CHAPTER-1

INTRODUCTION
1.1 INTRODUCTION
The banking system is an integral part of any Indian economy. Economists
have expressed a number of different views on the effectiveness of banking systems
in promoting economic development. As an economic institution, the bank is
expected to be more direct and positively linked to the performance of the economy
than most non-economic institutions. They are not only money dealers, but are in fact
developing dealers. Banks are important agencies for generating savings in society.
They are also the main credit agents they redirect and use the funds to allow for
greater use of resources in a country. They transfer funds from the regions where they
are available to a large extent that they can be used effectively, and the allocation of
funds between regions paves the way for balanced development of different regions.
They are therefore catalysts that create resource development opportunities to
accelerate economic development.
In the Indian financial system, commercial banks are the largest mobilizations
and disbursements of financial resources. They play a very important role in the
growth of a developing country like India. The role of banks in accelerating the
economic development of a country such as India is increasingly recognized
following the nationalization of 14 major commercial banks in July 1969 and six
other banks in April 1980 with nationalization. Banks are no longer simply
considered lending institutions. They must serve society in a much greater way with a
society focused on socio-economic development. In particular, they are encouraged to
use their resources to achieve social upheaval and faster economic development.
In order to achieve the various nationalisation objectives, nationalised banks
have implemented innovative programmes to mobilize and disburse resources.
Nationalization has resulted in a broad programme of innovations in the expansion
of industries with a view to mobilizing savings, lending to priority sectors and the
weakest strata of society, etc. Banks are increasingly identifying with national
problems and are therefore trying to bring about social and economic change in the
country.

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 The bank in India was established in the first decade of the 18th century, when
the General Bank of India was established in 1786. It was followed by the Bank of
Hindustan. Both banks are now gone. The oldest bank found in India is the State
Bank of India, established as the "Bank of Bengal" in Calcutta in June 1806. A few
decades later, foreign banks such as Le Crédit Lyonnais began their calcutta
operations in the 1850s. At the time, kolkatta was the most active trading port, mainly
because of the British Empire's trade, and because of which banking activity took
root there and flourished
The Reserve Bank of India officially assumed responsibility for regulating the
Indian banking sector from 1935. After India's independence in 1947, the Reserve
Bank was nationalized and gained broader powers. The public sector has proven to
be the engine of economic growth following the industrial revolution in Europe.
With globalization, the public sector has faced new challenges in developed
economies. The public sector no longer had the privilege of operating in a seller's
market and faced competition from domestic and international competitors. In the
second half of the 20th century, it was necessary toWithout a healthy and efficient
banking system in India, it cannot have a healthy economy. India's banking system
should not only be transparent, but it should be able to meet the new challenges posed
by technology and other external and internal factors. For the last few decades, India's
banking system has several excellent results to its credit. Moststriking is its wide
range. It is no longer limited to the big cities or cosmopolitan cities of India. In fact,
India's banking system has reached even remote corners of the country. This is one
of the main reasons for India's growth process.
Journey of Indian Banking System can be divided into three different stages. They are
highlighted below: Phase I: Early Stage from 1786 to 1969 by Indian BanksPhase II:
Nationalization of Indian Banks and until 1991 before the reforms of the Indian
banking sector. Phase III: This phase has introduced more products and facilities
into the banking sector in its reform measure
Phase 1
The Central Bank of India was established in 1786. Next came the Bank of
Hindustan and the Bank of Bengal. The East India Company founded the Bank of
Bengal (1809), the Bank of Bombay (1840) and the Bank of Madras (1843) as
independent entities, calling it the Banks of the Presidency.

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 These three banks were merged in 1920, and Imperial Bank of India was
created, which began as private shareholder banks, and especially European
shareholders.Between 1906 and 1913, the Bank of India, the financial institution
of India, the Bank of Baroda, the Canara Bank, the Indian Bank and therefore the
Bank of Mysore were established. The Reserve Bank of India arrived in 1935. In
the first phase, growth was very slow and therefore the banks also experienced
periodic errors between 1913 and 1948. There were about 1100 banks, mostly
small ones. In order to streamline the operations and operations of commercial
banks, the Indian government came up with the Corporations Banking Act of
1949, which was then amended to the Banking Regulation Act of 1949 under the
Amendment Act 1965 (Law 23 of 1965). The Central Banking Authority has
given the Reserve Bank of India extensive powers to oversee banking operations
in India. Today, the public has less confidence in banks. Subsequently, the
mobilization of deposits was slow. At the forefront of the savings bank facility
provided by the Post Office, was relatively better prepared.
Phase 2
The government took important steps in this reform of India's banking
sector after independence. She formed the State Bank of India to act as RBI
senior agent to manage banking transactions in the EU and state governments
across the country. Seven banks, which form a subsidiary of the State Bank of
India, were nationalized in 1960 on December 19, 1960. These were the efforts of
the then Prime Minister of India, Indira Gandhi. The second phase of
nationalization of the reform of India's banking sector was 1980 with seven other
banks.
This decision brought 80% of the banking segment in India under
government ownership. The Indian government has taken the following steps to
regulate financial institutions in the country: 1949: Adoption of the Banking
Regulation Act.1955: Nationalization of the State Bank of India.1959:
Nationalization of subsidiaries SBI.1961: Insurance coverage extended to also
1969: Nationalization of 14 major banks.1971: Creation of a credit guarantee
company.1975: Creation of regional banks in rural areas.1980: Nationalization of
seven banks with deposits of more than 200 crore.

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 As a result of the nationalization of banks, branches of public sector banks
in India reached about 800% of deposits and advances jumped by a whopping
11,000%. Banking in state ownership has given the public implicit confidence and
enormous confidence.
Phase 3
This phase has introduced more products and facilities into the banking
sector in its reform measure. In 1991, under Mr. Narasimham leadership, a
committee was set up under his name to work on the liberalization of banking
practices. The country is inundated with foreign banks and their ATMs. Efforts
are being made to provide satisfactory service to customers. Telephone banking
and online banking are introduced. The whole system has become more
troublesome and faster. Time is more important than money. India's financial
system has shown great resilience. It is protected from any crisis affected by an
external macroeconomic shock, as other East Asian countries have suffered. All
this is due to a flexible exchange rate regime, foreign exchange reserves are high,
the capital account is not fully convertible and banks and their customers have
limited foreign exchange exposure.
The role of banks in economic development:
• Promoting capital formation
• Promoting innovation
• mobilization
• Impact on economic activity
• Monitoring the policy facilitator
Need for study:
• How banks are making effective progress in the development of the Indian
economy.
• How are commercial and nationalized banks doing
Research gap:
As the new changes bring competition into the current scenario, this study
consists of the role of banks in economic development banks and the performance of
nationalized banks.

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Purpose of the survey:
 Examining the nature and development of the banking sector for economic
development
 To access the performance of the banking sector.
Research method:
 This study is mainly based on secondary data different tools used for the study
may indicate different results, since the approach distinguishes some changes
in the development procedure by concern can often make bank analysis
misleading.
 The survey can only cover data of limited duration
 It is only a review of the preliminary report on concern.
 The analysis must be carried out on the basis of certain assumptions, which is
why the assumptions are based on.
Data collection tools:
 The study is based solely on secondary data. The data required for the study
will be collected in journals and reports on trends, newspapers, magazines and
advances in banking in India, public publications, books and websites.
Data analytics tools:
 Different scales will be used to analyze different financial conditions data used
to track the growth of the Indianeconomy
Chapter of the study:
 introduction
 Review of the literature
 Company profile
 Data analysis and interpretation
 Results and conclusions

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 CHAPTER-2
REVIEW OF LITERATURE
Bhasin[2004]:He conducted a detailed assessment of changes in the model of
global financial banks and economic development The need for reforms in the
banking sector after the reform scenario, and the current issuance of Indian banks as
the banking sector reforms in India are based on the belief that competitive efficiency
in the real sectors of the economy will not reach its full potential unless the banking
sector has been reformed in this way.
Yv.reddy[2005]:Detailed assessment of banking sector reforms, including all
aspects of reform. The scale of this task, which is expected to be completed in 2006,
seems discouraging, as we have many of 90 ancillary banks in India.
RaoRamachandra, Das Abhiman, Singh Kumar Arvind (2006): Paper
examines trend inthesectoral allocation of bank credit to SSI relative to the non-ISS sector in
the post-reform period. The paper also attempts to understand the changes in bank credit for
the ISS sector between banking groups and the impact of the size and performance of banks
on credit to the ISS sector. The study includes 97 planned commercial banks. These banks are
also classified into three size classes on the basis of total assets as of December 31, 2004. The
period of investigation is from 1992 to 2003. It is felt that working capital assistance provided
by commercial banks to small businesses is far from sufficient. SSI's share of the sector's
priority overall progress of all planned commercial banks has steadily declined. The results
suggest that the high incidence of bad debts due to SSI advances may be one of the reasons
for the SSI loans from commercial banks.
Richaverma[2007]:He conducted a study on operationally and productively efficient
public sector banks in India showed that after much better liberalization of public sector
banks, they have become more innovative and have a larger market share in today's market
age.
Gupta Sumeet and Verma Renu (2008): analyzes the overall financial
performance of the major private sector banks in India using the CAMEL model. Ten
major private sector banks were taken - Axis Bank, Bank of Rajasthan, City Union
Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Karnataka Bank, Karur
Vysya Bank, South Indian Bank, Yes Bank. The ranking of these banks was achieved
6
by calculating the average of the different 5-year financial ratios from 2003 to 2007
on the 1-10 rating scale. For the comparative analysis of overall performance, the
composite ranking method was used on the basis of the group's results. The analysis
shows that Karur Vysya Bank ranked first in the overall performance followed by
City Union Bank and Kotak Mahindra Bank, Bank of Rajasthan achieved the lowest
composite ranking among all the banks under review. In conclusion, transparency and
good governance will be the main driving force in the current scenario
Verma Amitabh (2009): assessed the impact of technology on the performance of
Indian banks in terms of profitability and productivity. IT has become the buzzword
for the Indian banking sector. Technology can be the main difference between two
banks and an important factor in gaining a competitive advantage. The main challenge for
banks is to provide a consistent service to customers, regardless of the type of channel
they use. It concludes that Indian public sector banks have a unique advantage over their
counterparts in terms of their branch networks and large customer base, but it is the use of
technology that will allow public sector banks to leverage their strengths.
Sen Mitali (2010):In his empirical work, an exploratory attempt is made to study the
liability structure of Indian commercial banks. The sample of 82 Indian commercial
banks must be taken for which consistent data are available between 1995-96 and
2003-04. The main findings of the study are that the sets of six critical factors, namely
profitability, size, liquidity, risk and asset quality,fee-based profits and efficiency,
affect the liability structure of commercial banks. Empirical analysis shows that banks
should focus more on fee-based activities.
Kumar Sunil and Gulati Rachita (2010):Attempted to analyze the performance
of public sector banks in the post-reform period by examining trends in profitability and
convergence of its level among banks. The study period was from 1992-93 to 2007-08.
This paper used data wrapping analysis to empirically assess the costs, technical
outcomes and price effectiveness of individual public banks. Empirical results show
that deregulation has had a positive impact on the profitability of Indian banks in the
public sector. The profitability of most banks belonging to the SBI Group has
followed a downward trend and banks belonging to thenationalised group have
experienced a growing trend in profitability levels. It is concluded that the deregulation
process has increased the profitability of most BSCs. On the basis of empirical results,

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future reforms of the banking sector should be geared towards strengthening competition and
market-oriented policies.

CHAPTER-3
COMPANY PROFILE
After independence in 1947, the government considered that loans from
colonial banks were biased against working capital for trade and large enterprises.
Because of these views, all the major private banks were nationalized in two stages: in
1969 and then in 1980. Subsequently, these banks were subject to quantitative
borrowing targets to expand their rural networks and were geared towards extending
credit to priority sectors. These nationalized banks were increasingly being used to
finance budget deficits. Their activities have therefore remained insignificant. In this
context, the first wave of financial liberalization took place in the second half of the
1980s, mainly in the form of interest rate deregulation. Based on the 1985 Report of
the Chakra Arty Committee, the coupon rate on government bonds was gradually
increased to reflect supply and demand condition Bankersuntil then, were used for the 4-
6-4 method (loans of 4%; Lend at 6%; Go home at 4) to work. The new wave ushered
in a modern perspective and working methods for traditional banks. All this has led to
the rise of retail in India. Not only did people demand more from their banks, but they
also had more. Following the 1991 Narasimham Committee report,significant reforms
took place in the same year. The reforms included:
 A shift from banking supervision of micro-level intrusive interventions to
credit decisions to prudential rules and supervision;
 Reducing the CRR and the LRT
 Deregulation of interest rates and inflows
 Adoption of prudential standards (convergence of the development of
financial institutions and commercial banks or non-bank financial institutions
and adoption of the integrated regulatory and supervisory system).
 In addition, in 1992, the Reserve Bank of India issued guidelines on income
recognition, asset classification and provisions and also adopted the Basel
Agreement capital requirements standards. The government has also set up the
Reserve Bank of India's Financial Supervisory Board and recapitalized state-

8
 owned banks to give banks sufficient financial strength and access to the
capital market.

 In 1993, the Reserve Bank of India authorized private access to the banking
sector, provided that the new banks were well capitalized and technologically
advanced, while prohibiting cross-cutting practices with industry groups. The
Reserve Bank of India has also imposed certain restrictions on new banks for
branch openings in order to maintain the franchise value of existing banks.
 Narasimham Committee II (1998)
(a) Propose the legislative changes necessary for the implementation of
electronic money transfer, including through an electronic transmission
system.
Encryption of telephone networks for public switching (PSTN)
Recording electronic files as evidence
The treatment of electronic money transfers on an equal footing with income
tax cross-references/drafts, etc.;
b. Propose ways to quickly and efficiently introduce the computerization of
public accounts;
c. develop the methods necessary for the development and optimal use of a
secure and robust wide-area network (WAN), based on satellites with the
necessary security systems, by banks and other financial institutions, in order,
ultimately, to develop a robust and efficient payment system;
d. Examine the methods by which technological modulation in banks and
financial institutions can be implemented, and as part of the study the
possibility of setting standards, designing the backbone of the payment system
and standards for IDRBT security levels, notifications and smart cards.
e. Make recommendations for the development of data storage and data
mining to create opportunities for the development of an effective
management information system (MIS) in the near future;
f. Recommend guidelines for the development and implementation of
outsourcing programs, and
g. Make recommendations on other related issues such as:

9
  assigning a 2.5% risk weight to cover market risk associated with investments
in securities other than the RS prior to December 31, 2006;

 Lowering the exposure limit for an individual borrower from 25 per cent of
the bank's private equity fund to 20 per cent, effective April 1, 2000.The goal
of Narasimham's I-II Committee was to create "operational flexibility" and
"functional autonomy" respectively to increase"efficiency, productivity and
profitability."
RESERVE BANK OF INDIA:
The Reserve Bank of India (RBI) is India's central bank - it formulates,
implements and monitors India's monetary policy. The Reserve Bank of India was
established in 1935 and nationalized in 1949.It is wholly owned by the Indian
government and is headquartered in Mumbai.
The main features of the Reserve Bank of India are:
1. The Reserve Bank is head of the financial system.
2. The RBI publishes the guidelines for banking operations in which the
country's banking and financial system operates. It aims to protect the interests
of depositors and provides cost-effective banking services to the public by
monitoring the functioning of banks. If a bank does not solve a customer's
problem, it can turn to The Central Bank of India through the Bank Ombudsman's
scheme
3. Currency inflows and outflows are regulated by the RBI's Foreign
Exchange Management Act 1999. Any transfer of money from India, for
personal and commercial purposes, is subject to restrictions defined by rbi
4. The Reserve Bank of India issues coins and coins of different face value. It
is also a matter of exchanging or destroying damaged coins and coins that are
not suitable for circulation. The design of the currency changes periodically to
prevent the circulation of counterfeit currency.
5. RBI is a banker of the Indian government. It serves as an investment bank
for central and state governments. Departments bank with reserve bank in
India. In Mumbai, for example, the Income Tax Department issues income
tax.

10
0.6 RBI is the banker of all the major banks. It maintains bank accounts for all banks
registered in India. Deposits up to Rs 1 lakh in registered banks are insured. The cash
withdrawal tax can only apply to withdrawals from route banks. Small cooperative
banks are not normally registered banks. Bank interest rates rise or fall according to
RBI lending rates
7. The Reserve Bank of India also regulates the trade in gold. Currently, 17
Indian banks are involved in the gold trade in India. RBI has called on several
banks to request direct imports of gold in order to curb the illicit gold trade and
increase competition in the market.
8. In March 2006, RBI published know about your clients' guidelines for non-
bank finance companies (NBFC). The customer whose deposit balance with
NBFC is less than Rs 50,000 or a credit in circulation over Rs 1 lakh does not
need to provide all the documents. Customers will be classified as low-risk,
medium-risk and high-risk. Sahara India is one of the largest CFBCs in India
9. RBI buys and sells foreign currencies to maintain the exchange rate of the
Indian rupee against foreign currencies such as the US dollar, euro, pound
sterling and Japanese yen. Currency exchange rate trends are available on their
website.
10.Starting in March 2006, banks can offer an interest rate similar to London's
offered interbank rate (LIBOR) - an international benchmark interest rate on
dollar deposits
.11. The cash reserve ratio (CRR) is the percentage of deposits that Indian
banks should keep with the RBI. This also depends on the liquidity of the
money markets and is currently 5%. The reverse pension rate is the rate at
which RBI absorbs bank funds.
12. RBI also regulates the opening/installation of ATMs (ATMs). It is trying
to increase the density of ATMs in rural areas. Fresh ATM tickets provided by
RBI
13. There are approximately 1,050 clearing houses that settle transactions
related to cheques, drafts and pay orders. State Bank of India operates 567
clearing houses, mainly in small towns.
14. Annual monetary policy will be published annually in April.
15. A clearing check of metropolitan cities (Mumbai, Delhi, Chennai, Kolkata)
costs banks only 50 paisa for clearing through the RBI clearing system, but

11
 banks like hereci bank charges Rs 100 to clear the cheque. The RBI has asked
banks to show fees on their website, but only 5 banks have complied so far.
16. RBI regulates the opening of branches by banks and ensures that they
follow your customer's instructions.
17. Maintaining monetary stability so that business and economic life can fill
the well-being gaps in a well-functioning mixed economy
18.To to maintain stable payment systems so that financial transactions can be
carried out safely and efficiently.
19. Promote the development of financial infrastructure in markets and systems
and enable it to function effectively, i.e. to promote the development of financial
infrastructure in markets and systems.
.20. D to ensure that the credit allocation of the financial system largely
reflects national economic priorities and societal considerations.
21. Regulate the total amount of money and credit in the economy with a new
one to ensure a significant degree of price stability.

II.COMMERCIAL BANKS:
For any financial system to successfully mobilize and distribute the country's
savings and productivity and facilitate day-to-day transactions, there must be a
category of financial institutions that the public sees as safe and convenient
opportunities for their savings. In virtually all countries, the only dominant class of
institutions that have emerged as both respirators in a dominant class of the company's
cash savings and the entity by which payments are made is CommercialBanks.
These banks are primarily concerned with lending and accepting deposits.
Several other facilities are also provided by commercial banks in India. At the same
time, commercial banks in India have the opportunity to develop in a variety of ways
in the future, because the Indian economy is growing at a good pace and its financial
institutions are therefore determined to grow with this growth. The name commercial
bank may suggest a number of things, but the term is used to distinguish other forms of
banking services from that particular form.Commercial banks in India generate funds to
finance their various financial requirementsthrough a particular process. Commercial
banks in India accept deposits from a variety of sources such as businesses and
individuals. These banks have developed a wide range of financial products to promote
customers' savings habits.

12
 There are savings deposits, term deposits and many others to attract investors.
These deposits are reused in the economy through loans and other credit products
UAP Banks
Private banks
Foreign banking services. UAP Banks
Nationalized banks dominate the banking system in India. State Bank of India
(SBI) in July 1955. In July 1960, the seven subsidiaries were also nationalized with
deposits of more than 200 crores.These SBI subsidiaries were State Bank of Bikaner
and Jaipur (SBBJ), State Bank ofHyderabad (SBH), State Bank of Indore (SBIR),
State Bank of Mysore (SBM), State Bank of Patiala (SBP), But the great
nationalization of banks was made in 1969 by the then Prime Minister IndiraGandhi.
The main objective of nationalization was to diversify banking infrastructure in rural
areas and provide cheap financing to Indian farmers. The top 14 nationalized commercial
banks were Allahabad Bank, Andhra Bank, Bank of Baroda, Bank of India, Bank of
Maharashtra, Canara Bank, Central Bank of India, Corporation Bank.
In 1980, the second phase of the nationalization of Indian banks took place,
where 7 other bankswere nationalized with deposits of more than 200 crores. With
this, the Government of India controlled more than 91% of the banking sector in India.
After the nationalization of banks, there was an increase in bank deposits and advances.
State Bank of India is currently the largest commercial bank in India and is ranked one of
the five largest banks in the world. The nationalization of Seven StateBanks of India
(incorporated subsidiary) took place on 19 December 2005. The second phase of the
nationalization of Indian banks took place in 1980. Seven other banks were nationalized
with deposits of more than 200 crores. Until this year, about 80% of the banking
segment in India was under state ownership. Following the nationalization of banks in
India, branches of public sector banks increased to about 800% in deposits and
advances jumped by 11,000%.1955: Nationalization of the State Bank of India.1959:
Nationalization of SBI.1969 subsidiaries: Nationalization of 14 major banks.1980:
Nationalization of seven banks with deposits over 200 crores.

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Private sector banks
India currently has 88 planned commercial banks, 31 private banks and 38
foreign banks According to a report by ICRA Limited, a credit rating agency, private
and foreign banks with 18.2% and 6.5%, respectively, 0.3% of unplanned commercial
banks.
Insurance and other products, outsourcing of certain products, technology-
based payment systems.
Product innovations and process reconstruction to meet customer demands
reduce costs and improve efficiency.
III.CO - OPERATIONAL BANKS
The country's cooperative banks are part of a large and robust structure of
cooperative institutions that handle tasks such as production, processing, marketing,
distribution, services and banking in India. The beginnings of cooperative banking in
this country date back to about 1904, when formal efforts were made to create a new
type of institution based on principles of organization and management of
cooperation, which were deemed appropriate to solve problems specific to Indian
conditions.
In rural areas, in terms of agricultural and related activities, the delivery of
credit was insufficient, and money lenders would exploit the rural poor by providing
them with loans at higher rates.
They are covered by the Banking Regulations Act 1949 and the Banking Laws
(Cooperative Corporations) Act 1965.
definition
A cooperative bank is a financial entity owned by its members, who are at the
same time owners and customers of their bank.Operating banks generally provide a
wide range of banking and financial services to their members
Initiatives for the development of cooperative banks:
1. Reorganization of PACS (a diagram of NABARD).
2. Licensing the new liberalised USB
3. The National Co-operative Bank of India (NCBI) was registered in 1993.
(multi-state co-operative) - it has no regulatory functions.
4. Cooperative Development Bank (set up by NABARD).

14
5. The lending and borrowing rates of all co-operatives have been more or less
completely disengaged or deregulated.
6. Opportunity for all PCBs to rent and refund equipment
Businesses:
The cooperative bank performs all the main banking functions related to the
mobilization of deposits, the provision of loans and the provision of money transfer
facilities.
Cooperative banks belong to the money and financial markets.
Cooperative banks provide limited banking products and are functional specialists in
agricultural products. However, cooperative banks now also offer home loans
UCITS also offer working capital loans and long-term loans.
Tools;
• Cooperative banks are organized and managed on the basis of the principle of
cooperation, mutual aid and mutual aid. They work on the basis of "no profit
no loss." Maximizing profits is not their goal
• Cooperative banks operate mainly in agriculture and the rual sector.However,
UCBS, SCBS and CCB also operate in semi-urban, urban and metropolitan
areas.
• State-operated cooperative banks (SBB), central banks (CCBS) and urban
cooperative banks (BCI) can normally grant home loans of up to 1 rs lakh to a
person. However, planned CBUs can borrow up to Rs 3 lakh for residential
purposes.
• CBUs can advance stocks and bonds
one. Co-operative banks in India finance rural areas under:
• agriculture
• livestock
• milk
• hatchery
• Personal finance
B. Cooperative bank finance
• Self-employment
• Small units
• Home financing
• Consumer financing
15
 • Personal finance

Some facts about cooperative banks in India:

Some cooperative banks in India are more advanced than many public and
private banks.
According to NAFCUB, the total deposits and loans of cooperative banks in
India are much higher than the old private banks and also the new private
sector banks.
This exponential growth of cooperative banks in India is mainly due to their
much better personal interaction with customers and their ability to capture the
nerve of local customers.

IV. DEVELOPMENT BANKS

Development banks should be understood as institutions whose main interest
lies in financing, or they can and do for the most part public development services. In
other words, institutions that perform financial and development functions must be
considered development banks.

Structure of development banks

In the period after independence. India is well served by a network of development
banks, both nationally and state-level. Currently, there are seven all industrial
development banks in India. ie.
(1) Industrial Development Bank of India (IDBI)
(2) Small Industries Development Bank of India (SIDBI)
(3) National Bank of India for Agriculture and Rural Development
(NABARD)
(4) Export Import Bank of India (EXIM)
(5) Industrial Finance Corporation of India (IFCI)
(6) Indian Industrial Reconstruction Bank (IRBI)
(7) National Small Industries Corporation (NSIC)
(8) National Industrial Development Corporation (NIDC)
(9) Indian Credit and Investment Corporation (SCICI)

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Indian Industrial Development Bank (IDBI):
IDBI was established as a wholly owned subsidiary of RBI on July 1, 1964
under the Parliamentary Act and by merging the Industrial Refinance Corporation
(IRC), which was re-established by the government earlier in June 1958. In February
1976, IDBI was decoupled from the RBI, and since then it has become a separate and
independent entity 100% owned by it is now the government. Today it is a central or
leading institution in the field of industrial finance. The main objective is to provide
loans, long-term financing and financial services for the implementation of new
projects, as well as expansion, diversification, modernization and technology for the
classification of existing industrial activities for industrial development in the country.
It also provides a number of diversified financial products of a non-projected nature,
such as equipment financing,
Asset and equipment leasing, commercial banking, bond management and
Forex services It acts as a development finance agency in itself in addition to its
company. coordinating, supplementing and monitoring institutions in relation to other
mortgages, transactions provide indirect assistance in the form of discounting long-
term notes promised notes on long-term loans granted by SFCS, banks, etc. There are
more than 850 primary lending institutions eligible for idbi refinancing facilities. It
also includes various promotional activities such as the development of the regional
balance sheet, the development of entrepreneurial technology, etc.
During the four decades of IDBI's existence, it has played a key role not only
in establishing a well-developed, diversified and efficient industrial and institutional
structure, but also in adding a qualitative dimension to the industrial development
process in the country. IDBI has played a pioneering role in fulfilling its mission to
promote industrial growth by funding medium- and long-term projects in line with
national plans and priorities. Over the years.
IDBI has expanded its product and service portfolio covering almost the full
range of industrial activities, including manufacturing and services. IDBI provides
financial assistance in rupees and foreign currencies to green projects as well as for
expansion purposes. As a result of financial sector reforms unveiled by the government
since 1992. IDBI has developed a range of fund- and fee-based services to provide an
integrated solution that meets the total demand for financial and business advice from
its clients.

17
 IDBI also provides indirect financial assistance in the form of refinancing
loans from financial institutions and banks at the state level and redistributing foreign
exchange notes from the sale of domestic machines on deferred payment terms.
In accordance with this mandate, IDBI's activities exceeded the limits of pure
long-term lending to the industry and included:
The transition to the new business model of the investment bank with its entry
into the current deposits of savings banks. Help overcome most of the limitations of
the current business model of development finance while allowing it to diversify its
client base and asset base.
IDBI Bank, with which the parent company IDBI was merged, was a dynamic
next-generation bank. Private banking has been the fastest growing bank in India. The
bank has been a pioneer in adapting to the policy of the first mover in Tier 2 cities.
The bank also had the smallest NPA and the highest productivity per employee in the
banking sector
In particular, IDBI will leverage the strong business relationships that have
been put in place over the years to provide tailored and comprehensive financial
solutions for all business needs, a one-stop evaluation for, among other things, loans
for interest loans and working capital financing, strategic advice and "practical support
during the project implementation phase." The transformation of IDBI into a commercial
bank would provide a gateway to cheap deposits such as current deposits and savings
bank deposits. This would have a positive impact on the Bank's overall financing
costs and would facilitate loans at more competitive prices for its clients. The new
entity will offer a variety of retail products by leveraging its existing relationship with
retail investors through its existing Suvidha Flexi bond programs. In the new scenario,
the new IDBI hopes to fulfill its mission to position itself as a single-desk super-
boutique and the most preferred brand to provide unified financial and banking
solutions to businesses and individuals, leverage its intimate knowledge of the Indian
industry and customer requirements, and a broad retail base on the responsibilities
side.
IDBI's main function:
• IDBI coordinates the various financial institutions heavily involved in
providing financial assistance, promoting and developing various
industrial entities

18
 • IDBI also participates in a number of promotional activities, such as
development programs for new entrepreneurs, planning consulting services
for small businesses and medium-sized industrial units.
• IDBI strives to promote technology and other social assistance programs to
ensure economic development.
• The Industrial Development Bank of India acts as a catalyst in various
industrial development programmes
• IDBI provides financial assistance to all kinds of industrial entities that fall
under the provisions of the IDBI ActIDBI has served various industrial
sectors in India for about three years and has grown by leaps and bounds in
its size and operating units.
Infrastructure funding:
IDBI remains a major player in infrastructure financing. It has been a leader in
the structuring and financing of infrastructure projects in the electricity,
telecommunications, roads, airports, seaports, railways and logistics sectors, as well
as in special economic zones (SZs), since the opening of infrastructure to private
sector investment, and a significant portion of its total goes to the infrastructure
sector. IDBI continues to provide assistance to road projects given the importance of
road infrastructure development to achieve stronger growth in the national economy,
recognizing the crucial role of infrastructure development in the growth of the
national economy and huge investments in the sector, a targeted approach has been
taken to provide end-to-end solutions to infrastructure companies , i.e. corporate
advice, debt and equity syndication, financial structuring, long-term loans, working
capital, securitization and other related services.
Financial inclusion:
In addition to providing financing for development, IDBI remains firm on
financial inclusion and designs in this company of products and services for larger
parts of the company. Initially, the bank had already launched the "sabka" savings
account, with the aim of making basic banking services available to the vast majority
of the uns pounded and under-banked population. The facility offers basic banking
facilities and amenities with a low average balance sheet required. The plan was
subsequently amended to cover a wider network of customers.

19
B. Small Industrial Development Bank of India (SIDBI)
Sidbi was established in October 1989 under the Danish Parliament Act as a
wholly owned subsidiary of IDBI. It is the central, main or most important institution
that still oversees, coordinates and strengthens various financial and non-financial
assistance programs for small, small and artisanal industries.
SiDBI's targets are:
• Implementing technological modernization and modernization measures
for existing units
• Expand SSI product marketing channels in India and abroad
• In order to promote employment-oriented industries in semi-urban areas
and to control population migration to major cities
• It has two foundations: the Small Industry Development Fund and the
Small Industry Development Fund. The operation of the first and the
National Equity Fund, which was reviewed by IDBI, is now managed by
SIDBI. Its financial assistance is routed through the current credit delivery
system The total number of institutions eligible for SIDS funding is 900. It
reduces and redistributes invoices related to the sale of machinery to small
units, extends support for seed capital loans/reduced-rate loans through the
National Equity Fund and through seed capital programs for special
lending institutions, refinancing loans and services such as subsidy,
leasing, etc.The EU budget for 1996-1997 provided for a series of
measures for the development of small sectors, with SIDBI being the focal
point. These include: SIDBI will now refinance CFS and commercial
banks for modernization projects up to Rs 50 lakhs from an unused corpus
of about Rs 75 crore: SIDBI refinancing ceiling of Rs 50 lakhs for the
single-desk SFC scheme, etc. for compound loans will be doubled to Rs
100lakhsSIDBI will participate in venture capital funds created by public sector
institutions as well as private companies up to 50 percent of the total corpus of
the fund, provided that such a fund is dedicated to financing small industry,
SIDBI will provide refinancing lending institutions, which are now licensed
entities requesting ISO certification of quality loans to SSI Since the
beginning SIDBI has provided assistance to the entire SSIS sector ,
including small ones.village and artisanal industries through appropriate

20
 programmes adapted to the requirements of new product creation,
expansion, diversification, modernization and rehabilitation. It has
provided equity, loans in domestic and foreign currencies, working capital
financingetc.
Sidbi has entered into soft agreements with numerous banks, government
agencies, international agencies, research and development institutions, and trade
associations for the development of SSIS.
C. Indian Export Import Bank (EXIMBank)
EXIM was established in January 1982 as a statutory company, 100% owned by
thecentral government. Its paid-in capital in 1988-89 was Rs 220.50. Activities carried
out by EXIM Bank:
It provides direct loans inside and outside India for imports and exports;
Refinancing loans to banks and other financial institutions notified for international
trade
Rediscount's export invoices to the U.S. for banks;
Provide foreign investment financing to Indian companies against their holdings in
joint ventures abroad and, with banks, guarantee bonds on behalf of project exporters;
He is also a coordinating body in the field of international finance and is responsible for
the development of commercial banking activities related to export-oriented industries.It
thus provides funds-based and non-fund-based assistance in the foreign trade sector.
The main objective of the Export and Import Bank (EXIM Bank) is to provide
financial assistance to promote export production in India. Exim Bank's financial
assistance includes a large portion of the following:
Direct financial support
Direct financial support
Financing foreign investment
Long-term lending opportunities for export production and export development
Credit before sending
Buyer's credit
'Margins of credit'
Loan facility
'Remakingexport bills'

21
Refinancing to export-import Bank commercial banks also provides unfunded
collateral facilities to Indian exporters.
Different export stages covered by EXIM Bank
Development of export producers
Increased export production capacity
Export production
Funding after-shipment activities
Exports of manufactured goods
Exporting projects
Exporting technology and software
Financing small and medium-sized enterprises (SMEs)
The importance of the SME sector is well known around the world for its
important contribution to the achievement of various socio-economic objectives, such
as job creation, contribution to domestic production and exports, promotion of new
entrepreneurship and deepening of the industrial base of the economy. India has a
vibrant SME sector that plays an important role in maintaining economic growth and
increasing trade. create jobs and create a new entrepreneurial spirit
Indian SMEs need business advice to improve their international
competitiveness in a highly competitive globalized world. SMEs consider that the
services provided by reputable national and international consultants are not cost-
effective and often not sufficiently targeted. Aware of this lack of knowledge, EXIM
Bank of India has tried to provide tailored services to its SME clients. These include
the provision of business leads, ownership during the process of obtaining an export
contract, thus helping to create export companies on a cost-effective basis, countries,
dissemination of sector information, capacity building in niche areas such as quality,
security, export marketing, cte and financial advice such as syndication of loans, etc.
Agricultural funding:
The globalization scenario and the post-WTO era offer significant export
opportunities for Indian agricultural products. E Bank has a dedicated agro-industrial
group to meet the financing needs of export-oriented companies engaged in
agricultural products.

22
 Financial assistance is provided in the form of advance loans, credit after
shipment, credit from foreign buyers. bulk import financing, guarantees, etc. Loans of
different maturities are granted for the creation of processing plants, extension,
modernization, purchase of equipment to import equipment from equipment
technologies. Financing joint ventures and acquisitions abroad
The Bank has close ties to other agricultural stakeholders, such as the Ministry
of Food Processing Industry, the Government of China. NABARD, APEDA, Small
Farmers' Agri-Business Consortium (SFAC) and National Horticultural Board, etc. In
addition to financing operations, the Bank also provides a number of exporters for: Advice
on agri-services In addition, a number of occasional documents, working papers on
the export potential of various agricultural subsectors and a semi-annual publication
in different languages on the global scenario are published.
OVERVIEW OF THE ROLE OF ECONOMY THROUGH THE
BANKS
1. Capital formation:
The importance of FPIs lies in the provision of funds necessary to exploit the
savings generated in the economy, thus contributing to the formation of capital.
Capital formation involves redirecting the productive capacity of the economy
towards the production of capital goods, which increases future production capacity.
The capital formation process involves three distinct but interdependent activities:
saving financial intermediation and investment Regardless of the economy of poor
countries, institutions will need to enable practical and safe investment in these economies,
ensuring that they are channelled for the most useful purposes. A well-developed financial
structure will therefore support the collection and disbursement of investable funds,
thus contributing to the formation of capital in the economy, even though the Indian
capital market, although still considered underdeveloped, has made impressive
progress in the post-interdependence period.
2. Capital market assistance:
The fundamental objective of ISAs, particularly in the context of a developing
economy, is to accelerate economic development by increasing capital formation,
encouraging investors and entrepreneurs, sealing leaks of equipment and human
resources by carefully allocating them. Therefore, FPIs must perform financial and
development functions such as financing functions, which are sufficient long-term

23
financing and in development functions, including the provision of foreign currency
loans.
3. Loans rupees:
Loans in rupees are using more than 90 per cent of the total aid sanctioned and
disbursed. This is an eloquent testament to DFI's obsession with the term
4. Foreign currency loans
Foreign currency loans are intended for the creation of new industrial projects
and for the diversification, modernization or renovation of existing units in cases
where, in exceptional cases, part of the loan has been earmarked for the financing of imports
of equipment from dry and technical know-how.

5. Subscriptions of debt securities andguarantors

In terms of warranties, it is well known that when a contractor regularly buys
machinery, capital assets or capital goods, the supplier usually asks the contractor to
give the buyer a certain guarantee on a regular basis. In this case, IPF can act as
guarantors of quick repayments to the supplier of these machines or capital under a scheme
called deferred payment guarantee.

6. Support for regions whose development is lagging behind:

The operation of IFDs in India has been mainly governed by hierarchical rules
as specified in the five-year plans. This is reflected in the loan portfolio and the
paltem of financial assistance from financial institutions through various financing
mechanisms. Institutional financing of projects in backward regions is extended on
favourable terms such as lower interest rates, longer moratoriums, extended
repayment schedules and relaxed standards for developer contributions and the debt-to-
equity ratio. These concessions are extended on a graduated scale inthe backward
districts, classified in the three categories of A.B and e according to the degree of
their delay. In addition, the institutions have put in place provisions for the extension
of loans for the development of project-specific infrastructure and arcs. in recent
years.
India's development banks have launched specific programmes for the intensive
development of the least industrially developed areas.
7. Promoting new entrepreneurs:
Development banks in India have also achieved remarkable success by
creating a new class of entrepreneurs and spreading industrial culture to newer areas

24
and weaker strata of society, Special capital and start-up capital schemes have been
put in place to provide action-type assistance to new and technically qualified
entrepreneurs who do not have the financial resources on their own to provide
promoters with contributions given the long-term benefits to society of the emergence
of a new class of entrepreneurs. Development banks have been actively involved in
entrepreneurship development programs and in the creation of a number of
institutions that identify and train potential entrepreneurs. Again, to provide a set of
services that includes the preparation of feasibility of reports, project reports, technical
and management advice and at a reasonable price, the institutions sponsored a chain
of 16 technical consulting agencies covering virtually the entire country, promotion
and development.
as important to institutions as the role of finance. Promotional activities such as
carrying out potential industrial studies, identifying potential contractors. IDBI has
made a significant contribution to the industrialization process and the efficient use of
industrial financing, and IDBI has set up a special technical assistance fund to support
various promotional activities. Over the years, the scope of promotional measures has
been expanded to include skills-enhancing programs in state-level development banks and
other industry promotion organizations that conduct specific studies on important
industrial development issues that encourage voluntary organizations to implement
their rural lifting programs, village and craft industries, artisans and other weaker
sections of society.
8. Impact on corporate culture:
Project evaluation and monitoring of institutionally supported projects through
various instruments, such as project monitoring and the report of directors appointed
from the boards of directors of supported entities, have been mutually rewarding.
Through the monitoring of the projects supported, the institutions were able to better
understand the problems faced by industrialists. It has also been possible for corporate
governance to recognize that the interests of the entities and institutions supported are
not in conflict, but coincide. Over the years, institutions have been able to provide
businesses with a constructive partnership. Institutions have followed a continuous
learning process by making and making improvements to their systems and procedures
based on their cumulative experience.

25
 Developers of industrial projects are now developing more carefully ideas for
specific projects and are more systematically preparing project reports. Institutions
insist on a more critical assessment of technical feasibility demand, marketing
strategies and project placement, as well as the use of modern techniques for
discounted liquidity, internal returns, financial returns, etc. This has had a positive
impact on the decision-making process of the company seeking financial assistance
from the institutions. In fact, such an effect does not continue with projects supported
by them, but is also spread over industry-only projects.
The combination of institutions in the management of corporate organizations
has greatly facilitated the process of progressive professionalism in corporate
management institutions has been able to convince the company's management to
properly reorient their organizational structure, personal policies and planning and
control systems. In many cases, institutions have successfully admitted experts to the
boards of directors of supported companies. As part of their project monitoring work
and through their designated administrators, institutions have also been able to phase
in modern management techniques, such as business planning and performance
budgeting in supported units. Progressive industry professionalism Initiators of
industrial projects are now more carefully developing ideas for specific projects and
systematically preparing project reports. Institutions insist on a more critical
assessment of technical feasibility demand, marketing strategies and project
placement, as well as the use of modern techniques for updated cash flow, internal
returns, economic returns, when evaluating a project's prospects. This has had a
positive impact on the decision-making process of the company seeking financial
assistance from the institutions. In fact, this effect does not continue with projects
supported by them, but also extends to industry-only projects.
The combination of institutions in the management of corporate organizations
has greatly facilitated the process of progressive professionalism in corporate
management institutions has been able to convince the company's management to
properly reorient their organizational structure, personal policies and planning and
control systems. In many cases, institutions have successfully admitted experts to the
boards of directors of supported companies. As part of their project monitoring work
and through their designated directors, institutions have also been able to gradually
adopt modern management techniques, for example in the field of information
technology.
26
 CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
The authors attempt to examine the relationship between credit growth and GDP
growth in different sectors of the Indian economy. This is done using co-integration and
granger causality tests. The natural logarithm of the level series was used for the current
study.
Root test of the device
It is possible to use the root test of the AugmentedDickeyFuller (ADF), Phillips
Perron (PP) and is supported with the help of Kwiatkowski, Phillips-Schmidt-Shin (KPSS),
for root analysis.
ADF off-time test car:∆yt'α 't-yyt-1'

"J∆yt-j-st . Variables α and - must take into account the possibility of drift and
stochastic trend in the time series. Further delays in regression should lead to a higher-order
authorization process. Testing a device is part of thet-1 coefficient.1.0.The rejection of the
complete hypothesis simplifies the fact that the series has no common advantage.

The null hypothesis is not rejected, the series is still discriminated 30, and the ADF
test is performed until the null hypothesis is rejected. If the series has an AR structure, the
higher order time variables are part of the AR structure. In such a scenario, phillips Perron
(PP) Unit root test offers an alternative. Unlike the ADF test, the PP test does not take into
account delayed difference variables to account for autocorrlation, but applies a non-
parametric correction for all differential correlations and low steel density of other terms.
However, thePPtest has the disadvantage that it works well only for large samples. As a
result, the KPSS test receives additional support for the existence or absence of unit roots.
The KPSS test is used to supplement other tests of the device as it evaluates the entire
hypothesis processofatrendstationary against an alternative hypothesis of a unit root process.
The rejection of nullity in the KPSS test is therefore a strong indicator of the existence of a
unit root and complements the ADF and PP test, which is based on the non-rejection of the
null hypothesis for the existence of unitroot.
SamintegrationTest
When two or more variables follow a first-order integrated process or L(1), if there is
a linear combination of these variables so that the residual value is I(0) (stationary), the
variables would be co-integrated. Co-integration analysis test for a long-term relationship
between variables and is necessary to avoid the risk of false regression. There are two main
procedures for performing integrationco tests.

27
Angels and Granger (1987) formulated one of the first co-integration tests. They propose a
test, which consists of estimating co-integral regression using the smallest ordinary squares
(OLS), to estimate the differentindividualcertified seats. AndreformulatedJohansen(1988,
1991) uses the maximum probability procedure to determine the presence of common
integrated vectors in non-stationary interminal series. The zero H0 hypothesis isfor no co-
integration in relation to the alternative H 1incidence ofco-integration.For the purposes of the
current study, the Johansen test for co-integration was used. In order to test the time series
for co-integration, it is necessary that they are all integrated into the first order, i.e. they
must be integrated into the first order.
Granger Causation
A time seriesis said tobe barn-to-to-do causing another set of time 'Yt' if the
currentvalue y t can be betterpreditedif there are no100% delayed values or vice versa.
Instant causality is said to exist in the system when the current value of the X time series is
used to predict the current value of Y and not just the delayed values of X. There are several
tests that are used to test Granger causality in econometric series. The current study uses

The test is based on the procedure simply contained in Granger (1969).

Exploitation of amethodologiesimilartoLevineetal. (2000), over the years, "t" and "t-1" have
been on average and expressed as a fraction of real GDP. The natural logarithm of this
variable was then used for other readings.
The GDP deflator is calculated for each year using REAL GDP prices 2004-2005 to
deflate nominal GDP at current prices. This GDP deflator is then used to deflate nominal
credit data in order to obtain real credit.
for furtherstudy.
The GDP deflator is calculated for each year using REAL GDP prices 2004-2005 to
deflate nominal GDP at current prices. This GDP deflator is then used to deflate nominal
credit data in order to obtain real credit.
Variable credit
Annual data for the credit sector at all levels, i.e. agriculture and activities, industry
and services, were used for analysis. Industrial production was further reduced by allusion
and quadrving, manufacturing and others. As credit data are only available at the sectoral
level at all levels for the period 1973-2014, the survey was limited to this period. The ip of
total bank credit is 1951-2014. Since then the credit has been nominally converted to fixed
prices by adjusting it using the GDPdeflator.UsingamethodologysimilartoLevineetal.
( 2000), over the years "t" and "t-1," credit has averaged and expressed in a fraction of real
GDP. The natural logarithm of this variable was then used for other readings.

28
 The GDP deflator is calculated for each year using REAL GDP prices 2004-2005 to deflate
nominal GDP at current prices. This GDP deflator is then used to deflate nominal credit data
in order to obtain real credit.
GDP
Total and sectoral annual GDP data are based on FACTOR cost/AIG GDP at base
prices in 2004-2005. Although the base year is revised to 2011-12, the baseline year data for
2004-2005 for this study were taken into account because of the structural break inherent in
the revised baseline series of the base year of GDP. For the macro-economic survey, total
GDP data were used from 1951 to 2014.
Relationship between variables
It indicates that CreditGrowthandGDPGrowthexhibitastrongcor relations between
sectors. Both series, as well as a reasonable adjustment of the turning points between credit
growth and GDP growth, are not visible at first glance. Econometric analysis of the data
using the Granger causal test provides an additional insight into the relationship. This figure
also shows that total credit growth slowed and slowed in the early 1990s and finally began
to recover in the mid-1990s. The economic recovery that followed the policy of
liberalization, privatization and globalization from the late 1980s to the early 1990s may
have been largely responsible for this increase in credit. The devariables that are considered
for further analysis are compiled.

List of variables and their descriptions

Variable name description
LTOTC, LTOTGVA Total Credit Diary, Total AIG
Diary of agricultural credits, gross value
LAGC LAGGVA
added in agriculture
Credit Services Journal, Gross Value Added
LSERC, LSERGVA
Services
Industrial credit diary, gross value added in
CLIC, LINGVA
industry
Production credit diary, gross value added
LMANC, LMANGVA
for production
D (Variable name) First difference in the variable under study
Another difference in the variable under
DD (Variable name)
study

Results and results

Sector training:
Stationary tests

29
 The 10000-year--to-be-000-first-the-way-to-be-round-000-first-the-way test-go-test results
are shown (table 2).
Table 2: Stationarity Tests for Affected Variables
variable Adf PP Test KPSS Test
c Ct Nc level tendency
LAGC 0.8465 0.8017 0.0169** 0.8483 0.01*** 0.01***
DLAGC 0.312 0.5782 0.1525 0.01*** 0.1 0.01***
(DLAGC)
DDLAGC 0.01*** 0.01*** 0.01*** 0.01*** 0.1 0.1
LAGGVA 0.9591 0.0409** 0.99 0.01*** 0.01*** 0.1
DLAGGVA 0.01*** 0.01*** 0.01*** 0.01*** 0.1 0.1
Linc 0.99 0.9602 0.1132 0.9875 0.01*** 0.01***
DLINC 0.0187** 0.0185** 0.0109** 0.0193** 0.0481** 0.1
LINGVA 0.9292 0.1093 0.99 0.367 0.01*** 0.01***
DLINGVA 0.01*** 0.0152** 0.1221 0.01*** 0.1 0.1
LMANC 0.9031 0.366 0.0782* 0.6013 0.01*** 0.0158**
(LMANC)
DLMANC 0.01*** 0.0172** 0.01*** 0.0235** 0.1 0.1
LMANGVA 0.9661 0.3397 0.99 0.6259 0.01*** 0.01***
DLMANGVA 0.01*** 0.01*** 0.0742* 0.01*** 0.1 0.1
LSERC 0.4205 0.3509 0.1202 0.8413 0.01*** 0.01***
(LSERC)
DLSERC 0.01*** 0.01*** 0.01*** 0.0933* 0.1 0.0389**
LSERGVA 0.99 0.8892 0.99 0.9628 0.01*** 0.01***
DLSERGVA 0.3021 0.2692 0.4513 0.01*** 0.01*** 0.1
DDLSERGVA 0.01*** 0.01*** 0.01*** 0.01*** 0.1 0.1

() - Stationary variables; Level of importance: - 1%, - 5%, - 10%

ADF and pp tests are also used to determine the differential level required to make a series
stationary. If there is a conflict between the two tests other than the KPSS tests, it is used to
reach a conclusion. In the case of rural variables, conflicts and anditis, it has been found that
credit and AIG variables achieve stationary integrity at different levels. Since causation
testing and co-integration between variables with different integration orders include
techniques outside the scope of this paper, the paper focuses on an analysis of the ratio of
total credit to GDP, industrial credit and industrial AIG, manufacturing credit and
manufacturing.
Johansen co-integration test
The Johansen test is used to establish the long-term relationship between variables. For the
Johansen test, the series must be integrated into order 1, i.e. the series must be I(1). Levels in
the industrial and manufacturing sectors are taken into account for the Johansen test as they
are both I(1). The results of the co-integration test are shown in Table 3.

30
 Table 3: Johansen Co-Integration Test Results

Zero Hypothesis: No Co-integration, r-0

Level of importance if test statistics are higher than critical value
10% lynx 5% lynx 1% lynx conclusion
LMANC - rejected rejected Not rejected Co-integrated 5%
LMANGVA
CLIC - LINGVA Not rejected Not rejected Not rejected No co-integration

Granger causation test

The GrangerCausality test is used to establish a runcausal relationship between variables.
For Granger causation tests, it is necessary that the series be trendy and zero stationary
average. The series is initially rendered stationary, and the average value of the stationary
series is subtracted from the series to make it hovering average zero. The number of delays
for the barn test is chosen on the basis of the Akaike FPE and AIC (1969, 1974) criteria.
Table 4 shows the number of delays used for barn testing5.

Table 4: Number of layers used for the granger causation test

Variables Number of layers
Aic Fpe
DLINGVA DLINC 2 2
DLMANGVA DLMANC 2 2

Table 5: Granger Directional Causality Test Parking Value

Variables Value P (AIC layer) Value P (FPE layers)
DLINGVA DLINC 0.0193** 0.0193**
DLMANGVA 0.0267** 0.0267**
DLINGVA DLINC 0.9668 0.9668
DLMANGVA DLMANC 0.8782 0.8782
Level of importance: - 1%, - 5%, - 10%
Total credit and gross domestic product survey:
Global GDP data show a significant change in average growth in the 1980s and 1990s. In
1992, a potential violation was carried out. As can be seen in Table 6, the doll is statistically
significant at the 1% confidence level.

Table 6: Results of the regression of total GDP relative to a dummy variable

DLTOTGVA - C0- C1-D0

31
 (D0- Dummy variable0 for 1952-1992, 1 for 1993-2014)
Estimates Std. Error t-value P value
Interception (C0) 0.0391 0.0044 8.914 1.38x10-12
Dummy coefficient 0.0261 0.0074 3.549 0.0008***
(C1)

The data was broken down by breakpoint into two sets, as shown below:
variable years
LTOTGVA - Series 1 1952 – 1992
LTOTGVA - Series 2 1993 – 2014
LTOTC - Series 1 1952 – 1992
LTOTC 2 Series 1993 – 2014

Stationary tests
The 10000-year--to-be-000-first-the-way-to-be-round-000-first-the-way test-go-test results
are shown (Table 7).

32
 Table 7: Stationarity Tests for Affected Variables

Series 1 - 1952 to 1992

variable Adf PP Test KPSS Test
c Ct Nc level tendency
LTOTC 0.6681 0.2977 0.01*** 0.4294 0.01*** 0.0619*
DLTOTC 0.01*** 0.01*** 0.01*** 0.01*** 0.1 0.1
LTOTGVA 0.99 0.7775 0.99 0.3714 0.01*** 0.01***
DLTOTGVA 0.01*** 0.01*** 0.0447** 0.01*** 0.1 0.1
() - Stationary variables; Level of importance: - 1%, - 5%, - 10%

Series 2 - 1993 to 2014

variable Adf PP Test KPSS Test
c Ct Nc level tendency
LTOTC 0.704 0.4387 0.0516* 0.7273 0.01*** 0.0237**
DLTOTC 0.2736 0.6875 0.2795 0.7745 0.1 0.01***
DDLTOTC 0.043** 0.1211 0.01*** 0.0186** 0.1 0.1
LTOTGVA 0.9371 0.6367 0.99 0.803 0.01*** 0.01***
DLTOTGVA 0.322 0.6698 0.4205 0.2542 0.1 0.1
DDLTOTGVA 0.0116** 0.0432** 0.01*** 0.01*** 0.1 0.1
() - Stationary variables; Level of importance: - 1%, - 5%, - 10%

Johansen co-integration test

The results of the co-integration test are shown in Table 8. The results show that, although
there was a long-term correlation between total credit and total growth from 1952 to 1992,
this did not exist after 1992.
Table 8: Johansen Co-Integration Test Results

Zero Hypothesis: No Co-integration, r-0

Level of importance if test statistics are higher than critical value. Series 1 - 1952 to
1992
10% lynx 5% lynx 1% lynx conclusion
LTOTC - rejected rejected rejected Integrated into
LTOTGVA collaboration

Zero Hypothesis: No Co-integration, r-0

Level of importance if test statistics are higher than critical value. Series 2 - 1993 -
2014
10% lynx 5% lynx 1% lynx conclusion
DLTOTC -D Not rejected Not rejected Not rejected Not co-integrated
LTOTGVA

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 Granger causation test

Table 9 shows the number of delays used for the barn test. Table 10 shows the results of
thegranger causation tests performed on the trend and zero average stationary variable.

Table 9: Number of layers used for the Granger causation test; Series 1 - 1952 to 1992
Variables Number of layers
Aic Fpe
DLTOTGVA DLTOTC 2 2
Number of layers used for the granger causation test; Series 2 - 1993 - 2014
Variables Number of layers
Aic Fpe
DDLTOTGVA 1 1
DDLTOTC
Table 10: P value of the granger directional causation test; Series 1 - 1952 to 1992
Variables Value P (AIC layer) Value P (FPE layers)
DLTOTGVA 2,209x10-5 2,209x10-5
DLTOTGVA DLTOTC 0.3232 0.3232
Level of importance: - 1%, - 5%, - 10%

Granger directional causation test value; Series 2 - 1993 -2014

Variables Value P (AIC layer) Value P (FPE layers)
DDLTOTGVA - DDLTOTC 0.0413** 0.0413**
DDLTOTGVA DDLTOTC 0.497 0.497
Level of importance: - 1%, - 5%, - 10%
analysis
Manufacturing and manufacturing have long-term cooperation in reintegration
into society. This ratio is significant at the 5% level. However, the broader
variables for industrial credit and industrial GDP are not cooked.
GdPleadscred for the industrial manufacturing sector as prGrangercausalitytest.
Data on total GDP at the macroeconomic level showed a structural break in
1992. Credit and GDP data are divided into two series - Series 1 (1951-1992)
and Series 2 (1993-2014)
Series 1 shows a long-term co-integration relationship between credit and
GDP, while Series 2 demonstrates noco integration
For series 1 and 2, THE GDP causes a credit barnr according to the
directional causal tests barn

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Table 11: Summary of Findings: Granger Causal Criterion
Annual: 1973-2014
No. null hypothesis
delay p-value conclusion
1 DLINGVA DLINC 2 0.0193** Yes
2 DLINGVA DLINC 2 0.9668 No

3 DLMANGVA 2 0.0267** Yes

4 DLMANGVA 2 0.8782 No
DLMANC

Annual: 1952 - 1992

5 DLTOTGVA 2 2,209x10-5 Yes
6 DLTOTGVA DLTOTC 2 0.3232 No

Annual: 1993 - 2014

7 DLTOTGVA 1 0.0413** Yes
8 DLTOTGVA DLTOTC 1 0.497 No

35
 CONCLUSION
Nationalized banks have also implemented innovative systems for mobilizing
resources. However, India measures its economic growth in the context of the April-
March fiscal year. This is the announcement in the 2019-2020 preliminary budget of
direct money transfer programs for farmers, and middle-class tax cuts will boost public
finances by about 0.45 percent of GDP. These measures will support growth through short-
term RBI consumption, lowering its benchmark policy in February and changing policy
directions to neutral in relation to calibrated tightening. Inflation measures have fallen
steadily in 2018.

36
 REFERENCE
1. Depositor assessed by National Applied Economic Research, New Delhi[1971]
2. Report of the Rural Affairs Working Group of the Bank's Ministry of Finance in
India New Delhi[1972]
3. Report of the Committee on Operational Efficiency and Profitability of the R.B.I
Commercial Bank of Bombay[1976]
4. Ghosh AN 'A portrait of Nationalized Inter-India Bank Publications New
Delhi[1979]
5. D.Narayan Banking Sector Reforms and New Inequities in The Deployment of
Commercial Credit in India Center Development Studies March [2000].

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