BANKING TRADE AND COMMERCE

JOINT-STOCK BANKS

Though joint-stock banking as understood to-day did not function in the past, there were a number of bankers carrying out banking operations in the country. The Old Gazetteer of Kolhapur district mentions 24 such bankers in Sangli, some of whom also granted bills of exchange or hundis on Bombay, Poona and other large towns. Even in the early decades of this century joint-stock banking was not initiated in the district as the new banks such as the Central Bank, the Bank of Baroda, the 'Bank of Mysore restricted their functioning to big cities. The earliest bank in the district, viz., the Sangli Bank, Ltd., was established in 1916. There was, however, no remarkable progress in the field of banking in this district till the outbreak of the World War II in 1939. The latter proved a boon to the banking activity in the country. For, a number of banks were then started and these engaged themselves in lucrative business. But the partition of the country in 1947 soon spelled a temporary dislocation in the economy on account of which the number of banks declined considerably. This resulted in the weeding out of many uneconomic units in the country.

The Banking Companies Act of 1949 was enacted mainly to protect the interest of the depositors and to foster the growth of banking on sound lines. It was uniformly applied to the joint-stock bank. The main provisions of the Act are as follows:—

(1) No bank should engage itself in any kind of trade activity. (2) A banking company with only one place of business must have paid-up capital and reserves of not less than Rs. 50,000 in aggregate value. (3) A banking company must maintain in cash, gold or unencumbered approved securities, valued at current market, an amount which shall not be less than 20 per cent of the total of its time and demand liabilities in India. Further, the banking company has to maintain assets in India not less than 75 per cent of its demand and time liabilities. (4) The banking company should keep in cash with itself or in an account with the Reserve Bank a sum equivalent to at least 2 per cent of its time liabilities and 5 per cent of its demand liabilities. (5) A bank should have a reserve fund to which should be transferred every year 20 per cent of its profits annually till the fund is equal to the paid-up capital. (6) The banking company should not advance loans on the security of its own shares. (7) The banking company can carry out work only after obtaining licence from the Reserve Bank and follow policy of their advances determined by the Reserve Bank. (8) No office be opened without Reserve Bank's permission and (9) Reserve Bank is authorised to inspect any banking company.

In 1950, the Banking Companies Act was further amended with the result that the Reserve Bank was empowered to regulate the opening of branches by Indian banks in foreign countries, to approve securities to be considered as assets of member banks against their demand or time liabilities, and to facilitate and simplify the procedure for the amalgamation of banking companies.

The following statement gives the names and the location of the joint-stock banks existing in Sangli district:—

* The bank is now merged with the Bank of Baroda.

The State Bank of India is the most important bank because, besides its usual banking activities, it conducts, as an agent of the Reserve Bank of India, Government business and affords remittance and exchange facilities to the local banks and the public. It also affords special facilities, such as, (1) medium term finance, (2) special credit transfer system, (3) safe custody of articles, (4) financial assistance to small-scale industries, (5) traveller's cheques, and so on. They are briefly described below:—

Medium term Finance.

It is given to industrial concerns for expanding their existing units and for establishing new units. The advances made by the bank against suitable and adequate security, including the security of immovable property are to be repaid within seven years.

Financial assistance to small-scale industries.

Under this scheme advances are made to meet practically all the requirements of the small-scale industries. Normally the rate of interest charged is less than 6½ per cent.

Special credit transfer system

This scheme enables a personal deposit holder (current and savings) to transfer money paid in cash up to Rs. 1,000 a day from any branch of the bank to his account.

Safe custody.

Safe custody is provided for documents and other articles of value such as wills, title deeds, insurance policies, jewellery and other personal effects at moderate charges.

Traveller's cheques.

The bank issues its own rupee travellers cheques in denominations of Rs. 50 and Rs. 100 which are encashable at any of its offices in India. They provide a convenient form of carrying cash without any risk of loss or theft while travelling.

Whereas the State Bank of India acts as the Government's Bank, the other joint-stock banks in the district are engaged in activities mainly of a commercial nature. Their main object consists in carrying on banking business including the borrowing, raising and lending or advancing money against different types of securities, accounts, policies, bonds, hundis, bills, etc., granting and issuing letters of credit, and circular notes; dealing in stocks, funds, bonds, debentures, investments, etc., receiving money and valuables on deposit or for safe custody or otherwise collecting and transmitting money and securities, managing of property, and transacting all kinds of agency business. In short, the main business of the banks is to attract deposits—current, fixed and savings—and to make available to their clientele the requisite finance.

The balance sheet of a bank is usually divided into two parts, the assets and the liabilities. The former consists of cash on hand and with banks, investments (including debentures, shares not quoted on stock exchange), advances, bills receivable, acceptances, premises and furniture, non-banking assets, etc. The latter, on the other hand, consists of deposits and other accounts, borrowings from other banking companies, bills payable, acceptances, etc. The average of month-end deposits of these banks in the half-year July-December 1961 were to the tune of Rs. 3,35.00.000 as per the estimates of the Reserve Bank of India.

The following tables give the deposits owned by the banks in the Sangli district as well as an analysis of their advances according to security and purpose.

TABLE No. 15

OWNERSHIP OF DEPOSITS OF THE JOINT-STOCK BANKS IN SANGLI DISTRICT IN THE YEAR 1955

*Accounts of less than Rs. 500 are included in this amount.

TABLE No. 15-contd.

*Accounts of less than Rs. 500 are included in this amount.

TABLE No. 16

OWNERSHIP OF DEPOSITS OF THE JOINT-STOCK BANKS IN SANGLI DISTRICT IN 1957

TABLE No. 16-contd.

*Accounts of less than Rs. 500 are included in this amount.

TABLE No. 17

ANALYSIS OF ADVANCES OF SCHEDULED AND NON-SCHEDULED BANKS ACCORDING TO PURPOSE, DISTRICT SANGLI

TABLE No. 18

ADVANCES OF ALL SCHEDULED BANKS IN SANGLI DISTRICT ACCORDING TO SECURITY

(In thousands of Rs.)

TABLE No. 18—contd.

(In thousands of Rs.)

TABLE No. 18—contd.

(In thousands of Rs.)

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