Comparative Study of Commercial Banks and Co-Operative Banks

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COMPARATIVE STUDY OF COMMERCIAL BANKS AND CO-OPERATIVE BANKS

Introduction

The robust macroeconomic environment continued to underpin the financial performance of Indian banks during 2004-05, with major bank groups successfully weathering the impact of an upturn in interest cycle. The demand for credit was broad-based during 2004-05 with agriculture and industry joining the housing and retail sectors to drive up the demand for credit. A sharp increase in net interest income mitigated to a large extent the impact of a sharp decline in non-interest income mainly on account of decline in trading profits. Banks continued to earn sizeable profits albeit somewhat lower than last year. Asset quality of scheduled commercial banks improved further during 2004-05. Capital base of banks kept pace with the sharp increase in risk-weighted assets.

ORIGIN AND EVOLUTION OF INDIAN BANKING
Opinions differ as to the origin of the work "Banking". The word "Bank" is said to be of Germanic origin, cognate with the French word "Banque" and the Italian word "Banca", both meaning "bench". It is surmised that the word would have drawn its meaning from the practice of the Jewish money-changers of Lombardy, a district in North Italy, who in the middle ages used to do their business sitting on a bench in the market place. Again, the etymological origin of the word gains further relevance from the derivation of the word "Bankrupt" from the French word "Banque route" and the Italian word "Banca-rotta" meaning "Broken bench" due probably to the then prevalent practice of breaking the bench of the money-changer, when he failed. Banking is different from money-lending but two terms have in practice been taken to convey the same meaning. Banking has two important functions to perform, one of accepting deposits and other of lending monies and/or investment of funds. It follows from the above that the rates of interest allowed on deposits and charged on advances must be known and reasonable. The money-lender advances money out of his own private wealth, hardly accepts deposits and usually charges high rates of interest. More often, the rates of interest relate to the needs of the borrower. Money-lending was practised in all countries including India, much earlier than the recent type of Banking came on scene.

DEFINATION AS PER BANKING REGULATION ACT 1949
A Bank borrow by accepting deposits of money from the public, the deposits are to be repaid on demand or after fixed period. They can be withdrawn by the depositors by means of cheque, draft, order or any other way. A Bank accepts deposits (i.e. borrows) for the purposes of lending mainly to traders, industrialists and manufacturers and the like as also, for the purposes of investing in government securities to fulfill statutory obligations. Thus, Banking Regulations Act, 1949 defines “Banking as accepting for the purposes of lending or investment of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft , order or otherwise.” By and large, this definition can be satisfactory. As per the provision of the Banking Regulation Act, every company willing to do banking business must obtain license from the Reserve Bank for carrying on banking business in India. Besides, all companies carrying on banking business must use the word bank, banker or banking as per of their names. It may be noted that money-lenders are not bankers. Basic Concepts of Banking

Banking is different from money lending, but the two terms, usually carry the same significance to the general public. The money lender, advances money out of his own private wealth, hardly accepts deposits from general public and usually charges high rate of interest. More often, the rates of interest relate to the needs of the borrower and at times the rates may be exorbitant. On the other hand the banking is defined in section 5(b) of the Banking Regulation Act, 1949, as the acceptance of deposits of money...
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