The Indian Banking System plays a crucial role in the economic development of the country by mobilizing savings, providing credit, and facilitating payments. It has evolved significantly since independence.

==== Regulatory Framework ####

Reserve Bank of India (RBI):

• Establishment: 1935
• Role: Central bank, monetary authority
• Functions: Currency issuance, banking regulation, monetary policy
• Headquarters: Mumbai

Banking Regulation Act, 1949:

• Objective: Regulate commercial banks
• Provisions: Licensing, operations, supervision
• Amendments: Regular updates for modern banking

==== Types of Banks ####

==== Major PSBs ####

State Bank of India (SBI):

• Establishment: 1955 (merger of Imperial Bank)
• Market share: Largest bank in India
• Branches: 22,000+ branches
• Assets: ₹53 lakh crore (2021)

Other Major PSBs:

• Punjab National Bank (PNB) - Post-merger with OBC, United Bank
• Bank of Baroda - Merged with Vijaya Bank, Dena Bank
• Canara Bank - Merged with Syndicate Bank
• Union Bank of India - Merged with Andhra Bank, Corporation Bank

==== PSB Consolidation ####

Bank Mergers (2017-2020):

• Objective: Stronger capital base, operational efficiency
• Result: 27 PSBs reduced to 12
• Benefits: Reduced competition among PSBs, better resource utilization

==== New Generation Private Banks ####

HDFC Bank:

• Establishment: 1994
• Market capitalization: Highest among Indian banks
• Technology: Leader in digital banking
• Performance: Consistent profitability

ICICI Bank:

• Establishment: 1994
• Focus: Retail and corporate banking
• International presence: Multiple countries
• Innovation: Pioneered many banking products

Axis Bank:

• Establishment: 1993 (as UTI Bank)
• Strength: Corporate banking
• Network: Strong urban presence

==== Old Private Banks ####

• Karnataka Bank - Regional focus
• South Indian Bank - Kerala-based
• Lakshmi Vilas Bank - Merged with DBS India

==== Development Banks ####

National Bank for Agriculture and Rural Development (NABARD):

• Establishment: 1982
• Role: Agricultural and rural development finance
• Functions: Refinancing, policy formulation, supervision
• Coverage: Rural and semi-urban areas

Export-Import Bank (EXIM Bank):

• Establishment: 1982
• Role: Export-import finance
• Functions: Export credit, project financing
• Focus: International trade promotion

==== Small Finance Banks ####

• Objective: Financial inclusion, small businesses
• Minimum capital: ₹200 crore
• Examples: Equitas, Ujjivan, Jana Small Finance Bank
• Focus: Unbanked and underbanked segments

==== Payments Banks ####

• Objective: Payments and remittances
• Restrictions: No lending, limited deposit size
• Examples: Paytm Payments Bank, India Post Payments Bank
• Target: Digital financial services

==== Structure ####

Three-Tier System:

1. **Primary Agricultural Credit Societies (PACS)** - Village level
2. **District Central Cooperative Banks (DCCBs)** - District level
3. **State Cooperative Banks (SCBs)** - State level

==== Urban Cooperative Banks ####

• Function: Urban and semi-urban banking
• Regulation: RBI and state governments
• Issues: Governance, capital adequacy
• Examples: Saraswat Bank, Cosmos Bank

==== Establishment and Purpose ####

• Year: 1975
• Objective: Rural credit, financial inclusion
• Ownership: Central government (50%), State government (15%), Sponsor bank (35%)
• Current number: 43 RRBs (after consolidation)

==== Functions ####

• Agricultural credit: Crop loans, farm mechanization
• Rural development: Self-help groups, microfinance
• Banking services: Deposits, remittances, insurance

==== First Generation Reforms (1991) ####

Narasimham Committee I (1991):

• Recommendations: Deregulation, competition
• Implementation: New private banks, branch licensing deregulation
• Impact: Improved efficiency, customer service

==== Second Generation Reforms (1998) ####

Narasimham Committee II (1998):

• Focus: Strengthening banking system
• Recommendations: Capital adequacy, asset quality
• Implementation: Basel norms adoption

==== Recent Reforms ####

Jan Dhan-Aadhaar-Mobile (JAM) Trinity:

• Jan Dhan: Financial inclusion through bank accounts
• Aadhaar: Unique identification for KYC
• Mobile: Digital payments platform

Insolvency and Bankruptcy Code (IBC) 2016:

• Objective: Faster resolution of bad loans
• Process: Time-bound insolvency resolution
• Impact: Recovery rates improvement

==== Pradhan Mantri Jan Dhan Yojana (PMJDY) ####

• Launch: 2014
• Objective: Universal banking access
• Accounts opened: 46+ crore accounts
• Features: Zero-balance accounts, RuPay debit cards, insurance

==== Digital Banking ####

Unified Payments Interface (UPI):

• Launch: 2016
• Growth: 45 billion transactions (2022)
• Value: ₹84 lakh crore annually
• Impact: Financial inclusion, cashless economy

Digital Payment Systems:

• RTGS: Real-time gross settlement
• NEFT: National electronic funds transfer
• IMPS: Immediate payment service
• Mobile banking: App-based banking

==== Non-Performing Assets (NPAs) ####

• Definition: Loans overdue for 90+ days
• Peak level: 11.2% (2018)
• Current level: 6.9% (2021)
• Sectors affected: Infrastructure, steel, textiles, aviation

==== Other Challenges ####

• Governance issues: PSB management
• Capital adequacy: Meeting Basel III norms
• Technology adoption: Legacy systems
• Cybersecurity: Digital banking risks
• Competition: Fintech companies

==== Digital Transformation ####

• Artificial Intelligence: Credit scoring, chatbots
• Blockchain: Trade finance, record keeping
• Open banking: API-based services
• Neo-banking: Digital-only banks

==== Regulatory Developments ####

• Central Bank Digital Currency (CBDC): Digital rupee pilot
• Account Aggregator: Consent-based data sharing
• Regulatory sandbox: Fintech innovation testing

• Paper: General Studies Paper III (Economic Development)
• Topics: Banking reforms, financial inclusion, monetary policy
• Previous Year Questions:
  1. Banking sector consolidation impact (2021)
  2. Financial inclusion through digital banking (2020)
  3. NPA crisis and resolution mechanisms (2019)
  4. Cooperative banking structure and challenges (2018)

• Bank branches: 1.6 lakh+ (2021)
• ATMs: 2.13 lakh (2021)
• Credit-Deposit ratio: 71.9% (2021)
• CASA ratio: 44.9% (2021)
• Banking penetration: 80% adults have bank accounts

Major PSBs: SBI PNB BoB Canara Union

• S - State Bank of India
• P - Punjab National Bank
• B - Bank of Baroda
• C - Canara Bank
• U - Union Bank of India

Private Banks: HDFC ICICI Axis

• H - HDFC Bank
• I - ICICI Bank
• A - Axis Bank

• Agricultural credit and banking
• Role of private banks

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Sources: RBI Annual Report, Economic Survey, Banking Statistics