Modern Banking System in India, Meaning, History And Benefits

Modern Banking Systems, also known as E-banking systems, represent a comprehensive, Windows-accessed, full point-and-click, on-premise solution that provides Core Data Processing Solutions, Item Capture, Imaging Solutions, and Management Information Systems. These programs are integral components of the core banking solution, covering various aspects of modern banking, including Internet Banking, Telephone/PC Banking, Network Systems, and more.

Customers are issued with a internet banking account ID and password, allowing them to access their accounts, make payments, and generate receipts from the comfort of their home personal computer connected to the Internet. E-banking is the evolution of contemporary banking systems, essentially electronic banking accessible through standard broadband Internet connections. The e- banking service is available 24/7, enabling customers to make transactions at their convenience, without being restricted by office hours.

Modern Banking System Benefits for Consumers

Convenience: E-banking offers significantly greater convenience. Individuals can check their bank balances, get information, and pay bills online without the need to visit a physical bank.
Reduced Risk: Carrying physical cash is not necessary, as payments can be made using credit or debit cards. This has low risk than dealing with cash, as cards can be easily replaced or deactivated in case of loss or theft.
No Time Limitations: Traditional banks typically have working hours from 9:00 a.m. to 5:00 p.m. Whereas, e-banking allows individuals to make transactions at any time, providing flexibility that is not available in traditional banking systems.

Modern Banking or Internet banking offers a range of facilities, including online bill payments, fund transfers, online shopping, and investment opportunities. This is just not time saving but also allows individuals to carry out these activities from the comfort of their homes.

This innovative system eliminates the need for customers to handle banking tasks during office hours, offering flexibility and accessibility. The superior software, operational flexibility, quick access to crucial management information, reliability, and cost-effectiveness stand out as key features of these electronic banking systems. Essentially, electronic banking systems provide a service that enables transactions without the necessity of physically visiting a bank branch.

Modern Banking System History

The emergence of modern banking in India dates back to the mid-18th century. Early examples include the Bank of Hindustan, established in 1770 and dissolved between 1829 and 1832, and the General Bank of India, founded in 1786 but failed in 1791.
The State Bank of India (SBI) stands as the largest and oldest bank in continuous operation. It was originally established as the Bank of Calcutta in mid-June 1806, it was later renamed the Bank of Bengal in 1809.
The Bank of Bombay was founded in 1840, and the Bank of Madras in 1843. In 1921, these three banks merged to form the Imperial Bank of India, which, following India's independence in 1955, became the State Bank of India. The presidency banks, including the SBI's predecessors, played quasi-central bank roles until the establishment of the Reserve Bank of India in 1935.
In 1960, the State Bank of India gained control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959, with the merger taking effect on April 1, 2017.
The government's nationalization of 14 major private banks, including Bank of India, occurred in 1969, and an additional six private banks were nationalized in 1980. These nationalized banks, along with the State Bank of India and its associates, constitute the majority of lenders in the Indian economy, owing to their significant size and extensive networks.

The Indian banking sector is categorized into scheduled and non-scheduled banks, with scheduled banks falling under the second schedule of the Reserve Bank of India Act, 1934. Scheduled banks are further divided into nationalized banks, State Bank of India and its associates, Regional Rural Banks (RRBs), foreign banks, and other Indian private sector banks. Following the merger of its associate banks in 2017, the SBI holds a global ranking of 236 on the Fortune 500 index. The term "commercial banks" encompasses both scheduled and non-scheduled commercial banks, all regulated under the Banking Regulation Act, 1949. While the supply, product range, and reach of banking in India are generally well-developed, challenges persist in extending services to rural areas and the underprivileged. Government initiatives, such as the State Bank of India's branch network expansion and the National Bank for Agriculture and Rural Development's (NABARD) efforts in microfinance, aim to address these challenges and enhance financial inclusion.

Modern Banking System Advantage And Disadvantage

Modern Banking System Advantage And Disadvantage
Modern Banking System Advantage	Modern Banking System Disadvantage
Modern banking, particularly in the form of e-banking, provides unparalleled convenience to customers. With the ability to perform transactions, check balances, and manage accounts online, individuals can conduct banking activities at any time and from anywhere with internet access. This convenience is especially beneficial for those with busy schedules or in need of urgent financial management. Modern banking offers numerous advantages in terms of convenience, time efficiency, and accessibility, the increasing prevalence of cyber threats poses a significant disadvantage. Balancing the benefits with robust security measures is essential to ensure a positive and secure banking experience for customers.	One significant drawback of modern banking is the heightened susceptibility to cyber threats. The use of online platforms exposes customers to hacking, spyware programs, computer viruses, and password breaches. Cybercriminals employ various tactics, such as spreading viruses to compromise computer systems, gaining unauthorized access to sensitive information, and illegally transferring funds. This vulnerability poses a serious threat to the security of individuals' financial assets and personal data. Not everyone may have the technological literacy or access required for modern banking. The elderly, individuals in rural areas, or those with limited access to technology may face challenges in adapting to e-banking systems. This creates a digital divide, excluding certain demographics from the advantages of modern banking.