Banking

RESERVE BANK OF INDIA RBI was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act/1934.

• The Central bank was formed under the recommendations from John Hilton Young Commission 1926, also called Royal Commission of Indian Currency and Finance.
• The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937.

Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.   CONSTITUTION The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.

• Appointed/nominated for a period of four years.
• Present Governor

Dr. Urjit R. Patel (24th Governor)

• Deputy Governors

Shri BP Kanungo Shri more...

MONEY AND ITS TYPES Money: Money is anything that is widely accepted in exchange for goods and services.   Types of Money

• Commodity Money - Commodity money is the type of Money that is in the form of a commodity with intrinsic value which means it has value outside of its use as money. The commodity itself represents money, and the money is the commodity. Example: Gold silver, copper, salt, peppercorns, rice, large stones, etc.
• Representative Money - It actually represents Money. It is exchangeable for a commodity. Examples: Token coins, or any other physical tokens like certificates.
• Fiat Money - It is whose value is not derived from any intrinsic value or any guarantee that it can be converted into valuable commodity (like gold). It has value as money because a government decreed that it has value for that purpose.

  Money Market Money Market more...

INDIAN BANKING SYSTEM     COMMERCIAL BANKS Commercial bank is an institution that accepts deposits, makes business loans and offers related services to general public and businessmen. Commercial banks in India are largely Indian public sector and private sector with a few foreign banks. The public sector banks account for more than 80 percent of the entire banking business in India occupying a dominant position in the commercial banking. These are a profit making institution owned by government or private or both. There are currently 27 public sector banks in India out of which 19 are nationalised banks and 6 are SBI and its associate banks, and  rest two are IDBI Bank and Bharatiya Manila Bank, which are categorised as other public sector banks. There are more...

  DEVELOPMENT BANKS

• Development banks are specialized financial institutions.
• They provide medium and long-term finance to the industrial and agricultural sectors
• They provide finance to both private and public sectors.
• They do term lending, investment in securities and other activities.
• They even promote saving and investment habits in the public.

    Development banks in India are classified into following four groups;   Industrial Development Banks They include for example. Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), and Small Industries Development Bank of India (SIDBI). more...

Credit Functions of Banks   The two most distinctive features of a commercial bank are borrowing and lending, i.e. acceptance of deposits and lending of money to projects to earn Interest (profit). In short, banks borrow to lend. The rate of interest offered by the banks to depositors is called the borrowing rate while the rate at which banks lend out is called lending rate. The difference between the rates is called 'spread' which is appropriated by the banks. All financial institutions are not commercial banks but only those which perform dual functions of (i) accepting deposits and (ii) giving loans - are termed as commercial banks. For example post offices are not bank because they do not give loans. Functions of commercial banks are classified into two main categories - (A) Primary functions and (B) Secondary functions.   (A) PRIMARY FUNCTIONS:

Accepting deposits:

A commercial bank accepts deposits more...

Challenges in Banking System Our banking system, at present juncture, is facing significant challenges from several quarters. These challenges, if not addressed quickly and adequately, may result in loss of opportunities as and when the economic growth starts picking up momentum. In a sense, it has implications for both- the banks as well as the economy as a whole, because a strong banking system is one of the essential pre-requisites in the quest for growth.   NON-PERFORMING ASSETS (NPAs) A non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days. Description: Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.

Substandard assets: An Asset which has remained NPA for a period of less than or equal to 12 months.

Doubtful assets: An asset would be classified as doubtful if it has remained more...

Financial Inclusion "Financial inclusion is delivery of banking services at an affordable cost ('no frills' accounts,) to the vast sections of disadvantaged and low income group. As banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of the public policy."   Importance of FINANCIAL INCLUSION The policy makers have been focusing on Financial Inclusion of Indian rural and semirural areas primarily for three most important pressing needs.  

Creating a platform for inculcating the habit to save MONEY – The lower income category has been living under the constant shadow of financial duress mainly because of the absence of savings. The absence of savings makes them a vulnerable lot. Presence of banking services and products aims to provide a critical tool to inculcate the habit to save. Capital formation more...

Modern Aspects of Banking Technology has transformed the global world of banking and financial services beyond recognition. No other industry offers more complex challenges and more exciting opportunities than banking. Computerization of the business of banks has been receiving great importance. The banking institutions have already crossed 70% level of computerization of their businesses.   AUTOMATED TELLER MACHINE Automated Teller Machine is a computerized machine that provides the customers of banks the facility of accessing their account for dispensing cash and to carry out other financial and non-financial transactions without the need to actually visit their bank branch.   Types of ATMs

• Onsite ATMs: This type of ATM is situated either within the branch premises or in very close proximity of the branch.
• Offsite ATMs: It is not situated within the branch premises but is located at other places, such as malls, petrol stations etc
• Worksite ATMs: more...

BHARAT BILL PAYMENT SYSTEM (BBPS)   Bharat Bill Payment System (BBPS) is an integrated bill payment system which will offer interoperable bill payment service to customers online as well as through a network of agents on the ground. The system will provide multiple payment modes and instant confirmation of payment.

• With a need of bill payments system, various organizations decided to provide a single platform to make all these payments. So an integrated bill payment system called BBPS was proposed for which the policy guidelines were issued by the Reserve Bank of India on November 28, 2014.
• National Payment Corporation (NPCI) is identified to act as Bharat Bill Payment Central Unit (BBPCU) which will be a single authorized entity for operating the BBPS.
• The biggest advantage is that the bill can be paid anywhere and anytime. The system will provide multiple payment modes and instant confirmation of more...

Para Banking Services Para banking activities refer to those activities carried out by the bank which are other than their normal day-to-day activities (deposits withdrawals, giving credit/ etc.). The Para Banking activities include insurance business, portfolio management services, pension fund management, mutual funds business, money market mutual funds underwriting of bonds of PSUs, investment in venture capital funds, etc. The para Banking activities which can be performed by bank have been permitted by KBI. Banks can do these activities either departmentally or by setting up subsidiaries to undertake the type of business.   SUBSIDIARIES OF BANKS Banks are allowed to form subsidiaries as per Section 19(1) of the Banking Regulation Act, 1949. Banks can invest up to 10 percent of their capital in the subsidiaries.   Banks may form a subsidiary company tor undertaking the types of businesses which a banking company is otherwise permitted to undertake, with prior approval more...