Siruganur, Tiruchirappalli 621 105

Preliminary Test 1 Batch: 2010-2012 BA 6038: BANKING & INSURANCE Date: 17/01/2012 Part A (2x10=20 Marks) 1. State any two reasons for co-operative banking sickness in India. 2. Define Banker of the Banker. 3. Write short notes on Investment Banking. 4. Mention any 4 roles of reserve bank and give its significance. 5. What is the prime function of SIDBI? 6. What do you mean by core banking? 7. Define Mobile Banking 8. List out the function of NABARD? 9. Define Smart Card MARKS: 50 DURATION: 1 Hrs. TRIMESTER V

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10. Define International Banking.

Part B (2x15=30 Marks) 11. a .Explain the role of RBI in the changing scenario. b.Evaluate the performance of EXIM bank in the light of LPG. OR 12. a. Describe the evolution of Banking System in India. b. Describe the different aspects of Banking Regulations Act and its amendments. (7M) (8M) (8M) (7M)

13. a. Discuss the merits and demerits of ATMs and internet banking. b. Explain the various dimensions of Mobile banking Process. OR 14. a. Compare the features and advantages of EFDs with RTGS. b. Explain the various dimensions of Internet Banking Processes.

(8M) (7M)

(7M) (8M)

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Prepared by: ___________________ (Staff Concerned with date of submission to ECC)

Approved by: ____________________ (Director)

1.excessive overdues,inefficient societies,regional disparities,benefits to big land owners,dependence on outside resources,political interference,inadequate coverage,lack of other facilities,dual control,competition from private agencies,credit linked to assets. 2. A central bank is a lender of last resort -- Prof.Hawtry It is a bank of banker -- Samuelson Bank which has monopoly over note issue -- Vera Smith Central bank is the governments bank -- Sayers 3. Investment banking is a particular form of banking which finances capital requirements of enterprises. Investment banking assists as it performs IPOs, private placement and bond offerings, acts as broker and carries through mergers and acquisitions. 4. To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage. 5. Credit Guarantee Fund Trust for Micro and Small Enterprises provides guarantees to banks for collateral free loans extended to SME. SIDBI Venture Capital Ltd. is Venture Capital company focused at SME. SME Rating Agency of India Ltd. (SMERA) provides composite ratings to SME. 6. Core Banking Solution (CBS) is networking of branches, which enables Customers to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account. The customer is no more the customer of a Branch. He becomes the Banks Customer. Thus CBS is a step towards enhancing customer convenience through Anywhere and Anytime Banking. 7. Mobile banking is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. 8. 1.Providing refinance to lending institutions in rural areas 2.Bringing about or promoting institutional development and 3.Evaluating, monitoring and inspecting the client banks. 9.Smart card is an electronic card used to trade. 10. The International Bank is an international standard for identifying bank accounts across national borders with a minimal of risk of propagating transcription errors. It was originally adopted by the European Committee for Banking Standards (ECBS), and was later adopted as an international standard under ISO 13616:1997 and now as ISO 13616-1:2007. 11.a. RBI and its origin Commenced Operations on 1st April 1935 as per The Reserve Bank of India Act, 1934 (II of 1934) and Nationalise on 1st Jan 1949. To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability andTo operate the credit and currency system of the country to its advantage. Structure of Banking in India Functional Chart,Organisational Structure Functions of RBIBank of Note issueThe Governments BankBankers BankCustodian Foreign Exchange Reserves for countryLender of last resort and bank of rediscounting.Controller of creditMonetary Policy Monetary policy is essentially a programme of action undertaken by central bank,to control and regulate the supply of money with the public and flow of credit with a view of achieving predetermined macroeconomic goals.-Macroeconomics-Theory & policyD.N.Dwivedi-Tata Magraw Hill comp,Instruments of Monetary Policy (Economic variables)

Weapons of Monetary controlsNuts & Bolts of Monetary policy

-- Samuelson & Nordhaus

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Quantitative credit control (General credit control) Control of quantity or volume of money Qualitative credit control ( Selective credit control) Quality /Purpose/Direction of credit Conclusion Central bank plays important role in achieving economic growth of a developing country. It promotes economic growth with stability. It helps in attaining full employment of resources, in overcoming balance of payment disequilibrium & in stabilizing exchange rates. 11.b. Exim Bank (full name: The Export-Import Bank of India) is an Indian government-owned financial institution for the public sector created by and Act of the Parliament of India: the Export-Import Bank of India Act 1981.

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11.b. Exim Bank is managed by a Board of Directors, which has representatives from the Government, Reserve Bank of India, Export Credit Guarantee Corporation of India (ECGC), a financial institution, public sector banks, and the business community. The Bank's functions are segmented into several operating groups including: Corporate Banking Group which handles a variety of financing programmes for Export Oriented Units (EOUs), Importers, and overseas investment by Indian companies. Project Finance / Trade Finance Group handles the entire range of export credit services such as supplier's credit, preshipment Agri Business Group, to spearhead the initiative to promote and support Agri-exports. The Group handles projects and export transactions in the agricultural sector for financing. Small and Medium Enterprise: The group handles credit proposals from SMEs under various lending programmes of the Bank. Export Services Group offers variety of advisory and value-added information services aimed at investment promotion Export Marketing Services Bank offers assistance to Indian companies, to enable them establish their products in overseas markets. Besides these, the Support Services groups, which include: Research & Planning, Corporate Finance, Loan Recovery, Internal Audit, Management Information Services, Information Technology, Legal, Human Resources Management and Corporate Affairs. 12.a.Chart 12.b. The Act contains following five parts : Part 1 Preliminary Part 2 Business of Banking Companies Part 3 Suspension of business and winding-up of banking Companies Part 4 Miscellaneous Part 5 Application of the Act to cooperative banks

13.a. AN ATM COUNTER

ATMs are aquick and convenient way to accessmoney in youraccount. HISTORY Don Wetzel, vice-president of product planning at Docutel (USA), was the chief conceptualist of ATM. He along with Tom Barnes and George Chastain began work in 1968. The working prototype came about in 1969. The first ATM was installed at the Rockville Centre(New York) based Chemical Bank. PARTS OF AN ATM Consists of embedded software and hardware.Two input devices: Card reader & Keypad

Four output devices: Spaker Display screen Receipt printer Cash dispenserElectric eyeJournal Sensor Reject bin 13.b. Introduction Mobile banking is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone.

REASONS OF GENESIS OF MOBILE BANKING Introduction of new technologies.Control costs, removal of cost duplication Cater to increasing online channel customers Personalize customer interactionsnparalleled convenience and proactive customer service CLASSIFYING SERVICES On the basis of originator of service sessionPushPullOn the basis of nature of service

Transaction BasedEnquiry BasedMobile banking services Account InformationPayments, Deposits, withdrawals, and TransfersInvestmentSupportContent Services 14.a. Electronic Fund Transfer (EFT)

EFT is money transfer service from account to account of any bank branch to any other bank branch in places where such services are offered.The transactions are routed through RBI.

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The EFT system presently covers all the branches of the 27 public sector banks and 55 scheduled commercial banks at the 15 centres (viz., Ahmedabad, Bangalore, Bhubaneswar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthpuram). Operation of EFT Step-1: The remitter fills in the EFT Application form giving the particulars of the beneficiary (city, bank, branch, beneficiarys name, account type and account number) and authorises the branch to remit a specified amount to the beneficiary by raising a debit to the remitters account. Step-2: The remitting branch prepares a schedule and sends the duplicate of the EFT application form to its Service branch for EFT data preparation Step-3: The Service branch prepares the EFT data file by using a software package supplied by RBI and transmits the same to the local RBI (National Clearing Cell) to be included for the settlement. Step-4: The RBI at the remitting centre consolidates the files received from all banks, sorts the transactions city-wise and prepares vouchers for debiting the remitting banks on Day-1 itself. City-wise files are transmitted to the RBI offices at the respective destination centres. Step-5: RBI at the destination centre receives the files from the originating centres, consolidates them and sorts them bank-wise. Thereafter, bank-wise remittance data files are transmitted to banks on Day 1 itself. Bank-wise vouchers are prepared for crediting the receiving banks accounts the same day or next day. Step-6: On Day 1/2 morning the receiving banks at the destination centres process the remittance files transmitted by RBI and forward credit reports to the destination branches for crediting the beneficiaries accounts. Benefits Faster mode of transfer of funds Customer-savvy systemSecured means of transfer Beneficiary need not go to the bank since funds are credited automatically. RTGS Real Time Gross Settlement (RTGS) is a funds transfer mechanism where transfer of funds takes place from one bank to another on real time payment transaction is not subjected to any waiting period and gross settlement the transaction is settled on one to one basis without bunching any other transaction. Large value transactions minimum remittance amount is Rs.1 lakh. (no upper ceiling) The RTGS is available from 9 am to 4.30 pm on weekdays and 9 am to 12.30 noon on Saturday. The credit is instant. If the crediting , the receiving bank would have to return the funds within 2 hours. At present there are 58720 bank branches which are RTGS enabled. Details required from the remitter Account to be remittedAccount number to be debitedName of the beneficiary bank

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Name of the beneficiary customerSender to receiver information, if anyThe IFSC code of the receiving branch (the IFSC code can be obtained from the bank and also available on the cheque leaf.) Benefits of RTGS Faster transfer of large value funds.Less risky as funds are routed through RBI. Reduction in transaction cost. Companies are expected to save Rs. 2000 per Rs. 1 crores worth of transaction using RTGS.Innovative payment products have been developed utilising the RTGS infrastructure.

14.b. Internet banking Internet banking services is an additional delivery channel is just like telebanking, ATM with internet as the medium of operation.The major advantage of internet banking is that the user can utilize the services from anywhere at any time. It simply require a personal computer & as internet connection. The user connects to the bankss website through internet and log in to the services by using valid corporate id, user-id and password. Need for Internet banking It provide faster, accurate, efficient services at the touch of a button & at a very low cost. Banks initiating new technological innovation have an edge over other banks The internet offers an avenue to the issue of competitive advantage in the face of redefinition of financial services industryPhenomenal growth of customers & branches Time has come for banks to bring fundamental changes in their strategy to redefine customer banker relationship. Advantages Convenience banking Available anywhere/ anytime -24*7*365Low cost, unlimited access & lesser hassels Better customer / banker relationship, integrated customer dataWides reach to public, competitive edge for banks, enhance image of banks as technology driven bankEffective marketing tool for promotion of various schemes of banks Internet banking- working User can utilise the services from anywhere & at any time Require P C & an internet connection User connects to the banks websites through internet Login to the services by using valid user-id and password Utilities the services & facilities available & obtains the desired information Functions Checking account balanceMaking account enquiryOrdering a demandRequesting a cheque book Transferring funds Opening additional deposit a/cMaking a stop payment request Requesting to make payment of utility bills, electricity, water, telephone etc Distinct features of online banking over traditional banking Customer can do banking transactions round the clock Personal visit to the branch is no longer requiredCustomer can access & operate their a/c from anywhere in the world

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Cost of each transaction is much reducedQuick & effective customer service is possible Requirement of staff at the banks get reducedFaster decision making & better operational efficiency are possible Used as a platform for electronic delivery of varied banking services to the customer Increases customers convenience at all levels reates strong basic infrastructure for the bank to venture in the new fields.

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