1.1 INTRODUCTION : Indian Banking system is unique system in the emerging markets of the world. India is developing country but without consistency in various financial policies. Policies are best for economic development of the country. However, in India even after six decades of independence synchronization of various policies between different sectors is lacking. Policies for various sectors are changing on regular basis as per requirement of respective political leader′s choice, respective political party′s philosophy, countries legal bå structure and other aspect. Banking sector is providing fuel to all other sectors of the economy. Hence, consistency in the policies of banking sector is the key area of the concern. Inconsistency in the implementation of the policy is the lacuna of Indian Banking system. Due to changes in the policies relating to financial matters in India by reserve bank, Finance Ministry and other institutions. Various new institutions have been created by the central government on regular basis. Due to inability of public sector commercial banks separate financial institutions were floated for the particular sector or industry in true sense opening a higher number of institutions and designing various policies at regular interval of time through nationalize banks leads to inefficient financial assets of the institutions. Not only has this but in such situation central government found such organizations lack of control. However, all this different para–banking and banking organizations provides speed to the economic growth of specific sector as well as it provides push to the economic growth of the country. Following is the snapshot of the various organizations involved in the Indian financial sector. Basic Structure of Indian Banking System Banking system occupies an important place in a nation′s economy. A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core of the money market in an advanced country. In India, though the money market is still characterised by the existence of both the organised and the unorganised segments, institutions in the organised money market have grown significantly and are playing an increasingly important role. The unorganized sector, comprising the money lenders and indigenous bankers, caters to the credit needs of a large number of persons especially in the countryside. Amongst the institutions in the organised sector of the money market, commercial banks and co–operative banks–have been in existence for the past several decades. The Regional Rural Banks came into existence since the middle of seventies. Thus with the phenomenal geographical CHAPTER– 1 INDIAN BANKING SYSTEM 7 expansion of the commercial banks and the setting up of the Regional Rural Banks during the recent past, the organised sector of money market has penetrated into rural areas as well Besides the aforesaid institutions, which mainly serve as sources of short–term. credit to industry, trade, commerce and agriculture, a variety of specialised financial institutions have been set up in the country to cater to the specific needs of industry, agriculture and foreign trade.