Professional Documents
Culture Documents
Inflation: Decreasing the value of money in this state money loses the value hence prices will go up
Deflation: Opposite to inflation here money will have more value and hence product loses the value
Electronic Clearing Service (ECS): It is a service provided by the banks to facilitate direct debit from
your bank account towards an investment account (such as a mutual fund SIP) and/or paying regular loan
EMIs.
Billing Cycle: A billing cycle is a time period that covers the credit statement that usually lasts for 25
days
Bridge Loan: It is also known as swing loan, which is basically a real estate loan or a home loan, where
the current residence/real estate is pledged by the borrower as collateral in order to purchase a new
residence
Debit cum ATM Card: Customer can deposit and withdraw cash by means of magnetic ATM Card
Core Banking: A centralized database with online connectivity to branches, internet as well as ATM
network which has been adopted by almost all major banks of the country
Bank assurance: When the banks entertain in dealing with insurance business then it is called as bank
assurance
NRNR (Non Resident Non Repatriable A/c ) : Under this account Principal amount in not
permissible to repatriate but interest can be.
3.Reserve Bank of India: RBI is the Central Bank of India, which acts as a banker to the government
It is also called as Bankers bank, because all banks will have accounts with RBI. It provides funds to
all banks hence it is called as BANKERS BANK. RBI was established by an act of Parliament in 1934
It has four zonal offices at Mumbai, Kolkata, Chennai and Delhi and 19 regional offices
Current Governor: Dr. Raghuram Rajan
Its affairs are regulated by 21-member central board of directors: Governor (Dr. Raghuram Rajan), 4
deputy Governors, 2 Finance Ministry representatives, 10 Government-nominates directors,4 directors to
represent local boards
Chairman
Head Office
Year of Commencement
Allahabad Bank
1865
Andhra Bank
B.A. Prabhakara
Hyderabad
Bank of Baroda
S.S. Mundra
Baroda
(Vadodara)
Bank of India
V R Iyer
Mumbai
Bank of Maharashtra
Narendra Singh
Pune
1935
Canara Bank
1906
Mumbai
21 December, 1911
Corporation Bank
Mangalore
1906
Indian Bank
T.M. Bhasin
Chennai
1907
10
Shri M. Narendra
Chennai
11
Oriental
Commerce
New Delhi
12
New Delhi
1895
13
New Delhi
1908
14
Syndicate Bank
Shri
Jain
Mani pal
1925
15
UCO Bank
Mumbai
16
Shri D. Sarkar
Kolkata
17
1950
18
Vijaya Bank
Shri. H.S.
Kamath
Bangalore
1931
19
IDBI bank
Mumbai
July, 1964
20
Dena Bank
1938
21
ECGC
Shri N Shankar
Bank
of
Sudhir
Kumar
Upendra
Mumbai
State Bank of India has 5 associate banks State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State
Bank of Mysore, State Bank of Patiala and State Bank of Travancore. State Bank of Saurashtra and State
Bank of Indore are merged into SBI. On October 7th, 2013 Arundhati Bhatacharya is appointed as the
first lady chairperson for SBI.
Sl.NO
Chairman
Head Office
Year of Commencement
Arundhati
Bhattacharya
Mumbai
State
Bank
Hyderabad
of
1963
State
Bank
Travancore
of
State
Bank
Saurashtra
of
4.NABARD
NABARD is an apex development bank in India established on 12 July, 1982 with an aim of providing
services to rural India by increasing the credit flow for evaluation of agriculture & rural non form sectors.
It was set up by the Reserve Bank of India (RBI) under the chairmanship of Shri B. Sivaraman.
NABARD is a development bank for providing and regulating credit and other facilities for the promotion
and development of cottages, small scale industries, development of agriculture, village industries,
handicrafts and other rural crafts
With a view of promoting rural development and securing rural areas, NABARD is entrusted with
1.
2.
Established on: 3.
RBI sold its stake in NABARD to the Government of India, which now holds 99% STAKE. NABARD is
active in developing financial inclusion policy.
Important Points about NABARD
Head Quarters: Mumbai 12 July, 1982
Chairman: Dr. Harsh kumar Bhanwala
It provides training for the institutions working for the rural development.
It takes measures for improving credit delivery system, monitoring, schemes credit institutions,
and training of personnel
Helps the state governments in reaching their targets of providing assistance to eligible
institutions in agriculture and rural development
5.BANKING OMBUDSMAN
Banking Ombudsman is a quasi judicial authority functioning under Banking Ombudsman Scheme
2006.It provides independent, expeditious and inexpensive forum to aggrieved/Un-satisfied Bank
customers. RBI introduced this Scheme under powers granted U/s 35-A of Banking Regulation Act.
Complaints are accepted only if they are made within one year after the complaint has received the reply
from bank.
Types of Complaints:
1.
Non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.
2.
Non-acceptance, without sufficient cause, of coins tendered and for charging of commission for this
service.
3.
Non-acceptance without sufficient cause of small denomination notes tendered for any purpose and
for charging of commission for the service.
4.
5.
6.
7.
8.
Failure to provide or delay in providing a banking facility promised in writing by a bank or its direct
selling agents.
9.
Delays, non-credit of proceeds to partiesaccounts, non-payment of deposit or non-observance of
the Reserve Bank directives, if any applicable to rate of interest on deposits in any savings, current or
other account maintained with a bank.
10. Delays in receipts of export proceeds, handling of export bills, collection of bills etc. for exporters
provided the said complaints pertain to the Banks operations in India.
11. Refusal to open deposit accounts without any valid reason for refusal.
12. Levying of charges without adequate prior notice to the customers.
13. Non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/debit card
operations or credit card operations.
14. Non-disbursement or delay in disbursement of pension to the extent the grievance can be attributed to
the action on the part of the Bank concerned but not with regard to its employees.
15. Refusal to accept or delay in accepting payment towards taxes, as required by Reserve
Bank/Government.
16. Customers should have complained to the concerned Bank first and wait for one month. Complaint to
Ombudsman can be writing or in electronic mode.
Award :Ombudsman can give maximum award upto Rs.10 Lacs.
Appeal :Any party can file appeal within 30 days on receiving appeal award or the Ombudsman rejecting
his complaint to Appellate authority. If the appeal is the bank, it should be made with approval of CMD or
ED or CEO only.
6.E-Banking: E- banking refers to electronic banking. It is like e-business in
banking industry. E-banking is also called as virtual banking or online banking. Ebanking is a Result of the growing expectations of bank customers. E-banking
involves information technology based banking. Under this IT system the banking
services are delivered by way of a computer-controlled system. This system involves
direct interface with the customers. The customers need not to visit bank premises
Popular services covered under E-banking
1. Automated teller machine
2. Credit card
7. Mobile banking
3. Debit card
8. Internet banking
4. Smart card
9. Telephone banking
multiple functions. They hold a large amount of Personal information ranging from medical and health
history to Personal banking and personal preferences.
Services of E-banking : E-banking provides a multitude of services that are as follows
1. Bill payment service: E-banking facilitates the payment of electricity bills, telephone bills, Credit
card, and insurance premium bills. And the bank does not charge customers for online payments
2. Fund Transfer: You can Transfer any amount from one account to another of the same or any another
bank. Customers can send money anywhere in India.
3. Credit card customers: With internet banking customers cannot only pay their credit card bills online
but also get a loan on their cards. In case of loss of the credit card an online reporting can be done.
4. Investing through internet banking :Now, FD can be opened on line through funds Transfer and
investors with interlinked demit account and bank account can easily trade in the stock market.
5. Recharging prepaid mobile: By just selecting the operator name entering the mobile number and the
amount of Recharge the mobile phones can be back in action within few minutes.
6. RTGS fund Transfer: RTGS is an inter-Bank funds Transfer system. Where are Transferred as end
when the transactions are tiggered.
7. Shopping: Online Shopping can also be done with a range of all kind of products. Railway and air
tickets can be bought through the internet banking.
8. Online payment of taxes. A customer can pay various taxes on line including excise and service tax
direct tax etc.
Electronic funds Transfer: Electronic funds Transfer provides for electronic payments and collections.
EFT is safe secure, efficient and less expensive than paper check payments and collections . RBI EFT is a
scheme introduced by RBI to help banks offering their customers money Transfer service from account to
account to any branch to any other bank branch in places where services are offered.
Internet banking: Through internet banking you can check your transactions at any time of the day and
as many times as you want to. Where as in a traditional method you get quarterly statements from the
bank. If the fund Transfer has to be demand outstation where the bank does not have a branch the bank
would demand outstation charges. Whereas with the help of online banking.
Mobile banking transaction: Now banks have started offering mobile banking and telemarking to their
customers. The expansion in the use and geographical reach of mobile phones has created new
opportunities for banks to use this mode for banking transactions and also provide an opportunity to
expand banking facilities to the excluded sections of the society.
7. Financial Inclusion
Financial inclusion or inclusive Financing is the delivery of financial service at affordable costs to
sections of disadvantaged and low income segments of society. Or we can say that financial inclusion
may be defined as the process of ensuring access to financial inclusion in timely and adequate Credit
when needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.
Unrestrained access to public goods and services is the sine qua of an open and efficient society. It is
argued that as banking services are in the nature of public good it is essential that availability of banking
services and payment services to the nature of public good it is essential that availability of banking and
payment services to the entire population without discrimination should be the prime objective of public
policy. the term Financial inclusion has gained importance since the early 2000s and is a Result of
findings about Financial inclusion and it direct correlation to poverty. Financial inclusion is now a
common objective for many central banks among the Developing nations
Financial inclusion offers people the following things
1. Access to Financial markets
2. Access to Credit markets
3. Financial literacy
Objectives of Financial inclusion
1. Access at a reasonable cost for all households and enterprises to the range of Financial services for
which they bankable including savings , short and long term credit , leasing and factoring , mortgages ,
insurance , pensions, payment , local money Transfers and international remittances.
2. Sound institutions guided by appropriate internal management systems, industry performance standards
and performance monitoring by the market as well as sound prudential regulation wherever required.
3. Financial and institutional sustainability as a means of providing access to Financial services over time.
4. Multiple provider of financial services wherever feasible so as to bring cost effective and a wide variety
of alternatives to customers
Financially excluded sections largely comprise of the following activities.
1. Marginal farmers
2. Landless laborers
5. Urban slum dwellers
3. Oral lessees
6. Migrants
9. Women
8. Senior citizens
The north east eastern and central regions of India contain most of the financially excluded population.
Benefits of inclusive financial growth
The benefits of inclusive financial growth can be described
1. Growth with equity:- In the path of becoming super power we the Indians need to achieve the growth
of our country with equality. It is provided by inclusive finance.
2. Getting rid of poverty:- To remove poverty from the Indian context everybody will have to be given
access to formal Financial services . Because if they borrow loans for business or Education or any other
purpose then that will pave the way for their Development.
3. Financial transactions made easy:- Inclusive finance will provide banking related Financial
transactions in an easy and speedy way.
4. Safe savings along with Financial services:- People will have safe savings along with other allied
services like insurance cover, entrepreneurial loans payment and settlement facility etc.
5. Increasing National income:- boosting business opportunities will definitely increase GDP that will
be reflected in our National income growth.
6. Becoming global player:- Financial access will attract global market players to our country that would
Result in increased Employment and business oppurtunities.
8.NEGOTIABLE INSTRUMENT
There are certain documents used for payment in business transactions and are Transferred freely from
one person to another. Such documents are called negotiable Instruments like cheque, bank draft, bill of
exchange, promissory notes etc. Thus we can say negotiable Instruments are a transferable document
where negotiable means transferable and Instrument means document. According to section 13 of the
negotiable Instruments act 1881. A negotiable Instrument means promissory note bill of exchange or
cheque payable either to order or to bearer.
Features of a Negotiable Instrument
1. It is a written document
2. A negotiable Instrument payable to bearer is transferable merely by delivery whereas a Negotiable
Instrument payable to order is transferable by endorsement and delivery.
3. The holder of a Negotiable Instrument can sue upon it in his own name.
4. Its works in the same manner as money and like money it may also be transferred from one person to
another.
5. The Transferor does not need to give notice to any person at the time of transferring the Instrument.
6. It is the simplest and most convenient mode of assignment of a debt.
7. The tittle to the Instrument received by a bonafide transferee is not affected by defect in the title of the
transferor.
A. Negotiable Instruments
1. Promissory note
1. Money order
2. Bill of exchange
2. Postal order
3. Cheque
3. Deposit receipt
4. Exchequer bill
4. Share certificate
5. Circular note
6. Dividend warrant
1. Bill of lading
7. Share warrant
2. Dock warrant
8. Bearer debenture
3. Carriers receipt
9. Bank note
4. Letters of credit
5. Railway receipt
Types of Negotiable Instruments
According to the negotiable Instruments act 1881 there are just three types of Negotiable Instruments
example promissory note, bill of exchange and Cheque. However many other documents have also been
recognized as negotiable instruments on the basis of custom and usage like treasury bills, share warrant
etc. They possess the features of Negotiability
Promissory note: A promissory note is an Instrument in writing containing an unconditional
undertaking signed by the maker to pay a certain sum of money to or to the other of a certain person.
This type of a document is called a promissory note.
Features of promissory note
1. A promissory note is unconditional
2. It is always in writing a verbal promise to pay a specified sum of money is not a promissory note.
5. A cheque be dated.
3. Bearer cheque:- A cheque which is Payable to any person who presents it for payment at the bank
counter is called bearer cheque.
4. Order cheque:- An order cheque is one which is payable to a particular person. In such a cheque the
word bearer may be cut out or cancelled and the word order may be written. The payee can transfer an
order cheque to someone else by singing his or her name on the back of it..
Quasi Negotiable Instruments
Quasi Negotiable Instruments are those Instruments which can be transferred by endorsement and
delivery but the transferee does not get a better tittle that of the transferor. Therefore they cannot be
classified as negotiable Instruments and hence the negotiable Instruments act is not applicable to them.
Some Financial Institutions
Securities Exchange Board of India (SEBI): It is regulatory authority of stock exchanges and protects
investors from fraudulent dealings. It was established in April 1988 and awarded statutory status by Act of
parliament in 1992.
Chairman: UK Sinha
Headquarters: Mumbai
Insurance Regulatory & Development Authority (IRDA) : It is apex body formed under Sec.4 of
IRDA Act 1999 to protect the interests of the policyholders to regulate promote and ensure orderly
growth of the insurance industry in India
Financial Stability & Development Council : This is the apex financial regulator of our country.
Headed by Finance Minister, it coordinates and regulates to four financial regulators of the country i.e.
RBI,SEBI,IRDA and PFRDA to ensure that all of them operate and function in harmony to promote the
growth and stability of Indian Economy.
Indian Banks Association (IBA) : It is the official association of all the banks operating in India. It acts
as a bridge between banks on one hand and government and staff unions on the other. Presetly Mr. K.R.
Kamath, CMD of Punjab National Bank is Chairman of IBA.
Non-Banking Financial Company (NBFC): These are companies which have functions similar to
banking like accepting deposits and making loans. However they do not have license for banking,
although they are regulated by RBI.
Deposit Insurance & Credit Guarantee Corp.(DI&CGC) : It is a wholly owned subsidiary of RBI
which provides an insurance cover of Rs.1lakh per depositor per bank in case of bank failure.It also
provides guarantee of repayment amount in default of small loans given by banks.
Export Credit Guarantee Corporation of India (ECGC): ECGC is a Govt. body which provides
export credit insurance facilities to exporters and banks in India. It encourages Indian exporters by giving
them credit insurance covers.
Banking Codes and Standards Board of India: It is a industry watch dog set up by RBI to monitor and
assess the compliance with codes and minimum standards of service to individual customers, as
prescribed by the RBI.
Credit Information Report: A Credit Information Report is a factual record of a borrowers credit
payment history compiled from information received from different credit grantors. Its purpose is to help
credit grantors make informed lending decisions-quickly and objectively.
Credit Rating: Credit Rating is an assessment of the probability of default on payment of interest and
principal on a debt instrument. In simple words, it ranks the company or countrys ability to meet their
debt obligations.
9.Indian Currency
Name of the Indian Currency: The Indian Currency is called the Indian rupee and the coins are called
paisa. One rupee consists of 100 paisa.
Present denominations of bank notes in India: At Present notes in India are issued in the denomination
of Rs.5, 10, 20, 50, 100, 500 and 1000. These notes are called bank notes as they are issued by the RBI.
The printing of notes in the denominations of Rs.1 and Rs.2 has been discontinued as these
denominations have been coinised. However such notes issued earlier are still in circulation. The printing
of notes in the denomination of Rs.5 had also been discontinued however it has been decided to
reintroduce these notes in order to meet the gap between the demand and supply of coins in this
denomination.
Present available denomination of coins in India: Coins in India are available in denominations of 50
paisa, one rupees , two rupees , five rupees and ten rupees up to 50 paisa are called small coins and coins
of rupee one and above are called rupee coins.
Can bank notes and coins be issued only in these denominations: Not necessarily. The RBI can also
issue notes in the denominations five thousand rupees and ten thousand rupees or any other denomination
that the central Government may specify. There cannot through be notes in denominations higher than ten
thousand rupees in terms of the current provisions of the RBI act 1934. Coins can be issued up to the
denomination of Rs.1000
The role of the RBI in Currency management: The RBI manages Currency in India. The Government
on the advice of the RBI decides on the various denominations. The RBI also coordinates with the
Government in the designing of bank notes including the security features. The RBI estimates the quantity
of notes that are likely to be needed denomination wise and places the indent with the various security
presses through the Government of India. The notes received from the security presses are issued and a
reserve stock maintained. Notes received from banks and Currency chests are examined. Notes fit for
circulation are reissued and the others are destroyed so as to maintain the quality of notes in circulation.
The RBI derives its role in Currency management on the basis of the RBI act 1934.
The role of Government of India: The responsibility for coinage vests with Government of India on the
basis of the coinage act 1906 as amended from time to time. The designing and minting of coins in
various denominations is also attended to by the Government of India.
Who decides on the volume and value of bank notes to be printed and on what basis: The RBI
decides upon the volume and value of bank notes to be printed. The quantum of bank notes that needs to
be printed broadly depends on the annual increase
In bank notes required for circulation purposes replacement of soiled notes and reserve requirements.
Who decides on the quantity of coins to be minted: The Government of India decides upon the quantity
of coins to be minted.
How does the reserve bank reach the Currency to people: The RBI manages the Currency operations
through its offices located at Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Jaipur, Kanpur, luck now,
Mumbai, Nagpur, New Delhi, Patna, and Thiruvananthapuram? These offices receive fresh notes from the
note presses. Similarly the RBI offices located at Kolkata, Hyderabad, Mumbai and New Delhi initially
receive the coins from mints. These offices then send them to the other offices of the reserve bank. The
notes and rupee coins are stocked at the Currency chests and small coins at the small coin depots. The
bank branches receive the bank notes and coins from the Currency chests and small coin depots for
further distribution among the public.
What is a Currency chest: To facilities the distribution of notes and rupee coins the RBI has authorized
select branches of banks to establish Currency chests . These are actually storehouses where bank notes
and rupee coins are stocked on behalf of the reserve bank. At Present there are over 4422 Currency chests.
The Currency chest branches are expected to distribute notes and rupee coins to other bank branches in
their area of operation.
What is a small coin : Some bank branches are also authorized to establish small coin depots to stock
small coins. There are 3784 small coin deposits spread throughout the country.
What happens when the notes and coins return from circulation: Notes and coins returned from
circulation are deposits at the offices if the reserve bank. The reserve bank then separates the notes that
are fit for reissue and those which are not fit for reissue. The notes which are fit for reissue are sent back
in circulation and those which are unfit for reissue are destroyed after processing and shredding. The
same is the case with coins. The coins with drawn are sent to the mints for melting
From where can the General public obtain bank notes and coins: Banks notes and coins can be
obtained at any of the offices of the reserve bank and at all branches of banks maintaining Currency
chests and small coin deposits.
Why are Rs.1, Rs.2, and notes not being printed: volume wise the share of such small denomination
notes in the total notes in circulation was as high as 57 percent but constituted only 7 percent in terms of
value. The average life of these notes was found a year. The cost of printing and servicing these notes was
thus not commensurate with their life. Printing of these notes was therefore discontinued. These
denominations were Therefore coinised However it has been decided that notes in the denomination of
Rs.5 be re-introduced so as to meet the gap between the demand and supply of coins in this denomination.
Soiled and mutilated notes: soiled notes are notes which have become dirty and limp due to excessive
use. Mutilated notes are notes which are torn disfigured burnt, washed, eaten by white ants etc. A double
numbered note cut into two pieces but on which both the numbers are in fact is now being treated as
soiled note.
Can such notes be exchanged for value: Yes soiled notes can be tendered at all bank branches for and
exchange obtained.
How much value would one get in exchange of soiled or mutilated notes: Full value is payable against
soiled notes. Payment of exchange value of mutilated notes is governed by the reserve bank of India rules
1975. These rules have been framed under section 28 of the RBI 134.
What if a note is found to be non-payable: Non-payable notes are retained by the receiving banks and
sent to the reserve bank where they are destroyed.
Where soiled mutilated notes accepted are: All banks are authorized to accept soiled notes across their
counters and pay the exchange value. They are expected to offer these services even to non-customers. All
public sector bank branches and Currency chest branches of private sector banks are authorized to
adjudicated and pay value in respect of mutilated notes. The RBI has also authorized all commercial bank
branches to treat certain notes in two pieces as soiled notes and pay exchange value.
Special features Introduced in the notes of Mahatma Gandhi series: The new mahatma Gandhi series
of notes contain several special features the notes issued earlier these are:
Latent Image : A vertical band behind on the right side of the mahatma Gandhi portrait which contains
which contains latent image showing the denominational value 20, 50, 100, 500, 1000 as the case may be.
Introduction
India has had more than a decade of Financial sector reforms during which there has been substantial
Transformation and liberalization of the whole Financial system
Objectives of Financial sector reforms in India.
1. Reforms Financial repression that existed earlier
2. Create an efficient productive and profitable Financial sector industry
3. Enable price discovery particularly by the market determination of interest rates that then helps in
efficient allocation of resources
4. Provide operational and function autonomy to institutions
5. Prepare the Financial system for increasing international Competition
6. Open the external sector in a calibrated fashion
Narasimham committee report 1991 &1998
The narasimham committee was set up in order to study the problems of the indian Financial system and
to suggest some recommendations for improvement in the efficiency and productivity of the Financial
institution
The committee had given the following major recommendations:
1. Reduction in SLR and CRR : The committee recommeded the Reduction of the higher proportion of
the statutory liquidity ratio and cash reserve ratio . Both of these ratios were very high at that time. The
SLR the was 38.5 percent and crr was 15 percent . This high percentage of SLR and CRR meant locking
the bank resources for govt uses. SLR was recommeded to be from 38.5 to 25 percent and CRR from 15
percent and 3.5 percent
2. Phasing out of directed Credit programme : in india since Nationalization directed Credit
programmes were adopted by the Government . The committee recommed Phasing out of this
programme. This programme compelled banks to earmark their Financial resources for the needy and
poor sectors at concessional rates of interest
3. Interest rate determintaion: The committee felt that the interest rates in india were regulated and
controlled by the authorities . The committee recommeded eliminating Government controls on interest
rates and Phasing out the concessional interest rates for the priority sector.
4. Structural re organizations of the banking sector: The committee recommeded that the actual
number of public sector banks need to be reduced. Three to four large banks including SBI should be
developed as international banks. Eight to ten banks having nationwide presence should concerntrate in
the National and unverisal banking services.
Local banks should concerntrate on region specific banking . Regarding RRBs it recommeded that they
should focus on agr culture and rural financing
5. Establishment of the ARF and tribunal: The proporation of bad debts and non performing assets of
the public banks and Development Financial institute was veey alarming in those days. The committee
recommeded the Establishment of an assets reconstruction fund . This fund would take over the
proporation of the bad and doubt ful debts from the banks and Financial institutes. It would help banks to
get rid of bed debts.
6. Removal of dual control : The committee recommeded the stopping of this system. it considered and
recommeded that the RBI should be the only main agency to regulate banking in india
7. Banking autonomy : The committee recommeded that the public sector banks should be free and
autonomous. Banking technology upgradation would thus be easy.
Narasimham committee report II 1998
In 1998 the Government appointed yet another committee under the chairmanship of Mrt.Narasimham. It
better known as the banking sector committee. It was told to review the banking reform progress and
design a programme for further strengthening the Financial system of india the committee focused on
various areas such as capital adequacy bank mergers bank legislation,
It submitted its report to the Government in April 1998 with the following recommendations:
1. Strengthening the banks in india
2. Narrow banking
3. Capital adequacy ratio
4. Bank owership
5. Review of banking laws
Apart from these major recommendations the committee has also recommended faster computerization ,
technology upgradation , training of staff, depoliticizing of banks, professionalism in banking , reviewing
bank recruitment etc.
10.FUND TRANSFER SYSTEMS
There are two ways for transferring funds
RTGS is one of the fastest mode of fund transfer in India through banking channel
RTGS is nothing but transferring of money in real time on gross basis from one bank to other
without netting. This RTGS is mainly used for large transactions, Minimum amount to be
remitted through this RTGS is 2 Lakhs and there is no any upper limit
Through RTGS system, money will be remitted for beneficiary account within 2 hours of
receiving the fund transfer message
Main advantage of fund transferring through RTGS is remitting bank will receive the
conformation message from RBI that money have been transferred to beneficiarys account
Amount to be remitted
This RTGS fund transfer is not available for all branches of banks in India; one can check the availability
of RTGS system through http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB0112.xls.
National Electronic Fund Transfer (NEFT)
NEFT is an electronic fund transfer system on DNS (Deferred Net Settlement) basis through netting. This
NEFT will be done in 12 settlements
Timings for Transferring Funds through NEFT:
Normal Days: 08:00 am to 07:00 pm
Week Days: 08:00 am to 01:00 pm
Processing/Service Charges for NEFT Fund Transfer
Inward Transactions: No Charge
Outward Transactions:
Up to Rs.10, 000: Rs.2.50/- + Service Tax
Rs.10, 000 to RS.1lakh: Rs.5/- + Service Tax
RS.1lakh to RS.2lakhs: Rs.15/- + Service Tax
Above RS.2lakhs: Rs.25/- + Service Tax
ADVANTAGES:
Beneficiary need not to worry about the loss / theft of physical instruments
Cost effective
Remitter can initiate the remittances from home/ place of work through Internet Banking also
Secure
Both originating and destination bank branches should be a part of the NEFT system
IFSC (Indian Financial System Code) is an alpha-numeric code that uniquely identifies bank branch
participating in the NEFT system.
IFSC is an 11-digit code with the first four Alpha characters representing the bank, and the last 6
characters representing the branch. The 5th character is 0 (Zero)
In this IFSC code SBTR0000143, SBTR represents bank name State Bank of Travancore, Last 6
digits 000143 is the branch code
USES:
Main aim of using this IFSC code is to identify the originating/destination banks and branches and also to
route the messages to the concerned banks/branches appropriately
Account Information
Cash Deposit
Mini/Short Statement
Credit Card
Credit Card: Credit card is different from debit card, in debit card you must have money for using it. But
for using credit cards, its not necessary. If you use credit card for purchasing purposes it does not deduct
your money immediately.
Bank will pay the vendors and sends the bill to the customer every month.
MICRO, SMALL AND MEDIUM ENTERPRISES (MSME)
In accordance with the provision of MSMED Act, 2006, the Micro, small and Medium Enterprise are
classified as follow:
1. Manufacturing Enterprises The enterprise engaged in the manufacturing of goods pertaining to any
industry specified in the first schedule to the industries (Development and regulation Act,1951) or
employing plant and machinery in the process of value addition to the final product having a distinct
name or character or use. The manufacturing Enterprise is defined in terms of investment in Plant &
Machinery.
2. Service Enterprises: The enterprise engaged in providing or rendering of services and are defined in
terms of investment in equipment.
Manufacturing Sector
Micro Enterprises
Does not exceed 25lakhsSmall Enterprises
More than 25 lakhs but less than 5 croreMedium Enterprises
More than 5 crore but less than 10 crore
Service Sector
Enterprises
Investments in equipments
Micro Enterprises
TYPES OF MONEY
Commodity Money - Commodity money value is derived from the commodity out of
which it is made. The commodity itself represents money, and the money is the
commodity. For instance, commodities that have been used a Medium of exchange
include gold, silver, copper, salt, peppercorns, rice, large stones, etc.
Representative Money - is money that includes token coins, or any other physical tokens
like certificates, that can be reliably exchanged for a fixed amount/quantity of a
commodity like gold or silver.
Fiat Money - Fiat money, also known as fiat currency is the money whose value is not
derived from any intrinsic value or any guarantee that it can be converted into valuable
commodity (like gold). Instead, it derives value only based On government order (fiat)
Commercial Bank Money - Commercial bank money or the demand deposits are claims
against financial institutions which can be used for purchasing goods and services.
FINANCIAL INCLUSION
It is the delivery of financial services at affordable costs to vast sections of disadvantaged and
low income groups
Financial inclusion involves
1) Give formal banking services to poor people in urban & rural areas.
2) Promote habit of money-savings, insurance, pension-investment among poor-people.
3) Help them get loans at reasonable rates from normal banks. So they dont become victims in
the hands of local moneylender.
Some Important initiatives for financial inclusion:
1) Lead banking scheme (LBS).
2) No frills account.
3) BSBDA
4) Business Correspondents (BC) system.
5) Swabhiman Campaign
6) PMJDY
Lead Bank Scheme
The Lead Bank Scheme, introduced towards the end of 1969, envisages assignment of lead roles
to individual banks (both in public sector and private sector) for the districts allotted to them. A
bank having a relatively large network of branches in the rural areas of a given district and
endowed with adequate financial and manpower resources has generally been entrusted with the
lead responsibility for that district. Accordingly, all the districts in the country have been allotted
to various banks. The lead bank acts as a leader for coordinating the efforts of all credit
institutions in the allotted districts to increase the flow of credit to agriculture, small-scale
industries and other economic activities included in the priority sector in the rural and semiurban areas, with the district being the basic unit in terms of geographical area.
No Frill Account
'No Frills 'account is a basic banking account. Such account requires either nil minimum balance
or very low minimum balance. Charges applicable to such accounts are low. Services available to
such account is limited. In what can be described as a watershed Annual Policy Statement, the
RBI in 2005-06 called upon Indian banks to design a no frills account a no precondition, low
minimum balance maintenance account with simplified KYC (Know Your Customer) norms.
But All the existing No-frills accounts opened were converted into BSBDA in compliance with
the guidelines issued by RBI in 2012 .
BSBDA
RBI in 2012 came out with fresh guidelines and asked banks to offer a Basic Savings Bank
Deposit Account which will offer following minimum common facilities to all their customers.
These guidelines includes:(a) This account shall not have the requirement of any minimum balance.
(b) The services available in the account will include deposit and withdrawal of cash at bank
branch as well as ATMs; receipt/credit of money through electronic payment channels or by
means of deposit/collection of cheques drawn by Central/State Government agencies and
departments;
(c ) While there will be no limit on the number of deposits that can be made in a month, account
holders will be allowed a maximum of four withdrawals in a month, including ATM
withdrawals; and
(d) Facility of ATM card or ATM-cum-Debit Card.
Business Correspondent
Business correspondents are bank representatives. They personally goes to the area allotted to
them and carry out banking.
They help villagers in banking transactions. (deposit money, take money out of savings
account, loans etc.)
The villager gives his thumb impression or electronic signature, and gets the money.
Business Correspondents get commission from bank for every new account opened,
every transaction made via them, every loan-application processed etc.
1-Drawer or Maker
2-The bank (Drawee) - on whom the cheque is drawn (i.e. the bank with whom the account is
maintained by the drawer)
3- Payee Payee is the person whose name is mentioned on the cheque to whom or to whose
order the money is directed to be paid.
5) Special Drawing Rights (SDRs)
It is a reserve asset (known as Paper Gold) created within the framework of the International
Monetary Fund in an attempt to increase international liquidity, and now forming a part of
countries official forex reserves along with gold, reserve positions in the IMF and convertible
foreign currencies.
6) Negotiated Dealing System
The Negotiated Dealing System (NDS) for electronic dealing and reporting of transactions in
government securities was introduced in February 2002. It facilitates the members to submit
electronically, bids or applications for primary issuance of Government Securities when auctions
are conducted. NDS also provides an interface to the Securities Settlement System (SSS) of the
Public Debt Office, RBI, Mumbai thereby facilitating settlement of transactions in Government
Securities (both outright and repos) conducted in the secondary market.
7) NDS OM (Order Match)
In August, 2005, RBI introduced an anonymous screen based order matching module on NDS,
called NDS-OM. This is an order driven electronic system, where the participants can trade
anonymously by placing their orders on the system or accepting the orders already placed by
other participants. NDS-OM is operated by the Clearing Corporation of India Ltd. (CCIL) on
behalf of the RBI.
8) What is Asset Management Companies?
A company that invests its clients' pooled fund into securities that match its declared financial
objectives. Asset management companies provide investors with more diversification and
investing options than they would have by themselves. Mutual funds, hedge funds and pension
plans are all run by asset management companies. These companies earn income by charging
service fees to their clients.
9) "Soiled Note:" means a note which, has become dirty due to usage and also includes a two
piece note pasted together wherein both the pieces presented belong to the same note, and form
the entire note.
Unlike interest on fixed deposits, interest earned on savings bank accounts is not
subject to Tax Deduction at Source. However, this does not mean the interest
earned on Savings accounts is completely tax free. It is exempt upto Rs. 10,000 in a
year, and if the interest you earn from Savings accounts crosses this threshold, it
becomes subject to tax.
C) Senior Citizens Savings Scheme, 2004:
A Scheme which is giving a higher interest rate to the senior citizens, if they make
deposits in the banks.
The salient features of the Senior Citizens Savings Scheme, 2004 are given
below:
The seven shades of Indradhanush mission include appointments, destressing PSBs, capitalisation, empowerment, framework of accountability
and governance reforms.
Bank Board Bureau (BBB) will start the functioning from next financial year
i.e. from 1st April 2015 and the selection of its member will start in the next
six months.
banking system and will help reach out to people in rural areas. Moreover, the
payments bank licence will enable the network of 1,54,000 post offices (including
1,30,000 rural post offices) to offer banking services to the masses in the country.
List of the companies who got the license to run payment banks :
Department of Posts
The next question that arrives in ones mind is that what is the need of payment
bank and "Kya baaki banks kam hain" but there is only one answer to all the
questions that this step is one of the major step towards Financial Inclusion. These
banks have limited services as compared to the other banks. Let's see what these
banks can or can't do :
They cant offer loans but can raise deposits of upto Rs. 1 lakh, and pay
interest on these balances just like a savings bank account does.
They can offer services such as automatic payments of bills, and purchases
in cashless, cheque less transactions through a phone.
They can issue debit cards and ATM cards usable on ATM networks of all
banks.
They can transfer money directly to bank accounts at nearly no cost being a
part of the gateway that connects banks.
They can provide forex cards to travellers, usable again as a debit or ATM
card all over India.
They can also offer card acceptance mechanisms to third parties such as the
Apple Pay.
This is for the first time in the history of India's banking sector that RBI is giving out
differentiated licences for specific activities. RBI is expected to come out with a
second set of such licences for small finance banks and the process for those
is in its final stage. The move is seen as a major step in pushing financial inclusion
in the country.
co-founder Vijay Shekhar Sharma). Its peers like Oxigen, MobiKwik, Citrus and
ItzCash lost out on the opportunity to become payments bank, at least for now.
Indias domestic remittance market is estimated to be about Rs. 800-900 billion and
growing. With money transfers made possible through mobile phones, a big chunk
of it, especially that of the migrant labour, could shift to this new platform. Payment
banks can also play a crucial role in implementing the governments direct benefit
transfer scheme, where subsidies on healthcare, education and gas are paid directly
to beneficiaries accounts. Also, this is the first time since banks were nationalized,
that private sector business groups have bagged the RBIs nod for banking services.
Taking the first step towards a holding company structure for public sector banks (PSBs), the government
announced the setting up of a Banks Board Bureau (BBB), where each bank would be monitored on the
basis of "key performance indicators".
The Banks Board Bureau will recommend appointment of directors in public sector banks
(PSBs) and advice on ways of raising funds and dealing with issues of stressed assets.
The financial services secretary Hasmukh Adhia said that the political interference in the
functioning of banks must cease. The BBB would replace the existing appointments board
for PSBs. He also said that BBB will also be a link between the government and banks and
will be engaged with banks to evolve strategies for them.
The bureau will be a six-member board comprising three from the private sector and three
government nominees, while the chairman "will be a distinguished banker or regulator".
Banks have a requirement for Rs.180,000 crore over the next four years to meet their capital
requirements. Of this, the government will provide Rs.70,000 crore. They have to raise
Rs.1.1 lakh crore from the market. The BBB will advise the banks on ways of raising fund.
Also the government plans to provide Rs.25,000 crore capital each in the current and next
fiscal year, while Rs.20,000 crore would be provided during 2017-18 and 2018-19.
4) Functions: Give recommendations for appointment of full-time Directors as well as nonExecutive Chairman of PSBs.
5) Give advice to PSBs in developing differentiated strategies for raising funds through
innovative financial methods and instruments and to deal with issues of stressed assets.
6) Guide banks on mergers and consolidations.
The Union Government announced One Rank One Pension (OROP) scheme for exservicemen. The scheme was pending for nearly four decades.
As of now, the date of retirement determines the amount of pension. With each Pay
Commission coming up with its recommendations every 10 years, the military veterans who
retire early, receive less pension as compared to those who retired later with the same rank
and length of service
Under OROP, a sepoy who retired in 1995, for instance, would get the same amount of
pension as the one who retired in 1996.
"In simple terms, OROP implies that uniform pension be paid to the Armed Forces personnel retiring in
the same rank with the same length of service, regardless of their date of retirement. Future
enhancements in the rates of pension would be automatically passed on to the past pensioners. This
implies bridging the gap between the rate of pension of current and past pensioners at periodic intervals,"
said Defence Minister Manohar Parrikar while making the announcement.
Details of OROP
1) The benefit will be given with effect from 1st July, 2014. The present government
assumed office on 26th May, 2014 and therefore, it has been decided to make the scheme
effective from a date immediately after. Arrears will be paid in four half-yearly instalments.
2) All widows, including war widows, will be paid arrears in one instalment.
3) To begin with, OROP would be fixed on the basis of calendar year 2013.
4) Pension will be re-fixed for all pensioners retiring in the same rank and with the same
length of service as the average of minimum and maximum pension in 2013. Those drawing
pensions above the average will be protected.
5) Personnel who voluntarily retire will also be covered under the OROP scheme.
6) In future, the pension would be re-fixed every 5 years.
7) It has also been decided that a One Member Judicial Committee would be constituted
which will give its report in six months.