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The financial services sector contributed 15 per cent to India's GDP in FY09, and is the second-largestcomponent after trade, hotels, transport and communication all combined together, as per the Banking &Finance Journal, released by an industry body in August 2010.
Share of Financial services, banking, insurance and real estate sectors is expected to enhance by 9.7 percent for the year 2009-10 to 17.2 per cent of GDP (at factor cost).
Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and number of registeredsub-accounts rose to 5,592 as of November 10, 2010.
Overseas funds infused into Indian capital market in 2010 stood at US$ 39 billion. According to datareleased by Securities and Exchange Board of India (SEBI), stocks and debt securities over worth US$17.28 billion were purchased by the foreign institutional investors (FIIs) from the Indian capital market inJanuary 2011.
According to data available with SEBI, FIIs have made investments worth US$ 4.11 billion in equitiesand invested US$ 667.71 million into the debt market.
The average assets under management of the mutual fund industry stood at US$ 147.99 billion for thequarter ended December 2010, according to the data released by Association of Mutual Funds in India(AMFI).
As on January 21, 2011, India's foreign exchange reserves totaled US$ 299.39 billion, according to theReserve Bank of India's (RBI) Weekly Statistical Supplement.
According to Venture Intelligence, a research firm, private equity firms invested US$ 7,974 million over325 deals in India during 2010, as against US$ 4,068 million (over 290 deals) in 2009. The largestinvestment reported during the year was the US$ 425 million raised by power generation firm AsianGenco from investors including General Atlantic, Goldman Sachs, Morgan Stanley, Everstone andNorwest.
According to a global consultancy firm Ernst & Young (E&Y), sectors such as power and transportation,consumer and branded products, infrastructure ancillaries, education and financial services, and
healthcare are likely to witness increased PE activity in 2011.
Deals
India Inc announced merger and acquisition (M&A) deals worth a record US$ 55 billion in 2010,including a record number of billion-dollar transactions.
The number of mergers and acquisitions (M&A), private equity (PE) transactions and QualifiedInstitutional Placements (QIP) increased close to 40 per cent to US$ 3.23 billion in November 2010.Besides, there have been US$ 9 billion plus deals in 2010, the highest seen in any year.
Fund-raising activity gained pace by almost 65 per cent in 2010 as compared to 2009. In real terms, 27
funds were able to raise US$ 13 billion as PE as against US$ 8 billion by 22 funds in 2009. There has alsobeen a more than 80 per cent growth in PE and VC investments in India: 2010 witnessed 348 deals worth$8 billion, against 317 deals worth $4.4 billion in 2009, according to VCCedge data.
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The Indian aviation industry has witnessed an impressive growth during the past few years, withmajor contribution from the civil aviation segment. The market has been strongly supported by
the government and the private sector. Availability of skilled manpower along with favourablebusiness environment will position India as one of the most attractive investment destinations inthe coming years. It is currently the 9th largest market in the world. On the basis of strongmarket fundamentals, it is anticipated that the civil aviation market will register more than 16 percent Compound Annual Growth Rate (CAGR) during 2010-2013.
India is expected to be the fastest growing civil aviation market in the world by 2020 with about420 million passengers being handled by the Indian airport system, according to the EconomicSurvey 2010-11.
Stock markets
Market capitalisation of India as a proportion of world market cap has risen to a record high. According todata sourced from Bloomberg, the country's market capitalisation as a proportion of the world market capis currently 3.34 per cent. India's current market-cap is US$ 1.55 trillion as compared with world market-cap of US$ 46.5 trillion. This is higher than 3.12 per cent share India enjoyed at the market peak of
January 2008.
As analyzed by Venture Intelligence, private equity firms obtained exit routes for their investments in arecord 121 companies during 2010, including 24 via IPOs. (2009 had witnessed 66 liquidity eventsincluding 7 via IPOs). PE-backed companies raised about US$ 2.20 billion via IPOs during 2010.
Insurance
The Indian Life Insurance industry is one on the strongest growing sectors in the country. Currently aUS$ 41-billion industry, India is the fifth largest life insurance market and growing at a rapid pace of 32-34 per cent annually. Currently, there are 22 life insurance companies operating in India, according to theLife Insurance Council (LIC).
According to data released by the Insurance Regulatory and Development Authority (IRDA), insurancecompanies garnered US$ 11.73 billion in new business premium during April-August 2010, against US$6.90 billion in the corresponding period last year.
Further, according to IRDA, in October 2010, life insurance companies collected first year premiumworth US$ 542.19 million (individual single premium). For the period up to October 2010, total premiumcollected by life insurance companies was US$ 4.66 billion, as compared to US$ 2.39 billion collected inthe same period of 2009 (individual single premium).
The life insurance industry is expected to cross the US$ 66.8 billion total premium income mark in 2010-
11. "This year, we are expecting a growth of 18 per cent in total premium income. If achieved, it isexpected to cross the US$ 64.4 billion mark," said SB Mathur, Secretary General, Life Insurance Council.Total premium income, at US$ 56.04 billion, rose 18 per cent during 2009-10, against US$ 47.6 billion inthe previous year.
Banking services
Significantly, on a year-on-year basis, bank credit grew by 24.4 per cent in 2010 as against RBIsprojections of 20 per cent for the entire fiscal 2010-11.
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The number of passengers carried by the domestic airlines during JanuaryFebruary 2011 was9.51 million as against 7.95 million in the corresponding period in 2010, thereby registering agrowth of 19.6 per cent, according to the latest data released by the Directorate General of Civil
Aviation (DGCA).
The domestic airlines registered a growth of almost 16 per cent year-on-year (y-o-y), carrying a
record 5.2 million passengers in December 2010 as against 4.5 million passengers in December2009.
The domestic air passenger traffic grew by 19 percent in 2010, registering 51.53 millionpassengers as compared to 43.3 million in 2009, according to the Economic Survey 2010-11.
In terms of market share, private carrier Kingfisher Airlines was the market leader with 19 percent share, closely followed by Indigo with 18.7 per cent, Jet Airways with 18 per cent, Air Indiawith 15.8 per cent, Spicejet with 13.8 per cent, JetLite with 8.1 per cent and GoAir with 6.6 percent during the month of February 2011.
Delhi's Indira Gandhi International (IGI) Airport has been handling the maximum number of flightmovements per day. The airport handled an average of 741 flights each day between April andDecember 2010, followed by Mumbai's Chhatrapati Shivaji Termus (CST) Airport which handled695 flights each day during the same period.
Significantly, IGI has been rated the 14th best airport in the world in the Airports CouncilInternational's airport service quality survey for 2010. In the category of 25-40 millionpassengers per annum, the airport has been rated fourth.
Investment Opportunities
Leading aircraft manufacturers Airbus and Boeing have expressed optimism over the growth of
the civil aviation industry in India. As per Airbus, the country would need 1,032 new aircraftsworth around US$ 138 billion by 2028. On a similar note, Boeing has also predicted that thesector would require 1,150 commercial jets worth US$ 135 billion in the next 20 years.
The Hyderabad International Airport has been ranked amongst the world's top ten in the annualAirport Service Quality (ASQ) passenger survey along with airports at Seoul, Singapore, HongKong and Beijing. The Hyderabad International Airport - being managed by a public-private jointventure of the GMR Group, Malaysia Airports Holdings Berhad and the State Government of
Andhra Pradesh along with the Airports Authority of India (AAI) - retained its top position in thecategory of airports.
Timothy J Roemer, the US Ambassador to India has said that the US will work with the Indian
government and the domestic private sector to make the country an aviation hub. Speaking atIndia Aviation 2010, Roemer said that the public-private initiative, US-India Aviation Programme,would work together with the DGCA on helicopter aviation security.
The AAI is focusing its efforts towards modernisation of non-metro airports. AAI is planning thecity-side development of 24 airports, including those at Ahmedabad and Amritsar. Additionally,11 new greenfield airports have been identified to reduce passenger load on existing airports,according to Praveen Seth, member-operations, AAI. AAI also plans to spend around US$ 3.07
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billion in the next five years for developing, upgrading and modernising metro and non-metroairports.
With the growth in the industry, airport retailing has also gained pace in the recent times.Development of new terminals and airports such as the recently inaugurated T3 in New Delhihas provided added impetus to this segment. The highest margin earners in this segment are
food and beverages, beauty products, electronic items, apparel etc. It has been predicted thatairports would provide around 300,000-400,000 square feet retail space by 2015. Manycompanies are also planning to leverage on this growing segment by launching specificproducts for air travellers. For instance, French premium skincare brand L'Occitane is planningto develop a special range to cater to the airport retailing segment.
The Indian aviation sector will grow by 18-20 per cent this year, according to aviation industryexperts. Among airlines, national carrier Air India and low-cost airlines IndiGo and SpiceJet willadd more than 1,000 aircrafts in 2011.
Investment Policy
The consolidated document on FDI policy was released on March 31, 2010.
Currently, for the civil aviation sector (Airports):
FDI up to 100 per cent is allowed under the automatic route for greenfield projects. For existing projects, FDI up to 100 per cent is allowed; while investment up to 74 per
cent under the automatic route and beyond 74 per cent under the government route. FDI up to 49 per cent is allowed in the domestic airlines sector under the automatic
route, but not by of foreign airline companies.
Government initiatives
To create world class airports, the government has recognised the need for theinvolvement of private players in the development of airport infrastructure. Developmentof airports at Delhi and Mumbai has been taken up under Public Private Partnership(PPP) mode. The capital expenditure is funded through private equity, borrowings, andinternal resources of joint venture companies. The development work of Mumbai airportis likely to be completed by 2012 whereas the work of a new terminal (Terminal 3) atIndira Gandhi International Airport at Delhi got completed in July 2010. The developmentwork of Kolkata and Chennai International airport has been taken up by Airport Authorityof India whereas Bangaluru and Hydrabad international airports have been developedon PPP mode as greenfield airports. The AAI has taken up the development of 35 nonmetro airports.
As per the Economic Survey of 2010-11, out of 35 airports granted in 2006, 11 havebeen completed, while the remaining are under implementation. The survey also saidthat modernisation of Kolkata and Chennai airports was under way with the Airports
Authority of India ( AAI) spending an estimated US$ 514.6 million and US$ 446 million,respectively. Both the projects are expected to be completed between May-October2011.
The adoption of Open Sky Policy has resulted in the entry of several new privatelyowned airlines and increased frequency / flights for international airlines.
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Road Ahead
Investment opportunities of US$ 110 billion are being envisaged up to 2020 with US$ 80 billiontowards new aircraft and US$ 30 billion towards the development of airport infrastructure,according to the Investment Commission of India.
State-owned carrier Air India plans to take a call soon on making Dublin airport in the Irishcapital its new hub, after pulling out of Frankfurt in Germany. The talks between the Indian andIrish governments are at an advanced stage in this regard.
Airports-to-infrastructure conglomerate GMR is setting up a 420 MW power plant of its own tomeet the energy needs of IGI's Terminal 3, estimated to rise to 250 MW or 8-9 per cent ofDelhi's current demand in a few years from now.
Lufthansa Cargo and GMR group have signed an agreement to develop Rajiv GandhiInternational Airport as a South Asian cargo hub, with focus on pharmaceutical exports.
Kingfisher Airlines and American Airlines, both members of the Oneworld alliance, will begintheir codeshare and frequent flyer arrangement in 2011, the two airlines have announced.
Lockheed Martin Corp and Tata Advanced Systems, a wholly owned subsidiary of Tata SonsLtd has announced the formation of a new joint venture company - Tata Lockheed Martin
Aerostructures, for manufacturing aerostructures for the C-130 aircraft produced by LockheedMartin
GE Aviation has signed a 20-year engine maintenance agreement with Air India. Theagreement covers the maintenance, repair and overhaul (MRO) of GE90 aircraft engines.
India is poised to become the fastest growing market in the world for aircraft maintenance,
repair and overhaul (MRO) services over the next decade tripling its worth to US$ 1.5 billion, asairline companies buy more planes to cater for the countrys rapidly growing traffic
Russian-made civil helicopters operated in India will now have a service centre within thecountry. Russian Helicopters, part of United Industrial Corporation (UIC) Oboronprom anddomestic company, Vectra Group, have formed a joint venture company Integrated HelicopterServices Pvt Ltd to start a maintenance, repair and overhaul (MRO) facility in the outskirts ofDelhi.
Exchange rate used: 1 USD = 45.18 INR (as in March 2011)
Media and Entertainment (M&E) is one of the fastest growing sectors in India. The sector
consists of creation, aggregation and distribution of content, products and services, news andinformation, advertising and entertainment through various channels and platforms.
The industry is taking initiatives like regional content and distribution platforms (digital, non-digital and mobile) to enhance customer experience as well as monetize content. Newtechnologies such as 3G, broadband and mobile infrastructure are also helping in propelling thegrowth rate.
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The Indian economy grew at a faster pace in 2010 compared to 2009, which translated intomore advertising as well consumer spending. This high growth rate will continue to remain in2011 as well. The Indian advertising industry will grow by 17 per cent in calendar year 2011 andis expected to add about US$ 889 million to the existing ad pie worth US$ 5248 million,according to Pitch Madison Media Advertising Outlook 2011. This robust growth in advertisingindustry will benefit the M&E industry in 2011 as well.
The entertainment industry in India is estimated at about US$ 9.4 billion in revenues in year2010, which is expected to grow at a rate of 14.1 per cent to reach revenues of US$ 10.7 billionin 2011.
Television
The television industry is expected to grow by 12.9 per cent cumulatively over 2009-14. Themaximum growth is slated to occur in 2010 (15.6 per cent), followed by 2012 (13 per cent),according to a report by PricewaterhouseCoopers (PwC).
The television industry is expected to grow above 20 per cent in 2011. Two important cricketevents - World Cup and the Indian Premier League (IPL) - are expected to boost the televisionadvertising revenue. Cricket is expected to earn advertising revenue of US$ 405 million from itstelevision telecast this year, up from US$ 337 million in 2010.
The direct-to-home (DTH) market in India had 23.1 million active subscribers by the end of2010, as per Media Partners Asia. This amounts to 16 per cent penetration of television homesin India.
With advertisement revenues strengthening, M&E players are aggressively entering thetelevision (TV) broadcasting space. Broadcasters have added 444 television channels in the lastfive years with over 100 channels getting added in 2010 alone. Last year saw the second
highest additions of television channels in the decade after 2008 which saw a record permissionfor 152 channels.
The Ministry of Information and Broadcasting has granted permission to 39 channels includingnine high definition (HD) channels from Star India, ESPN and Sun TV network in December2010 and January 2011.
In the next twelve months, television's ad revenue is slated to grow by 20 per cent to add. TheTV ad revenues will touch a total of US$ 2804.3 million) in 2011, according to Pitch MadisonMedia Advertising Outlook 2011. (as on March 2011)
The report also projects that TV will remain the highest grosser of revenues in 2011 too. It is
expected to corner 45.7 per cent of the total ad pie this year, a further rise from 44.5 per cent in2010.
Times Network, Sahara Group, Colors and newspaper company Matrubhumi are planning thelaunch of their new TV channels. AETN18 also received Foreign Investment Promotion Board(FIPB) approval for the launch of specialized channels in India. Reliance Broadcast has initiateda buyout of Turner-controlled Bollywood music channel Imagine Showbiz.
Music
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The music industry in India has always been dominated by film music, which contributes to 15per cent of a films earning. The industry is expected to grow at a CAGR of 28.6 per cent over2010-14, reaching US$ 567.6 million in 2014, reports PwC.
With the advent of new technologies such as 2G and 3G, and incresing mobile penetrationIndias music industry is scaling on a high note. Handset major Nokia launched its music store in
India; Hungama announced the launch of two portals - Hungama.com and Artistaloud andSaregama too launched its music portal.
Radio
The Radio industry is now in the Phase III licensing stage which will take its station numbers to700 from the current 250.
In 2011, the radio industry is expected clock revenues of US$ 226 million, as per the PitchMadison Media Advertising Outlook 2011.
The radio advertising industry is projected to grow at a CAGR of 12.2 per cent over 2010-14,reaching US$ 342.7 million in 2014 from the present US$ 192.8 million in 2009, as per PwC.
Cinema
India is the largest film producing market in the world with over 1,000 films released every yearand 3.7 billion tickets sold annually.
The Indian film industry is set to top revenues of US$ 3.3 billion by 2010 as it rides newtechnologies and a booming economy set to expand at the rate of 18 percent per year. It is alsoone of the largest employment sectors in the country. The government of India gave the motionpicture industry the status of an industry in 2001, making it easier for film producers to obtain
institutional financing.
According to PwC, the industry is projected to grow at a CAGR of 12.4 per cent, reaching US$3.65 billion in 2014 from US$ 2.03 billion in 2009.
Advertising
The Indian advertising industry will grow at 17 per cent to clock US$ 6136.2 million in 2011,reported by Pitch Madison Media Advertising Outlook 2011.
The print media generated advertising revenue of US$ 2.2 billion, growing at 28 per centcompared to 2010; while television advertising generated US$ 2.34 billion, grabbing the biggest
share of 44.5 per cent of the entire advertising pie. The Out Of Home (OOH) advertisingmedium grew by 27 per cent in 2010, commanding US$ 320 million of the total ad spends.Radio advertising too has grown by 30 per cent to become a US$ 199 million industry.
Internet penetration in India reached an all time high with 50 million plus connections in 2010.As per Internet and Mobile Association of India (IAMAI), the total Online Advertising market ofIndia is estimated at US$174 million for the year FY2009-10 and is expected to grow to US$220million in year FY2010-11. The internet market is currently dominated by display ads and is
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expected to remain so for the next year. Total Display advertising market of India in year 2009-10 is estimated at US$ 92.5 million and is expected to grow by 28 per cent to reach US$ 118million in year 2010-11. Total text advertising market of India in year 2009-10 is estimated atUS$ 81 million and is expected to grow by 25 per cent to reach US$ 102 million in year 2010-11. Banking, Financial Services and Insurance (BFSI), Travel and Online Publishers - the topthree text advertisers of FY 10 are expected to continue to lead text based advertisers in FY11
as well.
Theatre
Midvalley Entertainment Ltd., a media and entertainment company, recently raised US 13.4million through an IPO. The company has plans to invest US$ 3.3 million of the amount inscreening agreements with 300 cinema theaters in Tamil Nadu, Andhra Pradesh andKarnataka, while US$ 5.8 million will be invested in the renovation and upgrade of cinemainfrastructure with digital equipment and other related assets for select 100 screens in SouthIndia.
Multiplex chain Cinemax plans to add 30 digital screens to its existing 105 screens across Indiain the next six to eight months, most of which will be located in western and southern states.The investments for the 30 screens will be in the tune of US$ 10 million.
PVR Cinemas presently runs about 142 screens at 32 locations across 18 cities in India andplans to open another 80-100 screens in FY 12 in at least 27 cities, at an investment of US$ 22-26 million.
Digital Media
The Information and Broadcasting (I&B) Ministry has accepted a proposal by TelecomRegulatory Authority of India (TRAI) to make broadcasting operations completely digital. The
timeline decided for closing the analog cable distribution has been decided for March 2015. Areport by ICRA states that the industry requires an investment of US$ 3.37 billion to go for thedigital system.
India is the third biggest Internet market, with over 100 million internet user base and theamount of time spent on the Internet for an average user in the country is 16 hours a week.
According to Google estimates, 40 million users access Internet through mobile phones anddownload 30 million applications.
Print and Publishing
The newspaper market in India has grown at 13 per cent compound annual growth rate (CAGR)
over the last five years to US$ 3.9 billion in 2010 will continue on its growth trajectory at anestimated CAGR of around 12 per cent between 2010 and 2013 to reach US$ 5.9 billion in2013, according to Ernst & Young India,.
As per the Indian Readership Survey (IRS) for the third quarter of 2010, conducted jointly by theMedia Research Users Council (MRUC) along with research firm Hansa Research Group PvtLtd, Dainik Jagran, published by Jagran Prakashan, continues to be the most preferrednewspaper in the country..
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Amar Ujala, which launched an NCR edition in February 2011, is the No 4 newspaper accordingto IRS Q4, 2010. It has lost a marginal 125 thousand readers and its total readership is downfrom 29.7 million to 29.6 million. The No 1 Bengali daily, Anandabazar Patrika is at No 10. TheTimes of India, India's No 1 English daily, continues to be at No 11 with a total readership of13.8 million. It had gained 114 thousand readers in Q3, 2010, while in the Q4, it has added 204thousand readers.
In Mumbai, the average issue readership (AIR) has grown from 6,06,000 to 6,27,000. TotalReadership (TR) across all Hindustran Times editions have risen from 63,33,000 to 64,57,000.In Mumbai, the TR figures have increased to 9,73,000 from 9,43,000 in Q3.
Foreign investment, including foreign direct investments (FDI) and investment by non-residentIndians (NRIs)/person of Indian origin (PIO)/foreign institutional investor (FII), up to 26 per cent,is permitted for publishing of newspapers and periodicals dealing with news and current affairsunder the Government route.
FDI policy for publication of Indian editions of foreign magazines dealing with news and currentaffairs is:
Foreign investment, including FDI and investment by NRIs/PIOs/FII, up to 26 per cent, ispermitted under the Government route.
'Magazine', for the purpose of these guidelines, will be defined as a periodicalpublication, brought out on non-daily basis, containing public news or comments onpublic news.
Foreign investment would also be subject to the Guidelines for Publication of Indianeditions of foreign magazines dealing with news and current affairs issued by theMinistry of Information and Broadcasting (I&B) on Publishing/printing of Scientific andTechnical Magazines/specialty journals/ periodicals 100 per cent FDI is permitted underthe Government route.
Publication of facsimile edition of foreign newspapers:
FDI up to 100 per cent is permitted under Government route in publication of facsimileedition of foreign newspapers provided the FDI is by the owner of the original foreignnewspapers whose facsimile edition is proposed to be brought out in India
Publication of facsimile edition of foreign newspapers can be undertaken only by anentity incorporated or registered in India under the provisions of the Companies Act,1956
Publication of facsimile edition of foreign newspaper would also be subject to theGuidelines for publication of newspapers and periodicals dealing with news and currentaffairs and publication of facsimile edition of foreign newspapers issued by Ministry of
Information & Broadcasting on 31.3.2006, as amended from time to time.
Government Policies
The Ministry of Information and Broadcasting (MIB) has set up a committee to assess thecurrent rating system for television rating points (TRP) of TV programs and has expressedconcern over this current system of evaluation. The MIB has recommended increasing thesample size and switching to a more scientific approach for accurate data.
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It has also proposed an increase in the sample size from 8,000 homes to 15,000 urban andrural households over a period of two years. It further recommends that this figure shouldincrease to 30,000 over the next three years, covering urban areas, rural areas and small townsas well as Jammu and Kashmir and the North-Eastern States, to provide complete geographicalcoverage of the country.
Insuranceis a federal subject inIndia.The insurance sector has gone through a number of
phases and changes. Since 1999, when the government opened up the insurance sector by
allowing private companies to solicit insurance and also allowingforeign direct investmentof up
to 26%, the insurance sector has been a booming market. However, the largest life-insurance
company in India is still owned by the government.
Contents
[hide]
1 History
2 Industry structure
o 2.1 Specialisation
3 Acts
4 Authorities
5 See also
6 References
7 External links
[edit]History
In India, insurance has a deep-rooted history. Insurance in various forms has been mentioned in
the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and Kautilya (Arthashastra).
The fundamental basis of the historical reference to insurance in these ancient Indian texts is
the same i.e. pooling of resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. The early references to Insurance in these texts has reference to
marine trade loans and carriers' contracts.
Insurance in its current form has its history dating back until 1818, when Oriental Life Insurance
Company was started by Anita Bhavsar inKolkatato cater to the needs of European
community. The pre-independence era in India saw discrimination between the lives of
foreigners (English) and Indians with higher premiums being charged for the latter. In 1870,
Bombay Mutual Life Assurance Society became the first Indian insurer.
http://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Insurance_in_Indiahttp://en.wikipedia.org/wiki/Insurance_in_Indiahttp://en.wikipedia.org/wiki/Insurance_in_Indiahttp://en.wikipedia.org/wiki/Insurance_in_India#Historyhttp://en.wikipedia.org/wiki/Insurance_in_India#Historyhttp://en.wikipedia.org/wiki/Insurance_in_India#Industry_structurehttp://en.wikipedia.org/wiki/Insurance_in_India#Industry_structurehttp://en.wikipedia.org/wiki/Insurance_in_India#Specialisationhttp://en.wikipedia.org/wiki/Insurance_in_India#Specialisationhttp://en.wikipedia.org/wiki/Insurance_in_India#Actshttp://en.wikipedia.org/wiki/Insurance_in_India#Actshttp://en.wikipedia.org/wiki/Insurance_in_India#Authoritieshttp://en.wikipedia.org/wiki/Insurance_in_India#Authoritieshttp://en.wikipedia.org/wiki/Insurance_in_India#See_alsohttp://en.wikipedia.org/wiki/Insurance_in_India#See_alsohttp://en.wikipedia.org/wiki/Insurance_in_India#Referenceshttp://en.wikipedia.org/wiki/Insurance_in_India#Referenceshttp://en.wikipedia.org/wiki/Insurance_in_India#External_linkshttp://en.wikipedia.org/wiki/Insurance_in_India#External_linkshttp://en.wikipedia.org/w/index.php?title=Insurance_in_India&action=edit§ion=1http://en.wikipedia.org/w/index.php?title=Insurance_in_India&action=edit§ion=1http://en.wikipedia.org/w/index.php?title=Insurance_in_India&action=edit§ion=1http://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/w/index.php?title=Insurance_in_India&action=edit§ion=1http://en.wikipedia.org/wiki/Insurance_in_India#External_linkshttp://en.wikipedia.org/wiki/Insurance_in_India#Referenceshttp://en.wikipedia.org/wiki/Insurance_in_India#See_alsohttp://en.wikipedia.org/wiki/Insurance_in_India#Authoritieshttp://en.wikipedia.org/wiki/Insurance_in_India#Actshttp://en.wikipedia.org/wiki/Insurance_in_India#Specialisationhttp://en.wikipedia.org/wiki/Insurance_in_India#Industry_structurehttp://en.wikipedia.org/wiki/Insurance_in_India#Historyhttp://en.wikipedia.org/wiki/Insurance_in_Indiahttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Insurance -
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At the dawn of the twentieth century, many insurance companies were founded. In the year
1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate
the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the
premium-rate tables and periodical valuations of companies should be certified by anactuary.
However, the disparity still existed as discrimination between Indian and foreign companies. The
oldest existing insurance company in India is the National Insurance Company Ltd., which was
founded in 1906. It is in business.
The Government of India issued an Ordinance on 19th January, 1956 nationalising the Life
Insurance sector and Life Insurance Corporation came into existence in the same year. The Life
Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75 provident
societies245 Indian and foreign insurers in all. In 1972 with the General Insurance Business
(Nationalisation) Act was passed by the Indian Parliament, and consequently, General
Insurance business was nationalized with effect from 1st January, 1973. 107 insurers wereamalgamated and grouped into four companies, namely National Insurance Company Ltd., the
New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India
Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a
company in 1971 and it commence business on January 1sst 1973.
The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private
sector. Before that, the industry consisted of only two state insurers: Life Insurers (Life
Insurance Corporation of India,LIC) and General Insurers (General Insurance Corporation of
India,GIC). GIC had four subsidiary companies.
With effect from December 2000, these subsidiaries have been de-linked from the parent
company and were set up as independent insurance companies:Oriental Insurance Company
Limited,New India Assurance Company Limited,National Insurance Company
LimitedandUnited India Insurance Company Limited.
[edit]Industry structure
Currently, a US$41 billion industry, India is the world's fifth largest life insurance market and
growing at a rapid pace of 32-34% annually as per Life Insurance Councilstudies.
Currently, in India only two million people (0.2 % of the total population of 1 billion) are covered
under Mediclaim, whereas in developed nations like USA about 75 % of the total population are
covered under some insurance scheme. With more and more private companies in the sector,
the situation may change soon.
[edit]Specialisation
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ECGC, ESIC and AIC provide insurance services for niche markets. So, their scope is limited by
legislation but enjoy special powers.
[edit]Acts
The insurance sector went through a full circle of phases from being unregulated to completelyregulated and then currently being partly deregulated. It is governed by a number of acts.
The Insurance Act of 1938[1]was the first legislation governing all forms of insurance to provide
strict state control over insurance business.
Life insurance in India was completely nationalized on January 19, 1956, through the Life
Insurance Corporation Act. All 245 insurance companies operating then in the country were
merged into one entity, theLife Insurance Corporation of India.[2]
The General Insurance Business Act of 1972 was enacted to nationalise the about 100 general
insurance companies then and subsequently merging them into four companies. All the
companies were amalgamated into National Insurance, New India Assurance, Oriental
Insurance and United India Insurance, which were headquartered in each of the four
metropolitan cities.[3]
Until 1999, there were not any private insurance companies in India. The government then
introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-
regulating the insurance sector and allowing private companies. Furthermore, foreign
investment was also allowed and capped at 26% holding in the Indian insurance companies.
In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on
par with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects
and Company Secretaries.
A minimum capital of US$20 million(Rs.100 Crore) is required by legislation to set up an
insurance business.
[edit]Authorities
The industry recognises examinations conducted by IAI (for actuaries), III (for agents, brokers
andthird-party administrators)and IIISLA (for surveyors and loss assessors). TAC is the soledata repository for the non-life industry.
IBAI gives voice for brokers while GI Council and LI Council are platforms for insurers.
AIGIEA, AIIEA, AIIEF, AILICEF, AILIEA, FLICOA, GIEAIA, GIEU and NFIFWI cater to the
employees of the insurers.
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In addition, there are a dozen Ombudsman offices to address client grievances.
[edit]See also
List of insurance companies in India
IRDA controls all the Insurance business in India. They are setting structure and boundaries for
the insurance companies to act upon. Starting from licensing to approving the products, IRDA
directs the companies in India. They also protect customer interests in the country.
Insurance Institute of India
[edit]References
1. ^http://www.irdaindia.org/regulations/TheInsuranceAct1938er126042004.dochere
2. ^History of Insurance in India,http://www.licindia.com/history.htmaccessedon 29 April
2006
3. ^Regulation of General Insurance in India,Insurance in India,accessed on29 April
2006.
CRM in insurance
4.Insurance Regulatory and Development Authority India5.History of Insurance
[edit]External links
Insurance Regulatory & Development Authority
Life Insurance
^ [Birla Sun Life Insurance]http://www.insurance.birlasunlife.com
Health and Travel Insurance for International Traveller
Categories:Insurance in India
A bankis afinancial intermediaryand appears in several related basic forms:
acentral bankissues money on behalf of a government, and regulates themoney supply
acommercial bankacceptsdepositsand channels those deposits intolendingactivities,
either directly or throughcapital markets.A bank connects customers with capital deficits to
customers withcapital surpluseson the world's openfinancial markets.
asavings bank,also known as abuilding societyin Britain is only allowed to borrow and
save from members of a financialcooperative
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n.wikipedia.org/w/index.php?title=Insurance_in_India&action=edit§ion=8http://www.i-save.com/blog/post/2010/08/23/History-and-Insurance.aspxhttp://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo4&mid=2http://www.indiacore.com/insurance.htmlhttp://en.wikipedia.org/wiki/Insurance_in_India#cite_ref-2http://www.licindia.com/history.htmhttp://en.wikipedia.org/wiki/Insurance_in_India#cite_ref-1http://www.irdaindia.org/regulations/TheInsuranceAct1938er126042004.dochttp://en.wikipedia.org/wiki/Insurance_in_India#cite_ref-0http://en.wikipedia.org/w/index.php?title=Insurance_in_India&action=edit§ion=7http://en.wikipedia.org/wiki/Insurance_Institute_of_Indiahttp://en.wikipedia.org/wiki/List_of_insurance_companies_in_Indiahttp://en.wikipedia.org/w/index.php?title=Insurance_in_India&action=edit§ion=6 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Banks often start asmicrocreditorsavings clubswhich become formalized, first ascredit
unionsand later savings banks which transform themselves from cooperatives tolimited
liabilitycompanies. A fuller description of these forms appears below.
Banking is generally ahighly regulatedindustry, and government restrictions on financial
activities by banks have varied over time and location. The current set of global bank capital
standards are calledBasel II.In some countries such asGermany,banks have historically
owned major stakes in industrial corporations while in other countries such as theUnited
Statesbanks are prohibited from owning non-financial companies. InJapan,banks are usually
the nexus of a cross-share holding entity known as thekeiretsu.In Iceland banks had very light
regulation prior to the2008 collapse.
The oldest bank still in existence isMonte dei Paschi di Siena,headquartered inSiena,Italy,
and has been operating continuously since 1472.[1]
Contents
[hide]
1 History
o 1.1 Origin of the word
2 Definition
3 Banking
o 3.1 Standard activities
o 3.2 Channels
o 3.3 Business model
o 3.4 Products
3.4.1 Retail
3.4.2 Wholesale
4 Risk and capital
5 Banks in the economy
o 5.1 Economic functions
o 5.2 Bank crisis
o 5.3 Size of global banking industry
6 Regulation
7 Types of banks
o 7.1 Types of retail banks
http://en.wikipedia.org/wiki/Microcredithttp://en.wikipedia.org/wiki/Microcredithttp://en.wikipedia.org/wiki/Microcredithttp://en.wikipedia.org/wiki/Christmas_clubhttp://en.wikipedia.org/wiki/Christmas_clubhttp://en.wikipedia.org/wiki/Christmas_clubhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Limited_liabilityhttp://en.wikipedia.org/wiki/Limited_liabilityhttp://en.wikipedia.org/wiki/Limited_liabilityhttp://en.wikipedia.org/wiki/Limited_liabilityhttp://en.wikipedia.org/wiki/Bank_regulationhttp://en.wikipedia.org/wiki/Bank_regulationhttp://en.wikipedia.org/wiki/Bank_regulationhttp://en.wikipedia.org/wiki/Basel_IIhttp://en.wikipedia.org/wiki/Basel_IIhttp://en.wikipedia.org/wiki/Basel_IIhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Keiretsuhttp://en.wikipedia.org/wiki/Keiretsuhttp://en.wikipedia.org/wiki/Keiretsuhttp://en.wikipedia.org/wiki/2008%E2%80%932010_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932010_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/2008%E2%80%932010_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/Monte_dei_Paschi_di_Sienahttp://en.wikipedia.org/wiki/Monte_dei_Paschi_di_Sienahttp://en.wikipedia.org/wiki/Monte_dei_Paschi_di_Sienahttp://en.wikipedia.org/wiki/Sienahttp://en.wikipedia.org/wiki/Sienahttp://en.wikipedia.org/wiki/Sienahttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Bank#cite_note-boland1-0http://en.wikipedia.org/wiki/Bank#cite_note-boland1-0http://en.wikipedia.org/wiki/Bank#cite_note-boland1-0http://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Bank#Historyhttp://en.wikipedia.org/wiki/Bank#Historyhttp://en.wikipedia.org/wiki/Bank#Origin_of_the_wordhttp://en.wikipedia.org/wiki/Bank#Origin_of_the_wordhttp://en.wikipedia.org/wiki/Bank#Definitionhttp://en.wikipedia.org/wiki/Bank#Definitionhttp://en.wikipedia.org/wiki/Bank#Bankinghttp://en.wikipedia.org/wiki/Bank#Bankinghttp://en.wikipedia.org/wiki/Bank#Standard_activitieshttp://en.wikipedia.org/wiki/Bank#Standard_activitieshttp://en.wikipedia.org/wiki/Bank#Channelshttp://en.wikipedia.org/wiki/Bank#Channelshttp://en.wikipedia.org/wiki/Bank#Business_modelhttp://en.wikipedia.org/wiki/Bank#Business_modelhttp://en.wikipedia.org/wiki/Bank#Productshttp://en.wikipedia.org/wiki/Bank#Productshttp://en.wikipedia.org/wiki/Bank#Retailhttp://en.wikipedia.org/wiki/Bank#Retailhttp://en.wikipedia.org/wiki/Bank#Wholesalehttp://en.wikipedia.org/wiki/Bank#Wholesalehttp://en.wikipedia.org/wiki/Bank#Risk_and_capitalhttp://en.wikipedia.org/wiki/Bank#Risk_and_capitalhttp://en.wikipedia.org/wiki/Bank#Banks_in_the_economyhttp://en.wikipedia.org/wiki/Bank#Banks_in_the_economyhttp://en.wikipedia.org/wiki/Bank#Economic_functionshttp://en.wikipedia.org/wiki/Bank#Economic_functionshttp://en.wikipedia.org/wiki/Bank#Bank_crisishttp://en.wikipedia.org/wiki/Bank#Bank_crisishttp://en.wikipedia.org/wiki/Bank#Size_of_global_banking_industryhttp://en.wikipedia.org/wiki/Bank#Size_of_global_banking_industryhttp://en.wikipedia.org/wiki/Bank#Regulationhttp://en.wikipedia.org/wiki/Bank#Regulationhttp://en.wikipedia.org/wiki/Bank#Types_of_bankshttp://en.wikipedia.org/wiki/Bank#Types_of_bankshttp://en.wikipedia.org/wiki/Bank#Types_of_retail_bankshttp://en.wikipedia.org/wiki/Bank#Types_of_retail_bankshttp://en.wikipedia.org/wiki/Bank#Types_of_retail_bankshttp://en.wikipedia.org/wiki/Bank#Types_of_bankshttp://en.wikipedia.org/wiki/Bank#Regulationhttp://en.wikipedia.org/wiki/Bank#Size_of_global_banking_industryhttp://en.wikipedia.org/wiki/Bank#Bank_crisishttp://en.wikipedia.org/wiki/Bank#Economic_functionshttp://en.wikipedia.org/wiki/Bank#Banks_in_the_economyhttp://en.wikipedia.org/wiki/Bank#Risk_and_capitalhttp://en.wikipedia.org/wiki/Bank#Wholesalehttp://en.wikipedia.org/wiki/Bank#Retailhttp://en.wikipedia.org/wiki/Bank#Productshttp://en.wikipedia.org/wiki/Bank#Business_modelhttp://en.wikipedia.org/wiki/Bank#Channelshttp://en.wikipedia.org/wiki/Bank#Standard_activitieshttp://en.wikipedia.org/wiki/Bank#Bankinghttp://en.wikipedia.org/wiki/Bank#Definitionhttp://en.wikipedia.org/wiki/Bank#Origin_of_the_wordhttp://en.wikipedia.org/wiki/Bank#Historyhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Bank#cite_note-boland1-0http://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Sienahttp://en.wikipedia.org/wiki/Monte_dei_Paschi_di_Sienahttp://en.wikipedia.org/wiki/2008%E2%80%932010_Icelandic_financial_crisishttp://en.wikipedia.org/wiki/Keiretsuhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Basel_IIhttp://en.wikipedia.org/wiki/Bank_regulationhttp://en.wikipedia.org/wiki/Limited_liabilityhttp://en.wikipedia.org/wiki/Limited_liabilityhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Christmas_clubhttp://en.wikipedia.org/wiki/Microcredit 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o 7.2 Types of investment banks
o 7.3 Both combined
o 7.4 Other types of banks
8 Challenges within the banking industry
o 8.1 United States
o 8.2 Competition for loanable funds
9 Accounting for bank accounts
o 9.1 Brokered deposits
10 Banking by country
11 See also
12 References
13 External links
[edit]History
Main article:History of banking
Banking in the modern sense of the word can be traced to medieval and
earlyRenaissanceItaly,to the rich cities in the north likeFlorence,VeniceandGenoa.
TheBardiandPeruzzifamilies dominated banking in 14th century Florence, establishing
branches in many other parts ofEurope.[2]Perhaps the most famous Italian bank was
theMedicibank, set up by Giovanni Medici in 1397.[3]The earliest known state deposit
bank,Banco di San Giorgio(Bank of St. George), was founded in 1407 atGenoa,Italy.[4]
Banks can be traced back to ancient times even before money whentempleswere used to
store commodities. During the 3rd century AD, banks inPersiaand other territories in the
PersianSassanid Empireissuedletters of creditknown as akks.[citation needed]Muslim tradersare
known to have used thechequeorakksystem since the time ofHarun al-Rashid(9th century)
of theAbbasid Caliphate.In the 9th century, a Muslim businessman could cash an early form of
the cheque inChinadrawn on sources inBaghdad,[5][verification needed]a tradition that was
significantly strengthened in the 13th and 14th centuries, during theMongol Empire.[citation
needed]
Fragments found in theCairo Genizaindicate that in the 12th century cheques remarkablysimilar to our own were in use, only smaller to save costs on the paper. They contain a sum to
be paid and then the order "May so and so pay the bearer such and such an amount". The date
and name of the issuer are also apparent.
[edit]Origin of the word
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The word bankwas borrowed inMiddle EnglishfromMiddle Frenchbanque, from
OldItalianbanca, fromOld High Germanbanc, bank"bench, counter". Benches were used as
desks or exchange counters during theRenaissancebyFlorentinebankers, who used to make
their transactions atop desks covered by green tablecloths.[6]
The earliest evidence of money-changing activity is depicted on a silver Greek drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modernTrabzon,c. 350325 BC,
presented in theBritish Museumin London. The coin shows a banker's table (trapeza) laden
with coins, a pun on the name of the city. In fact, even today inModern Greekthe word Trapeza
() means both a table and a bank.
[edit]Definition
The definition of a bank varies from country to country. See the relevant country page (below)
for more information.
UnderEnglish common law,a banker is defined as a person who carries on the business of
banking, which is specified as:[7]
conducting current accounts for his customers
paying cheques drawn on him, and
collecting cheques for his customers.
Banco de VenezuelainCoro.
In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relationtonegotiable instruments,includingcheques,and this Act contains a statutory definition of the
term banker: bankerincludes a body of persons, whether incorporated or not, who carry on the
business of banking' (Section 2, Interpretation). Although this definition seems circular, it is
actually functional, because it ensures that the legal basis for bank transactions such
aschequesdoes not depend on how the bank is organised or regulated.
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The business of banking is in manyEnglish common lawcountries not defined by statute but by
common law, the definition above. In other English common law jurisdictions there are statutory
definitions of the business of bankingor banking business. When looking at these definitions it
is important to keep in mind that they are defining the business of banking for the purposes of
the legislation, and not necessarily in general. In particular, most of the definitions are from
legislation that has the purposes of entry regulating and supervising banks rather than
regulating the actual business of banking. However, in many cases the statutory definition
closely mirrors the common law one. Examples of statutory definitions:
"banking business" means the business of receiving money on current or deposit account,
paying and collecting cheques drawn by or paid in by customers, the making of advances to
customers, and includes such other business as the Authority may prescribe for the
purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).
"banking business" means the business of either or both of the following:
1. receiving from the general public money on current, deposit, savings or other similar
account repayable on demand or within less than [3 months] ... or with a period of call or
notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers[8]
Since the advent ofEFTPOS(Electronic Funds Transfer at Point Of Sale), direct credit,direct
debitandinternet banking,the cheque has lost its primacy in most banking systems as apayment instrument. This has led legal theorists to suggest that the cheque based definition
should be broadened to include financial institutions that conduct current accounts for
customers and enable customers to pay and be paid by third parties, even if they do not pay
and collect cheques.[9]
[edit]Banking
[edit]Standard activities
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Large door to an oldbank vault.
Banks act as payment agents by conductingchecking or current accountsfor customers,
payingchequesdrawn by customers on the bank, and collecting cheques deposited to
customers' current accounts. Banks also enable customer payments via other payment methods
such astelegraphic transfer,EFTPOS,andATM.
Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such asbanknotesandbonds.Banks lend money by
making advances to customers on current accounts, by makinginstallment loans,and by
investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable by
most businesses, individuals and governments. Non-banks that provide payment services such
as remittance companies are not normally considered an adequate substitute for having a bank
account.
Banks borrow most funds from households and non-financial businesses, and lend most funds
to households and non-financial businesses, but non-bank lenders provide a significant and in
many cases adequate substitute for bank loans, and money market funds, cash management
trusts and other non-bank financial institutions in many cases provide an adequate substitute to
banks for lending savings too.[clarification needed]
[edit]Channels
Banks offer many different channels to access their banking and other services:
ATMis a machine that dispenses cash and sometimes takes deposits without the need for a
humanbank teller.Some ATMs provide additional services.
Abranchis a retail location
Call center
Mail:most banks accept check deposits via mail and use mail to communicate to their
customers, e.g. by sending out statements Mobile bankingis a method of using one's mobile phone to conduct banking transactions
Online bankingis a term used for performing transactions, payments etc. over the Internet
Relationship Managers,mostly for private banking or business banking, often visiting
customers at their homes or businesses
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Telephone bankingis a service which allows its customers to perform transactions over the
telephone without speaking to a human
Video bankingis a term used for performing banking transactions or professional banking
consultations via a remote video and audio connection. Video banking can be performed via
purpose built banking transaction machines (similar to an Automated teller machine), or via
avideoconferenceenabled bank branch.[edit]Business model
A bank can generate revenue in a variety of different ways including interest, transaction fees
and financial advice. The main method is via chargingintereston the capital it lends out to
customers[citation needed]. The bank profits from the differential between the level of interest it pays
for deposits and other sources of funds, and the level of interest it charges in its lending
activities.
This difference is referred to as the spreadbetween the cost of funds and the loan interest rate.
Historically, profitability from lending activities has been cyclical and dependent on the needs
and strengths of loan customers and the stage of theeconomic cycle.Fees and financial advice
constitute a more stable revenue stream and banks have therefore placed more emphasis on
these revenue lines to smooth their financial performance.
In the past 20 years American banks have taken many measures to ensure that they remain
profitable while responding to increasingly changing market conditions. First, this includes
theGramm-Leach-Bliley Act,which allows banks again to merge with investment and insurance
houses. Merging banking, investment, and insurance functions allows traditional banks torespond to increasing consumer demands for "one-stop shopping" by enabling cross-selling of
products (which, the banks hope, will also increase profitability).
Second, they have expanded the use ofrisk-based pricingfrom business lending to consumer
lending, which means charging higher interest rates to those customers that are considered to
be a higher credit risk and thus increased chance ofdefaulton loans. This helps to offset the
losses from bad loans, lowers the price of loans to those who have better credit histories, and
offers credit products to high risk customers who would otherwise be denied credit.
Third, they have sought to increase the methods of payment processing available to the general
public and business clients. These products includedebit cards,prepaid cards,smart cards,
andcredit cards.They make it easier for consumers to conveniently make transactions and
smooth their consumption over time (in some countries with underdeveloped financial systems,
it is still common to deal strictly in cash, including carrying suitcases filled with cash to purchase
a home).
http://en.wikipedia.org/wiki/Telephone_bankinghttp://en.wikipedia.org/wiki/Telephone_bankinghttp://en.wikipedia.org/wiki/Video_bankinghttp://en.wikipedia.org/wiki/Video_bankinghttp://en.wikipedia.org/wiki/Videoconferencehttp://en.wikipedia.org/wiki/Videoconferencehttp://en.wikipedia.org/wiki/Videoconferencehttp://en.wikipedia.org/w/index.php?title=Bank&action=edit§ion=7http://en.wikipedia.org/w/index.php?title=Bank&action=edit§ion=7http://en.wikipedia.org/w/index.php?title=Bank&action=edit§ion=7http://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Economic_cyclehttp://en.wikipedia.org/wiki/Economic_cyclehttp://en.wikipedia.org/wiki/Economic_cyclehttp://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Acthttp://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Acthttp://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Acthttp://en.wikipedia.org/wiki/Risk-based_pricinghttp://en.wikipedia.org/wiki/Risk-based_pricinghttp://en.wikipedia.org/wiki/Risk-based_pricinghttp://en.wikipedia.org/wiki/Default_(finance)http://en.wikipedia.org/wiki/Default_(finance)http://en.wikipedia.org/wiki/Default_(finance)http://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Default_(finance)http://en.wikipedia.org/wiki/Risk-based_pricinghttp://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Acthttp://en.wikipedia.org/wiki/Economic_cyclehttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/w/index.php?title=Bank&action=edit§ion=7http://en.wikipedia.org/wiki/Videoconferencehttp://en.wikipedia.org/wiki/Video_bankinghttp://en.wikipedia.org/wiki/Telephone_banking -
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However, with convenience of easy credit, there is also increased risk that consumers will
mismanage their financial resources and accumulate excessive debt. Banks make money from
card products throughinterestpayments and fees charged to consumers andtransaction
feesto companies that accept the cards. This helps in making profit and facilitates economic
development as a whole[citation needed].
[edit]Products
A formerbuilding society,now a modern retail bank inLeeds,West Yorkshire.
An interior of a branch ofNational Westminster Bankon Castle Street,Liverpool
[edit]Retail
Business loan
Cheque account
Credit card
Home loan
Insurance advisor
Mutual fund
Personal loan
http://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Transaction_feehttp://en.wikipedia.org/wiki/Transaction_feehttp://en.wikipedia.org/wiki/Transaction_feehttp://en.wikipedia.org/wiki/Transaction_feehttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/w/index.php?title=Bank&action=edit§ion=8http://en.wikipedia.org/w/index.php?title=Bank&action=edit§ion=8http://en.wikipedia.org/w/index.php?title=Bank&action=edit§ion=8http://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Leedshttp://en.wikipedia.org/wiki/Leedshttp://en.wikipedia.org/wiki/Leedshttp://en.wikipedia.org/wiki/West_Yorkshirehttp://en.wikipedia.org/wiki/West_Yorkshirehttp://en.wikipedia.org/wiki/West_Yorkshirehttp://en.wikipedia.org/wiki/National_Westminster_Bankhttp://en.wikipedia.org/wiki/National_Westminster_Bankhttp://en.wikipedia.org/wiki/National_Westminster_Bankhttp://en.wikip