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Scheduled Banks in India :

Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of
India(RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42
(6) (a) of the Act.
As on 30th June, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches.The scheduled
commercial banks in India comprise of State bank of India and its associates (8), nationalised banks (19), foreign banks (45),
private sector banks (32), co-operative banks and regional rural banks.
"Scheduled banks in India" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a
subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank
constituted the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank"
The following are the Scheduled Banks in India:
State Bank of India, Union Bank of India ,United Bank of India ,UCO Bank ,Vijaya Bank. ING Vysya Bank Ltd ,Axis Bank
Ltd ,Indusind Bank Ltd ,ICICI Bank Ltd.

Treasury Bills :
T-bills are short-term securities that mature in one year or less from their issue date. They are issued with three-month, six-month
and one-year maturities. T-bills are purchased for a price that is less than their par (face) value; when they mature, the
government pays the holder the full par value. Effectively, your interest is the difference between the purchase price of the
security and what you get at maturity. For example, if you bought a 90-day T-bill at $9,800 and held it until maturity, you would
earn $200 on your investment. This differs from coupon bonds, which pay interest semi-annually.
Treasury bills (as well as notes and bonds) are issued through a competitive bidding process at auctions. If you want to buy a Tbill, you submit a bid that is prepared either non-competitively or competitively. In non-competitive bidding, you'll receive the
full amount of the security you want at the return determined at the auction. With competitive bidding, you have to specify the
return that you would like to receive. If the return you specify is too high, you might not receive any securities, or just a portion
of what you bid for. The only downside to T-bills is that you won't get a great return because Treasuries are exceptionally safe.

Contra assets in bank balance sheet;A contra asset is a negative asset account that is designed to offset the
balance in the asset account with which it is paired. The purpose of a contra asset account is to store a reserve that reduces the
balance in the paired account. By stating this information separately in a contra asset account, a user of financial information can
see the extent to which a paired asset should be reduced. The natural balance in a contra asset account is a credit balance, as
opposed to the natural debit balance in all other asset accounts. There is no reason for there to ever be a debit balance in a contra
asset account; thus, a debit balance probably indicates an incorrect accounting entry. When a contra asset transaction is created,
the offset is a charge to the income statement, which reduces profits. The proper size of a contra asset account can be the subject
of considerable discussion between a company controller and the company's auditors. example, the accumulated depreciation
account is a contra asset account, and it is paired with the fixed assets account. When combined, the two accounts show the net
book value of a company's fixed assets. Note: It is customary to have one accumulated depreciation account and multiple fixed
asset accounts with which it is linked. Examples of other contra assets are: accumulated depletion, Reserve for obsolete inventory

Market segments of money market in India are:

Call Money Market ,Treasury Bills Market ,Commercial Bills Market ,Inter-Bank Participation Certificates ,Certificates of
Deposits (CDs), Commercial Papers (CPs)
Call money is short-term finance repayable on demand, with a maturity period of one to fifteen days, used for inter-bank
transactions. The money that is lent for one day in this market is known as "call money" and, if it exceeds one day, is referred to
as "notice money." Commercial banks have to maintain a minimum cash balance known as the cash reserve ratio. The Reserve
Bank of India changes the cash ratio from time to time, which, in turn, affects the amount of funds available to be given as loans
by commercial banks.Call money is a method by which banks lend to each other to be able to maintain the cash reserve ratio. The
interest rate paid on call money is known as the call rate. It is a highly volatile rate that varies from day to day and sometimes
even from hour to hour. There is an inverse relationship between call rates and other short-term money market instruments such
as certificates of deposit and commercial paper. A rise in call money rates makes other sources of finance, such as commercial
paper and certificates of deposit, cheaper in comparison for banks to raise funds from these sources.
Currency deposits- CDs are negotiable money market instrument issued in demat form or as a Usance Promissory Notes. CDs
issued by banks should not have the maturity less than seven days and not more than one year. Financial Institutions are allowed
to issue CDs for a period between 1 year and up to 3 years.
CDs are like bank term deposits but unlike traditional time deposits these are freely negotiable and are often referred to as
Negotiable Certificates of Deposit. CDs normally give a higher return than Bank term deposit. CDs are rated by approved rating
agencies (e.g. CARE, ICRA, CRISIL)
Payment System and Monetary Policy Payment and settlement systems are to economic activity what roads are to traffic,
necessary but typically taken for granted unless they cause an accident or bottlenecks develop Bank for International Settlements
(1994). Banks administer payment systems which are core to an economy. Through payment system: banks execute customers
payment instructions by transferring funds between their accounts,,, customers receive payments and pay for the goods and
services by cheques, credit or debit cards or orders ,,funds to flow between individuals, retail business and wholesale markets
quickly and safely.The system should ensure a high degree of security and operational reliability and should have contingency
arrangements for timely completion of daily processing.The system should provide a means of making payments which is
practical for its users and efficient for the economy.. The system should have objective and publicly disclosed criteria for
participation, which permit fair and open access.The systems governance arrangements should be effective, accountable
and transparent

Busness segmentation of banks

Retail banking--it includes exposures to individuals or small businesses. Retail banking activities are identified based on four criteria of
orientation, granularity, product criterion and low value of individual exposures. In essence, these qualifiers imply that retail exposures
should be to individuals or small businesses.
Wholesale banking--Wholesale banking includes high ticket exposures primarily to corporates. Internal processes of most banks classify
wholesale banking into mid corporates and large corporates according to the size of exposure to the clients. A large portion of wholesale
banking clients also account for off balance sheet businesses. Hedging solutions form a significant portion of exposures coming from
corporates. Hence, wholesale banking clients are strategic for the banks with the view to gain other business from them.Treasury
Treasury operations include investments in debt market (sovereign and corporate), equity market, mutual funds, derivatives, and trading
and forex operations. These functions can be proprietary activities, or can be undertaken on customers account. Treasury operations are
important for managing the funding of the bank. Apart from core banking activities, which comprises primarily of lending, deposit taking
functions and services; treasury income is a significant component of the earnings of banks.
Other Banking Businesses
This is considered as a residual category which includes all those businesses of banks that do not fall under any of the aforesaid
categories. This category includes para banking activities like hire purchase activities, leasing business, merchant banking, factoring
activities etc.

Treasury and funds management in banks

Treasury generally refers to the funds and revenue at the disposal of the bank and day-to-day management of the same.
The treasury acts as the custodian of cash and other liquid assets.
The art of managing, within the acceptable level of risk, the consolidated fund of the bank optimally and profitably is called Treasury
It is the window through which banks raise funds or place funds for its operations.Functions of an integrated treasury---Reserve
Management and Investment
,Liquidity and Funds Management,Asset-Liability Management,Risk Management,Transfer Pricing,Derivatives Trading,Arbitrage,Capital

Regulatory role of RBI and its monetary policy

RBI was constituted for the need of following :To regulate the issue of banknotes,To maintain reserves with a view to securing monetary
stability ,To operate the credit and currency system of the country, to its advantage.Main functions :Bank of Issue,Banker to
Government,Bankers' Bank and Lender of the Last Resort,Controller of Credit,Custodian of Foreign Reserves,Supervisory

Monetary policy of India :

functions,Promotional functions
Monetary policy is the process by which monetary authority of a country, generally a central bank controls the supply of money in the
economy by exercising its control over interest rates in order to maintain price stability and achieve high economic growth. In India, the
central monetary authority is the Reserve Bank of India (RBI).
Monetary policy is so designed as to maintain the price stability in the economy. Other objectives of the monetary policy of India, as
stated by RBI, are:
Price Stability ,Controlled Expansion of Bank Credit,Desired Distribution of Credit ,Equitable Distribution of Credit ,Promotion of Fixed

Assets Reconstruction Companies :

Need : In the banking system, high level of NPAs can be serious drag on overall performance of economy on account of diversion of its
management and financial resources towards recovery of NPAs. Greater the resources needed by banks to reserve for losses, lesser is the
amount of capital they can leverage. Consequently it makes the banks risk averse in providing new loans leading to credit crunch in the


financial market, amounting to economic and financial degradation.

Relieving banks of the burden of NPAs would allow them to focus better on managing the core business including new business
opportunities..The transfer should help restore depositor and investor confidence by ensuring the lenders financial health. ARCs are
meant to maximise recovery value while minimizing costs.ARCs can also help build industry expertise in loan resolution, besides serving
as a catalyst for important legal reforms in bankruptcy procedures and loan collection.ARCs can play an important role in developing
capital markets through secondary asset instruments.


Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees
from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI
becomes more expensiveReverse Repo rate is the rate at which the RBI borrows money from commercial banks. Banks are always happy
to lend money to the RBI since their money are in safe hands with a good interest.An increase in reverse repo rate can prompt banks to
park more funds with the RBI to earn higher returns on idle cash. It is also a tool which can be used by the RBI to drain excess money out

Repo rate and inflation:

of the banking system.

When the repo rate is raised, banks are
compelled to pay higher interest to the RBI which in turn prompts them to raise the interest rates on loans
they offer to customers. The customers then are dissuaded in taking credit from banks, leading to a shortage
of money in the economy and less liquidity. So, while on the one hand, inflation is under controlled as there
is less money to spend, growth suffers as companies avoid taking loans at high rates, leading to a shortfall
in production and expansion. The RBI revises CRR and repo rates in their quarterly and mid-quarter policy
reviews to maintain a balance between growth and inflation. The past two years have been proof of this
practice as the apex bank tried to first tame the monster of inflation with aggressive rate hikes, and once it
saw growth taking a hit, reduced key rates to revive the economy.

Foreign Exchange Markets :

Buying / selling foreign exchange ,Hedging exposures through derivatives,Speculation trading,Exchange Rate Risk,Fast changing
exchange rates,Unpredictable ,Source of Exchange Rate Risk,24 hour Market - Global Market 5 days in a week,Day opens at Tokyo
and Sydney,Day closes at Los Angeles trading,Before closing at Los Angeles, Sydney opens up for the next dayA two-way price is a
term most often used in the currency trading markets, but can also be found in trading



A two-way

ask price

price is when an investor is given the best

for a currency. Using this information an
investor can decide whether to make a sale of a given currency if the difference between the two would


represent profit for him. The difference between the two-way price is often called the
, and can be
only hundredth of a unit of measure of a given currency, known as a pip. While often small differences, these
amounts add up quickly in large volume exchanges of international currencies such as those executed by major
banks. The amount of value that compromises the two way price is based on the current value of the currency
involved in the


at that given moment. With this in mind, a two way price quote will change if not

What is ALM ? ALM is a comprehensive and dynamic framework for measuring,

monitoring and managing the market risk of a bank. It is the management of structure
of balance sheet (liabilities and assets) in such a way that the net earning from interest
is maximised within the overall risk-preference (present and future) of the institutions.
The ALM functions extend to liquidly risk management, management of market risk,
trading risk management, funding and capital planning and profit planning and growth
projection. Benefits of ALM - It is a tool that enables bank managements to take
business decisions in a more informed framework with an eye on the risks that bank is
exposed to. It is an integrated approach to financial management, requiring
simultaneous decisions about the types of amounts of financial assets and liabilities both mix and volume - with the complexities of the financial markets in which the
institution operates.The ALM process rests on three pillars: ALM Information Systems-Management Information Systems,Information availability, accuracy, adequacy and expediencyALM Organisation-Structure and responsibilities,Level of top management involvementALM Process--Risk parameters,,Risk
identification,,Risk measurement,Risk management,Risk policies and tolerance levels.

CRR means Cash Reserve Ratio. Banks in India are required

to hold a certain proportion of their deposits in the form of cash. However,
actually Banks dont hold these as cash with themselves, but deposit such case
with Reserve Bank of India (RBI) / currency chests, which is considered as
equivlanet to holding cash with RBI. This minimum ratio (that is the part of the
total deposits to be held as cash) is stipulated by the RBI and is known as the
CRR or Cash Reserve Ratio. Slr----banks are required to invest a certain percentage of their

and slr--

time and demand deposits in assets specified by RBI, including gold, and government bonds and securities. In
monetary jargon, SLR is that percentage of net demand and time liabilities (NDTL); in other words, bank
deposits, that must be used to buy specified assets. The SLR ratio has been in a range of 23-25% for the past
10 years. The current SLR ratio of 22.5%, which means that for every Rs.100 deposited in a bank, it has to
invest Rs.22.50 in any of the asset classes approved by RBI. Banks usually keep more than the required SLR,
CASA AND WAYS TO IMPROVE--usually CASA has to be divided in two parts like NCA and ERV
NCA needs to focus highly because its add up the incremental growth of your CASA., so focus to open some good
nee accounts which gives more float..the key area of concentration needed are Current accounts (it gives 100%
NII), TASC and Government accounts..its will defiantly helps you for your incremental CASA growth..
and the ERV part as usual you need to concentrate the service excellence to the existing may
provide some other alternate services like offering Business loans, mortgage loans, property search etc to
your present good will helps you to geeting additional float from the existing customers..
and also you need to monitor personally to your top 50 clients at your touch base..the same way your
supportinates to be taking care of the rest..-------The CASA (current and savings account) ratio is the




ratio of deposits in the

accounts of a bank to its total deposits. A high CASA ratio
indicates that a higher portion of the banks deposits come from current and savings accounts. This means that
the bank is getting money at low cost, since no interest is paid on the current accounts and the interest paid
on savings account is usually low.


ALCO is a decision making unit responsible for balance sheet planning from
risk -return perspective including the strategic management of interest rate and liquidity risks. Each bank
will have to decide on the role of its ALCO , its responsibility as also the decisions to be taken by it. The
business and risk management strategy of the bank should ensure that the bank operates within the limits /
parameters set by the Board. The business issues that an ALCO would consider, inter alia, will include product
pricing for both deposits and advances, desired maturity profile of the incremental assets and liabilities,
etc. In addition to monitoring the risk levels of the bank, the ALCO should review the results of and progress
in implementation of the decisions made in the previous meetings. The ALCO would also articulate the current
interest rate view of the bank and base its decisions for future business strategy on this view. In respect of
the funding policy, for instance, its responsibility would be to decide on source and mix of liabilities or
sale of assets. Towards this end, it will have to develop a view on future direction of interest rate
movements and decide on a funding mix between fixed vs floating rate funds, wholesale vs retail deposits,
money market vs capital market funding, domestic vs foreign currency funding, etc. Individual banks will have
to decide the frequency for holding their ALCO meetings.

co-operative bank ?
According to the International Co-operative Alliance Statementof co-operative identity, a co-operative is an
autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and
aspirations through a jointly-owned and democratically-controlled enterprise. Co-operatives are based on the values
of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders,
co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.
The 7 co-operative features are :Voluntary and open membership,,Democratic member control,,Member economic
participation,,Autonomy and independenc,,Education, training and information,,Co-operation among Cooperatives,,Concern for CommunityA co-operative bank is a financial entity which belongs to its members, who are at
the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging
to the same local or professional community or sharing a common interest. Co-operative banks generally provide their
members with a wide range of banking and financial services (loans, deposits, banking accounts...)

Commericial Banks
According to the Indian Banking Company Act 1949, "A banking company means any company which transacts the
business of banking . Banking means accepting for the purpose of lending of investment of deposits of money
from the public, payable on demand or other wise and withdraw able by cheque, draft or otherwise."

Endonment vs
Annuity policy
Death BenefitAn endowment is
a life
policy with
cash value and
an annuity is a
vehicle. Even
though you have
a savings
aspect in an
endowment policy, you also have a death benefit. If your family needs a specific amount of money by a certain
date, the endowment pays it whether you live or die. The annuity simply pays your heirs the amount you put
into the policy plus any return you made on the funds.Growth--The cash value in most annuities grows much
faster than the cash in an endowment plan. The reason is simple: there is no cost of insurance to pay on the
annuity.Resale--There's a large market for the resale of the endowment policies in several countries. This
isn't true of annuities. Often investors pay more than the owner would receive if he cashed out the
policy.Variety--Annuities offer more types of investments than endowments. Endowments are all guaranteed and
use only fixed investments.Maturity-Endowments have a specific maturity date. Annuities run until you decide
to cash them out, or reach 99 years of age.Popularity--Most people feel that the combination of an annuity
and term life insurance fills their needs far better than an endowment policy. The cash and insurance coverage
is often higher on both. Endowment policies are now rarely sold in the United States.