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Banking Terminology

Banking Terminology

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Published by: nilkitacacs on Dec 23, 2009
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Scheduled Banks:
Those banks which have been included in theSecond Schedule of Reserve Bank of India(RBI) Act, 1934. RBI inturn includes only those banks in this schedule which satisfy thecriteria laid down vide section 42 (6) (a) of the Act.As on 30th June, 1999, there were 300 scheduled banks in Indiahaving a total network of 64,918 branches. The scheduledcommercial banks in India comprise of State bank of India and itsassociates (8), nationalized banks (19), foreign banks (45),private sector banks (32), co-operative banks and regional ruralbanks.
Nationalized Banks
: The nationalization of banks in India tookplace in 1969 by Mrs. Indira Gandhi the then prime minister. Itnationalized 14 banks then. These banks were mostly owned bybusinessmen and even managed by them.(Central Bank of India, Bank of Maharashtra ,Dena Bank PunjabNational Bank, Syndicate Bank, Canara Bank, Indian Bank ,IndianOverseas Bank, Bank of Baroda, Union Bank, Allahabad BankUnited Bank of India, UCO Bank, Bank of India)Before the steps of nationalization of Indian banks, only StateBank of India (SBI) was nationalized. It took place in July 1955under the SBI Act of 1955. Nationalization of Seven State Banksof India (formed subsidiary) took place on 19th July, 1960.The State Bank of India is India's largest commercial bank and isranked one of the top five banks worldwide. It serves 90 millioncustomers through a network of 9,000 branches and it offers --either directly or through subsidiaries -- a wide range of bankingservices.The second phase of nationalization of Indian banks took place inthe year 1980. Seven more banks were nationalized with deposits
 
over 200 crores. Till this year, approximately 80% of the bankingsegment in India were under Government ownership.After the nationalisation of banks in India, the branches of thepublic sector banks rose to approximately 800% in deposits andadvances took a huge jump by 11,000%.
Central Bank
: A Central Bank or reserve bank, by definition, isthe organization within a specific country that regulates all of thecurrency supplies and related policies for that particular area. ACentral Bank will perform various actions, but its most important job is to make certain that the national currency and MoneySupply remain stable. Depending on the country, Central Banksmay be government owned and controlled or may be run under regulations that are specifically created to prevent extensivegovernment interference.Eg.RBI is central bank of India and FED is central bank of USA.
SLR((Statutory Liquidity Ratio)
is the amount a commercialbank needs to maintain in the form of cash, or gold or govt.approved securities (Bonds) before providing credit to itscustomers. SLR rate is determined and maintained by the RBI(Reserve Bank of India) in order to control the expansion of bankcredit. Present rate of SLR is 25 %.
CRR (Cash Reserve Ratio):
Cash reserve Ratio (CRR) is theamount of Cash(liquid cash like gold) that the banks have to keepwith RBI. This Ratio is basically to secure solvency of the bankand to drain out the excessive money from the banks. If RBIdecides to increase the percent of this, the available amount withthe banks comes down and if RBI reduce the CRR then availableamount with Banks increased and they are able to lend more.RBIhas reduced this ratio three times and reduced it from 9 % to 5%.

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