Bankis a German word which means ‘to collect’. Now a day, a bank occupies importantposition in the economic structure of the country. A commercial bank is aprofit-seeking business organization, which dealing in money and credit. Banks arefinancial institution, which accepts deposits of money from general public tokeep them in its safe custody.
It also deals in with credit, i.e., it createscredit by giving as advances from the funds received as deposits to needy customers(Somsheskar, 2009).
Theterm ‘Bank’ has been defined in different ways by different economists. A fewdefinitions are:Accordingto Walter Leaf (1999) “A bank is a person or corporation which holds itself outto receive from the public, deposits payable on demand by cheque.” Horace Whitehas defined a bank, “as a manufacture of credit and a machine for facilitatingexchange.” (Somsheskar, 2009). Years Events 1786 General Bank of India was set up. 1806 Presidency Bank of Calcutta was established in 1806; it was renamed in 1809 as Presidency Bank of Bengal. 1840 Presidency Bank of Bombay established 1843 Presidency Bank of Madras established 1920 Three presidency banks viz. Bank of Calcutta, Bank of Bombay and Bank of Madras amalgamated to form Imperial Bank of India 1935 Reserve Bank of India was formed based on the recommendation of Hilton Young Commission (setup in 1926).
1949 Nationalization of Reserve Bank of India 1955 Nationalization of Imperial Bank of India, which now became State Bank of India 1969 Nationalization of 14 major Banks 1980 Nationalization of another 6 major Banks 1991 Narsimhan committee-I gave its recommendation 1998 Narsimhan committee-II gave its recommendation (Source:Pankaj Goel & Shobhna)Kinley(1999) cited in NSE, (2010) defines banks as an establishment which makes toindividuals such advances of money as may be required and safely made, and towhich individuals entrust money when not required by them for use.” TheBanking Companies Act of India defines Bank as “A Bank is a financialinstitution which accepts money from the public for the purpose of lending orinvestment repayable on demand or otherwise withdrawable by cheques, drafts ororder or otherwise” (Somsheskar, 2009).DigitalBankingBeforeLiberalization and Globalization, the Indian Banking sector is doing theirbusiness in a very slow manner. In 1990, the revolution is came byprivatization, liberalization & globalization in banking sector.
In thisera foreign banks & private banks came in existence by issuing licensesfrom Reserve Bank of India. By do this Indian banks are faced intensecompetition from these banks due to Introduction of Digital/Informationtechnology in banking sector. Though these changes started with the recommendationsof Narasimham Committee’s (1992) forcomputerization, after that another Saraf Committee’s (1994) given suggestionsfor Electronic Clearing Services (ECS), Electronic Fund Transfers (EFT) and bankscan given services of IT as mobile banking, internet banking, automated tellermachine (ATM) etc. (Source: www.rbi.
org.in)”Internetbanking” refers to systems that enable bank customers to access accounts andgeneral information on bank products and services through a personal computer(PC) or other intelligent device” (Chakraborty, 2015).E-bankingmay allow banks to offer new products and services, to expand their markets fortraditional activities and to consolidate their competitive position inoffering available payment services, while ensuring operating costs cut forbanks (BCBS, 1998). Information Technology is refers to storing, processing andtransferring of information with the use of personal computers, telephones,mobile phones, fax machines etc.
Technology has changed the banking processfrom traditional banking. It gives extra edged to the banking industry toenhance customer base as well reach geographical distant and complex markets.It is a fastest and cheapest way for delivery of banking products and services.Customers canalso get benefits by get instant account statements, transfer funds, fixeddeposits and purchase drafts by just browsing bank’s website through their pcor mobile app’s. (Dhadwal & Rajinderkapil, 2017). E-banking includes thesystems that enable financial institution customers, individuals or companiesto access their accounts, transact business, or obtain information related tofinancial products and services through a public or private network, likeinternet or mobile phone etc. (Chovanova, 2006).
(Source: Gvozdanovic & Solomon, (2016).Supply Chain ManagementAim of Supplychain Management (SCM) to provide transmission of goods and information withhighest level of customer satisfaction at the lowest possible cost. A supplychain is the network of the things involved in delivering finished goods to thecustomer (Lindeke RR (2014) Supply chain management). The definition of theSupply Chain Management (SCM) “in the process of planning, organizing,implementing and controlling of the four things (material, capital, informationand manpower) from the point of production (supplier) to the point of Sale(customer), forward & reverse, effectively & efficiently in order tosatisfy customer needs.
“Supply chain Management as the integration of businessprocess from the end user through original supplier who provides products,services and information that adds value for the customers” according to(Douglas M Lambert). Supply chain finance allows a supplier to sell itsinvoices to a bank at a discount as soon as they approved by the buyer, so thatthe risk of seller is reduced as the time of sale. The purpose of FSC to maketransparency in processes between purchase to-order and order-to-cash(Kristofik & Hoff, 2012).Globalization is driving banks to examine new ways to cater to corporateclients, including financial supply chain management (FSCM).
FinancialSupply Chain Management is generally defined as a set of financial activities happenedvarious parties involved in a supply chain – i.e. the customer, producer andthe financing institution to reducing financing costs and improved business efficiency (Vousinas & Ponis, 2017). “The goal offinancial supply chain management is to make celerity in processes involved frompurchase to payment and sale to cash, as well as processes involved inordering, invoicing, reconciliation and payment” (Kristofik & Hoff, 2012).
“Growthof the bank stands on the relationshipbetween Supply Chain Management (SCM) practices, and Organizational performance and it is also found that information andcommunication technology (ICT) had a major role in determining the performanceof bank. The study recommends that to use correct ICT methods should be appliedto promote the competitiveness of banks and improve performance” (Kimechwaet al., 2015).HistoryBankingin India established in 18th century, and Bank of Hindustan wasincorporated in 1770 followed by Bengal bank in 1784 and further General bankof India came into existence in 1786. But they were not able to run for longtime & failed. In1804, Where British ruler was established, Presidency Bank of Calcutta whichwas renamed as Presidency Bank of Bengal in 1809, then Presidency Bank ofBombay (1840), and later Presidency Bank of Madras in 1843. In 1920, the firstMerger in Indian Banking history came in existence, when all these three bankswere amalgamated to make a single entity called Imperial Bank of India, aforeign private Bank.
The Presidency Banks(19th Century)Bank of Bengal(1804) Bank of Bombay (1840) Bank of Madras (1843TheImperial Bank of India (Amalgamation)(1921)The State Bank ofIndia- 1955 (Nationalisation)Associate Banks (mergers)The State Bank of India Group1960 (Source:Dr. P. N. Reddy, 1998. Banking Theory and Practice).
Finallythe first Indian Bank was then opened in 1865 by the name of Allahabad Bank andPunjab National Bank that was started and operated from Lahore. Later CentralBank of India, Bank of India, Bank of Baroda, Indian Bank, Bank of Mysore andCanara Bank started within 1906 to 1913.Inthe initial stage, the development of banking sector was very slow and wasfacing tough time between 1913 to 1948. Between 1913 to 1918 minimum 94 banksin India failed during the First World War (1914-1918). The failure of banks in1913 revealed the weaknesses of the banking system such as the propermanagement of unduly low proportion of cash and other liquid assets, thedistribution of large unsecured advances to the companies in which thedirectors were interested.
After hectic and uncontrolled expansion, therefollowed the inevitable crash. The committee is formed to investigate thereasons of failure of banks. As per the suggestions of the report of thisCommittee the need for enacting a special Bank Act, covering the organisation,management, and audit liquidation of banks was felt. On the strong recommendationsof committee, the establishment of a supreme body with the view point of developmentof banking facilities in India.In 1926,The Hilton Young Commission was suggested to originate a separated bank incountry by the name of Reserve bank of India. Then in 1933 bill was presentedin Legislative assembly, which led to formation of Reserve Bank of India (RBI)in 1935. The Preamble of the Reserve Bank of India describes the basicfunctions of the Reserve Bank as, “to regulate the issue of Bank notes andkeeping of reserves with a view to securing monetary stability in India andgenerally to operate the currency and credit system of the country to its advantage; to have a modernmonetary policy framework to meet the challenge of an increasingly complexeconomy, to maintain price stability while keeping in mind the objective ofgrowth” (www.rbi.
org.in/Scripts/AboutusDisplay.aspx).ReserveBank of India authorized The Imperial Bank of India to work on behalf of RBI,where they had no branches.Laterwhen India got Independence in 1947 from British rule, it was the time whenIndian banking sector saw tremendous growth. The Government of India took firststep for Nationalization of Reserve bank of India in 1948, to make solidfoundation of Indian banking system and for this Banking Regulation Act wasestablished in 1949 (Reserve bank of India act 1949).
Further State bank ofIndia (SBI) was first nationalized bank. It was in 1955, when the Imperial bankin India was renamed as SBI.1.1.
1 Nationalization,Liberalization and Globalization in Banking:- In1960, till the time State bank of India was the only Government bank, whichwere authorized by the RBI and rest of the other banks were owned and functionedby the private Individuals. It was seen the growth of Indian Economy it isnecessary to regulate Indian Banking industry more effectively.Laterin 1967 Government of India took major steps for the development of bankingindustry in which, they nationalized some private banks and finally they endedup by nationalizing 14 major banks on 19 July, 1969 and in second phase 6 morebanks were nationalized on 15 April, 1980. Later in 1993, the governmentamalgamated New Bank of India with PNB. By doing this the number of governmentbanks got reduced from twenty to nineteen.
Globalizationimplies that the distinction between domestic and international arena becomesblurred and it is hard to think anything remaining purely domestic.Globalization means the free movement across national borders of the followingfour elements of economy:(i) Physical capital as represented byinvestments in plant and machinery;(ii)Financial capital as represented by investment of financial institutions incapital market;(iii)Technology; and(iv)Labour.(Aggarwal,2011)In1990, the Government worked on the policy of liberalization and gave license tomany small private banks. New generation these banks were Tech-savvy banks, andGlobal trust bank got started at this time. After sometime these banks weremerged with Oriental bank of Commerce (OBC), ICICI Bank, UTI Bank (Renamed AXISBank) and HDFC Bank.
Thisstep taken by the government boosted the Indian Economy and banking sector both,which all the three sectors of banks showed tremendous growth (Foreign banks,Govt. banks & Private Banks).Banking Structure in India (As onMarch 31, 2010)