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Evolution of Banking The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Indian Banking Regulation Act 1949 was formulated to govern the financial sector. In 1921 the presidency Banks of Bengal, Bombay and Madras with their 70 branches were merged in 1921 to form the Imperial Bank of India. During the First 5 year plan in 1951, an act was passed in Parliament in May 1955 nationalizing the Imperial Bank and the State Bank of India was constituted on 1 July 1955 During the period 1906-1911, several Commercial banks such as BOI, Central Bank of India, BoB, Bank of Mysore etc were established which were all Joint Stock Banks
Definition of a Bank Indian Banking Regulation Act (1949) defines Banking as the Acceptance of money for the purpose of lending or investment, from deposits received from the public, repayable on demand or otherwise withdrawable by cheques, drafts or order to otherwise (Standing Instructions, ECS).
Nationalization of Banks First only State Bank of India (SBI) was nationalized in July 1955 under the SBI Act of 1955. Nationalization of Seven State Banks of India (formed subsidiary) took place on 19th July, 1960. In 1969, Mrs. Indira Gandhi the then prime minister nationalized 14 banks then. These banks were mostly owned by businessmen and even managed by them.
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Central Bank of India Bank of Maharashtra Dena Bank Punjab National Bank Syndicate Bank Canara Bank Indian Bank Indian Overseas Bank Bank of Baroda Union Bank Allahabad Bank United Bank of India UCO Bank Bank of India
1980 : Nationalisation of seven more banks with deposits over 200 crores. Problems: Nationalized banks had job guarantee so employee efficiency very low, indiscipline and high absenteeism, trade union problems etc. Compare with present banks TYPE OF BANKS AND THEIR FUNCTIONS
SBI and its Associate banks are responsible for . aiming generally at stability.1. 6. or advances on approved short term securities or government papers. cotton. CRR. Moral Suasion. It should be the agent . 7. of the government would be performed. Maintains the foreign exchange reserves and gold reserves for the country (Discussed in classnotes given) 9. Rediscounting bills for scheduled banks (Discussed in class-notes given) 11. sterilization. When necessary. It does not deal directly with the public. SLR. notes given) 6. 5.Mild persuasion to banks and financial institutions to follow RBI requirements based on market situations 2. The Bank can lend against agricultural bills upto a maximum period of fifteen months and incase of other bills upto a maximum period of six months.The Bank borrows money from the public by accepting deposits such as current account deposits. industries and manufacturers. It should be the holder of all the government balances. Clearing House of Commercial Banks (Discussed in class-notes given) 10.Open Market Operation.It lends money to merchants . channeled through agencies such NABARD. Central Bank State Bank of India Scheduled and Non Scheduled Banks Co operative Banking Retail Banking Private Banking Investment Banking Corporate Banking 1. 4. the bank provides loans to commercial bank when required and also rediscount their bill. wheat. 5. CENTRAL BANK: RBI 1. It should be the channel. (4) It also acts as the clearing house of the commercial bank where RBI doesnot have its branches (CLEARING FUNCTIONS DISCUSSED IN CLASS). fixed deposits and demand deposits. Bank Rate etc(Discussed in class. It indirectly helps agriculture. oil-seeds. suitable contraction and suitable expansion on money supply. Lender of last resort/ Banker to Banks 7. so to speak. It lends mostly on the security of easily realizable commodities like rice. STATE BANK OF INDIA The State Bank of India acts as an agent of the Reserve Bank of India and performs the following functions: (1) Borrows money:. (2) Lends money:. legal tender currency 2. 4. (3) Banker s Bank:-The State Bank of India acts as the banker s bank. In discharging this responsibility. 3. bby using the following tools: OMO. 3. A Central bank has the sole right of note issuance i. cloth. SIDBI. industry by augmenting resources of other banks. through which the financial operations. NHB ie priority sector targets 8. Based on its Monetary Policy It should further be the duty of the central bank to effect so far as it could . It also lends to farmers and co-operative institutions.e. and the sole channel for the output and intake of legal tender currency. and the holder of all the reserves of the other banks and branches of banks in the country. at home and abroad. 2. 8. it should be the ultimate source from which emergency credit might be obtained in the form of rediscounting approved bills. gold and government securities.
The State Bank of India also acts as the agent of the Reserve Bank of India. As an agent. Runs as a democracy: Run by Board of Director elected on the basis of one vote per member Cosmos. Nor do these people have large incomes or large assets to offer as security. Saraswat. 2. (4) Government s Bank:. dividends interest. It also helps in the transfer on the funds of the State and Central Government. It collects checks. salaries and pensions on behalf of its customers.. Rural Co-operative banks: predominantly agriculture credit banks-short. limited resources and fund shortage. Suvarna Sahakari etc 1. cottage industries. handicraft. chances of financial mis-management by the management itself (corruption). Membership open to traders. perishable agricultural commodities. All nationalised banks. SBT State Bank of Travancore. The Bank also manages the debts (buying or selling of Bonds and Treasury Bills) floated by the State Governments. SCHEDULED AND NON SCHEDULED BANKS In the RBI ACT OF 1934.The State Bank performs various subsidiary services also. foreign banks are scheduled. professionals etc who have to contribute to share capital. RBI can rediscount the bills already discounted by them 2. SBM State Bank of Mysore. All government accounts and transaction get routed through them 5.clearing: SBBJ State Bank of Bikaner & Jaipur. They have their own funds (paid up share capital) and borrowed funds (deposits from public and borrowing from other banks) . Issues: Recovery. bank guarantee. SBH State Bank of Hyderabad. problem of valuing land.Their drafts. letter of credit accepted in all government offices 3. SBP State Bank of Patiala. drafts.The State Bank of India facilitates remittance of money from one place to another. It receives valuables and documents for safe custody and maintains safe deposit vaults 3. It is a voluntary concern with equitable participation and control among all concerned. bill of exchange. COOPERATIVE BANKING Definition by Paul Lambert: It is an enterprise formed and directed by an association of users. improper title of property as security. 1. More account holders and lesser interest payment towards deposits as compared to non scheduled banks 4. (7) Subsidiary service functions:.RBI acts as lender of last resort 4. Urban Co-operative banks: Formed for meeting the credit requirement of the urban lower middle class which larger banks do not wish to lend due to high cost of advancing and recovery. all banks listed in the second schedule is known as Scheduled banks All Scheduled bank operations are under strict surveillance of RBI. Advantages of scheduled banks: 1. high Non performing Assets. (5) Remittance:. SBIN State Bank of Indore. It is organized by those who themselves need credit 2. livestock.The State Bank of India performs the functions of a Central Bank where RBI does not have its presence. medium and long term to agriculture. merchant. Most cooperative banks are non scheduled (not subjected to strict financial discipline). applying within itself the rules of democracy and directly intended to serve both its own members and the community as a whole. most private sector banks. (6) Functions as Central Bank:. the State Bank of India maintains the treasuries of the State Government.
and the rate of interest the bank charges to debtors on bank loans.home loans. Non Traditional financial services in the recent times: Wealth Management and Relationship Management Services. General Utility services such as Bill payments. general Insurance i. overdrafts. houses. construction etc 3. RETAIL BANKING Basic Functions 1. In exchange for the lack of liquidity. Multi currency accounts (2007) for exporters with inter project fund transferability in any currency and country . portfolio management schemes. Foreign Currency loans to Exporters / Importers via Corporate Banking 5. credit cards. insurance. Banking as a part of the Financial Services industry a. Interest calculation for premature withdrawal of deposit and savings account inte rest calculation explained in class 2. consumer goods.5. (Net Interest Income) FEE BASED INCOMES: Third party incomes as Distributors of mutual funds. issuing bank guarantees. in terms of interest paid to depositors. Distribution of third party products such as mutual funds. Acting as an Intermediary: Collects Savings from those who have them and give to those who need them. Conversion charges on currency notes OTC 2. merchant outlets: swipe machines. RBI Bonds. equity trading brokerage . issuing travellers cheques etc d. personal loans . selling gold coins Major Income Streams for Retail Banks BANKING SPREAD: The bank spread is the difference between the bank's cost of funds. Converting foreign currency for exporters and importers 4. safety lockers. Loans & Advances: Accepts funds so that they can lend out credit to customers for consumption towards cars. tax payments. Interest income on term loans. Acceptance of Deposits: Classification of Deposits: Demand Deposits/Current Deposits-Repayable on demand-Savings accounts for individuals. b. cash credit. Use of Cheques: Since the deposits with banks are withdrawable by cheques it elevates bank deposits to the position of money n 4.e. Conversion charges on Inward and Outward fund remittances 3. letter of credit etc FOREIGN EXCHANGE INCOMES: 1. Current Accounts for businesses (CASA) Fixed Deposits/Time Deposits The deposit is placed for a fix time period and fixed interest rate/ instructions needed for premature withdrawal. RBI bonds etc c. banks offer a higher yield on time deposits than they offer on regular savings accounts. life insurance. mediclaims & Property insurance.
Banks advance loans to Brokers. cheque. Liquid plus & ultra short term mutual funds. Section 13 defines a negotiable instrument means a promissory payable either to order or bearer Bills of exchange/cheques/drafts/ certificate of deposits-unsecured borrowing by scheduled banks for a period ranging 3 months to 1 yr by issuing promissory notes/ Accommodation bill. The loan amounts are credited to the respective borrower s accounts and they are authorised to draw cheques up to the sanctioned amounts. Therefore debt gets converted to money. Thus money available for credit increases. promissory notes etc thereby increasing credit money supply. When banks loan out these primary deposits Derivative deposits are created which add to the money supply. financial institutions. Treasury bills. Incase the borrower is an account holder in the same bank that has advanced the loan. which the respective borrower/seller can withdraw using cheques. Therefore the deposits of the respective borrowers bank increases. Certificate of Deposits. current account. individuals etc and Discount Bill of exchange. total supply of money does not increase from that when people come and open the account with these. the deposits of the same bank will increase. of which the bank has to keep 20% as cash reserves and may lend the rest Step 1: Bank A Liability New Dep: Rs 2000 Total: Liab: 2000 Step 2: bank A Liability Deposit: 2000 Asset New cash: 2000 Asset: 2000 Asset Cash: 400 Loan to X: 1600 . Thus banks convert debt into money Balance Sheet approach: Let us assume a Deposit of INR 2000. Layering and Integration (Please refer to notes given in class) Credit Creation of Banks: Loans Created Deposit Primary deposits: hard cash. This third party remains liable till the bill amount is repaid to the bank BANK S ASSETS: Loans and Bank s Investments BANK S LIABILITIES: Savings account.Placement. Where the bank had lent out via the cheque route. fixed deposits and bank borrowings from other sources KYC-Know your Customer or Client/ AML. Whenever any bank purchases an income earning asset.INVESTMENT INCOME Income from investment in interbank call money market. This will increase that banks deposit base by the equivalent amount. thereby indirectly creating a new deposit. commercial papers Negotiable Instruments Transactions related to NI are governed by the negotiable instruments act 1881.it is a bill of exchange where a reputed third party is providing a guarantee towards repayment as a favor without any compensation for the same. drafts etc. government securities. whether in a different bank or the same one. the borrower will credit the cheque into his respective bank account. it credits that amount to the account of the seller.
Operational aspect of physically opening customer Accounts post checking the accuracy of all documents and resolution of any discrepancy . photograph etc) are followed and collected during account opening . 4. ROLES AND FUNCTIONS OF DIFFERENT DEPARTMENTS 1. 2. 2. photo ID. where r=percentage of deposit to be kept as liquid money under the Cash Reserve Ratio requirement .75% which is around 18 times. which is currently at 5. 3. CUSTOMER SERVICE: Following services are performed by them 1. Marking them according to the customer type as Special Category Client or high risk client in case he s a politician. Ensuring that all KYC norms (Address proof.Total: Liab: 2000 Asset: 2000 Step 3 : Bank B (X is an Account holder) Liability Asset New Dep: 1600 Cash in hand: 1600 Total: Liab: 1600 Asset: 1600 Step 4: bank B Liability Deposit: 1600 Total Liability: 1600 Asset Cash in hand:320 Loan to Y: 1280 Total Asset: 1600 Step 5: Bank C (Y is an Account holder) Liability Asset New Dep: 1280 Total: Liab: 1280 Cash in hand: 1280 Asset: 1280 Credit creation multiplier (K) K (Deposit multiplier)=1/ r .75% Therefore K=1/5. Divert customers to Alternate Delivery Channels (ADC) such as Phone Banking and Internet Banking to save the time of Service executives. Judge the potential of customers for cross sale of banking products based on their perceived net worth and thereby directing them to Branch Banking or Priority banking for either starting a new relationship or deepening existing relationship. Thus Credit creation can take place up to 20 times the initial deposit amount. police official etc who has enough influence to damage the bank s reputation in case of any customer issue. Assist in resolving very basic service queries 2. Primary screening and addressing customers requirements when they enter the branch and then directing them to the respective departments as per their queries and demands. MIHU: May I help you: 1.
Responsible for service and resolution of queries pertaining to products such as interest calculation on deposits. These are all held by them confidentially in fire proof lockers etc 11. change of EMI structure or part or full foreclosure and services related to accounts. The . Maintaining Branch inventories of credit cards. Safeguard interest of customers from fraudulent practices by identifying signature mismatches and forgery on cheques. terrorism financing etc. They are responsible for meeting branch audit requirements 3. maintenance and collecting the charges are their responsibility 10. Resolve queries pertaining to Credit cards. 3.3. gift cheques. assisting clients in their payments. Account to account fund transfers within the same bank/ branch. service standards are followed as per rules laid down by group compliance. and demand drafts. phone banking.e. 5. internet banking. Receipt and payment of cash over the counter and following certain security norms in case the amounts are very large i. Track accounts with heavy inflow/outflow and report to the relevant authorities to safeguard the interest of the bank. This is the fastest possible money transfer system through the banking channel. documentation. 6. Settlement in 'real time' means payment transaction is not subjected to any waiting period. Ensuring all transactions. Encashment and also issuance of traveller s cheques. deposits which are low involvement product or else directing the customer to the Relationship Manager for the respective product or department by generating warm leads . Sealed passwords for Accounts. country risk and reputation analysis before opening Non Resident accounts (CRRT-Country Risk and Reputational Table). account opening kits and cards. Exchanging foreign currency OTC (Over the Counter) 9.e. Acceptance and Clearing of cheques RTGS: The acronym 'RTGS' stands for Real Time Gross Settlement. which has a list of countries which are high risk for money laundering. 9. personal loans and home loans. debit cards. Follow AML guidelines diligently. accounts opening formalities. 6. All services pertaining to Locker opening. Generating leads or Cross Sale of investments and other banking products by selling some of the products themselves like credit cards. since they have a specimen signature on the records 4. Identify and destroy counterfeit currency 5. letter from customer stating source of funds or its usage/Pan Card copy etc 2. Assist the customers in inward and outward remittances/ money transfers 8. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. Maintenance of Cash in ATMs 8. placing fresh deposits and renewing the ones which have maturing selecting the optimum interest rates and time periods as per client specifications 7. Keep a tab on clients whose cash flows highly exceed their mentioned profession or business. RTGS-real Time Gross Settlement-/ NEFT-National Electronic Fund transfer 7. Raise STRs i. Suspicious Transaction Report based on these heavy irregular fund flows 4. TELLERS (CASHIERS) 1.
transactions are settled as soon as they are processed. while fees are waived off in mostly all banking transactions and products 5.00 am. gold.00 noon). All annual charges on cards are waived.25% in mutual funds when Entry Load was prevalent i. Experienced Relationship Managers and Customer Service Managers assigned to fewer groups of customers for personalised and specialised services 2. 11. 'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction. even then insurance is much more profitable.000 . real estate etc. Extremely competitive rates are offered on currency conversion. bonds. while approx INR 90.00 hours and 17. insurance. especially in multinationals Relationship Managers and Financial Consultants are assigned to customers to cross-sell banking products and offer wealth management services. No minimum or maximum stipulation has been fixed for EFT and NEFT transactions.Premier/ ABN Amro-Van Gogh Preferred Banking/ Citibank-Citigold/ Standard CharteredPriority Circle Value proposition with account opening amounts ranging from 25 30 lacs 1. consolidating previous. Very high limits offered on debit and credit cards with international service facilities included which are either free or heavily subsidised. stocks. while remittance charges are mostly waived or discounted . There is no upper ceiling for RTGS transactions.1 lakh. Thereby providing customised investment solutions which are extensively tracked. 4. commodities.00 am. High focus on Structured investment products using derivatives etc are designed especially for these clients 4. BRANCH BANKING SEGMENT HSBC. PRIORITY BANKING HSBC. while 1 Lac for Mid market. 11. Wealth Management Services to customers. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. the focus is to primarily to sell Life Insurance with a secondary focus on mutual funds.Power Vantage/ Citibank-Citi Blue Mid market and Mass market Customers. The minimum amount to be remitted through RTGS is Rs. so that large percentage of income may be derived from the smaller amounts sold per customer 5. foreign investments. Commissions on basic insurance products ranged from 15% to 40% on the first years premiu m as against 2. deposits. Since Branch banking is a Volumes game and not a Value proposition the products aggressively sold are all very high revenue products.000 of MF sales gave the similar revenues) Even now with entry load ban on MFs upfront charges and reduced charges on insurance. The account opening cheques range from Rs. rebalanced and allocated according to customer risk profiling and cash flows 3.5000 for Mass market. credit cards etc. 12.00 noon.00 hours.00 hours) and 3 times during Saturdays (9. NEFT settlement takes place 6 times a day during the week days (9.e. ( 5 lac of Premium in insurance @ 40% commission gives a revenue of INR 200. in RTGS. debt and sectoral mutual funds. Apart from the other products such as retail assets. Contrary to this. 15.00 am and 12. existing and fresh investments spanning equity. 6. transactions are processed continuously throughout the RTGS business hours.00 am. Higher Deposit rates are offered.00. 13.
equity and commodities side 8. to either enhance profitability or hedge risks 9. Cross border investment and insurance norms have been followed. Maintain and grow CASA balances. 8.e.Multiple account facilities in different countries offered to High Net worth clients with business interest across the globe. Nigeria. . Most products are designed with inbuilt features to participate in the derivatives segment and involve aggressive option trading strategies and positions in Futures. Track foreign currency markets to enable Non Resident customers profit from exchange rate fluctuations 10. Also focus on the corporate relationship segment (company accounts) as an avenue for high revenue from large company investments. market linked plans (ULIPs). Constant reviewing and monitoring customer s portfolios and detailed financial planning to address any need gaps using proprietary software. 5.e. All investments have to be documented extensively capturing the minutest of investor/investment details. Investor risk profiling. Managing incremental cross sale of investments and other banking products 3. Portfolio tracking & rebalancing 2. investments coming from Iraq. and also with much lesser documentation requirements 6. Thereby make changes in the portfolio based on current market levels and movements debt. Sales of all categories of Life Insurance products i. by liaising with the corporate banking channel 11. In one country the priority account minimum balance needs to be maintained. Acquire new relationships and grow their balances through investments in various products . advisory. Wealth Management: Financial Planning. Asset allocation & Product selection. Retention of customers. RELATIONSHIP MANAGEMENT 1. Equity research. Zambia etc which are of risky nature 7. Ensuring all audit and compliance norms are followed. monitoring and stock trading through the Portfolio Management Services route 7. deepen the relationship with constant interaction and ensure quality service and resolution of queries within given TAT (Turn around time) 4. Provide structured products to HNI clients. Interest Rates charged on Home loans and personal loans are at a significant discount to Branch banking customers. term policies and Endowment Plans 6. Anti Money Laundering measures have to be followed and country specific risk measures have to be taken as per CRRT (Country Risk Reputational Table) i. while in other countries it can be a zero balance account.
seminars & events 2. report on competitor activities of other banks and financial institutions . For home loans. Hold marketing events at the bank. car loans and Personal loans to existing and new customers 2. TRAINING & DEVELOPMENT 1. new technologies. Develop Learning & management modules covering a wide range of banking. RETAIL ASSETS 1 Selling Home loans. Selling Fixed deposits to increase the banks deposit base 9. Regular training on investments. 4. 7. Balance transfer. clubs. Ensure all mandatory certifications are completed by the sales and service staff and provide training for the same 2. liaison with designated lawyers and property valuers to ensure that the property to be kept as mortgage is secure with clear title.12. multiplexes etc sometimes offering concessional interest rates to promote loans. assess. 5. Selling CASA: Current accounts and savings accounts 2. RETAIL LIABILITIES 1. changes in bank policies. Extensive training provided on identifying money laundering trails and investments routed from high risk countries. Also discuss the detailed process of Sanctioning and Disbursement of loans (Discussed in details class) 8. Conduct regular market research to review.and capturing changing consumer behavior and general industry trends 7. analyze. Procuring databases from various sources for cold calling and selling banking propositions 3. rebranding and re launching existing products 5. finance and investment topics with online tests for getting a formal qualification 3. companies. Credit managers verify customer income documents. takes place post a clear legal report of the property papers from lawyers and based on the technical valuation report by property valuer of the current market value of property 6. Provide training on new product launches. societies. CUSTOMER ACQUISITIONS TEAM (CAT) 1. Top up . malls. Taking customer references from existing and prospective clients for sourcing more accounts 4. 4. Types of products: Home Loans. Cheque handed out to borrower. Loan against property. The final Disbursal of loan ie. calculate his repayment capacity and then Sanction loans. Collecting and completing the required documentation for account opening 10. Loan against commercial property. organizing customer meets. Initiating and implementing Marketing efforts for acquiring new accounts by individual sales efforts. insurance and financial planning for customers . no encumbrances and with required market valuation for ensuring the security of the loan.
sectors etc. CRRT (Country Risk and Reputations Table) countries such as African countries etc are highlighted. debit and credit cards and their respective passwords. Conduct regular audit on all investment & insurance sales making sure that cross border investment norms are maintained (US. placement and withdrawal of deposits. credit card defaults etc Customer background checks. 3. AUDIT & COMPLIANCE 1. Issuance of cheque books. economics. Assist the sales team in closing large investment deals with their value added inputs based on views and market direction 13. Create talent pools by identifying and segregating employees based on various skill sets ranging from team management. generating account opening kits. product not matching the clients risk profile. competitor strategies and prevailing market opportunities 11. Update staff on new legislations. Track and research all mutual funds based over many parameters and compile a White list or Choice list which streamlines the best mutual funds in every sector and category based on their research which are recommended by the bank 4. credit history etc before the bank authorizes loans or credit cards RATES GOVERNING BANKS PLR-PRIME LENDING RATE: RBI: 11-12%/ 5 top Commercial Banks 11-15%. healthiness of his prior banking transactions. COLLECTIONS Recovery and settlement of bad loans. generating internet & phone banking passwords. Ensure Sales Quality is maintained on all banking product sales. field investigation reports and risk management measures such as verifying customer s area of residence and whether he stays in a negative area . 3. global and local trends. AMFI etc 2. Checking that there is no wrong selling due to target pressure. IRDA. RESEARCH TEAM 1.Prime Lending Rate (PLR) is that rate of interest at which a bank lends to its best customers with highest credit worthiness . documentation and records are all in order. knowledge quotient. selling skills. mismatch of signatures.6. investment tenure and age. BACK OFFICE OPERATIONS Back office functions. forgery of documents while selling banking products. Daily updates. previous loan repayment records. Canada Australia etc) Anti Money Laundering guidelines are followed. customer handling techniques etc by conducting regular workshops 7. bank statement etc 14. new & existing funds. the Sales person had all the mandatory licenses and customer interest has been met 12. mails & messages on market trends and occurrences spread over all investment types 2. Oversee that all branch operations are conducted based on Group compliance norms and legalities laid down by external entities such as the central bank. equity. Compile extensive and detailed studies about markets.
BANK RATE: 6%. products are customized for the entire group of customers) .The RBI uses Repo and Reverse Repo to aid banks in adjusting their liquidity requirements and help in meeting Monetary policy measures.Capital Adequacy Ratio. Equity linked note. PRIVATE BANKING Caters to Super High Net worth customers. Lending functions are secondary and a part of the service functions. Aim is to make fee based incomes by offering structured Products and specialized investment services from which bank earns commissions.SLR refers to the amount that all banks require to maintain in form of approved government securities.75%. (Capital/Risk) determines the capacity of the bank in terms of honoring deposit withdrawals and managing other risk such as credit default risk.Longer term borrowing rate from RBI. All products and services are offered at discounted or special rates. operational risk. remittance charges waived. The banks then repay the loan by repurchasing the securities from RBI by paying the principle and the applicable rate REVERSE REPO RATE: 4.liquid cash that banks have to maintain with the Reserve Bank of India (RBI) as a percentage of their demand and time liabilities and borrowing from CBLO market STATUTORY LIQUIDITY RATIO: 25% . foreign exchange conversion rate few paises plus minus the interbank rate.minimum account opening cheques: 4 crores (HSBC).CASH RESERVE RATIO: 6%. Stress is mainly on customized investment products which are specifically designed for them using derivatives. 1 Crore (ICICI). documentation waived (fundamentally similar services given to HNIs in Retail banking except Investment products which are personally customized for these individual clients while in Retail HNI banking. Customer service being rendered on a more personal basis. Deposit rates better.Short term lending to RBI when banks have surplus liquidity CAR.Short term Bank borrowing from RBI by pledging government bonds as security when banks have to meet temporary shortfalls.e.5%.As per Basel 2 norms the minimum is 8% while RBI has fixed 9% as CAR -It is amount of a bank's own z (Tier 1 and Tier 2 capital) expressed as a percentage of its risk weighted credit exposures i. capital protection equity plans using Constant Proportionate portfolio investment (CPPI model) (Explained in class)etc. The difference between the two rates is called the Interest Rate Corridor (Explained in class) 6. In case of Scheduled Commercial Banks CAR= 9 per cent For New Private Sector Banks CAR = 10 per cent For Banks undertaking Insurance Business CAR = 10 per cent For Local Area Banks CAR =15 per cent LAF: Liquidity Adjustment facility. bill re discounting rate REPO RATE: 5. loan rates discounted. dedicated Relationship Managers with 8 to 10 years of investment experience.
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