ECONOMICS PrOjECt 2020-2021

By Rohan – 10 F

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 INdEx
Serial No Topic Page No.
Bank services in India, Central bank control over banks.

1. Introduction and Project Aim. 3

2. Project details 4

4. Summary 8

4. Bibliography 9

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Introduction
A bank is an institution that provides
fundamental banking services like
accepting deposits and providing
loans. The structure of Indian banking
system is like other countries. Main
bank, central bank – Also called RBI:
The reserve bank supervises, control
and regulates the activity of
the banking sector.
Indian banking system consists of central bank and commercial banks. Commercial
banks are public (government) and private banks. Central bank control all the banks.

All commercial Banks offer services like accepting deposits, offering loans to business,
an individual and farmers etc. Banks play an important role in our country economy.

Central bank is the backbone of our financing system. They control functions of all
commercial banks. They issue currency.

Project AIM
To get understanding on banking services in
India and different kinds of services being
offered by banks.
To gain knowledge on how banks help in
economy development of the country.
To understand function of central bank and
how does it control commercial banks.

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Project details
There are two kinds of banking services in India.
Individual banking and Business banking.
Individual banking typically offers a variety of services to assist individuals in managing
their finances, including:
 Checking accounts.
 Savings accounts.
 Debit & credit cards.
 Insurance*
 Wealth management.
 Advancing of Loans.
 Overdraft.
 Discounting of Bills of Exchange.
 Check/Cheque Payment.
 Collection and Payment Of Credit Instruments.
 Foreign Currency Exchange.
 Consultancy.

Business banking services include:

 Business loans.
 Checking accounts.
 Savings accounts.
 Debit and credit cards
 Merchant services (credit card
processing, reconciliation and reporting, check
collection)

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  Treasury services (payroll services, deposit services, etc.)
 Bank Guarantee
In India, all banks work through Digital Banking. It provides facility to customer the ability
to manage finances online from computer, tablet, or smartphone . Banks will typically
offer digital banking services that include:
Online, mobile, and tablet banking, Mobile check deposit, Text alerts, eStatements and
Online bill pay

Bank also offers Loans—Loans are a common banking service offered, and they come in
all shapes and sizes. Some common types of loans that banks provide include:
 Personal loans
 Auto and boat loans
 Home equity lines of credit
 Home loans
 Business loans
 Role of bank in economic development
Role of Banks in development of country economy:
Commercial banks play an important role in the financial system and the economy. ...
They provide specialized financial services, which reduce the cost of obtaining
information about both savings and borrowing opportunities. These financial services help
to make the overall economy more efficient.
Central banks affect economic growth by controlling the liquidity in the financial system.
They have three monetary policy tools to achieve this goal. First, they set a reserve
requirement. ... Second, they use open market operations to buy and sell securities from
member banks.

Manufacturers borrow from banks the money needed for the purchase of raw materials
and to meet other requirements such as working capital. It is safe to keep money in banks.
Interest is also earned thereby. Thus, the desire to save is stimulated and the volume of
savings increases. The savings can be utilized to produce new capital assets.

Thus, the banks play an important role in the creation of new capital (or capital formation)
in a country and thus help the growth process.

Banks arrange for the sale of shares and debentures. Thus, business houses and
manufacturers can get fixed capital with the aid of banks. There are banks known as
industrial banks, which assist the formation of new companies and new industrial
enterprises and give long-term loans to manufacturers.

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The banking system can create money. When business expands, more money is needed
for exchange transactions. The legal tender money of a country cannot usually be
expanded quickly. Bank money can be increased quickly and used when there is need of
more money. In a developing economy (like that of India) banks play an important part as
supplier of money.

The banking system facilitates internal and international trade. A large part of trade is
done on credit. Banks provide references and guarantees, on behalf of their customers,
on the basis of which sellers can supply goods on credit. This is particularly important in
international trade when the parties reside in different countries and are very often
unknown to one another.

Trade is also assisted by the grant of loans by discounting bills of exchange and in other
ways. Foreign exchange transactions (the exchange of one currency for another) are also
done through banks.

Finally, banks act as advisers, counsellors and agents of business and industrial
organizations. They help the development of trade and industry.

How does central bank controls individual banks?

Central bank works as a Banker’s Bank and Supervisor:

There are usually hundreds of banks in a country. There should be some agency to
regulate and supervise their proper functioning. This duty is discharged by the central
bank.

As a banker, the central bank performs banking functions for the government
as commercial banks performs for the public by accepting the government deposits and
granting loans to the government

Central bank acts as banker’s bank in three capacities:

1. It is the custodian of their cash reserves. Banks of the country are required to keep
a certain percentage of their deposits with the central bank; and in this way the
central bank is the ultimate holder of the cash reserves of commercial banks,

2. Central bank is lender of last resort. Whenever banks are short of funds, they can
take loans from the central bank and get their trade bills discounted. The central
bank is a source of great strength to the banking system.

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 3. It acts as a bank of central clearance, settlements and transfers. Its moral
persuasion is usually very effective so far as commercial banks are concerned.

The central bank is given the sole monopoly of issuing currency in order to secure control
over volume of currency and credit. These notes circulate throughout the country as legal
tender money. It has to keep a reserve in the form of gold and foreign securities as per
statutory rules against the notes issued by it.

It also works as an Instruments of money policy. It fixes the rate of credit. This is the rate
of interest at which the central bank lends to commercial banks. It is, in a way, cost of
borrowing.:
Commercial banks are required under the law to keep a certain percentage of their total
deposits with the central bank in the form of cash reserves. This is called CRR. It is a
powerful instrument to control credit and lending capacity of the banks. Presently (Feb.,
2013), CRR is 4.0%.

Lender of Last Resort:

When commercial banks have exhausted all resources to supplement their funds at times
of liquidity crisis, they approach central bank as a last resort. As lender of last resort,
central bank guarantees solvency and provides financial accommodation to commercial
banks (i) by rediscounting their eligible securities and bills of exchange and (ii) by
providing loans against their securities. This saves banks from possible failure and
banking system from a possible breakdown. On the other hand, central bank, by providing
temporary financial accommodation, saves the financial structure of the country from
collapse.

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Summary

Banks offers below services for Individual banking and Business banking
 Checking accounts.
 Savings accounts.
 Debit & credit cards.
 Insurance*
 Wealth management.
 Business loans.
 Merchant services (credit card processing, reconciliation and reporting, check
collection)
 Treasury services (payroll services, deposit services, etc.)
 Various Loans. car loan, house loan, study loan, business loan etc.
Banks also offer digital banking services like, Online, mobile, and tablet banking, Mobile
check deposit, Text alerts, eStatements and Online bill pay
Commercial banks play an important role in the financial system and the economy. ...
They provide specialized financial services. These financial services help to make the
overall economy more efficient.
The banking system plays an important role in the modern economic world. Banks collect
the savings of the individuals and lend them out to business- people and manufacturers.
Bank loans facilitate commerce.
Central bank works as a Banker’s Bank and Supervisor. It is the custodian of their cash
reserves. Central bank is lender of last resort. Whenever banks are short of funds, they
can take loans from the central bank and get their trade bills discounted. It acts as a bank
of central clearance, settlements and transfers. Its moral persuasion is usually very
effective so far as commercial banks are concerned.

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Bibliography
https://www.paisabazaar.com/indian-bank/

https://localfirstbank.com/article/four-different-types-of-services-banking/

https://www.economicsdiscussion.net/banking/role-of-banks-in-the-economic-development-of-a-
country/26094

https://www.academia.edu/5086304/State_Three_Measures_Used_By_The_Central_Bank_To_Control
_The_Commercial_Banks

https://en.wikipedia.org/wiki/Central_bank

https://www.economicsdiscussion.net/banks/top-9-functions-of-central-bank-explained/613

https://en.wikipedia.org/wiki/Banking_in_India

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