27 july 2011-chp 2

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TYPES OF BANKS

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Types of Banks

Commercial banks/Nationalized banks

Cooperative banks

Land Development Banks

Regional Rural banks

Foreign banks

Private Sector banks

Development banks

NABARD

EXIM Bank

National Housing Bank

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Commercial Banks

Mobilize Deposits from the public which are repayableon demand or at short notice.

They lend to general public , traders and manufacturers.

They provide working capital to the business in the formof overdraft and cash credit.

No. of agency services like; collection of cheque, bills,safe keeping for valuables, issue of letter of credit, etc.

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Investment Bank or Industrial Bank

Provide medium-term and Long-term finance toindustries to meet their Fixed capital requirements.

For existing industries , they lend for expansion and

modernization .

Help to promote new industries by underwriting theissue of securities.

The industrial bank secure funds through share capitaland debentures.

They also receive deposits from the public for long- periods.

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Exchange Banks

Specialized in f inancing the f oreign trade.

Supply Necessary

f oreign e

xchange required for

settlement of transactions in f oreign trade.

Now a days commercial banks themselves undertake

foreign exchange business so, there is no separateforeign exchange bank.

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Savings Banks

Collects savings from poor and middle income peopleof the society.

These banks primarily intended to encourage habits

of thrift and savings among people with smallincomes.

Depositors are allowed to withdraw the amount intimes of needs.

The govt. runs savings bank and they are managed by postal department.

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Co-operative Banks

Formed on the principle of co-operation.

Provide short-term credit to agriculturists,

artisans, small f armers and small scale industries.

Accept all kind of deposits and make loan to themembers at lower rate of interest.

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Land Development Banks

Provide Long-term loans to Agriculturists for purchasing toolsand equipments and cattle and making permanent improvementon land.

Granted against the security of land.

Organized on co-operative basis in India.

The banks raise their resources in the form of shares and byissuing long-term securities.

These banks are presently known as Agriculture and Rural

Development Banks.

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Central Bank

Acts as leader of the money market; supervising, controlling,and regulating the activities of commercial banks and otherf inancial institutions.

Enf orces monetary discipline in the country¶s economy.

Manage the issue and circulation of currency to safeguardfinancial stability in the country.

Functions in close touch with the government and assists in theimplementation of its economic policies.

It serves as banker, agent and advisor to the government.

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Types of BankingCore Banking

A centralized branch computerization model in which

branches are connected to a central host.

It incorporates branch automation modules and online

multiple delivery channels like ATM, Debit card, Tele-

banking, Internet Banking, etc., under one roof.

In core banking there is a central database f or the bank andtransactions done centrally, online.

It offers integrated products and services to customers round

the clock.

Core

Banking

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Retail Banking

Retail banking refers to banking in which banks

undergo transactions directly with consumers, rather

than corporations or other banks. Services offeredinclude: savings and checking accounts, mortgages ,

personal loans, debit cards, credit cards, etc.

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Investment Banking

Financial intermediary that performs a variety of

services Like, underwriting, acting as an intermediary

between an issuer of securities and the investing public,

facilitating mergers and other corporatereorganizations, and also acting as a broker for

institutional clients.

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Electronic Banking

With the introduction of computers in Indian Banks and with

the arrangements of ATMs, the services are provided across the banks.

Customers need not necessarily visit the Bank to do banking

transactions when their banker provides them tele-banking or

remote-banking facility. This type of banking is called electronic

banking .

Anytime Banking

Any where Banking

Home banking (corporate and personal)

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Corporate Banking

Corporate customers are especially big business/industrialhouses.

For getting these types of services from the banks , the

customers requires a computer, a telephone connection and a

modem and could be utilized at the time of performing

banking transactions.

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Personal Banking

By using tele-banking facility, the customer get the connectivityto the branch¶s designated computer.

The software provided in the machine will be interactive with

the customer asking him to dial the code number of the service

required by him and suitably answer him. A customer can have access to his balance, and also can place

order for statement of accounts, cheque books and other selected

services through this tele (phone) banking.

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hole Sale Banking

Banking services between merchant banks and other

f inancial institutions. In other words, business to

business banking (B2B).

Other Banking are:

- Mobile Banking

- Internet Banking, etc.

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Present Era

The last decade experienced a complete reform in the Banking

sector.

With the advancement of technology, banking sector has become more EASY, FAST , ACCURATE and also TIME

SAVING.

ATMs, Mobile Banking, Net Banking are the tools to

facilitate the customers of the bank.

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SOME

BANKING

CONCEPTS

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NPA

KYC

Basel ±I & II Bancassurance

Money Laundering

Banking Sector Reforms

Derivatives Merchant Banking

Repo Rate and Reverse

Repo Rate

CRR & SLR Risk Management

Venture Capital

Recovery management

Overdraft

Government Securities

SEBI

Lease Financing FDI (Foreign Direct Investment)

FII (Foreign Institutional

Investment)

Credit Rating Agencies Commercial Paper

Certificate of Deposit

Equity

Bonds

Mutual funds

Close ended and O pen ended

schemes

Cash Credit

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Cont«.

Bill of exchange

Discounting of bills

Promissory note

Mortgage

Interest warrant

Dividend warrant

Clearing house Underwriting

Hire-purchase finance

Bill of lading

Material alteration

Budla Transactions or

carry over Factoring services

Commercial paper

Certificate of Deposits

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WHAT IS BANKING ?

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Def inition of a Bank

Under English law, a Bank is defined as a person whocarries on the business of banking , which is specifiedas;

Conducting current accounts for his customers

Paying cheques drawn on the bank, and

Collecting cheques for the customers.

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In India

Section 5 (b) of Banking Regulation Act 1949

³ Accepting for the purpose of lending and investment,

of deposits of money from the public, repayable on

demand, order or otherwise and withdrawal by

cheque, draf t order or otherwise´.

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Primary or Traditional Functions

The major f unctions of banks are:

1. Acceptance of Deposits

2. Lending of money3. Creation of credit, and

4. Transferring of money and other related activities

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Ancillary Services

Safe custody of Valuables

Safe deposit Vault

Purchase and sale of securities

Collection of interest on securities/debentures and

dividend on shares, etc

Remittance of Funds ± Bank drafts, Mail Transfers,

Telegraphic Transfers Agent and Trustee

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Cont«.

Personal tax assistance

Investment facilities ± Underwriting, banker to new

issues, Guidance to Investment, etc.

Credit Transfers

Travelers' Cheques and Gift Cheques,etc.

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K inds of business that cannot be done

Section 8 of the Banking Act, prohibits a bank f rom

carrying on trading activities which are not incidental

to banking business.

For example, it can buy or sell securities for the

purpose of realizing them, can deal with stocks, shares,

bullion, etc., and can act as Trustees, Executor,

Administrator, etc.

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R OLE PLAYED BY BANKS

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Economic Development

Mobilization of Savings

Balanced Regional Development

Extension of credit

Creation of money

Facilitate Commerce and Trade

Role of Banks

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Banks contribute to the operation and growth of the

economy through various roles, including that of

intermediary and provider of payment settlement

facilities. Promote confidence and stability in the system.

Transfer of funds with minimal risk to the parties.

Efficient allocation of resources in an economythrough lending to businesses and individuals.

Cont..

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Banking facilities to unbanked areas

Deployment of credit to neglected sections of the

society (priority sectors)

Bank finance to small-scale industries

Small business finance (self-employed)

Financing of agriculture

Assistance to women

Welfare of minorities

Assistance to students

«««««««««««« And many more

Social Responsibility of Commercial Banks

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Changing Prof ile of Indian Banking

Organizational Changes Change from wholesale character to retail character

Purpose orientation in Lending

Credit Planning

Reduction of regional imbalances Development of banking habits

Increase in volume of credit

Increase in advances to priority sector and weaker sections

Housing finance

leasing

Innovations

Venture capital financing

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QUESTIONS

27 july 2011-chp 2

Documents

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