BANKING AWARENESS

What are the reasons that lead to Nationalisation of banks ?

In view of the reluctance of Commercial Banks, before 1969, to finance small business ventures and agriculture and not opening branches in rural areas on account of low business potential, compelled the GOI to take over the control of banks by nationalising them.

What is the need for Financial Intermediaries in India.

Financial intermediaries play an important economic function by facilitating a productive use of the communitys surplus money, Transfer funds to those in need, Eliminate risks and Boost Economy.

What do you mean by teaser rates?

A teaser rate means, a low introductory interest rate on an adjustable rate mortgage (ARM), generally in home loans. The lender though charges low interest rate initially he will charge the real interest rate subsequently. The lender in this case has to tell future rate of interest to the borrower and also its date of commencement. In other words, the home loans which are neither at fixed rate nor at floating are called teaser rates? In fact, it a technique to entice the borrowers who otherwise unable to qualify a mortgage home loan. In view of the higher risk associated with such loans, the standard asset provisioning on the outstanding amount has been increased from 0.40 per cent to 2 per cent with immediate effect. The provisioning on these assets would revert to 0.40 per cent after 1 year from the date on which the rates are reset at higher rates if the accounts remain standard.

IDRBT Institute for development & Research in Banking Technology

was set up by the RBI in 1996. The RBI formed a committee on "Technology Upgradation in the Payment Systems". The committee recommended a variety of payment applications which can be implemented with appropriate technology upgradation and development of a reliable communication network. As a result of the committee's recommendations the institute was established in Hyderabad.

OLTAS: Online tax accounting system is introduced to enable the customers to pay all
their taxes in Bank itself, instead of going to the concerned departments like, Income Tax, Central Excise, Sales Tax etc. On the other hand this is an extra service and extra income to the banks. This type of income is called non-interesst income. Banks will earn around Rs 45/per transaction from the concerned departments.

SMART CARDS:A smart card, chip card, or integrated circuit card (ICC), is in any pocket-sized card with embedded integrated circuits which can process data. This implies that it can receive input which is processed by way of the ICC applications and delivered as an output. There are two broad categories of ICCs. Memory cards contain only non-volatile memory storage components, and perhaps some specific security logic. Microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally PVC. The card may embed a hologram to avoid counterfeiting. Using smartcards also is a form of strong security authentication for single sign-on within large companies and organizations.

The Society for Worldwide Interbank Financial Telecommunication

SWIFT provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment., through SWIFT codes.

IRDA: A statutory body called the Insurance Regulatory Authority set up in 1996.
Renamed as Insurance Regulatory and Development Authority with the passage of IRDA Act, 1999. Mr J Harinarayan is the present Chairman. The headquarters of IRDA is at Hyderabad The major objectives of the IRDA Act are: Protect the policy holders / investors interest, Promote orderly growth of insurance industry Registration of insurance companies Administer the provisions of Insurance Acts, Devise control activities for functioning of insurance companies, Lay down the accounting methodology, Adjudicate disputes

The minimum paid up equity capital for life or general insurance business is Rs.100 crores. The minimum paid up equity capital for carrying on reinsurance business has been prescribed as Rs.200 crores.

Practice Bits
01. Which of the following are the essential characteristics of Money? A. Durability D. All A,B & C B. Portability E. None of the above C. Divisibility

02. The Imperial Bank of India was renamed as ? A. Reserve Bank of India D. IDBI B. State Bank of India E. None of the above C. Union BanK of India

03. Plastic money Exchanged electronically Includes: A. Debit Cards D. Smart Cards B.Credit Cards E. All the above C. ATM Cards

04. Some of the institutions covered under all India DFIs are: A Industrial Finance Corporation of India (IFCI) B Industrial Development Bank of India (IDBI) C Industrial Credit and Investment Corporation of India (ICICI) D Industrial Investment Bank of India (IIBI) E All the above 05. OLTAS stands for A. Online Tax Assessment System C. Online Tax Analysis System E. None of the above 06. Updated technology enables the banks to provide efficient products and services. Some of the products and services are: A. ATM Cards D. Internet Banking B. Credit Cards E. All the above C. Smart Cards B. Online Tata Administrative Services D. Online Tax Accounting System

07. ___________has been set up for exchange of credit information among its members: A. DICGC B. ECGC C. CIBIL D. EXIM BANK E. RBI

08. BCSBI stands for: A. Basel Committee for State Bank of India B. Banker Customer Stability Board of India C. Banking Codes and Standards Board of India D. Banking Codes and State Bank of India E. None of the above 09. IDRBT is a Banking Research Institute, established in 1996 by: A. Reserve Bankj of India C. Department of Information & Technology E. None of the above 10. Teaser Rate of Interest means: A. A teaser rate means, a low introductory interest rate on an Adjustable Rate Mortgage (ARM), generally in home loans B. Charging high rate of interest C. Charging high rate of interest for HNIs D. Rate of interest charged to college staff members E. None of the above 11. Urban Cooeprative banks are controlled by ___________ and _______________ A. State Government and RBI B. State Government and NABARD B. Government of India D. ICRISAT

C. Both State Government and Central Government D. RBI and NABARD. E. None of the above

12. __________regulates all aspects of Insurance Business A. RBI B. IRDA C. AMFI D. SEBI E. All the above

13. SWIFT stands for A. Society for Worldwide Interbank Financial Telecommunication B. Society for Worldwide Indian Financial C. Social net(Working) for International Funds Transfer D. Only C E. None of the above

14. RBI is popularly known as a lender: A. To Central Government D. Of the last resort B. To State Government E. None of the above C. Of Foreign Currency

15. Name the scheme in Mutual Funds which is askin to recurring deposits? A. Systematic Invetment Plan C. Open Ended scheme B. Unit Linked Insurance Policy D. All the above E. None of the above

16. Name the payment system where payment instructions are processed on a continuous basis: A. Protocol Conversion Device C. ECS B. RTGS D. ATM E. None of the above

17 The benefits of leveraging technology to the customer are: A. Easier access D. Global access B. Quicker services E. All the above C. Convenience of banking

18. Which of the following organisations/agencies works solely to monitor and arrange flow of agriculture credit in India? A. NABARD B. RBI C. SIDBI D. SEBI E. None of the above

19. IFSC code represents: A. Indian Financial Systematic Code C. Indian Financial System Code F. None of the above 20. When banks accept a fixed sum of money from an individual for a definite term and pay on maturity with interest, the deposit is known as : A. Term Deposit D. Mortgage ANSWERS 01 D 02 B 03 E 04 E 05 D 06 E 07 C 08 C 09 A 10 A B. Demand Draft E. None of the above C. Bond B. Indian Forex Service Council D. Integrated Financial Services Code

11 A

12 B

13 A

14 D

15 A

16 B

17 E

18 A

19 C

20 A