LAB, Foreign Banks, PVT Banks 

Prologue: from now on, all Powerpoint available at http://mrunal.org/powerpoint BUT in Mediafire folder, don’t try to download all PPTs at once in zip file, else it’ll give error in opening the powerpoints.

Banking Classification #1: RBI Structure, Functions, NPA Ordinance, Enforcement Department

  • Banking sector evolution in the pre-independent India, Geographical location factors.
  • Impact of Great Depression, Hilton Young commission and the birth of RBI Act 1934 with Sir Osborne Arkhall Smith as its first governor, Sir CD Deshmukh as its first Indian Governor and Dr. Urjit Patel as its latest governor.
  • Selection, appointment and tenure of RBI governor and four Deputy Governors, four divisions.
  • Reserve Bank of India- its structure, functions, ownership, departments including the latest enforcement department and latest post “Chief Financial Officer (CFO).
  • RBI Transfer of Ownership Act 1948
  • Banking Regulation Act 1949 and NPA ordinance 2017.
  • What is a scheduled Bank?

RBI functions
Youtube Link: https://youtu.be/6rm_D2mkLU0

Banking Classification #2: Nationalized PSBs, Merger of SBI Associate Banks & Bharatiya Mahila Bank (BMB)

  • In the Post Independent India, till 1963, 188 influential people like Raabert Waadra were in the board of top 20 banks, 1452 companies, and numerous insurance, finance companies, NGO, trust. And such reckless lending to directors was the main cause of banking collapse.
  • And these private owned banks were not opening branches in rural areas, not giving loans to farmers and MSME, not helping in the achievement of five year plans.
  • Therefore in two rounds (1969 and 1980), the Government of India nationalized total 20 private banks, with deposits worth Rs.50 cr and Rs. 200 crores respectively.
  • The smaller private banks which escaped the nationalization drive, as known as old private banks. Therefore 12 such banks, namely- 1) Catholic Syrian Bank Ltd , 2) Dhanlaxmi Bank, 3) RBL Bank , 4) Tamilnad Mercantile Bank, 5) City Union Bank, 6) Federal Bank, 7) Jammu & Kashmir Bank, 8) Karur Vysya Bank, 9) Lakshmi Vilas Bank, 10) Nainital Bank, 11) South Indian Bank and 12) Karnataka Bank
  • After the Gyan Sangam-II summit in 2016, government decided to merge the 5 associate bank of SBI and Bharatiya Mahila Bank (BMB) with the State Bank of India (SBI). In this lecture, we’ll see the history of all these banks, and the merge procedure, including the arguments in favour and against this move.
  • Lastly, Government also decided to privatize and transform IDBI Bank just like how they did with UTI to Axis Bank. What’s this entire case, we’ll see in this lecture.

Public Sector Banks in India
Youtube Link: https://youtu.be/wcc-KvpZCw8

Banking Classification #3: India Postal Payment Bank (IPPB), On-Tap License, RRB, LAB, Foreign Banks, PVT Banks

  • In the previous lecture we had learned about the nationalization of private banks in the post-independent India. However this nationalisation created more problems than it solved, because of the politicization of the board of directors, unionism among the bank staff, high level of administered interest rates and unsustainable level of non-performing assets
  • ultimately, in 1991 the committee was Constituted under the chairmanship of former RBI Governor M.Narsimhan for comprehensive banking sector reforms in India. And as per his recommendations, government reduced the control over public sector banks by gradual diluting of its shareholding, liberalised brand expansion policy and permission to open new foreign banks and private banks in India.
  • The licensing of private banks in India was done in three rounds. In the first round, then private banks were given license to operate including ICICI, HDFC. In the second round, two private banks were allowed viz. Yes Bank and Kotak Mahindra. In the third round, again two private banks are allowed viz. Bandhan and IDFC.
  • The total number of universal private commercial banks in India is 21. And, if IDBI is privatized then it’ll be 22.
  • Now, private bank licensing was done through “rounds of notifications and applications ”, but for future RBI has issued guidelines for “On Tap” licensing system i.e. as and when you’re ready and interested, you can apply to start a commercial bank in India with minimum paid-up capital of Rs. 500 crore.
  • What are the foreign investment limits in Indian commercial banks?
  • Foreign commercial banks in India: branch model and subsidiary model.
  • What are differential banks? How are they different from other universal commercial banks? The bottom line is that differential banks are restricted in the geographical expansion and deposit and lending operations
  • in the chronological manner, we will learn about all the differential banks in India viz. 1) regional rural banks RRB (1976), 2) local area banks-LAB (1996), 3) small finance banks and payment banks (2015). And in next lecture we’ll see the latest proposed type “wholesale Banks”.
  • What are the internal differences between small finance bank and payment bank- in terms of the client base, deposit and lending operations, priority sector lending requirements et cetera.
  • In January 2017, two payment banks started their operations 1) Airtel 2) Indian post payment bank (IPPB). We’ll look at the logo, products and services offered by IPPB- SAFAL, SUGAM and SARAL accounts.

Private Banks and Cooperative Banks
Youtube Link: https://youtu.be/v8CeDM_xqRc
In the next lecture, we’ll learn about remaining types of Banks and NBFCs.

Mrunal recommends

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  6. Word Power made Easy -Norman Lowe
  7. Topic wise Solved Paperset by Disha

9 Comments on “[BES171] Banking-Classification: RBI Structure Functions, Nationalization, Scheduled Banks, Merger of SBI Associate Banks & BMB, Private Banks, SFB & Payment Banks”

  1. Sir, all the series will be done before prelims na ? Thanks a lot..they are very very helpful.

  2. thanks for teaching us. Really admire ur efforts.

  3. Thanx Sir JI……

  4. mrunal sir, banking classification and financial market k baki videos link upload kr dijiye. Ban.Classi. only 3 but 5. like Fin.Mar. k bhi. thanks. good revision going on. thanks a lot.

  5. you are the the the best mrunal…… one word for economy prep mrunal

  6. Sir jee tussi kamal kar dita

  7. I can’t understand Hindi sir… Pls help me out to learn the concepts in above mentioned videos BES171 ASAP

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