project report on hero company

Topics: Bank, Commercial bank, Retail banking Pages: 16 (4656 words) Published: November 14, 2013

Summer internship
project report on:

Submitted by: Mr. Pankaj Yadav


The origin of banking in India is traceable in ancient time through the modern banking hardly 200 years old. The main functions of a bank are to accept deposits and grant loans. There are evidences of these functions being performed by a section o the community in the Vedic periods. There are many references of Debt in the Vedic Literature. During the Ramayana and Mahabharata eras banking, which was a side businesses during the Vedic period, became a full-time business activity for the people. During the Smriti period, the banking business was carried on by the members of the Vanish community and Manu speaks of earning through interest as the business of Vaishyas. He accepted deposits from the public, granted loans against pledges and personal security, granted simple open loans, acted as bailee for his customers, subscribed to public loans by granting loans to kings, acted as treasurer and banker to the state and managed the currency of the country. Indigenous bankers used to maintain a regular system of accounts and borrowers used to sign the loan deeds. Money changing came into vogue and the state regulation of the business became more systematic. Indigenous bills of exchange came also in use.

The maximum rates of interest were fixed.

At the time of Independence in 1947, the banking system in India was fairly well developed with over 600 commercial banks operating in the country. However, soon after Independence, the view that the banks from the colonial heritage were biased in favor of working-capital loans for trade and large firms and against extending credit to small-scale enterprises, agriculture and commoners, gained prominence. To ensure better coverage of the banking needs of larger parts of the economy and the rural constituencies, the Government of India (GOI) created the State Bank of India (SBI) in 1955. Despite the progress in the 1950s and 1960s, it was felt that the creation of the SBI was not far reaching enough since the banking needs of small scale industries and the agricultural sector were still not covered sufficiently. Following the Nationalization Act of 1969, the 14 largest public banks were nationalized which raised the Public Sector Banks' (PSB) share of deposits from 31% to 86%. The two main objectives of the nationalizations were rapid branch expansion and the channeling of credit in line with the priorities of the five-year plans. To achieve these goals, the newly nationalized banks received quantitative targets for the expansion of their branch network and for the percentage of credit they had to extend to certain sectors and groups in the economy, the so-called priority sectors, which initially stood at 33.3%. The main policy changes were the introduction of Treasury Bills, the creation of money markets, and a partial deregulation of interest rates. Besides the establishment of priority sector credits and the nationalization of banks, the government took further control over banks' funds by raising the statutory liquidity ratio (SLR) and the cash reserve ratio (CRR). From a level of 2% for the CRR and 25% for the SLR in 1960, both witnessed a steep increase until 1991 to 15% and 38.5% respectively. In summary, India's banking system was at least until an integral part of the government's spending policies. Through the CRR and the SLR more than 50% of savings had either to be deposited with the RBI or used to buy government securities. Of the remaining savings, 40% had to be directed to priority sectors that were defined by the government. Besides these...
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