BANKING AWARENESS

MODULE -1

PERS

INTE ONAL
1
REST
LOAN
8
1
CORP
IN
1
7 %
S

INTE
REST
IN
1 %

BULK
DEPOSI
FIXED
1
2
TS
1
DEPOSI
90
RECURR
TS
8
ING
7
DEPOSI
SAVINGS
6
TS
ACCOUN
5
T
CURRENT
4
DEPOSIT
3
ACCOUN
2
S
T
1
DEPOSIT
S
DEP

1
6
5
1
1
4
3
1
1
2
1
90
8
7
6
5
4
3
2
1

ORAT
MORT
E
GAGE
HOUS
LOAN
LOAN
ES
S
LOAN
S

Averag
Averag
e yield
e Cost
of
All the
The
Funds
figures
COST OF
number
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IN
are
s on
FUNDS
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approxi
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the
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WILL
BE
OSIT
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vertical COST
YIELD BANKS
IN
S
AND
OFADVANTAGES
ADVANTAGES
LIABI
and
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/INCO
lines
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ADVAN
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TS
ME
taken
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show
PROFITAB
CES WILL BE
DS
S
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for the
FOR
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the
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e
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ation
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DE
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SIT
S
WIT
ACCOUNT
TERM
HS
LOANS
BA
NK
S
CASE 1

Learning Space, Vijayawada

NGBE
WILL
LESS
DEPOSIT

S & BULK
DEPOSIT
S

1
1
8
1
7
1
6
1
5
1
4
1
3
1
2
1
90
8
7
6
5
4
3
2
1

AVER
AGE
YIELD
NET
ON
INTE
ADVA
RES
NCES
T
9.8%
MAR
GIN
(NIM
) All the
3%figures

BANKING
Note VIABLE
The OPERATIONS
AVER
AGE 1
give COST
1
2
1
1
0
n
OF 9
8
7
figur FUND
6
S
5
es 6.8% 43
The
2
1
are
numbers
on the INTERES INTERE
only
ST
ON
TCOS
ON
vertical
YIEL
appr
LOANS
DEPOSIT
lines
T OF
D/IN
AND
S
show
FUN
COM
oxim
ADVAN
(in
the
DS%)
E
atio
CES
(in
rates of
%)
interest
ns

TO
TA
L

Learning Space, Vijayawada

are
approxim
ate and
taken for
the
purpose
of
explanati
on

NK
DE
LET US ASSUME

BANKS WILL GET

YIELD
9%
PO
RS 9 CRORES PER ANNUM
SIT
3%
NIM
S
BANKS HAVE TO PAY
RSCOST OF FUNDS
6%
RS
6
CRORES
NOW, BANKS WILL HAVEPER ANNUM
10
0 RS 3 CRORES WITH
CR THEM TO PAY
ORSALARIES, RENT &
ES OTHER EXPENSES,
STILL THEY WILL GET
PROFIT.

1
1
8
1
7
1
6
1
5
1
4
1
3
1
2
1
1
90
8
7
6
5
4
3
2
1

AVER
AGE
YIELD
NET
ON
INTE
ADVA
REST
NCES
MAR
9.8%
GIN

NoteSTRAINED BANKING
AVER
The OPERATIONS
AGE 1
1
give COST
2
1
1
0
OF 9
8
n
FUND 7
(NIM
figur S 654
)
7.3%
3
All the
esThe
2
2.5%
1
numbers
figures
are
INTERES INTERE
on the
are
ST
ON
T
COST
ON
YIEL
vertical
approxim
only
LOANS
DEPOSIT
OF
D/IN
WE HAVE
lines
ate and
appr
SO FAR
AND taken for
FUN
S
COM
show the
LEARNT
ADVAN
(in
DS%)
E
rates of
the
oxim
THAT
CES
(in
interest
purpose
atio
%)
of
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3
explanati
ns
on

CASE 2
Net Interest Margin (NIM) is the important parameter for the survival of any banking
system.

At present, some new generation

private sector banks
along with SBI are able to achieve
+3% NIM, which is the benchmark
for profitable banking operations.

But most of the public sector banks are struggling with

NIMs of 2.2 to 2.7%. Hence these banks are not able to
achieve desired levels of profitability.

HENCE, THE CORE OF THE BANKING OPERATIONS LIES IN

KEEPING COST OF FUNDS AS MINIMUM AS
POSSIBLE
SO AS TO KEEP HIGH NET INTEREST
MARGINS
CHALLENGES FOR PUBLIC SECTOR BANKS (BARRING SBI)

Unable to attract current account deposits

Not matching with technological upgradation of private

sector banks

Bureaucratic apathy

High Non Performing Assets (NPAs)

Lagging in personalised service

Emphasis by Govt. for opening zero balance accounts like

BSBDA,
PMJDY
etc. OF THE NEW GENERATION PVT. SECTOR BANKS
IN VIEW OF THE
ABOVE,
MOST
ARE
INCHING AHEAD IN PROFITABILITY AND EFFICIENCY IN OPERATIONS

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