For a country to develop it needs a good leader as well as a good economic policy and a strong banking system. Because a businessman needs a factory to make goods, a government builds roads and bridges to develop the country, it needs a lot of money, so the only sector in any country that has the capacity to supply such a huge amount of money is the banking sector, that’s why we don’t use banks and don’t hear the name bank in our daily life. We cannot spend even a single day in India. When we hear the word bank in India, the first name that comes to our mind is SBI State Bank of India. But how did the original State Bank of India start? Although the name SBI was given to this bank in 1955, it actually has a history of 200 years behind it. It has been in the development of our country for several hundred years. I am going to tell you how SBI played a very important role and became the largest public sector bank in India today. In 1806, a bank was established to hide money needed for wars against the kings in India. The same bank of Calcutta changed the name of this bank to Bank of Bengal in a few days. If you want to go back a bit further in the time line, after 1602 the British occupied some important kingdoms in our India and developed those kingdoms as municipalities and announced them as prasidency towns, namely Madras Residency, Bombay Residency and Bengal President after a few years established three banks in these three presidency towns.
They are called President, Bank of Calcutta, Bank of Bombay and Bank of Madras, I think now you will get a clarity why Bank of Calcutta was established the British Government directly gave the power to print and circulate paper currency in India to these three banks until 1861, so for more than 100 years, these three banks also worked together for the British Government in India, and finally in 1921, these three Presidency Banks were merged to establish a single bank. The same was done by the Internal Bank of India, at that time it was run by a private bank. After the independence of India, in 1952, Jawaharlal Nehru formed the first time government. In 1921 through this sbi act which means merging a private organization with the government, Imperial Bank of India changed its name to State Bank of India and announced it as a government bank. In 1959, the Indian Government announced the eight small banks in India as SBI subsidy under the SBI Subsidy Act, which means they work under SBI. We have seen how Bank of India started, how it became a government bank, but now let’s see what the actual business of SBI is, not only SBI, the business of any bank in this world is the same interest business. If we give them interest, how can they give us our money immediately when we want it Now I will tell you about the banking business model. Listen carefully. There are three types of income. Number one is lending. Number two is investment returns. Number three is fees and charges.
The money that we have deposited in Bengaluru is given back to us as loans in different categories such as home loans, car loans and personal loans, but this does not mean that all the money that comes in the form of interest is the bank’s own, because even those who have deposited money in the bank, the bank has to pay back the interest, for example many customers. The money is deposited in the savings account and all of them also have to pay bank interest, so what banks do is that if a person deposits lakhs in the bank, the bank will give four percent interest to that person. For example, even if the bank gets 8% interest, 4% is paid to the deposit and the remaining 4% is the actual income, but all the interest I mentioned here is just for example. In real life, all this interest depends on the loan you take. If all our deposits are given as loans to other people then how can they give us money as soon as we ask, how does this happen RBI controls all the banks in India. RBI has brought some rules and regulations to control every bank. Banks also hide part of the deposit with the Reserve Bank of India instead of lending it completely. This is called CRR which means cash resoration and banks hide some more money in bank deposits in the form of liquid cash or government securities. It is also used to control inflation in our country to run stably
Investment is a very important concept. Let’s discuss it in future videos. Do you understand how it works? The second source of income for Next Bank is the money we hide in investment returns. Banks invest some part of it elsewhere. About 1 lakh 30 thousand crores of rupees have been invested in 92 companies in India, so when these companies make profits, the people who invested in them also get profits, and SBI also earns a return on their invested money every year. The way of income is please and charges but we all know it very well. A part of the income coming to the banks from difference sources is used for employee salaries and bank maintenance and the rest is used by the bank to invest elsewhere, by doing this the bank’s assets increase but here you can get a doubt that any Surya Bank does not have all the profits and losses. Many people may have a doubt, if not, banks will also incur losses. Whoever takes loans, even if they don’t pay on time, some people will try to default completely, by doing so, the bank will incur losses at that time. In banking technology, it is called non-performance, that is, if someone takes a loan from a bank and does not pay the principal or interest for 90 days, it is called a non-performing asset. In 2002, the Indian government brought a law to collect such defaulted loans.
According to the same Surfasi Act, RBI will establish Tree Construction Company and try to recover the properties of the defaulters and collect the loans taken by them, but it will take a lot of time and we cannot say clearly how much they will collect the loan by 2023. According to the calculations, State Bank of India has these non-performing assets, but this number seems a bit high, but it is only 0.6% of the assets of SBI. In the video starting, State Bank of India was completely under the ownership of RBI, but in 2008, Indian Government SBI Take it from RD ownership and put it in complete government ownership. The reason for this is that RBI controls all the banks in India. So having a bank as a personal under such a regulatory body can lead to any illegal activities like that bank fever, so to prevent that from happening, the Indian government has taken SBI from RBI into complete government ownership.
Above rupees, all this also came not only from SBI, after the formation of State Bank of India in 1955, many banks were merged into it, so the assets and liabilities of those banks were also added to SBI and recently in 2017, State Bank of Mysore, State Bank of Bikaner and Jaipur. State Bank of Hyderabad, State Bank of Travancore and State Bank of Patiala were also merged into SBI due to which SBI became one of the largest banks not only in India but also in the world but based on market cap in India the largest bank is HDFC. And SBI is in third place but among government banks SBI is in number one position which SBI is not better than HDFC because SBI is a government bank so it has some applications in terms of loans but HDFC is a private bank so it completely focuses on profits and does business.
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