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PARABANKING

Presented by

Dr.S.C.Bihari

Payment and Clearing Operations


Electronic Debit Transfers Electronic Credit Transfers
Magnetic Ink Character Recognition (MICR)

Telegraphic Transfers
Electronic Clearing Service Electronic Fund Transfers

OFF BALANCE SHEET ACTIVITIES


Banks also generate fee income through business, which generates income without creating a balance sheet entry. Such activities are called off balance sheet activities where a bank is not required to invest bank funds. Such business often creates a contingent liability a liability that comes into existence only when triggered by a specific event. Such activities must be recorded as asset/liabilities at fair market value.

Some Popular OBS Activities:

STANDBY LETTER OF CREDIT LOAN COMMITMENTS UNDERWRITING DERIVATIVE TRANSACTIONS

BANCASSURANCE .
The provision of insurance and banking products and services through a common distribution channel or to a common client base.

Benefits to banks
Increased return on assets Meeting the requirements of customers Bank is benefited through advertisement Sales distribution channel Increases the span of banking transactions

Benefits to insurer
Gaining market through banks Cost effective Better performance of expert agents Premium collections without hindrances Market segmentation becomes more easier Sale of insurance product through different branches

Insurance

Banking

Bancassurance proving useful Insurers are finding distribution of insurance products through Bancassurance beneficial. There is considerable opportunity in Bancassurance in India as banks are trusted, have good access to clients and are already involved in the shortshortterm financial planning of their customers.

DEMAT ACCOUNTS Banks can function as depository participant and can open demat account in the name of investors and can earn good commission on the same.
A demat account helps the investors to hold shares / securities in electronic form and to sell / buy such securities without involving any physical movement or transfer of share certificate. As per the SEBI guideline, almost all shares listed in stock exchange are required to be traded only in demat form and therefore there is a very good demand for opening of demat account.

SAFE DEPOSIT LOCKERS Lockers can be rented to individuals singly or jointly Lockers are not be rented to minors. As renting lockers to illiterates is fraught with risk, it is done in very exceptional cases only. While renting lockers to partnership firms, companies, societies, government departments, HUFs, all formalities required for opening and operating account are to be complied with.

RBI guidelines for letting out lockers As per the recommendation of the Committee on Procedure and Performance Audit of the Public Services (CPPAPS), the RBI has directed bank in April 2007 against fixed deposit as a precondition for the allotment of lockers. However, banks can obtain at the time of allotment a fixed deposit which would cover three years rent and the charges for breaking open the locker in case of an eventually. Banks should not insist such deposit from the existing locker hirers.

RBI guidelines contd.

Branches should maintain transparency in allotment of lockers and should maintain a waiting list for allotment of lockers. Banks are advised to give a copy of the locker agreement, executed in prescribed form and stamped as per stamp duty applicable to the state, to the customer at the time of the allotment of the locker to the hirer.

RBI guidelines contd. In case the locker hirer does not respond, not operate the locker, bank should consider opening the locker after giving notice to the hirer. Bank should incorporate a clause in the locker agreement that in case the locker remains un operated for more than one year banks would have the right to cancel the allotment of the locker and open the locker even if the rent is paid regularly.

Locker Rent Locker rent varies depending upon the size of the locker and is also different for rural and semisemi-urban / urban and metropolitan branches. In case of revision of rent, notice must be sent to the hirers. Non-Payment of Rent Bank can break open a locker for nonnon-payment of rent after giving due notice to the hirer. The locker should be broken only by the representative mechanic of the locker manufacture in presence of three respectable outside witnesses and two of the bank.

Banks Responsibility in case of Burglary of lockers The legal relationship between the bank the hirer is that of a lesser and lessee. As regards liability of the Banker, the Supreme Court held in National Bank of Lahore Ltd vs. Sohanlal Senegal (1965) that a bank can be held responsible if there is negligence on the part of the bank regarding the quality of the strong room and its conditions, quality of locker, safeguards required in the location.

FUND OPERATED BY
with

a stated set of objectives.

FROM SHAREHOLDERS

MUTUAL FUNDS
In

return for the money they give to the fund when purchasing shares, investors get a share in the fund and, in effect, in each of its underlying securities. For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund.

FOR YOUR ATTENTION

Dr. S. C. Bihari Tell:08417-236660 to 65(Extn: 6214) Mail:scbihari@gmail.com

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