STATE BANK OF INDIA (IBPS PO & SBI PO Exam Oriented)
STATE BANK OF INDIA
The Reserve Bank of India had been attempting to help the villagers through the state cooperative banks but the extent of its assistance was very limited. At the same time, the need to help the farmers in all possible ways so as to increase agricultural production has been most pressing since independence. The All India Rural Credit Survey Committee (AIRCSC) recommended the setting up of a State Bank of India, a commercial banking institution, with the special purpose of stimulating banking development in rural areas. The State Bank of India was set up in July 1, 1955, when it took over the assets and liabilities of the former Imperial Bank of India.
6.1 Capital
SBI had 14,816 branches in India, as on 31 March 2013, of which 9,851 (66%) were in Rural and Semi-urban areas. In the financial year 2012-13, its revenue was INR 200,560 Crores (US$ 36.9 billion), out of which domestic operations contributed to 95.35% of revenue. Similarly, domestic operations contributed to 88.37% of total profits for the same financial year.
6.2 Management
The management of the State Bank vests in a Central Board constituted thus: A Chairman and a Vice-chairman appointed by the Central Government in consultation with the Reserve Bank; not more than two Managing Directors appointed by the Central Board with the approval of the Central Government; six Directors elected by the shareholders other than the Reserve Bank; eight Directors nominated by the Central Government in consultation with the Reserve Bank to represent territorial and economic interests, not less than two of whom shall have special knowledge of the working of co-operative institutions and of the rural economy; one Director nominated by the Central Government; and one Director nominated by the Reserve Bank.
6.3 Functions
The State Bank of India performs all the functions of a commercial bank and acts as an agent of the Reserve Bank in those places were the latter has no branch offices. Further it is required to play a special role in rural credit, namely, promoting banking habits in the rural areas, mobilizing rural savings and catering to their needs. It is expected to look after the banking development in the country. It provides financial assistance to the small scale industries and the co-operative institutions.
We can discuss the functions of the State Bank under the following three sub-heads:
6.3.1. A. Central Banking Functions
Though the State Bank is not the Central Bank of the country, yet it acts as the agent of the Reserve Bank in all those places where the latter does not have its own branches. As agent to the Reserve Bank, the State Bank performs some very important functions:
1. It acts as the Bankers Bank: It receives deposits from the commercial banks and also gives loans to them on demand. The State Bank rediscounts the bills of the commercial banks. It also acts as the clearing-house for the other commercial banks. In addition to this the State Bank also provides cheap remittance facilities to the commercial banks.
2. It acts as the Government�s Banker: It collects money from the public on behalf of the government and also makes payments in accordance with its instructions. The bank also manages the public debt of the Central and the State Governments.
6.3.2. B. Ordinary Banking Functions
The ordinary banking functions of the State Bank are as follows:
1. Receiving Deposits from the Public: Like other commercial banks, the State Bank also receives different types of deposits from the public. The total deposits of the State Bank stood at Rs. 36,188 crores on 29th June, 1990. Of this amount, Rs. 7,105 crores were demand deposits and Rs. 29,083 crores were time deposits.
2. Investment in Securities: Like other commercial banks, the State Bank invests its surplus funds in the Securities of Government of India, the State Governments, Railway Securities, Securities of Corporations and Treasury Bills. The total amount invested by the State Bank in these securities stood at Rs. 9,942 crores on 29th June, 1990.
3. Loans and Advances to Businessmen: The State Bank grants loans and advances to businessmen against the security of government papers, exchange bills, approved promissory notes and title deeds. The total advances of the State Bank to businessmen stood at Rs. 24,047 crores on 29th June, 1990.
4. Foreign Banking: In recent years, the State Bank of India has extended its foreign banking business. It has opened its branches in important world banking centres, such as Nassau, Singapore, Hong Kong, London, New York, Frankfurt etc. The Bank�s foreign business is expanding every year. It has been able to give a new direction to its foreign business. The State Bank, in collaboration with leading foreign banks, has also been extending loans to foreign governments.
5. Miscellaneous Work: The miscellaneous functions of the State Bank are as follows:
(a) The State Bank can receive securities, jewels etc. for safe custody.
(b) Sale and purchase of gold, silver, bullion and coins.
(c) Safe custody of the valuables of its customers.
(d) Issuing of credit certificates to the customers.
(e) Issuing drafts on its own as well as the branches of the subsidiary banks.
(f) Telegraphic remittance of funds from one place to another place.
(g) Acting as the agent of the co-operative banks under certain circumstances.
(h) Working as the liquidator of banking companies and doing other miscellaneous jobs assigned to it by the Reserve Bank.
(i) The State Bank grants special credit facilities to small scale industries and co-operative societies.
6.3.3 C. Prohibited Business of the State Bank
The State Bank of India Act has enumerated certain business which cannot be done by the State Bank.
(a) The State Bank cannot grant loans against stocks and shares for a period exceeding six months. But, according to an amendment of the Act, made in 1957, the State Bank can grant loans to industries against their assets for a period of 7 years.
(b) The State Bank can purchase no immovable property except for its own offices.
(c) The State Bank cannot re-discount those bills which do not carry at least two good signatures.
(d) The State Bank could neither discount bills nor extend credit to individuals or firms above the sanctioned limit.
(e) The State Bank can neither re-discount nor offer loans against the security of those exchange bills whose period of maturity exceeds six months.
6.4 Role of the State Bank in Economic Development
Growth of banking facilities is indispensable for speedy economic development. By helping in the encouragement of small savings, mobilization of savings and development of credit into the priority sectors, the State Bank of India is playing a significant role in India�s economic development. The role of the SBI can be studied under the following heads:
1. The SBI and Small-scale Industries: State Bank Group has been the most important single source of institutional finance to small-scale industries in the country. The SBI has set up several pilot centres, to experiment with financing schemes. Through its Installment Credit Scheme the SBI provides finances for the purchase of equipments and machinery by small and medium size business engaged
in approved manufacturing industries. In 1967, the State Bank introduced the �Entrepreneur Scheme�, under which credit to the small sector was based on the ability and competence of the entrepreneurs as well as the technical feasibility and economic viability of the project.
2.The SBI and Agricultural Credit: The SBI provides direct advances to farmers for all agricultural operations and indirect loans to Primary Co-operative Credit Societies, Farmers Service Societies, etc. The SBI Group provides agricultural advances for a variety of purposes which include loans to co-operative banks, advances to Land Development Banks, Village Adoption Scheme, Integrated Rural Development, Financial Assistance to marketing and processing societies, development of warehousing facilities, etc.
3. The SBI and Small Road and Water Transport: The development of transport facilities, especially in the rural areas, is very vital for the maximum utilization of the localized resources. The SBI provides advances to the small road and water transport operators at concessional rates.
4. The SBI and Industrial Estates: The State Bank of India has been playing a significant role in the establishment of industrial estates in the country. The total advances for setting up of industrial estates have increased to over Rs. 2 crores in June 1989.
5. The SBI and Export Promotion: The State Bank of India also helps in the export promotion by providing finances to exporters, maintaining close relationship between exporters and importers, collecting and disseminating information about market etc. About 30 per cent of the total export finance of scheduled banks comes from the SBI Group.
6. The SBI and Regional Development: The SBI is also helping in reducing the regional disparities by establishing a major portion of its new branches in the rural and unbanked areas. The Lead Bank Schemes has been very successful in the integrated development of the rural areas.
In brief, the State Bank of India is playing the role of leading public sector commercial bank for the speedy economic development of the Indian economy.
6.5 Conclusion
Thus, the SBI is truly shaping itself as a national institution of major financial importance. It has helped in making more effective Government control over the country�s money market.
It has extended appreciably banking facilities to rural and other areas lacking badly in such facilities. The Bank massive resources are made available to the high priority sectors of the economy according to the objectives of planned development. To achieve so much in such a short time is highly creditable indeed.
