📘 44 : Indian Banking System & Committees

🔹 Indian Banking System

भारतीय बैंकिंग प्रणाली का Apex Body Reserve Bank of India (RBI) है।
RBI की स्थापना 1935 में हुई।
RBI का प्रारंभिक Head Office Kolkata में था।
RBI का स्थायी मुख्यालय 1937 में Mumbai स्थानांतरित हुआ।

🔹 Scheduled Banks

Scheduled Banks RBI Act, 1934 की Second Schedule में सूचीबद्ध होते हैं।
Scheduled Banks RBI से Loan / Refinance ले सकते हैं।
Commercial Banks और Co-operative Banks Scheduled Banks के अंतर्गत आते हैं।
Public Sector, Private Sector, Foreign Banks और RRBs Scheduled Commercial Banks हैं।
Scheduled Urban Co-operative Banks भी Scheduled Banks हैं।

🔹 Non-Scheduled Banks

Non-Scheduled Banks RBI Act की Second Schedule में शामिल नहीं होते।
सामान्य परिस्थितियों में Non-Scheduled Banks RBI से उधार नहीं ले सकते।

🔹 Development Banks

Development Banks सामाजिक लाभ वाले दीर्घकालीन प्रोजेक्ट्स को वित्त देते हैं।
EXIM Bank की स्थापना 1 जनवरी 1982, HQ – Mumbai।
SIDBI की स्थापना 1990, HQ – Lucknow।
NABARD की स्थापना 12 जुलाई 1982, HQ – Mumbai।
NABARD ग्रामीण विकास का Apex Development Bank है।

🔹 Government / PSU Banks

जिन बैंकों में भारत सरकार की हिस्सेदारी 51% से अधिक हो वे PSU Banks कहलाते हैं।
भारत में वर्तमान में 12 Public Sector Banks हैं।
PNB, BoB, SBI, Canara, Union Bank प्रमुख PSU Banks हैं।

🔹 Bank Nationalisation & Mergers

Imperial Bank of India का राष्ट्रीयकरण कर SBI (1955) बना।
1969 में 14 निजी बैंक राष्ट्रीयकृत हुए।
1980 में 6 और बैंक राष्ट्रीयकृत हुए।
SBI के Associate Banks का विलय 1 अप्रैल 2017 को हुआ।
2020 में PNB + OBC + United Bank का विलय हुआ।
HDFC Bank और HDFC का विलय हुआ (Private Sector)।

🔹 RRB Amalgamation

“One State One RRB” के सिद्धांत पर RRBs का विलय किया गया।
वर्तमान में 28 RRBs (26 States + 2 UTs) हैं।
DFS RRBs के Amalgamation को अधिसूचित करता है।

🔹 Important Banking Committees

New Bank License – Bimal Jalan Committee
NBFC – A.C. Shah Committee
NPA – Khanna Committee
Banking Sector Reforms – Narasimham Committee
Payment Bank – Nachiket Mor Committee
Computerisation – Rangarajan Committee
Lead Banking Scheme – Gadgil Committee
Financial Inclusion – Dr. C. Rangarajan Committee
Nomination & Customer Service – Goiporia Committee
Teller System – Talwar Committee
Digital Payments – Ratan Watal Committee
MSME Task Force – T.K.A. Nair Committee

🔹 ATM Authorisation Response Codes

00 – Transaction Approved with Balance
01 – Approved without Balance
05 – Invalid PIN
59 – Insufficient Fund (Deposit Account)
58 – Insufficient Fund (OD Account)
61 – Withdrawal Limit Exceeded
62 – PIN Tries Exceeded
70 – System Error
76 – Dormant Account
150 – Hot Listed Card

🔹 TDS on Deposits

FD Interest पर TDS सामान्यतः 10% होता है।
PAN न देने पर TDS 20% कटता है।
NRO FD पर TDS 30% लगता है।
NRE और FCNR FD Tax Free हैं।
Form 15G / 15H देकर TDS से बचा जा सकता है।
Senior Citizen के लिए TDS Threshold ₹1,00,000 है।
Non-Senior Citizen के लिए TDS Threshold ₹50,000 है।
Savings Account Interest ₹10,000 तक 80TTA में Exempt है।

🔹 TDS on Cash Withdrawal (Sec 194N)

ITR Filed होने पर ₹1 Crore से अधिक Cash Withdrawal पर TDS।
ITR Not Filed होने पर ₹20 Lakh से अधिक पर TDS।
ITR Filed – TDS Rate 2%
ITR Not Filed – ₹20L–₹1Cr → 2%, ₹1Cr से ऊपर → 5%

🔹 DEAF (Depositor Education & Awareness Fund)

10 वर्ष से अधिक Unclaimed Deposits DEAF में ट्रांसफर होती हैं।
DEAF का संचालन RBI (e-Kuber) के माध्यम से होता है।
वर्तमान DEAF Interest Rate 3% Simple Interest है।
DEAF BR Act की Sections 26A & 35A के तहत लागू है।

🔹 Payments Bank vs Small Finance Bank

Payments Bank Loan नहीं दे सकता।
Payments Bank Maximum Balance Limit – ₹2,00,000
SFB Deposits और Loans दोनों दे सकता है।
First SFB – Capital Small Finance Bank (2016)
First Payments Bank – Airtel Payments Bank (2016)

🔹 Local Area Banks & Co-operative Banks

LAB Scheme की शुरुआत 24 August 1996।
LAB का Minimum Capital ₹5 Crore।
LAB केवल सीमित जिलों में कार्य करते हैं।
Co-operative Banks “One Person One Vote” सिद्धांत पर कार्य करते हैं।
Co-operative Banks का Apex Body – NABARD
Banking Regulation का नियंत्रण – RBI

Indian Banking

SCHEDULED

COMMERCIAL
- PUBLIC SECTOR
- PRIVATE SECTOR
- FOREIGN BANKS
- REGIONAL RURAL BANKS
CO-OP BANK
- SCHEDULED URBAN CO-OP BANKS

Reserve Bank of India

NON SCHEDULED

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(i) Scheduled Banks : - These are the banks included in the second schedule of the Reserve Bank of India Act of 1934. These banks are eligible for debts or loans at the RBI's bank rate. Commercial and cooperative banks are subdivisions of scheduled banks.

(ii) Non-scheduled Banks : - Those banks which are not covered by the second section of the Reserve Bank of India Act, 1934. Except in times of crisis, they cannot borrow from the RBI for traditional banking purposes.

(iii) Development Financial Institutions or Development Banks : -Development Banks finance Investment-intensive projects with low profits but enormous social benefits. They include the Export-Import Bank of India (1982),

» Small Industries Development Bank of India (SIDBI) was established under an Act of the Parliament in 1990. SIDBI is the Principal Financial Institution engaged in promotion, financing & development of the Micro, Small and Medium Enterprises (MSMESs) sector and coordination of the functions of the various institutions engaged in similar activities. HQ - Lucknow

» National Bank for Agriculture and Rural Development (NABARD) : -Development Bank of the Nation for Fostering Rural Prosperity (12 july 1982). HQ - Mumbai

» Export-Import Bank of India (1st January 1982 HQ - Mumbai ) is the premier export finance institution of the country that seeks to build value by integrating foreign trade and investment with the economic rise of India.

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» What are Government Banks?

**» Government banks, often referred to as public sector banks (PSBs), are financial institutions in which the Government of India holds the majority of shares, typically more than 51%

» Currently, there are 12 PSU banks in the country. Here is the list of government banks in India in 2024:

State Bank of India
Bank of Baroda
Punjab National Bank
Bank of India
Union Bank of India
Canara Bank
Bank of Maharashtra
Central Bank of India
Indian Overseas bank
Indian Bank
UCO Bank
Punjab and Sind Bank

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» Some of the recent mergers in year 2020 include Punjab National Bank joining forces with Oriental Bank of Commerce and United Bank of India, Canara Bank merging with Syndicate Bank, Indian Bank combining with Allahabad Bank, and Bank of Baroda merging with Dena Bank and Vijaya Bank.

» In 1960, the State Banks of India was given control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959.

» However the merger of these associated banks with SBI went into effect on 1 April 2017.

» In 1969, the Government of India nationalised 14 major private banks; one of the big banks was Bank of India. In 1980, 6 more private banks were nationalised.

» Imperial bank of india nationalised as state bank of india in 1955.

» First indian bank was bank of Hindustan.

» The first wholly indian bank was PNB.

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Like, Share & Subscribe - Truegyan » Here are the updates on the recent bank mergers in India :

Name of Acquiring Bank	Name of Banks Merged
Punjab National Bank (PNB)	Oriental Bank of Commerce<br>United Bank of India
Canara Bank	Syndicate Bank
Union Bank of India	Andhra Bank<br>Corporation Bank
Indian Bank	Allahabad Bank
Bank of Baroda	Dena Bank<br>Vijaya Bank
State Bank of India	State Bank of Bikaner & Jaipur<br>State Bank of Mysore<br>State Bank of Patiala<br>Bharatiya Mahila Bank<br>State Bank of Travancore<br>State Bank of Hyderabad
HDFC Bank	HDFC

» Department of Financial Services (DFS) has notified amalgamation of 26 Regional Rural banks (RRBs) on the principles of "One State One RRB". This is fourth phase of amalgamation of RRBs. 28 RRBs in 26 states and 2 UTs.

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List of Important Banking committee

Committee	Headed by
New Bank license	Bimal Jalan
NBFC (Non Banking Financial Company)	AC Shah
Non Performing Assets	Khanna committee
Banking sector Reform (Financial system)	Narsimhan Committee
Electronic fund Transfer	Mrs KS Shere committee
Payment Bank is recommendation of	Nachiket Mor
Concept of weaker section	Ghose Committee
Service Area Approach	PD Ojha Committee
Computerization of Banking Industry	Rangrajan Committee
Technology Issues In banking Industry	WS Saraf Committee
Education loan scheme	Kamath Committee
Regional Rural Banks	Recommended by Narsimhan Committee<br>(Related ML Dantwala Committee)
Prime Minister's Task Force on functioning of MSME	T KA Nair
CGTMSE guarantee for MSME loans	V.K. Sharma
Rehabilitation of Sick SMEs	Dr. K.C. Chakrabarty

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List of Important Banking committee

Committee	Headed by
To regulate payments and settlement for Digital Payments	Ratan Watal Committee
Service Area Approach	PD Ojha Committee
Lead Banking system (Agriculture Finance)	Gadgil Committee (1969)
Lead Banking scheme (Review)	UK Sharma Committee, Usha Thorat
Inspection system of Banks	R Jilani Committee
Foreign Exchange Markets in NRI Investment In India	Sodhani Committee
Deposit accounts, quick delivery of services, Government business, exchange of mutilated notes, etc. Nomination (common column)	Gioporia committee
Reforms In Small Savings	YV Reddy
Customer Service - Teller System, Nomination,	Talwar Committee
Financial Inclusion	Dr. C. Rangarajan Committee
Financial Sector Reform (The Hundred steps to Financial Development)	Raghuram Rajan Committee
Areas of foreign exchange, currency and government transactions including pension payments, recommended setting up of BCSBI	S. S. Tarapore committee

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Code	Description
00	Transaction approved with balance: Transaction approved and okay with display of balance
01	Transaction approved without display of balance: Transaction approved and okay without display of balance.
02	Unauthorized Usage: Card is not authorized for usage.
03	Expired Card: Card used is expired.
04	Invalid Card: No CAF record for Card is available.
05	Invalid PIN: Incorrect PIN is being used.
06	Database problem: Card could not be used because of Base 24/branch database problem.
07	Ineligible Transaction: Transaction denied because processing restriction imposed on type of transaction being performed.
08	Ineligible Account: The transaction could not be performed because of restriction on / difficulty with the account specified in cardholder's CAF record.
09	Transaction not supported: Type of transaction being attempted is not supported by the ATM.
58	Insufficient Fund in case of OD accounts.
59	Insufficient Fund in case of Deposit Accounts.
60	User Limit Exceeded: Limit of maximum number of withdrawal allowed during current usage period exceeded.

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Code	Description
61	Withdrawal Limit Exceeded: Transaction declined because it would have caused Limit of cardholders withdrawal allowed during current usage period to be exceeded.
62	PIN tries exceeded: Cardholder had already reached the maximum no. of PIN tries allowed for the current usage period.
63	Withdrawal Limit Already Reached: Transaction denied because card holder has already reached maximum withdrawal limit during the card usage period.
64	Invalid Credit Card Cash Advance Amount: (Applicable in case of Credit Card only) Transaction denied as it did not meet the criteria set for credit of the credit card issuer.
65	No Statement for information for the Account: Transaction denied by the host, i.e. database.
66	Statement Information Not Available: Transaction denied by the host i.e. database
67	Invalid Cash Back Amount; (Applicable in case of cash back deposits) Transaction declined because amount requested back in a deposit with cash back transaction exceeded the amount of the deposit

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Code	Description
68	External Decline: Transaction declined as a result of processing by an external system (Host).
69	No Sharing Between the card issuer and terminal owner: Transaction declined when there is no sharing between card issuer and terminal owner.
70	System Error: Transaction denied because ATM record was faulty.
71	Contact Card Issuer: Transaction declined due to following reasons:<br>a). PAN (Personal Authorization Number) of the card is incomplete.<br>b). Cash withdrawal attempted less than minimum withdrawal allowed.
72	Destination not available: Transaction denied, as the destination is not available. (Database cannot be accessed).
73	Routing Look Up Problem: Transaction declined because of a configuration problem.
74	Message Edit Error: Transaction declined because invalid data was encountered.
76	Dormant Account
150	Hot Listed

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✓ Payment of term deposit by cash — section 269 of income tax act prohibits payment in cash if principle plus interest is Rs 20000/- or more. Payment may be made towards a/c payee only.

✓ TDS - Under existing Income Tax rules, the TDS rate on FD interest is 10% deducted, 20% if you do not provide your PAN Card to the bank. For NRO (Non-Resident Ordinary) FDs, the TDS rate is 30%. For NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) FDs, there is no TDS because these FDs are tax-free.

✓ FD holders can apply for TDS waiver on their fixed deposit earnings by declaring them through Form 15G or Form 15H. Subsequently, they must submit the same to their FD provider at the beginning of any given financial year.

✓ Individuals whose total taxable income is lower than Rs. 2.5 lakh are exempted from paying TDS on FD.

✓ Tax on Income : - The Rebate has been increased to Rs. 60,000 from Rs. 25,000 for the FY 2025-26. With the revised tax structure, individuals earning up to Rs.12 lakhs will have no tax liability due to the increased rebate of Rs.60,000. For salaried individuals, the tax liability will be zero for incomes up to Rs.12.75 lakhs due to the Rs.75,000 standard deduction.

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✓ When no tax is to be deducted : - As per section 194A of IT act

» If aggregate amount of interest credited or paid to the payee in respect of time deposit during the financial year does not exceeds the following limit :

Threshold limit if payee is	General public	Senior Citizen
Banking company	Rs 50000	Rs 100000
Post office
Taxable income	2.5 lakh	3 lakh

✓ 5 lakh for super senior citizens (Age 80 year above)

» What is the new TDS exemption limit on mutual fund and stock dividends?

» The exemption limit has been raised from ₹5,000 to ₹10,000, allowing investors to retain more of their dividend income.

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» Banks have to deduct TDS when your interest income is more than Rs. 50,000 in a year for individuals other than senior citizens (for senior citizens, the limit is Rs. 1,00,000) under section 194A of the Income Tax Act.

» Interest paid upto Rs 10000 on savings bank account is exempt under sec 80TTA of IT act.

» The bank aggregates the interest on deposits held in all its branches to calculate this limit.

✓ However, if your total income is below the taxable limit, you can submit Form 15G and 15H to the bank and request them not to deduct any TDS.

✓ Form 15G - The total interest income subject for the year is less than the basic exemption limit of that year, which is Rs.2.5 lakhs(old regime) or Rs.3 lakhs(new regime) for financial year 2023-24 (AY 2024-25)

✓ Form 15H - a) You can submit Form 15H if you have attained the age of 60. b) Your taxable income for the financial year should be up to the maximum exempt amount; i.e., Rs 3 lakhs and Rs 5 lakhs in the case if you are above 80 years of age

✓ Important Points : - a) You should ideally submit your Form 15G or Form 15H at the beginning of the financial year. b) Benefits of Form 15G and 15H cannot be claimed by Non-residents.

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TDS on Cash withdrawals (sec 194N IT act) — a) ₹ 20 lakh (if no ITR has been filed for all the three previous AYs), or b) ₹ 1 crore (if ITRs have been filed for all or any one of three previous AYs).

✓ At what rate is TDS on cash withdrawal u/s 194N deducted ?

✓ TDS will be deducted at a rate of 2% on cash withdrawals in excess of ₹ 1 crore if the person withdrawing the cash has filed income tax return for any or all three previous AYs.

✓ TDS will be deducted at 2% on cash withdrawals of more than ₹ 20 lakh and 5% for withdrawals exceeding ₹ 1 crore if the person withdrawing the cash has not filed ITR for any of the preceding three AYs.

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The Depositor Education and Awareness (DEA) Fund Scheme, 2014 — Revised Operational Guidelines : -

**» These instructions are issued in exercise of powers conferred under Sections 26A and 35A of the Banking Regulation Act, 1949.

✓ A bank needs to register under the DEA Fund module on e-Kuber system.

✓ A bank shall transfer to the DEA Fund, the amounts becoming due in each calendar month (i.e., proceeds of the inoperative accounts and balances remaining unclaimed for 10 years or more) .

✓ The window for transferring unclaimed amounts/deposits to the Fund through e-Kuber shall be kept open only during the first 10 working days of every month.

✓ The window for submitting claim from the Fund shall be kept open in e-Kuber system during the first 10 working days of every month.

» Interest Rates Payable on Interest Bearing Deposit in DEAF : -

Period	Interest Rate
Upto June 30, 2018	4 per cent per annum (simple interest)
July 1, 2018 up to May 10, 2021	3.5 per cent per annum (simple interest)
May 11, 2021 onwards	3 per cent per annum (simple interest)

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	Small Finance Bank	Payments Bank
Definition	Small Finance Banks are financial institutions that intend to fund the financial needs of the underprivileged sections through basic banking activities	A Payments Bank is like any other bank, but operating on a smaller scale without involving any credit risk. It can carry out most banking operations but can't advance loans or issue credit cards.
Objectives:	These have been set up to further financial inclusion by:<br>• supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities	Further financial inclusion by providing:<br>• small savings accounts<br>• payments/remittance services to migrant labour workforce, low-income households, small businesses, other unorganised sector entities
Capital Requirement:	minimum paid-up voting equity capital / net worth requirement shall be ₹ 200 crore	The minimum paid-up equity capital of the payments bank is Rs.100 crore
Scope of Activities:	• The small finance bank shall primarily undertakes basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.<br>• Time Deposit such as Fixed Deposit (FD) and Recurring Deposit (RD) are both accepted	• ATM/Debit cards can be issued<br>• Credit cards cannot be issued<br>• Mobile banking available<br>• Only Acceptance of demand deposits restricted to holding a maximum balance of Rs. 2,00,000 per individual customer.<br>• cannot undertake lending activities.
First Bank	Capital Small Finance Bank 2016	Airtel Payments Bank 2016

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» The Local Area Bank Scheme was introduced on 24th August 1996.

» Local area banks are referred to as small private banks with low-cost structures that provide financial services limited by the area of operation and their activities are regulated and controlled by the Reserve Bank of India.

» These banks usually function in rural and semi-urban areas and three main contiguous districts.

» The main objective of the local area banks is to mobilise rural savings through local institutions. They are also set up to give rise to new investment opportunities in the same local areas.

» The minimum start-up capital of a LAB was fixed at Rs.5 crore.

» The LABs were allowed to open branches in only one urban centre per District and rest of the branches were allowed to be opened in the rural and semi urban centers

✓ Cooperative Banks refer to those financial institutions under the Banking System in India that operate on the principles of cooperation and mutual benefit for their members. They operate on the principle of "one person, one vote" in decision making.

✓ Reserve Bank of India: Under the Banking Regulation Act, 1949, and the Banking Laws (Application to Co-operative Societies) Act, 1965, the RBI is responsible for regulating banking aspects of these banks, such as capital adequacy, risk control, and lending norms.

✓ The National Bank for Agriculture and Rural Development (NABARD) is the apex body of the cooperative sector in India.

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