banking mp

BANKING

BANKING

FIVE DIFFERENT MARKETS 1) MONEY MARKET 2) STOCK MARKET 3) FOREX MARKET 4) COMMODITY MARKET 5) REAL ESTATE MARKET

BANKINGSYLLABUS

FUNCTIONS OF THE BANK VARIOUS KINDS OF DEPOSITS VARIOUS KINDS OF ADVANCES CRR, SLR, LENDABLE RESOURCES BILL CULTURE/ BILL FINANCE

(CHORE COMMITTEE) TANDON COMMITTEE

BANKINGSYLLABUS

FINANCIAL SECTOR REFORMS INCOME RECOGNITION ASSET CLASSIFICATION PROVISIONING NORMS CAPITAL ADEQUACY

BANKINGSYLLABUS

BASEL COMMITTEE NORMS ENTRY OF FOREIGN BANKS /

PRIVATE BANKS, ETC. INTERNATIONAL BANKING FUNCTIONS OF RESERVE BANK OF

INDIA

BANKING

BANKING IS DIFFERENT FROM MONEY-LENDING BUT THE TWO TERMS CARRY SAME SIGNIFICANCE TO THE LAYMAN.

BANKING THE WORD “BANK” IS SAID TO BE OF

GERMANIC ORIGIN, COGNATE WITH THE FRENCH WORD “BANQUE” AND ITALIAN WORD “ BANCA”

BOTH THESE WORDS MEAN “BENCH” THE JEWISH MONEY-CHANGERS USED

TO DO THEIR BUSINESS SITTING ON A BENCH IN MARKET.

BANKING

SIMILARLY THE WORD “BANKRUPT” IS BELIEVED TO HAVE BEEN ORIGINATED FROM FRENCH WORD “BANQUE-ROUTE” AND ITALIAN WORD “BANCA-ROTTA” MEANING “BROKEN BENCH”.

MONEY CHANGER USED TO BREAK HIS BENCH WHEN HE FAILED.

BANKING

BANKING EXISTED IN INDIA IN ONE FORM OR THE OTHER FROM TIMES IMMEMORIAL.

AMONG EARLIEST BANKS ESTABLISHED WERE, BANK OF BENGAL, BANK OF BOMBAY, BANK OF MADRAS KNOWN AS “PRESIDENCY BANKS”.

BANKING

ALL THESE BANKS WERE AMALGAMATED TO FORM IMPERIAL BANK OF INDIA WHICH WAS SUBSEQUENTLY CONVERTED INTO STATE BANK OF INDIA.

BANKING

IN EARLY PHASE INDIGENOUS BANKERS, NIDHIS AND MONEYLENDERS ACTED AS BANKERS.

THEY WORKED ON ESTABLISHED NORMS AND TABOOS OF THE COMMUNITY.

BANKING

IN THE INITIAL STAGES BANKING COMPANIES WERE REGISTERED UNDER THE COMPANIES ACT.

HOWEVER WITH GROWTH OF JOINT STOCK BANKING IN FIRST QUARTER OF 19TH CENTURY, IT BECAME NECESSARY TO CODIFY RULES AND REGULATIONS.

BANKING THUS EMERGED THE BANKING

REGULATION ACT IN 1949. BANKING LEGISLATION ACT AIMS AT

PROTECTING INTEREST OF DEPOSITORS ENSURING CONTROL OVER CREDIT STREAMLINING PROCEDURES EVOLVING UNIFORM BANKING PRACTICES DEVELOPING BANKING ON SOUND LINES.

BANKING

SECTION 5 C OF THIS ACT DEFINES A BANKING COMPANYAS “A COMPANY WHICH CARRIES ON THE BUSINESS OF BANKING.”

BANKING

SECTION 5 B DEFINES BUSINESS OF BANKING AS “ ACCEPTING, FOR THE PURPOSE OF LENDING OR INVESTMENT, DEPOSITS OF MONEY FROM THE PUBLIC, REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWABLE BY CHEQUES, DRAFTS OR OTHERWISE.”

BANKING

MAIN PROVISIONS OF ACT 1) BUILT IN SAFEGUARDS 2) POWERS AND COSEQUENTIAL

FUNCTIONS AND RESPONSIBILITIES OF RBI.

BANKING

BUILT IN SAFEGUARDS RELATE TO 1) ORGANISATION 2) MANAGEMENT 3) OPERATIONSOF A BANKING COMPANY.

BANKINGORGANISATIONAL SAFEGUARDS

1) PERMITTED BUSINESS 2) HOLDING IMMOVABLE PROPERTY 3) FORMATION OF SUBSIDIARY

COMPANIES 4) USE OF WORD ‘BANK’, ‘BANKING

COMPANY’, ‘BANKER’ AND ‘BANKING’

BANKINGORGANISATIONAL SAFEGUARDS

5) PAID UP CAPITAL AND RESERVES

6) CHANGE OF NAME

BANKINGOPERATIONAL SAFEGUARDS

1) MAINTENANCE OF CASH RESERVES AND ASSETS

2) GRANT OF UNSECURED LOANS AND ADVANCES

3) OPENING OF NEW BRANCHES

BANKINGMANAGERIAL SAFEGUARDS

1) PREPARE ANNUAL ACCOUNTS IN THE FORMS PRESCRIBED UNDER THE ACT

2) THE ACCOUNTS ARE TO BE AUDITED BY A QUALIFIED AUDITOR.

3) PUBLISH AND SEND COPIES TO RBI 4) DISPLAY AT IT’S OFFICES.

BANKINGFUNCTIONS

1) PRIMARY FUNCTIONS 2) AGENCY FUNCTIONS 3) GENERAL UTILITY FUNCTIONS

BANKINGPRIMARY FUNCTIONS

ACCEPTANCE OF DEPOSITS LENDING MONEY BORROWING MONEY MAKING INVESTMENTS

BANKINGAGENCY FUNCTIONS

COLLECTION AND PAYMENT OF CHEQUES

COLLECTION AND PAYMENT OF BILLS

REMITTANCE OF FUNDS COLLECTION OF GOVERNMENT

TAXES

BANKING AGENCY FUNCTIONS

UNDERTAKING ADMINISTRATION OF ESTATES AS EXECUTORS AND TRUSTEES.

BANKING GENERAL UTILITY FUNCTIONS

ISSUING OF GUARANTEES ISUING OF LETTERS OF CREDIT DEALING IN FOREIGN EXCHANGE DEALING IN BULLION SAFE DEPOSIT VAULT SAFE CUSTODY OF ARTICLES

BANKING GENERAL UTILITY FUNCTIONS

MERCHANT BANKING ACQUIRING, HOLDING AND

DEALING WITH PROPERTIES AS SECURITY FOR ADVANCES.

ISSUING AND ENCASHING GIFT CHEQUES

ISSUING CREDIT / DEBIT CARDS

BANKER-CUSTOMER RELATIONSHIP

1) DEBTOR AND CREDITOR 2) BAILER-BAILEE 3) PRINCIPAL-AGENT 4) TRUSTEE-BENEFICIARY

BANKER-CUSTOMER RELATIONSHIP

DEBTOR AND CREDITOR – IN CASE OF DEPOSIT ACCOUNT BANKER IS A DEBTOR AND CUSTOMER IS A CREDITOR

BANKER-CUSTOMER RELATIONSHIP

BAILER-BAILEE – IN CASE A SEALED BOX IS DEPOSITED WITH THE BANK FOR SAFE CUSTODY, THE CUSTOMER IS A BAILER AND THE BANK IS A BAILEE.

BANKER-CUSTOMER RELATIONSHIP

PRINCIPAL-AGENT – IN CASE OF COLLECTION AND PAYMENT OF CUSTOMER’S CHEQUES / BILLS, THE CUSTOMER IS A PRINCIPAL AND THE BANK IS AN AGENT.

BANKER-CUSTOMER RELATIONSHIP

TRUSTEE-BENEFICIARY – IF A BANK IS ASKED TO MANAGE THE PROPERTY OF A TRUST, THE BANK IS A TRUSTEE AND THE TRUST IS THE BENEFICIARY.

DEFINITION OF CUSTOMER

NO STATUTORY DEFINITION IS AVAILABLE. WE HAVE TO DEPEND ON JUDICIAL PRONOUNCEMENTS.

WORD CUSTOMER DERIVES FROM ‘CUSTOM’ MEANING HABIT OF RESORTING TO SAME PLACE OR PERSON TO DO BUSINESS.

DEFINITION OF CUSTOMER

ONE WHO MAINTAINS SOME SORT OF DEPOSIT ACCOUNT

STATE OF ACCOUNT IS IMMATERIAL

BY FREQUENTLY PURCHASING DRAFTS OR CASHING CHEQUES ONE DOES NOT BECOME A CUSTOMER

DEFINITION OF CUSTOMER

A CUSTOMER OF ONE BRANCH IS NOT A CUSTOMER OF ANOTHER BRANCH OF THE SAME BANK.

BANKER- CUSTOMER RELATIONSHIP EXISTS BETWEEN TWO BANKS, IF ONE HAS AN ACCOUNT WITH THE OTHER

CONTRACTUAL RELATIONSHIP

THE BANKER IS ENTITLED TO USE MONEY WITHOUT BEING CALLED UPON TO ACCOUNT FOR SUCH USE.

LIABILITY TO RETURN THE AMOUNT THE BANKER CAN NOT CLOSE

CUSTOMER’S ACCOUNT WITHOUT GIVING HIM NOTICE.

CONTRACTUAL RELATIONSHIP

BANKER IS OBLIGED TO KEEP TRANSACTIONS OF CUTOMER SECRET, EXCEPT UNDER SPECIAL CIRCUMSTANCES

BANKER ENJOYS A RIGHT OF LIEN. IT IS A LIMITED PLDEGE EXCEPT IN CASE OF ARTICLES RECEIVED FOR SAFE CUSTODY

CONTRACTUAL RELATIONSHIP

BANKER’S RIGHT OF SET OFF BANKER HAS A RIGHT FOR

APPROPRIATION OF ACCOUNTS BANKER IS ENTITLED TO INTEREST

ON LOANS AND COMMISSION FOR OTHER SERVICES.

CONTRACTUAL RELATIONSHIP

TERMINATION OF RELATIONSHIP i) VOLUNTARY ii) BY PROCESS OF LAW1) DEATH OF CUSTOMER2) BANKRUPTCY3) INSANITY OF CUSTOMER4) GARNISHEE ORDER

EXERCISETRUE OR FALSE

1) THE BANKER IS A PRIVILEDGED DEBTOR IN AS MUCH AS HE NEED NOT REPAY HIS DEPOSITORS UNLESS A DEMAND IS MADE ON HIM.

2) BANKER IS AN AGENT WHEN HE ARRANGES SALE OF SHARES ON BEHALF OF HIS CUSTOMER

EXERCISETRUE OR FALSE

3) THE BALANCE IN THE ACCOUNT OF THE WIFE CAN BE DISCLOSED TO THE HUSBAND, BUT NOT VICE VERSA

4) BANKER CAN EXERCISE RIGHT OF SET OFF WITHOUT NOTICE TO THE CUSTOMER

EXERCISETRUE OR FALSE

5) RIGHT OF SET OFF CAN BE EXERCISED IN RESPECT OF BILLS DISCOUNTED BUT NOT YET DUE.

6) IF BANKER FINDS THE ACCOUNT OF THE CUSTOMER UNDESIRABLE OR UNREMUNERABLE, HE CAN CLOSE THE ACCOUNT AND REMIT THE BALANCE BY A CHEQUE.

EXERCISETRUE OR FALSE

7) THE BANK HAS GRANTED OVERDRAFT FACILITY; THE ACCOUNT IS IN CREDIT BALANCE. THE BANKER IS A CREDITOR OF THE CUSTOMER

8) THE BANKER IS A BAILEE WHEN HE PAYS SUBSCRIPTION ON BEHALF OF CUSTOMER

BANKING REGULATION ACT

GOVERNMENT OF INDIA PASSED A COMPREHENSIVE BANKING REGULATION ACT IN 1949 FOR SAFEGUARDING THE BUSINESS OF BANKING COMPANIES.

BANKINGCLASSIFICATION OF BANKS

CLASSIFICATION OF BANKS CAN BE DONE IN MANY WAYS.

BASED ON FUNCTIONING COMMERCIAL BANKS CO-OPERATIVE BANKS DEVELOPMENT BANKS RESERVE BANK OF INDIA

BANKINGCLASSIFICATION OF BANKS

COMMERCIAL BANKS SCHEDULED BANKS NON-SCHEDULED BANKS

BANKINGCLASSIFICATION OF BANKS

SCHEDULED BANKS ONE WHICH IS REGISTERED IN THE

SCHEDULE OF RBI. COME UNDER PURVIEW OF VARIOUS

CREDIT CONTROL MEASURES OF RBI. REQUIRED TO MAINTAIN CERTAIN

MINIMUM BALANCE WITH RBI. ENTITLED TO BORROW FROM RBI.

BANKINGCLASSIFICATION OF BANKS

SCHEDULED BANKS INDIAN SCHEDULED BANKS FOREIGN SCHEDULED BANKS

SCHEDULED BANKS PUBLIC SECTOR COMMERCIAL BANKS PRIVATE SECTOR COMMERCIAL BANKS

BANKINGCLASSIFICATION OF BANKS

PUBLIC SECTOR COMMERCIAL BANKS STATE BANK OF INDIA AND ITS

SUBSIDIARIES; 20 NATIONALISED BANKS;

BANKINGCLASSIFICATION OF BANKS

PRIVATE SECTOR COMMERCIAL BANKS OTHER INDIAN SCHEDULED BANKS

THAT DO NOT FALL IN THE ABOVE GROUP

BANKINGCLASSIFICATION OF BANKS

NON-SCHEDULED BANKS THOSE WHICH ARE NOT INCLUDED IN

SCHEDULE OF RBI THEY ARE NOT ENTITLED TO

BORROWINGS AND REDISCOUTING FACILITIES FROM RBI

BANKINGCLASSIFICATION OF BANKS

BASED ON OWNERSHIP NATIONALISED BANKS PRIVATE BANKS FOREIGN BANKS CO-OPERATIVE BANKS

BANKINGEVOLUTION & GROWTH DISTINCT PHASES IN BANKING SYSTEM

PRIOR TO 1948 - EVOLUTIONARY PHASE 1949-1968 - FOUNDATION PHASE 1969- 1984 - EXPANSION PHASE 1985- 1990 - CONSOLIDATION PHASE SINCE 1990 - REFORMATORY PHASE

BANKINGEVOLUTION & GROWTH EVOLUTION PHASE

REGULATIONS WERE BEING INTRODUCED ROLE CONFINED TO ATTEND TO CREDIT

NEEDS OF SELECTED AND LIMITED SEGMENTS OF ECONOMY

OPERATIONS WERE INFLUENCED BY COMMERCIAL PRINCIPLE AND NOT BY DEVELOPMENT FACTOR.

FAILURE OF BANKS WAS COMMON.

BANKINGEVOLUTION & GROWTH FOUNDATION PHASE

EMPHASIS ON LAYING FOUNDATION FOR SOUND BANKING SYSTEM

AS A CONSEQUENCE BANKING REGULATION ACT WAS PASSED

TRANSFORMATION OF IMPERIAL BANK OF INDIA INTO STATE BANK OF INDIA

STRONG STRESS ON CLASS BANKING BASED ON SECURITY THAN ON PURPOSE

BANKINGEVOLUTION & GROWTH

EXPANSION PHASE NATIONALISATION BANKS

14 IN 1969 6 IN 1980

EXPANSION AT PATHBREAKING PACE APPRX 50000 BRANCHES WERE SET UP INEFFICIENCY AND LACK OF CONTROL QUALITY BECAME A CASUALTY

BANKINGEVOLUTION & GROWTH

DIRECTED LENDING INTEGRATED RURAL DEVELOPMENT

PROGRAMME VARIOUS SCHEMES ANNOUNCED BY

GOVT. BIRTH OF REGIONAL RURAL BANKS IN

1975 AND NABARD IN 1982 TRANSFORMATION FROM CLASS

BANKING TO MASS BANKING.

BANKINGEVOLUTION & GROWTH

CONSOLIDATION PHASE EXTENSION OF EARLIER PHASE IMPROVING HOUSEKEEPING,

CUSTOMER SERVICE, CREDIT MANAGEMENT, STAFF PRODUCTIVITY AND PROFITABILITY.

BANKS ENDED UP IN CONSOLIDATING LOSSES RATHER THAN THE GAINS.

BANKINGEVOLUTION & GROWTH

REFORMATORY PHASE UNPRECEDENTED ECONOMIC CRISIS

ENGULFED THE ECONOMY INDIA ALMOST DEFAULTED ON ITS

INTERNATIONAL COMMITMENTS INTERNATIONAL CREDIT RATING

DOWNGRADED BREAKDOWN OF FISCAL DISCIPLINE

BANKINGEVOLUTION & GROWTH

REFORMATORY PHASE (CONTD) HENCE TO REDRESS THE

IMBALANCES VARIOUS MACRO ECONOMIC STRUCTURAL REFORMATORY MEASURES WERE UNDERTAKEN BY GOVERNMENT IN THE FIELD OF TAX SYSTEM, INDUSTRIAL POLICY, FINANCIAL SECTOR AND FOREIGN TRADE.

BANKING

IN VIEW OF THIS BANK TRANSACTIONS ARE BROADLY CLASSIFIED IN FOLLOWING 3 WAYS 1) CASH TRANSACTIONS 2) TRANSFER TRANSACTIONS 3) CLEARING TRANSACTIONS

BANKING

MOST VULNERABLE AND RISKY AREA THEFT FORGED NOTES SOILED NOTES SHORT RECEIPT EXCESS PAYMENT

BANKING

CASH TRANSACTIONS ARE BALANCED ON DAILY BASIS AS UNDER: CLOSING CASH = OPENING CASH +

CASH RECEIPTS DURING THE DAY – CASH PAYMENTS MADE DURING THE DAY

BANKING

TO PREVENT FRAUDS, THE PARCTICE OF MAINTAINING A SCROLL OF ALL CASH RECEIPTS IS FOLLOWED BY THE BANK.

AN OFFICIAL (NOT ATTACHED TO CASH DEPARTMENT) WILL KEEP A RECORD OF ALL CASH RECEIPTS

BANKING

AT THE END OF THE DAY THIS WILL BE TALLIED WITH CASH DEPARTMENT

THIS ENSURES THAT ALL THE CASH TENDERED BY THE CUSTOMERS IS ACCOUNTED FOR.

BANKING AS AN ABUNDANT PRECAUTION (FOR

HIGH VALUE TRANSACTIONS), SAME TRANSACTION IS PASSED THROUGH SECOND OFFICIAL.

ARMED GUARDS ARE PLACED BURGLAR ALARMS ARE PLACED.

THE BUTTONS ARE KEPT IN STRATEGIC PLACES IN BRANCH PREMISES.

DIRECTLY CONNECTED TO NEAREST POLICE STATION

BANKING CASH RECEIVED FROM

CUSTOMERS IS IDLE MONEY FOR THE BANK.

AFTER KEEPING SUFFICIENT CASH FOR DAY TO DAY OPERATIONS, THE BRANCHES DEPOSIT THE EXCESS CASH WITH THE NEAREST CURRECY CHEST

THERE BY THEY EARN INTEREST.

BANKING IF THE AMOUNT OR FUNDS ARE

TRANSFERRED FROM ONE ACCOUNT TO ANOTHER ACCOUNT IN THE SAME BRANCH OR ANOTHER BRANCH OF THE SAME BANK.

TRANSFER SCROLL IS MAINTAINED DEBIT TRANSFER AND CREDIT

TRANSFER MUST TALLY.

BANKING

WHEN A CUSTOMER DEPOSITS A CHEQUE IN HIS ACCOUNT WHICH IS DRAWN ON ANOTHER BANK, THEN IT NEEDS TO BE CLEARED BEFORE CREDITING THE AMOUNT TO THE ACCOUNT OF THE CUSTOMER.

INWARD CLEARING AND OUTWARD CLEARING