Banking and Insurance

By- Chintan Prajapati

Evolution of commercial banking in
India
Ramayana and Mahabharat, Munu smriti period
Two functions: accepting deposits and lending monies
Moghul period: metalic money
1786: English agency house had established the bank
of bengal at calcutta.
1969: nationalization of 14 banks
1980: nationalization of 6 banks
From 1992: issued licenses to private sector banks
Currently, total 27 public sector banks in India, out of
which 19 are nationalised banks, 6 are SBI and its
associate banks, 2 are IDBI bank and Bhartiya Mahila
Bank.
Total 93 commercial banks in India.
Currently, total 27 public sector banks in India, out
of which 19 are nationalised banks, 6 are SBI and
its associate banks, 2 are IDBI bank and Bhartiya
Mahila Bank.
Total 93 commercial banks in India.
21 private sector banks
44 foreign banks with branches in India
40 foreign banks with representative offices in India
56 regional rural banks in India
40 state cooperative banks
60 urban cooperative banks
Banker
Any company which transacts the business
of banking- means the accepting of
deposits of money from public/ lending to
public and for investment in securities.
The deposit is either payable on demand or
after time-period.
Demand deposits are payable, either by
cheque/draft or withdrawal order.
Bank customer
Having some kind of account with a bank
Account can either be deposit or loan
account
Duration of relationship is not material
Account can be operative one or
inoperative (Dormant) kind
Dealing with the bank should be banking-
business
Relationship with the bank could be either
debtor or creditor
Customer could be either an individual/
firm/limited company/association of
Traditional banking functions
Receiving of money on deposit
Fixed, saving and current deposits
Lending of money
Chief source of profit for commercial banks
Form of loans, cash credits, bills discount facilities
Transferring money from place to place
Demand drafts, telegraphic transfers, mail transfers
Miscellaneous functions
Safe custody of valuables
Issue of various forms of credits: letter of credit,
travellers cheques, furnishing guarantees on behalf
of customers
Providing fee based services
Forms of deposits
Demand deposits
Current deposits
Saving deposits
Call deposits
Term deposits
Fixed deposits
Recurring deposits
Principles of sound lending
Liquidity
Profitability
Spread of risks- diversification
Purpose
Security
Types of credit facilities
Fund based
By allowing overdrafts
By sanctioning cash credit limit
By way of demand loan: upto 12 months
By granting term loan: 3 years to 5 years (for
housing: 20 years)
By purchasing/ discounting bills
Non- fund based
Letter of credit
Letter of gaurantees
Commercial banks
Scheduled banks
State bank of India
Associate banks
Nationalized banks
Private banks
Foreign banks
Regional rural banks
Urban cooperative banks
Local area banks
Non- scheduled banks
Ascheduledbank, in India, refers to a
bank which is listed in the 2ndScheduleof
the Reserve Bank of India Act,
1934.Banksnot under thisScheduleare
called non-scheduled banks.Scheduled
banksare usually private, foreign and
nationalisedbanks operating in India.
Types of banks
Central bank is the supreme monetary institution of
the country. This Bank is pivot of the entire banking
system of a country. It is generally set up by the
Govt. of the country to undertake central banking
functions in the country. Reserve Bank of India is
the central bank of our country.
Commercial Banks are those banks which perform
all kinds of ordinary banking business such as
accepting deposit, advancing loans ,etc. Some of
the commercial banks in India are:-
State Bank of India
Punjab National Bank
Bank of India
Co-operative banks refers to those group of
institutions which are organised on the
principles of cooperation. Co-operative
banks are set up under the Co-operative
Societies Act. This banks are engaged in
ordinary banking business of accepting
deposits of money from the public and
granting loans to the needy borrowers.
Development Banks are specialized
multipurpose financial institutions. These
banks provide medium term and long term
finance, promote entrepreneurship, etc. Some
of the developments banks of India are:-
Industrial Development Bank of India(IDBI)
National Bank for Agricultural & Rural
Development(NABARD)
Industrial Finance Corporation of India(IFCI)
Investment Banks are those banks which
specialise in providing medium and long
term financial assistance to business and
industry. These banks are also known as
industrial banks as they are mainly
concerned with industrial finance.
Agricultural Banks are those banks which
provide credit to farmers for both short
term as well as long term need. They inject
life into lifeless agriculture, resulting in
enhance productivity which benefits both
the farmers and the country.
Exchange banks are those banks which are
primarily engaged in transactions involving
foreign exchange. These are also known as
foreign exchange banks and they specialise
in financing foreign trade.
International Banks are special banks
created to deal with international financial
matters. These banks operate at the
international level and occupy a very
important place in the banking structure of
the world. Some the international banks are
:-
International Monetary Fund(IMF)
Asian Development Bank(ADB)
International Bank for Reconstruction &
Development Bank(IBRD) or World Bank.
Savings Banks are those banks which are
primarily engaged in collecting savings of
the general public. The main object of
these banks are to promote savings habit
among the middle and lower income
sections of the society and thus mobilize
small savings for capital formation.
Opening of saving account

KYC (Know Your Customer) information.

Information about the Savings Bank
account you wish to open and the facilities
you would want in the account.
Form 60, if you do not have Permanent
Account Number (PAN) of Income Tax.
Form DA-1 (optional), if you wish to make a
nomination (recommended).
ACCOUNT OPENING PROCESS

Step 1: Fill the Customer Information Section.

Step 2: Fill the Account Information Section.
Step 3: Read the Savings Bank Rules.

Note :- For each person who wishes to open the

account, you will need to provide:
2 Recent passport-size colored photographs.
KYC documents as mentioned in the AOF.
Modes of creating charge on assets
Security in banking terms and specifically
in relation to a bank loan refers to any
asset on which a charge is created by a
bank in its favour; where any default
occurs, i.e., the borrower (loan taker) is not
able to pay the loan amount back, then this
asset is the Banks refuge!
Types of charge
Mortgage
Immovable Properties
Land and Building
Possession of: Borroweri.e., the one who has taken the
loan.
Pledge
Movable goods or property
Share Certificates/NSC Certificates/Gold jewellery
Possession of: Lender, i.e., the Bank = Pledgee
Hypothecation
Movable goods or property
Plant and Machinery/ Automobiles
Possession of: Borrower
Lien
Paper security
Shares/Debentures/Mutual Funds/ Bonds
Personal Liability
Is nothing but personal guarantee
By 3rdparties
Thank you