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Banking Awareness Capsule by Affairscloud
Banking Awareness Capsule by Affairscloud
Awareness Capsule
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and abbreviations. It is in the short manner.
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Banking Awareness Capsule
Contents
First In Banks In India ............................................................................................................................................. 2
Indian Currency ......................................................................................................................................................... 3
Reserve Bank of India .............................................................................................................................................. 4
RBI Committees In Recent Times......................................................................................................................... 7
Some Important Banking Institutions ............................................................................................................... 8
The Emergence of Small Finance and Payment Banks ...............................................................................16
Credit Rating Agencies in India ..........................................................................................................................18
Know Your Customer Guidelines .......................................................................................................................19
Types of Accounts, Deposits, Cheques, DDs & BSBDS .................................................................................20
Types of Payments & Money Transfer .............................................................................................................22
Balance Sheet ............................................................................................................................................................27
NPA and Recovering NPA ......................................................................................................................................28
Basel Accords ............................................................................................................................................................29
Various Types Of Risks ..........................................................................................................................................30
Inflation and its types ............................................................................................................................................30
Financial Inclusion Schemes ...............................................................................................................................31
Financial Market ......................................................................................................................................................33
Priority Sector Lending .........................................................................................................................................37
Miscellaneous ...........................................................................................................................................................39
Banks Head Quarters & Taglines .......................................................................................................................44
Important Banking Abbreviations ....................................................................................................................45
Version 1 – Updated on June 2017 ....................................................................................................................51
Apps launched by Various Banks(2016-2017 May) ....................................................................................57
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12. First Indian bank to open branch outside India in London in 1946 – Bank of India
13. First Indian Bank started with Indian capital indigenous Bank -- Punjab National Bank
14. First Regional Rural Bank - Prathama Grameen Bank ( Sponsoring Bank- Syndicate Bank)
15. First Universal Bank in India – ICICI Bank
16. First bank in India listed in New York Stock Exchange (NYSE) – ICICI Bank
17. First Bank in India to launch Talking ATMs for differently able person – Union Bank of India
18. First Bank in India to launch its own Payment Aggregators – State Bank of India. (SBIePay)
19. Country’s first all woman bank – Bhartiya Mahila Bank
20. First Indian private sector bank to open a branch in the African continent – ICICI Bank
21. First private sector bank to open dedicated branch for Startups - RBL
22. First Aadhaar-based ATM launched by – DCB Bank
23. First bank to sell Indian gold coins - IOB
24. First India bank Got ISO – Canara Bank
25. First Bank to introduce Internet Banking – ICICI BANK
26. First Payment Bank – Airtel m commerce, Rajasthan
27. First small finance bank - Capital Small Finance Bank Limited, Punjab
28. First ‘contactless’ credit cards for small and mid-sized enterprises – ICICI
29. First certified green bond at London Stock Exchange – Axis Bank
30. India’s first small and medium enterprises (SME) Bank - HDFC
31. First issurer of Masala Bonds – HDFC
32. First domestic bank to open branch in Yangon – SBI
33. India’s First Transaction On Blockchain executed by – ICICI Bank
34. First firm to get debt recast under RBI’s S4A Scheme – HCC
35. First Humanoid Banking Assitant introduced by HDFC Bank
36. First life insurance Chatbot introduced by HDFC Bank
37. Manipur's Karang is India's first cashless island
38. IDFC launches Aadhaar Pay, becomes the first to launch biometric based payment system
39. Odisha becomes first state to bring banking to remote rural areas through SHG
40. ICICI Bank data centre becomes country's first CII-IGBC Platinum rated project
41. Edelweiss Tokio launches India's first insurance that can be bought at PoS
42. IDBI initiated insolvency proceeding against Lanco, first among 12 accounts identified by RBI
43. Axis Bank, Kochi Metro launches India's first single-wallet contactless, Open Loop Metro Card
44. DCB bank launches Aadhaar based iris eye scan customer verification service
Indian Currency
The Indian currency is called the Indian Rupee (INR) and the coins are called paise. One Rupee consists of 100 paise.
The Reserve Bank manages currency in India. The Government, on the advice of the Reserve Bank, decides on the
various denominations.
• The Reserve Bank can also issue notes in the denominations of one thousand rupees, five thousand rupees and
ten thousand rupees, or any other denomination that the Central Government may specify.
• There cannot, though, be notes in denominations higher than ten thousand rupees in terms of the current
provisions of the Reserve Bank of India Act, 1934. Coins can be issued up to the denomination of Rs.1000.
Soiled and Mutilated Notes
• Soiled notes are notes, which have become dirty and limp due to excessive use. Mutilated notes are notes,
which are torn, disfigured, burnt, washed, eaten by white ants, etc.
• A double numbered note cut into two pieces but on which both the numbers are intact is now being treated as
soiled note.Soiled notes can be tendered at all bank branches for and exchange obtained.
• Soiled or mutilated notes are fully payable against such notes. Payment of exchange value of mutilated
notes is governed by the RBI under refund Rules, 1975.
• In order to increase the life of currency notes, Reserve Bank of India (RBI) issued Clean Note Policy in 2001.
These Rules have been framed under Section 28 of the Reserve Bank of India Act, 1934. The public can get value for
these notes as laid down in the Rules, after adjudication. Currently, provisions exist for paying either full, half or no
value as far as notes in the denomination for Rs.10 and above are concerned; as regards Re.1, Rs.2 & Rs.5, a tenderer
can get either full or no value depending upon the condition of the note.
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Coin Minting:
The Union Government has the sole right to mint the coins and one rupee note. The responsibility for coinage comes
under the Coinage Act, 1906 which is amended from time to time. The designing and minting of coins in various
denominations is also the responsibility of the Government of India. The coins are issued for circulation only through
the Reserve Bank in terms of the RBI Act.
Coins are minted at the four India Government Mints.
1. Mumbai,
2. Alipore (Kolkata),
3. Saifabad (Hyderabad), Cherlapally (Hyderabad)
4. NOIDA (UP).
Currency Notes:
The design of banknotes is approved by the central government, on the recommendation of the central board of the
Reserve Bank of India. The current series of banknotes (which began in 1996) is known as the Mahatma Gandhi
series. Banknotes are issued in the denominations of Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.2000.
1. Currency notes are printed at the Currency Note Press in Nashik,
2. Bank Note Press in Dewas,
3. Bharatiya Reserve Bank Note Mudran (P) Ltd at Salboni and Mysore and at
4. The Watermark Paper Manufacturing Mill in Hoshangabad.
Demonetisation in India
The largest note ever printed by the Reserve Bank of India was Rs.10000 which was introduced in 1938 by
the British India government and subsequently again by Independent India in 1954.
• The notes introduced in 1954 were Rs.500, Rs.1000, Rs.5000 and Rs.10000.
• These notes were withdrawn in 1946 by the RBI under the British Indian Government to curb the
black money menace in India.
• These notes were exchanged for Rs.100 or lower denomination
• The notes were re-introduced in 1954 by the RBI, which was subsequently demonetized in 1978 by
the Morarji Desai-led Janta Parivar government(first non government congress in Independent India)
just after the downfall of the Indira Gandhi government in 1977 due to Emergency crisis the country
faced.
• 3 times demontisation occur in India Since 1935(1946, 1978, and 2016)
RBI was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
• The Central bank was formed under the recommendations from John Hilton Young Commission 1926-also
called Royal Commission of Indian Currency and Finance.
• The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to
Mumbai in 1937.
• Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the
Government of India.
The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of
India in keeping with the Reserve Bank of India Act. Appointed/nominated for a period of four years
Constitution
Official Directors
Full-time: Governor and not more than four Deputy Governors
Non-Official Directors
Nominated by Government: ten Directors from various fields and two government Official
Others: four Directors - one each from four local boards.
Functions of RBI:
• Monetary Authority: Formulates, implements and monitors the monetary policy.
Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.
• Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations within
which the country's banking and financial system functions.
Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective
banking services to the public.
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Manager of Foreign Exchange Manages the Foreign Exchange Management Act, 1999.
Objective: to facilitate external trade and payment and promote orderly development and maintenance of
foreign exchange market in India.
• Issuer of currency: Issues and exchanges or destroys currency and coins not fit for circulation. Objective: to
give the public adequate quantity of supplies of currency notes and coins and in good quality.
• Developmental role Performs a wide range of promotional functions to support national
Objectives.
Related Functions
• Banker to the Government: performs merchant banking function for the central and the state governments;
also acts as their banker.
• RBI under the Section 20 of the RBI Act 1934 has the obligation to undertake the receipts and payments of the
Central Government and to carry out the exchange, remittance and other banking operations, including the
management of the public debt of the Union.
• Further, as per Section 21 of the said Act, RBI also has the right to transact Government business of the Union
in India.
• State Government transactions are carried out by RBI in terms of the agreement entered into with the State
Governments in terms of section 21 A of the Act.
• As of now, such agreements exist between RBI and all the State Governments except Government of
Sikkim.
• Banker to banks: maintains banking accounts of all scheduled banks. Offices Has 19 regional
offices, most of them in state capitals and 11 Sub-offices.
Currency Circulation:
In India we follow Minimum Reserve System. Under this system, Reserve Bank of India (RBI) maintains gold and
foreign exchange reserves of Rs. 200 crores. Out of Rs. 200 crores, at least 115 crores must be in the form of gold and
Rs85crores of foreign exchange in its holding totaling the sum.
Fully Owned RBI Subsidiaries:
1. National Housing Bank (NHB)
2. Deposit Insurance and Credit Guarantee Corporation of India(DICGC).
3. Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL),
RBI regulates liquidity in a manner that balances inflation and help in GDP growth and development. The tools that
RBI uses to manage monetary policy are,
Bank rate:
Bank rate is the interest rate at which central bank lends money to domestic banks. Such loans are given out either by
direct lending or by rediscounting (buying back) the bills of commercial banks and treasury bills. Thus, bank rate is
also known as discount rate. In bank rate there is no need for collateral security.
Repo rate: As on 25-06-2017
When banks sell security, banks promise to buy back the same security from Bank Rate 6.50%
RBI at a predetermined date with an interest at the rate of REPO. It is Repo Rate 6.25%
actually a repurchase agreement. When RBI reduces the Repo Rate, the Reverse Repo Rate 6.00%
banks can borrow more at a lower cost. MSF 6.50%
Reverse repo rate: CRR 4%
In case RBI borrowing money from banks and the interest paid by RBI to SLR 20 %
banks on such borrowing is known as Reverse Repo Rate. It is opposite of
Repo rate.
An increase in this rate can cause the banks to transfer more funds to RBI due to their attractive interest rates. Hence
RBI uses this way to drawn out excess money from the banks.
Cash reserve ratio:
All the commercial banks has to keep certain minimum amount of cash reserves with RBI. It uses CRR as a tool to
increase or decrease the reserve requirement depending on whether RBI wants to increase or decrease in the money
supply. RBI can vary Cash Reserve Ratio (CRR) rate between 3% and 15%.
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SLR:
Amount of liquid assets such as Gold or other approved securities that a financial institution must maintain as reserves
other than the cash.
MSF:
Marginal standing facility (MSF) created by Reserve Bank of India in its credit policy of May 2011 which is a frame
for banks to borrow from the RBI in an emergency situation when inter-bank liquidity dries up completely.
Liquidity Adjustment Facility:
Liquidity adjustment facility (LAF) is a monetary policy toolwas introduced by RBI during June, 2000which allows
banks to borrow money through repurchase agreements. LAF is used to aid banks in adjusting the day to day
mismatches inliquidity.
• This tool used for absorbing liquidity and injecting the same with banks through agreement with the Cap of
0.25% of NDTL as on April 2014.
Monetary Policy Committee
The Reserve Bank of India Act, 1934 (RBI Act) has been amended by the Finance Act, 2016, to provide for a
statutory and institutionalized framework for a Monetary Policy Committee, for maintaining price stability, while
keeping in mind the objective of growth.
• As per the provisions of the RBI Act, out of the six Members of Monetary Policy Committee, three Members
will be from the RBI and the other three Members of MPC will be appointed by the Central Government.
1. The Governor of the Bank—Chairperson, ex officio;
2. Deputy Governor of the Bank, in charge of Monetary Policy—Member, ex officio;
3. One officer of the Bank to be nominated by the Central Board—Member, ex officio;
4. Shri ChetanGhate, Professor, Indian Statistical Institute (ISI) —Member
5. Professor PamiDua, Director, Delhi School of Economics (DSE) — Member
6. Dr. Ravindra H. Dholakia, Professor, Indian Institute of Management (IIM), Ahmedabad
• The Members of the Monetary Policy Committee appointed by the Central Government shall hold office for a
period of four years, with immediate effect or until further orders, whichever is earlier.
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There are currently 27 public sector banks in India out of which 19 are nationalised banks and 6 are SBI and its
associate banks, and rest two are IDBI Bank and Bharatiya Mahila Bank, which are categorised as other public sector
banks. There are total 93 commercial banks in India.
Commercial Banks:
They are refers to both scheduled and non-scheduled commercial banks which are regulated under Banking Regulation
Act, 1949.
Scheduled Commercial Banks:
• Listed on second schedule of RBI Act 1934.
• Minimum Paid up capital should be Rs 5.00 Lac.
• These Banks have to maintain stipulated CRR, SLR and other instructions issued from time to time fixed by
the Central Bank.
The Indian banking sector is classified into scheduled banks and non-scheduled banks.
• All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are
Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative
Banks. Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled
Urban Cooperative Banks.
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Scheduled Commercial Banks in India are categorized into five different groups:
● State Bank of India and its Associates
● Nationalised Banks
● Private Sector Banks
● Foreign Banks
● Regional Rural Banks
The RRBs were owned by three entities with their respective shares as follows:
● Central Government → 50%
● State government → 15%
● Sponsor bank → 35
NABARD
NABARD is an apex development bank, established in 1982 by a Special Act of the Parliament, with a
mandate to uplift rural India by facilitating credit flow in agriculture, cottage and village industries,
handicrafts and small-scale industries. NABARD functions to promote sustainable rural development for
attaining prosperity of rural areas in India.
RBI has sold its own stake to the Government of India. Therefore, Government of India holds 99% stake in
NABARD.
● It has power to deal with all matters concerning policy, planning as well as operations in
giving credit for agriculture and other economic activities in the rural areas.
● A refinancing agency for those institutions that provide investment and production credit for
promoting the several developmental programs for rural development.
● Improving the absorptive capacity of the credit delivery system in India, including
monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, and training of
personnel.
● Co-ordinates the rural credit financing activities of all sorts of institutions engaged in
developmental work at the field level.
● Prepares rural credit plans, annually, for all districts in the country.
● Promotes research in rural banking, and the field of agriculture and rural development.
IDBI
Industrial Development Bank of India (IDBI) came into being on 1st July, 1964 as a Development Financial
Institutions under IDBI Act 1964.It is headquartered at Mumbai.
*Key points:
● Regarded as a Public Financial Institution in terms of Companies Act. It continued as DFI till
2004 when it was transferred into a Bank. To transform this into Bank Industrial Development
Bank Act 2003 was passed.
● A new company under the name of Industrial Development Bank of India Ltd. was
incorporated as a Govt company under the Companies Act on 27th September, 2004, and thus now it
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came to be known as IDBI Ltd wef 1st October 2004 but it also worked as a Bank in terms of the
Repeal Act.
● W.e.f. 2nd April, 2005, IDBI Bank Ltd. was finally amalgamated with IDBI Ltd. and was
known as IDBI Ltd. It is a Public Sector Bank as GoI has above 70% shareholding in this Bank.
DICGC:
Deposit Insurance and Credit Guarantee Corporation BANKS CAPITALS
(DICGC) is a subsidiary of Reserve Bank of India. The New bank license 500 crores
authorized capital of the Corporation is 50 crore, which is Private banks 500 crores
fully issued and subscribed by the RBI. It is headquartered Foreign bank 500 crores
in Mumbai. Urban cooperative banks 100 crores
• It was established on 15 July 1978 under Deposit State cooperative banks 100 crores
Insurance and Credit Guarantee Corporation Act, Small bank & payment 100 crores
1961 for the purpose of providing insurance of EXIM bank 8500 crores
deposits and guaranteeing of credit facilities. SIDBI 1000 crores
• DICGC insures all bank deposits, such as saving, Authorised Regional 2000 crores
fixed, current, recurring deposits for up to the limit MUDRA BANK 20000 crore
of Rs. 100,000 of each deposits in a bank.The NABARD 500 crores
insurance covers principal and interest up to a
maximum amount of 1 lakh.
• All commercial banks including branches of foreign banks functioning in India, local area banks and
regional rural banks are insured by the DICGC.
SIDBI
Small Industries Development Bank of India (SIDBI) was set up under an Act of Parliament in 1990.
Though it was a wholly owned subsidiary of Industrial Development Bank of India, presently the ownership
is held by 33 Government of India owned / controlled institutions.
It is headquartered in Lucknow
Functions:
● To initiate steps for technological upgradation and modernisation of existing units.
● To expand the channels for marketing the products of SSI sector in domestic and
international markets.
● To promote employment oriented industries especially in semi-urban areas to create more
employment opportunities and thereby checking migration of people to urban areas.
IFCI
Government of India set up the Industrial Finance Corporation of India (IFCI) in 1948 under a special
Act. This is the first financial institution set up in India with the mainobject of making medium and long
term credit to industrial needs. It issue bonds and debentures in the open market, to borrow foreign
currency from the World Bank and other organisations, accept deposits from the public and also borrow
from the Reserve Bank.
Functions
● Grants loans and advances to industrial concerns.
● Granting of loans both in rupees and foreign currencies.
● Underwrites the issue of stocks, bonds, shares etc.
● Grant loans only to public limited companies and co-operatives but not to private limited
companies or partnership firms.
EXIM
Export-Import Bank (Exim bank) was set up in 1982 to take over the operations of international finance
wing of the IDBI and to provide financial assistance to exporters and importers.
The authorised capital of Exim bank is Rs. 200 crore and paid-up-capital is Rs. 100 crorewholly subscribed
by the Central Government.
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Functions
● Provides direct financial assistance to exporters of plant, machinery and related service in the form
of medium-term credit.
● Provides rediscount of export bills for a period not exceeding 90 days against short-term usance
export bills discounted by commercial banks.
● Gives overseas buyers credit to foreign importers for import of Indian capital goods and related
services.
● Developing and financing export oriented industries.
● Collecting and compiling the market and credit information about foreign trade.
NHB
National Housing Bank(NHB), a wholly owned subsidiary of Reserve Bank of India (RBI), was set up by an
Act of Parliament in 1987.
NHB is an apex financial institution for housing. It commenced its operations in 1988.
Objective:
● To promote housing finance institutions both at local and regional levels and to provide
financial and other support incidental to such institutions and for matters connected therewith
● NHB registers, regulates and supervises Housing Finance Company (HFCs), keeps
surveillance through On-site & Off-site Mechanisms and coordinates with other Regulators.
SEBI
Securities Exchange Board of India was set up in 1988 to regulate the functions of securities market. It
promotes orderly development in the stock market but initially it was not able to exercise complete control
over the stock market transactions. It was left as a watchdog to observe the activities but was found
ineffective in regulating and controlling them. So in 1992, SEBI was granted legal status.
i.Reason for establishment: With the growth in the dealings of stock markets many malpractices started in
stock markets such as price rigging, and delay in delivery of shares, violation of rules and regulations of
stock exchange.
ii.Due to these malpractices the customers started losing confidence in the stock exchange. So government
of India decided to set up an agency or regulatory body known as Securities Exchange Board of India
(SEBI).
Functions:
● Checks Price Rigging
● Prohibits Insider trading
● Prohibits fraudulent and Unfair Trade Practices
● Registers and regulates the working of stock brokers, sub-brokers,share transfer agents,
trustees, merchant bankers and all those who are associated with stock exchange in any manner.
● Registers and regulates the working of mutual funds etc.
● Regulates takeover of the companies
MUDRA Bank
Micro Units Development and Refinance Agency Bank (MUDRA Bank), is a new institution setup in 8 April 2015 by
the Government of India for development of micro units and refinance of MFIs to encourage entrepreneurship in India
& provide the funding to the non-corporate small business sector.
• It was announced by the Finance Minister while presenting the Union Budget for FY 2016.MUDRA has a
corpus of Rs 20,000 crore, and creditguarantee corpus of Rs 3,000 crore.
Products and Offerings:
The initial products and schemes under this umbrella have already been created and the interventions have been
named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of growth of the beneficiary micro unit / entrepreneurs.
• Shishu: covering loans upto Rs. 50,000/-
• Kishor: covering loans above Rs. 50,000/- and upto Rs. 5 lakh
• Tarun: covering loans above Rs. 5 lakh and upto Rs. 10 lakh
Indian Postal payment Bank:
• The India Post Payments Bank (IPPB) was a Public Limited Company under the Department of Posts with
100% GOI equity.
• IPPB will offer demand deposits such as savings and current accounts upto a balance of Rs 1 Lac
• The corpus of the payments bank is of Rs 800 crore (650 branches)
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Pension Fund PFRDA has set up a Trust Pension sector Hemant New Delh G N Bajpai
Regulatory and under the Indian Trusts Act, Contractor
Development 1882 to oversee the functions of
Authority the Pension Fund Managers
(PFRDA) (PFMs).
NABARD NABARD was established on Agriculture Dr. Harsh Mumbai, Shivaraman
(National Bank the recommendations of Development Kumar Maharashtra Committee
for Agriculture Shivaraman Committee, (by Bank Bhanwala 12 July 1982
and Rural Act 61, 1981 of Parliament) on
Development) 12 July 1982 to implement the
National Bank for Agriculture
and Rural Development Act
1981.
The nationalization of banks was an important move undertaken by the Union Government for the development of the
country. Firstly, it instilled public confidence in the banking system encouraging the masses to save and invest.
• By the early 1960s, the Government realized that a significant share of deposits coming from the masses of
India was controlled by 14 privately owned commercial banks. Acquisition of the Imperial Bank of India in
1955 was the next big step.
• 1770: First Bank of Hindustan.
• 1949: RBI was nationalized (RBI was state owned at the time of Indian independence).
• 1955: Control of Imperial Bank of India was acquired by RBI
• 1969: 14 Indian private banks were nationalised
• 1972: 106 insurance companies were nationalised into four insurance companies
• 1980: 6 more Indian private banks were nationalised
• 1993: New Bank of India Merged into Punjab National Bank
The Story behind SBI and IDBI:
The State Bank of India was set up as the Imperial Bank of India in January 1921 through the merger of Bank of
Calcutta, Bank of Bombay and Bank of Madras.
• In 1955, the RBI fall for a 60-percent stake in the bank and renamed it State Bank of India (under SBI Act,
1955). During the nationalisation of banks in 1969, and again in 1980, SBI was not added to the list of the
‘nationalised banks’ since it was already a state-owned financial institution.
• In 2008, the Government of India took over the RBI's stake in the bank to avoid any conflict of interests
within the RBI (which both owned and regulated the SBI). Now though the SBI and its subsidiaries are often
referred to as a nationalised bank, it is a Public Sector Undertaking (PSU) and not one of the nationalised
banks of India.
• In the same way, IDBI Bank is also a public sector bank but not one of the nationalised banks of India. IDBI
Bank was established in 1964 (under IDBI Act, 1964) to support developmental finance in the country.
Initially, it was a financial institution and did not participate in core banking activities.
Draft Guidelines for ‘on tap’ licensing of Universal Banks in the Private Sector
Eligible Promoters:
• Existing non-banking financial companies (NBFCs) that are ‘controlled by residents’ and have a successful
track record for at least 10 years.
• Individuals / professionals who are ‘residents’ and have 10 years of experience in banking and finance.
• Entities / groups in the private sector that are ‘owned and controlled by residents’ [as defined in FEMA
Regulations, as amended from time to time] and have a successful track record for at least 10 years, provided
that if such entity / group has total assets of Rs.50 billion or more, the non-financial business of the group does
not account for 40 per cent or more in terms of total assets / in terms of gross income.
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Cooperative Banks
Banks in India can be broadly classified under two heads — commercial banks and co-operative banks.
While commercial banks (nationalised banks, State Bank group, private sector banks, foreign banks and
regional rural banks) account for an overwhelming share of the banking business, co-operative banks also
play an important role.
The structure of cooperative network in India can be divided into 2 broad segments
● Urban Cooperative Banks
● Rural Cooperatives
Long-term structures
State Cooperative Agriculture and Rural Development Banks (SCARDS): Operate at state-level.
Primary Cooperative Agriculture and Rural Development Banks (PCARDBS): Operate at district/block
level.
With a need of financial inclusion in the country, RBI and government has taken many steps at different times. Taking
a further step, RBI gave differentiated licenses for specific activities to new set of banks named Payment Banks and
Small Banks.
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Payment Banks:
Payments banks are a new model of banks conceptualised by the Reserve Bank of India (RBI).
These banks can accept a restricted deposit which is currently limited to INR 1 lakh per customer.
Initial Capital - 100 crore
Payments Banks Formation - Nachiket Mor Committee
For the first five years, the stake of the promoter should be 40% minimum. Foreign share holding will be
allowed in these banks as per the rules for FDI in private banks in India
On 19 August 2015, the Reserve Bank of India gave "in-principle" licences to eleven entities to launch payments
banks
Out of these, three have surrendered their licenses. First one being "Chalomandalam Distribution Services", then
"Dilip Shanghvi, Sun Pharmaceuticals" and the latest, "Tech Mahindra".
• The "in-principle" license is valid for 18 months within which the entities must fulfill the requirements.They
are not allowed to engage in banking activities within the period. The RBI will consider grant full licenses
under Section 22 of the Banking Regulation Act, 1949, after it is satisfied that the conditions have been
fulfilled.
• Airtel Payments Bank Limited or Airtel Bank, a subsidiary of Bharti Airtel Limited rolled out India’s first
Payment Bank in Rajasthan with massive 7.25% interest on savings accounts.
• Airtel Bank’s services can be accessed by Airtel customers on their mobile phones through the Airtel Money
app, through USSD by dialing *400#; or via a simple IVR by dialing 400.
Features:
1. Digital Banking: Quick and paperless account opening using Aadhaar based e-KYC. This requires no documents at
all, only the customer’s Aadhaar number is needed
2. Customer’s Airtel mobile number will be his/her bank account number
3. Interest rate of 7.25 % p.a. on deposits in savings accounts
4. Money transfer to any bank account in India (Free money transfer from Airtel to Airtel numbers within Airtel Bank)
5. Personal Accidental Insurance of Rs 1 Lakh with every Savings Account
6. Deposit and withdrawal facility across a network of Airtel retail outlets.
7. Airtel payments bank offers 1 minute talktime for every Rs 1 deposit.
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These banks will be subject to all prudential norms and These banks also should maintain CRR with the
regulations of RBI as applicable to existing commercial Reserve Bank, it will be required to invest minimum
banks including requirement of maintenance of Cash 75 percent of its demand deposit balances in
Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). Statutory Liquidity Ratio (SLR) with maturity up to
No forbearance would be provided for complying with the one year and hold maximum 25 per cent in current
statutory provisions. and time or fixed deposits with other scheduled
commercial banks for operational purposes and
liquidity management.
These Banks can offer all types of Deposits as like Payments banks can only offer Savings and Current
commercial Banks be it savings, Current, Fixed as well as accounts.
Recurring.
Small Finance Banks: Payment Banks :
1. Ujjivan 1. Aditya Birla Nuvo
2. Janalakshmi 2. Airtel M Commerce Services
3. Equitas 3. Cholamandalam Distribution Services
4. AU Financiers 4. Department of Posts
5. Capital LAB 5. FINO PayTech
6. Disha 6. National Securities Depository
7. Reliance Industries
7. ESAF
8. Sun Pharmaceuticals
8. RGVN
9. Paytm
9. Suryoday 10. Tech Mahindra
10. Utkarsh 11. Vodafone M-Pesa
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credit rating agency in largest credit rating limited company. service credit rating sector
India. agency in India, with * ICRA’s majority agency exclusively set agency set up by
a market share of shareholder is up for micro, small Onida Finance
greater than 60%. Moody’s and medium
*CRISIL’s majority enterprises (MSME) in
shareholder is India.
Standard & Poor’s.
Rating of Banks in India
As per the recommendations of Padmanabhan Committee the banks in India should be rated on a 5 point
scale of A to E, based on international CAMELS rating model.
• Upon this guidelines RBI has evolved the model for rating banks based on CAMELS. Each of the 6
components would be weighed on a scale of 1 to 100 and would contain several parameters with
individual weightage.
CAMELS Rating for Rating parameters for Rating Scale in India
Domestic Banks foreign banks
C Capital adequacy C Capital adequacy ratio A Sound in every respect
ratio
A Asset quality A Asset quality B Fundamentally sound, but with moderate
weaknesses
M Management L Liquidity C Financial, operational and/or compliance
Effectiveness weaknesses that give cause for supervisory
concern
E Earning C Compliance D Serious or moderate financial, operational
and/or managerial weaknesses that could impair
future viability
L Liquidity (asset- S System and controls E Critical financial weaknesses that render the
liability) possibility of failure in the near term
S System and
controls
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Bank Accounts are classified into four different types. They are,
1) Current Account
2) Savings Account
3) Recurring Deposit Account
4) Fixed Deposit Account
1) Current account
• For business persons, firms, companies, public enterprises etcand are never used for the purpose of
investment or savings.
• These deposits are the most liquid deposits and there are no limits for number of transactions or the
amount of transactions in a day.
• No interest paid on amount held in the account, banks charges certain service charges, on such
accounts.
• Do not have any fixed maturity as these are on continuous basis accounts.
2) Savings Account
• For saving purposes
• Any individual either single or jointly can open a savings account. Most of the salaried persons, pensioners
and students use Savings Account.
• Advantage of having Savings Account is Banks pay interest for the savings. The saving account holder is
allowed to withdraw money from the account as and when required.
• Rate of interest ranges between 4% to 6% per annum in India.
• There is no restriction on the number and amount of deposits. But withdrawals are subjected to certain
restrictions. Some banks recommend to maintain a minimum amount to keep it functioning.
3) Recurring deposit account or RD account is opened by those who want to save certain amount of
money regularly for a certain period of time and earn a higher interest rate.
• A fixed amount is deposited every month for a specified period and the total amount is repaid with
interest at the end of the particular fixed period.
• Period of deposit is minimum six months and maximum ten years.
• Interest rates vary for different plans based on the amount one saves and the period of time and also
on banks.
• No withdrawals are allowed from the RD account. However, the bank may allow to close the account
before the maturity period.
• Can be opened in single or joint names. Banks are also providing the Nomination facility to the RD
account holders.
4) Fixed Deposit Account(FD)
A particular sum of money is deposited in a bank for specific period of time. In some other countries these
are known as "Term Deposits" or even called "Bond".
• It’s one time deposit and one time take away (withdraw) account. The money deposited in this account can not
be withdrawn before the expiry of period.
• In case of need, the depositor can ask for closing the fixed deposit prematurely by paying a penalty(usually of
1%, but some banks either charge less or no penalty) The penalty amount varies with banks.
• A high interest rate is paid on fixed deposits. The rate of interest paid for fixed deposit vary according to
amount, period and also from bank to bank.
Demat account
Demat account is an account in which the shares and securities are held in dematerialized form i.e. electronically
without any physical papers held. To carry out transactions in the stock market, one should get open a demat account.
Multiple demat accounts can be opened. Demat accounts are held by a single person i.e. no joint accounts can be
operated.
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CASA Deposits
It refers to Current Account Saving Account Deposits.
• Low interest deposits for the Banks compared to other types of the deposits. So banks tend to
increase the CASA deposits and for this they offer various services such as salary accounts to
companies and encouraging merchants to open current accounts also use their cash-management
facilities.
• The Bank is High CASA ratio(CASA deposits as % of total deposits) are in a more
comfortable position than the Banks with low CASA ratios , which are more dependent on term
deposits for their funding, and are vulnerable to interest rate shocks in the economy, plus lower
spread they earn.
Term Deposits are of three kinds
1. Fixed deposits: A fixed rate of interest is paid at fixed, regular intervals.
2. Re-investment deposits: Interest is compounded quarterly and paid on maturity, along with
the principal amount of the deposit. In the Flexi Deposits amount in savings deposit accounts beyond
a fixed limit is automatically converted into term-deposits.
3. Recurring deposits: Fixed amount is deposited at regular intervals for a fixed term and the
repayment of principal and accumulated interest is made at the end of the term. These deposits are
usually targeted at persons who are salaried or receive other regular income. A Recurring Deposit
can usually be opened for any period from 6 months to 120 months.
A cheque is an agreement between two individuals or organizations to make a payment. In simple words Cheque is an
order to a bank to pay a stated sum from the drawer’s account, written on a specially printed form. Cheque is used to
make safe and convenient payment. It is less risky and the danger of loss is minimized.
• Drawer: The person writing the cheque, who has a transaction banking account where their money is held.
• The drawer writes the various details including the monetary amount, date, and a payee on the cheque, and
signs it, ordering their bank, known as the Drawee, to pay that person or company the amount of money
stated.
Bearer Cheque
Bearer Cheque refer to a cheque that is payable to whoever presents the cheque, rather than to a designated payee.
Uncrossed/Open Cheque
When a cheque is not crossed, it is known as an “Open Cheque” or an “Uncrossed Cheque”. The payment of such a
cheque can be obtained at the counter of the bank.
Crossed Cheque
Crossing of cheque means drawing two parallel lines on the face of the cheque. A crossed cheque cannot be encashed
at the cash counter of a bank but it can only be credited to the payee’s account.
Anti-Dated Cheque
If a cheque bears a date earlier than the date on which it is presented to the bank, it is called as “anti-dated cheque”.
Such a cheque is valid upto three months from the date of the cheque.
Post-Dated Cheque
If a cheque bears a date which is yet to come (future date) then it is known as post-dated cheque. A postdated cheque
cannot be honoured earlier than the date on the cheque.
Stale Cheque
If a cheque is presented for payment after three months from the date of the cheque it is called stale cheque. A stale
cheque is not honoured by the bank.
Demand Draft:
DD, it is kind of a pre-paid negotiable instrument that is used to direct payments from one bank to another bank or one
of its own branches to pay a certain sum to the specified party
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Credit Card
A credit card is a Plastic card issued by Banks to enable the cardholder to pay a merchant for goods and services,
based on the cardholder's promise to the card issuer to pay them for the amounts so paid plus other agreed
charges.Central Bank of India was the first public bank to introduce Credit card.
• Banks in India can undertake credit card business either departmentally or through a subsidiary company set
up for the purpose. They can also undertake domestic credit card business by entering into tie-up arrangement
with one of the banks already having arrangements for issue of credit cards.
• Prior approval of the Reserve Bank is not necessary for banks desirous of undertaking credit card business
either independently or in tie-up arrangement with other card issuing banks.
• Banks can do so with the approval of their Boards. However, only banks with net worth of `100 crore and
above should undertake credit card business.
Prepaid cards
A prepaid card works a bit like a gift card – you top it up with money, and you can only spend up to that
amount. Often used by travellers to carry holiday money, and by anyone without a normal bank account
– generally kids, teens and people with poor credit ratings.
Smart card:
It contains an electronic chip which is used to store cash. This is most useful when you have to pay for small
purchases. For example bus fares and coffee. No identification, signature or payment authorisation is
required for using this card. The exact amount of purchase is deducted from the smart card during payment
and is collected by smart card reading machines. No change is given.
Co-branded cards
are credit cards issued by card companies that have tied up with a popular brand for the purpose of offering
certain exclusive benefits to the consumer. For example, the Citi-Times card gives you all the benefits of a
Citibank credit card along with a special discount on Times Music cassettes, free entry to Times Music
events, etc.
Rupay Card:
RuPay is the Indian version of the card network which is started by National Payment Corporation of India on 26th
March, 2012. Rupay primarily provides debit cards. Apart from this, Rupay also issues ‘Kisan Credit Cards’ for
farmers.
• RuPay competes with other card based payment system providers such as MasterCard, Visa and Amex in
India.RuPay has over 36% of market share in Indian card payment scheme behind Visa which has over
50% of the market share.
• India is now the sixth country in the world to have domestic payment gateway system (the other five
countries are US, Japan, China, Singapore and Brazil).
• RuPayis the combination of two terms Rupee and Payment. The RuPay Visual Identity is a modern and
dynamic unit.
• The orange and green -nation on the move and a service that matches its pace.
• The color blue - feeling of tranquility which is the people must get while owning a card of the brand
‘RuPay’.
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• It was first proposed in the Budget 1998-99 by then Finance Minister Yashwant Sinha. In the Subsequenttimes
NABARD had prepared a Model Kisan Credit Card Scheme in consultation with the Major Banks on the
recommendations of R V Gupta Committee.
• Repayment:
Cash Credit: Crop loans as well as working capital for agriculture and allied activities to be provided
as revolving cash credit limit repayable in 12 months. .
Term Loan: Repayable within a maximum period of 5 years, depending on the type of activity /
investment and repayment capacity.
SWIFT Code:
It is a unique identification code for both financial and non-financial institutions approved by the International
Organization for Standardization (ISO). SWIFT Standards, a division of the Society for Worldwide Interbank
Financial Telecommunication (SWIFT), handles the registration of these codes.
• SWIFT Codes are used when transferring money between banks, particularly for international wire transfers,
and also for the exchange of other messages between banks.
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Unified Payment Interface have officially launched by National Payments Corporation of India (NPCI), under RBI for
instant inter-bank real time transactions using android apps.
• UPI is a payment system that allows money transfer between any two bank accounts by using a smartphone.
• UPI allows a customer to pay directly from a bank account to different merchants, both online and offline,
without the hassle of typing credit card details, IFSC code, or net banking/wallet passwords.
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*99# Service
NPCI launched *99# service, which works on Unstructured Supplementary Service Data (USSD) channel. This
service was launched envisioning the potential of Mobile Banking and the need for immediate low value remittances
which will help in financial deepening and inclusion of under banked society in the mainstream banking services.
• *99# service was dedicated to the nation by Prime Minister of India Narendra Modi on 28th August 2014 as
part of Pradhan Mantri Jan Dhan Yojana (PMJDY).
• Banking customers can avail this service by dialing *99#, a “Common number across all Telecom Service
Providers (TSPs)” on their mobile phone and transact through an interactive menu displayed on the mobile
screen.
• Key services offered under *99# service include, interbank account to account fund transfer, balance enquiry,
mini statement besides host of other services.
• This service offered by 43 leading banks & all GSM service providers and can be accessed in 12 different
languages including Hindi & English.
• Currently, following Financial (Fund Transfer (P2P), (P2A), (P2U)) and, Non-financial and Value Added
Services (VAS) are offered through *99# service.(P2P- Person to Person ), (P2Account ), (P2U- Aadhaar
Number(UID)).
Balance Sheet
A balance sheet is a snapshot of a business' financial position on one particular day.
• It provides a summary of what a business owns or is owed. It states what assets the business owns and
what liabilities it owes, at a particular date.
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• The balance sheet is used to show how the business is being funded and how those funds are being used.
Why it is called Balance Sheet?
Because there is a debit entry and a credit entry for everything, so the total value of the assets is always the
same value as the total of the liabilities.
Contents
● Fixed assets:: Long-term
● Current assets: Short-term
● Current liabilities: What the business owes and must repay in the short term
● Long-term liabilities: Owner's or shareholders' capital
Fixed assets
Tangible assets - e.g. buildings, land, machinery, computers, fixtures and fittings.
Intangible assets - e.g. goodwill, intellectual property rights (such as patents, trademarks and long-term
investments.
Current assets e.g. stock, work in progress, money owed by customers, cash in hand or at the bank, short-
term investments, pre-payments
Current liabilities
These are amounts owed to you and due within one year.
● money owed to suppliers
● short-term loans, overdrafts or other finance
● taxes due within the year
Long-term liabilities
Creditors due after one year: Amounts due to be repaid in loans or financing after one year, eg bank or
directors' loans, finance agreements
Capital and reserves: Share capital and retained profits, after dividends (if your business is a limited
company), or proprietors capital invested in business (if you are an unincorporated business)
What does a balance sheet show?
● How solvent the business is
● How liquid its assets are - how much is in the form of cash or can
● Be easily converted into cash, i.e. stocks and shares
● How the business is financed
● How much capital is being used
Recovering NPA:
For recovery of NPA there are different tools are available. The important purpose of these tools are to recover the
loan amount from borrower. These tools can because according to Loan amount.
Securitization Act:
The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
(SARFAESI) aims to empower banks as secured creditors to take possession, manage and sell the securities without
the intervention of court/tribunal.
• It also aims at Asset Reconstruction by securitization or Reconstruction Company. However, loan with
balance below Rs.1 lakh unsecured loans and loans against collateral of agricultural land are exempted from
the purview of this act.
• After the amendment of the SARFAESI Act in August 2016, the law now allows secured creditors to take
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possession over a collateral, against which a loan had been provided, upon a default in repayment. This
process is undertaken with the assistance of the District Magistrate, and does not require the intervention of
courts or tribunals. The Bill provides that this process will have to be completed within 30 days by the District
Magistrate.
ARC:
ARCs specialized in resolution of stressed assets. They acquire stressed assets from banking sector and use their
expertise to resolve these cases. They in-turn issue security receipts against acquired assets to
Qualified Institutional Borrowers (which also includes banks).
Lok Adalats:
LokAdalat is for the recovery of small loans. According to RBI guidelines issued in 2001, they cover NPA up to Rs. 5
lakhs, both suit filed and non-suit filed are covered.
Basel Accords
The Basel Accords refer to the banking supervision Accords (recommendations on banking regulations) issued by the
Basel Committee on Banking Supervision (BCBS). They are called the Basel Accords as the BCBS maintains its
secretariat at the Bank for International Settlements (BIS) in Basel, Switzerland and the committee normally meets
there. The Basel Accords is a set of recommendations for regulations in the banking industry.
Upto now three accords have been published –
BASEL I
Basel I norms were published in 1988 which asked to set a minimum capital requirements for banks. It defined capital
requirement and structure of risk weights for banks. The goal was to minimize credit risk i.e. the defaults on a credit or
loan when the borrower is unable to pay back to the bank.
The 1988 Accord called for a minimum capital ratio of capital to risk-weighted assets of 8% to be implemented by the
end of 1992. Ultimately, this framework was introduced not only in member countries but also in virtually all other
countries with active international banks.
BASEL II
After Basel I, Basel II norms were published in 2004.
Unlike the goal of Basel I norms, Basel II focused on how much of the bank’s capital, bank must keep aside in order
to reduce their credit risks. So in case if a bank is exposed to a greater risk, it needs to keep aside a greater capital to
guard against the risks.
Basel II was to be implemented in early 2008.
The revised framework comprised three pillars, namely:
Minimum capital requirements, which sought to develop and expand the standardised rules set out in the 1988 Accord;
Supervisory review of an institution’s capital adequacy and internal assessment process; and
Effective use of disclosure as a lever to strengthen market discipline and encourage sound banking practices.
BASEL III
• After Basel II, Basel III norms were published in 2010. They have been designed to address the shortcomings
of Basel II after the 2008 financial crisis that the world faced.
• In September 2010, the Group of Governors and Heads of Supervision announced higher global minimum
capital standards for commercial banks.
• According to Basel Committee, “Basel III” is a comprehensive set of reform measures, developed by the
Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of
the banking sector.
These measures aim to:
• Improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the
source
• Improve risk management and governance
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Inflation is a rise in the general level of prices of goods and services in an economy over a period of time
Types of Inflation:
Demand pull inflation: This type of inflation occurs when total demand for goods and services in an economy
exceeds the supply of the same.
Cost-push Inflation: If there is increase in the cost of production of goods and services, due to increase of wages and
raw materials cost, there is likely to be a consequent increase in the prices of finished goods and services.
Stagflation: It is a situation in which the inflation rate is high and the economic growth rate is low.
Reflation: It is the act of stimulating the economy by increasing the money supply or by reducing taxes. It is an act of
pumping money in the market to increase the circulation so that economy can be stipulated again.
Disinflation: It is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price level of
goods and services in a nation’s gross domestic product over time.
Deflation: It is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate
falls below 0% (a negative inflation rate).
Hyper inflation: It is the extremely rapid escalation of prices (typically more than 50% per month) for goods and
services.
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Financial inclusion is the delivery of financial services at affordable costs to vast sections of disadvantaged and low
income groups.
No-frills account – These accounts provide basic facilities of deposit and withdrawal to accountholders makes
banking affordable by cutting down on extra frills that are no use for the lower section of the society. These accounts
are expected to provide a low-cost mode to access BANK ACCOUNTS. RBI also eased KYC (Know Your customer)
norms for opening of such accounts.
Banking service reaches homes through business correspondents – The banking systems have started to
adopt the business correspondent mechanism to facilitate banking services in those areas where banks are unable to
open brick and mortar branches for cost considerations.
Business Correspondents provide affordability and easy accessibility to this unbanked population. Armed with suitable
technology, the business correspondents help in taking the banks to the doorsteps of rural households.
Lead Bank Scheme-1969 aimed at forming a coordinated approach for providing banking facilities. To enable
banks to assume their lead role in an effective and systematic manner, all districts in the country (excepting the
metropolitan cities of Mumbai, Kolkata, Chennai and certain Union Territories) were allotted among Public Sector
Banks and a few Private Sector Banks The Lead bank role is to act as a consortium leader for co-coordinating the
efforts of all credit institutions in each of the allotted districts for expansion of branch banking facilities and for
meeting the credit needs of the rural economy. For the preparation of District Credit Plans and monitoring their
implementation a Lead bank Officer (LBO) now designated as Lead District Manager was appointed in 1979
Swabhiman Scheme– Opening of Bank accounts covering the habitations with minimum population atleast through
Business correspondent model providing cash services.Habitations with population more than 1600 in plain areas and
1000 in north-eastern and hilly states as per 2001 census are covered.
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• There will be no limit on the number of deposits that can be made in a month, account holders will be
allowed a maximum of four withdrawals in a month, including ATM withdrawals.
No charge will be levied for nonoperation/activation of inoperative ‘Basic Savings Bank Deposit Account’.
• Holders of ‘Basic Savings Bank Deposit Account’ will not be eligible for opening any other savings bank
deposit account in that bank. If a customer has any other existing savings bank deposit account in that bank,
he/she will be required to close it within 30
days from the date of opening a ‘Basic Savings Bank Deposit Account’.
• One can have Term/Fixed Deposit, Recurring Deposit etc., and accounts in the bank where one holds
‘Basic Savings Bank Deposit Account’.
• In the BSBDA Accounts with introduction/ Small Accounts aggregate of all credits in a financial year does
not exceed Rs.1.00 lac.
• The aggregate of all withdrawals and transfers in a month does not exceed Rs.10,000/ Balance at any point of
time does not exceed Rs.50,000/.
Others
Strategic Debt Restructuring Scheme
The Scheme has been enacted with a view to revive stressed companies and provide lending institutions with a way to
initiate change of management in companies which fail to achieve the milestones under Corporate Debt Restructuring.
• The Strategic Debt Restructuring (SDR) has been introduced with a view to ensuring more stake of
promoters in reviving stressed accounts and providing banks with enhanced capabilities to initiate change
of ownership, where necessary, in accounts which fail to achieve the agreed critical conditions and
viability milestones.
• Therefore, banks should consider using SDR only in cases where change in ownership is likely to improve
the economic value of the loan asset and the prospects of recovery of their dues.
• Conversion of outstanding debts can be done by a consortium of lending institutions. Such a consortium is
known as the Joint Lenders Forum (JLF) which may include banks and other financial institutions such as
NBFCs.The Scheme will not be applicable to a single lender.
Financial Market
Financial market are divided in two types depends on duration for which they need money. They are Money and
Capital Market.
• Money Market Money Market is a short-term credit market. The Money Market is regulated by the Reserve
Bank of India.
• It is the centre in which short-term funds are borrowed and lent. It consists of borrowers and lenders of short-
term funds.
• The lenders are commercial banks, insurance companies, finance companies and the central bank. The money
market brings together the lenders and the borrowers.
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less than 7 days and not more than one year, from the date of 7days and a maximum of up to one year from the date of
issue. The FIs can issue CDs for a period not less than 1 issue. However, the maturity date of the CP should not go
year and not exceeding 3 years from the date of issue. beyond the date up to which the credit rating of the issuer
is valid.
CDs can be issued to individuals, corporations, companies Individuals, banking companies, other corporate bodies
(including banks and PDs), trusts, funds, associations, etc. (registered or incorporated in India) and unincorporated
Non-Resident Indians (NRIs) may also subscribe to CDs, bodies, NRIs and Foreign Institutional Investors (FIIs) etc.
but only on non-repatriable basis, which should be clearly can invest in CPs. However, investment by FIIs would be
stated on the Certificate. Such CDs cannot be endorsed to within the limits set for them by Securities and Exchange
another NRI in the secondary market. Board of India (SEBI) from time-to-time.
The money market is a market for short-term financial assets that are close substitutes of money. The most important
feature of a money market instrument is that it is liquid and can be turned into money quickly at low cost and provides
an avenue for equilibrating the short-term surplus funds of lenders and the requirements of borrowers.
• Call Money” means deals in overnight funds.
• “Notice Money” means deals in funds for 2 – 14 days.
• “Term Money” means deals in funds for 15 days-1 year.
Participants
Scheduled commercial banks (excluding RRBs), co-operative banks (other than Land Development Banks) and
Primary Dealers (PDs), are permitted to participate in call/notice money market both as borrowers and lenders.
Commercial Paper:
• Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.
CP, as a privately placed instrument, was introduced in India in 1990 with a view to enable highly rated
corporate borrowers to diversify their sources of short-term borrowings and to provide an additional
instrument to investors.
• Individuals, banking companies, other corporate bodies (registered or incorporated in India) and
unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs) etc. can invest
in CPs. However, investment by FIIs would be within the limits set for them by SEBI from time-to-time.
Who is permitted to issue CP:
Subsequently, primary dealers (PDs) and all-India financial institutions (FIs) were also permitted to issue CP to enable
them to meet their short-term funding requirements.
However the corporate issuing CP should meet the following conditions
1. The tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs.4 crore;
2. The company has been sanctioned working capital limit by bank/s or FIs; and
3. The borrowal account of the company is classified as a Standard Asset by the financing bank/institution.
4. The minimum credit rating shall be ‘A3’ as per rating symbol and definition prescribed by SEBI.
Capital Market
Capital Market are institutional arrangements for facilitating the borrowing and lending of long-term funds. Usually,
stress is laid on the markets for long-term debt and equity claims, government securities, bonds, mortgages, and
other instruments of long-term debts.
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• This capital market encircles the system through which the public takes up long-term securities, either directly
or through intermediaries. It also to be noted that Risk is much greater in capital market unlike Money Market
which has small risk.
• This instruments consists of a series of channels through which the savings of the community are mobilised
and made available to the entrepreneurs for undertaking investment activities.
• Regulator: Stock Exchange Board of India setup guidelines, and supervise and regulate the working of capital
market. SEBI in consultation with the Government has taken a number of steps to introduce improved
practices and greater transperancy in the capital markets in the interest of the investing public and the healthy
development of the capital markets.
Capital Market Instruments
1. Shares
2. Debentures
3. Bonds
Masala Bonds
Masala bonds are the rupee-denominated bonds which can be issued by the Indian entities to raise money from
overseas markets. By rupee-denominated bonds, it means that the money borrowed will be in Indian rupees and not
any foreign currency
Amount Under the automatic route the amount will be equivalent to INR 50 billion (Rs 5,000 crore)per annum
through Automatic Approval, beyond Rs 5,000 crore in a financial year will require prior approval of
the Reserve Bank
Maturity Minimum maturity period of 3 years. However they can be issued for three or five or seven-year
maturities.
Who >>Any corporate or body corporate as well as Real Estate Investment Trusts (REITs) and Infrastructure
Can Investment Trusts (InvITs) can issue such off-shore rupee denominated bonds.
Issue >>>Indian banks can issue these bonds in the forms of (i) Perpetual Debt Instruments (PDI) qualifying
for inclusion as Additional Tier 1 capital and debt capital instruments qualifying for inclusion as Tier 2
capital, and (ii) Long term Rupee Denominated Bonds overseas for financing infrastructure and
affordable housing.
Where The Rupee denominated bonds can only be issued in a country and can only be subscribed by a resident
can of a country:
these 1. that is a member of Financial Action Task Force (FATF) or a member of a FATF-Style
bonds be Regional body; and
issued? 2. whose securities market regulator is a signatory to the International Organization of Securities
Commission's (IOSCO’s) Multilateral Memorandum of Understanding (Appendix A
Signatories) or a signatory to bilateral Memorandum of Understanding with the SEBI for
information sharing arrangements;
Key Facts:
Masala bonds are a step to help internationalize the Indian rupee and also deepen the Indian financial
system.The advantage is that that of the currency risk.
IFC issued an Rs 1,000 crore bond to fund infrastructure projects in India. These bonds were listed on the
London Stock Exchange (LSE).
IFC then named them Masala bonds to give a local flavour by calling to mind Indian culture and cuisine.
They are the first rupee bonds listed on the London Stock Exchange.
They can be issued for three or five or seven-year maturities.
The first Masala bonds were issued on 10 November 2014 under IFC’s $2 billion offshore rupee program.
They are different from External Commercial Borrowings (ECB) in a way that in ECB the currency risk lies
with the Indian issuer while in case of masala bonds, the currency risk lies with the overseas investor.
In the first ever 'masala bond' issue, housing finance major HDFC has raised Rs 3,000 crore.
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The same target has to be achieved in a phased manner by 2020 by foreign banks with less than 20 branches.
2015-16 32
2016-17 34
2017-18 36
2018-19 38
2019-20 40
Sub-targets for Priority sector:
Sector Target
Agriculture 18 percent of ANBC (Within this 18 % target prescribed for Small and Marginal Farmers,
to be achieved in a phased manner i.e., 7 per cent by March 2016 and 8 per cent by March
2017)
Micro Enterprises 7.5 percent of ANBC (In a phased manner i.e. 7 per cent by March 2016 and 7.5 per cent
by March 2017.)
Advances to Weaker 10 percent of ANBC
Sections
Agriculture
Farm credit:
• Loans to individual farmers up to Rs.50 lakh against pledge/hypothecation of agricultural produce (including
warehouse receipts) for a period not exceeding 12 months.
Loans to corporate farmers, farmers' producer organizations/companies
• Farmers directly engaged in Agriculture and Allied Activities, viz., dairy, fishery, animal husbandry, poultry,
bee-keeping and sericulture up to an aggregate limit of Rs.2 crore per borrower.
• Loans up to Rs.50 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts)
for a period not exceeding 12 months.
Agricultureinfrastructure
Loans for construction of storage facilities (warehouses, market yards, godowns and silos) including cold storage
units/ cold storage chains designed to store agriculture produce/products, irrespective of their location an aggregate
sanctioned limit of Rs.100 crore per borrower from the banking system, will apply.
• For the purpose of Ancillary activities loans up to Rs.5 crore to co-operative societies of farmers for disposing
of the produce of members.Loans for Food and Agro-processing up to an aggregate sanctioned limit of Rs.100
crore per borrower from the banking system.
For the purpose of computation of 7 percent/ 8 percent target, Small and Marginal Farmers:
• Farmers with landholding of up to 1 hectare are considered as Marginal Farmers. Farmers with a landholding
of more than 1 hectare and upto 2 hectares are considered as Small Farmers.
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Export Credit
Domestic banks Foreign banks with 20 branches and Foreign banks with less than 20
above branches
Export credit over corresponding date Incremental export credit over Export credit will be allowed up
of the preceding year, up to 2 percent corresponding date of the preceding year, up to 32 percent of ANBC or Credit
of ANBC. Effective from April 1, to 2 percent of ANBC or Credit Equivalent Equivalent Amount of Off-
2015 subject to a sanctioned limit of Amount of Off-Balance Sheet Exposure, Balance Sheet Exposure,
Rs.25 crore per borrower to units whichever is higher, effective from April 1, whichever is higher.
having turnover of up to Rs.100 crore. 2017 (As per their approved plans, foreign
banks with 20 branches and above are
allowed to count certain percentage of
export credit limit as priority sector till
March 2016).
Education
Loans to individuals for educational purposes including vocational courses upto Rs. 10 lakh irrespective of the
sanctioned amount will be considered as eligible for priority sector.
Housing
(i) Loans to individuals up to Rs. 28 lakh in metropolitan centres (with population of ten lakh and above) and loans
up to Rs. 20 lakh in other centres for purchase/construction of a dwelling unit per family provided the overall cost
of the dwelling unit in the metropolitan centre and at other centres should not exceed Rs. 35 lakh and Rs. 25 lakh
respectively. The housing loans to banks’ own employees will be excluded.
(ii) Loans for repairs to damaged dwelling units of families up to Rs. 5 lakh in metropolitan centres and up to Rs. 2
lakh in other centres.
Social infrastructure
Bank loans up to a limit of Rs. 5 crore per borrower for building social infrastructure for activities namely schools,
health care facilities, drinking water facilities and sanitation facilities in Tier II to Tier VI centres.
Renewable Energy
Bank loans up to a limit of Rs. 15 crore to borrowers for purposes like solar based power generators, biomass based
power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities viz. street
lighting systems, and remote village electrification. For individual households, the loan limit will be Rs. 10 lakh per
borrower.
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Miscellaneous
Assets Vs. Liabilities
Assets are the ones which are useful or valuable things a person/organization has like goods, property, vehicles,
equipment, machinery, etc. If we talk about bank’s assets: They are those which the bank has and can be readily
converted to cash whenever bank requires money.
Liabilities are the ones for which an amount of money is owed like in a company the salaries of employees are to be
given, etc. If we talk about bank’s liabilities: They are those which the bank has from the customer deposits and
borrowed money for bank’s purpose.
Insolvency Vs Bankruptcy
When a person/organization is unable to pay their debts when they become due and payable, it is called insolvency.
When a person/organization is unable to pay their debts when they become due and payable and is also declared as
bankrupt by court, it is called bankruptcy.All bankrupts will be called insolvent, but not vice-versa.
FDI Vs FII
Foreign Direct Investment (FDI) as the name suggests is investing directly in another country. A foreign company
which is based in some other country like France invests in India either by setting up a wholly owned subsidiary or
getting into a joint venture with some company based in India and then conducts its business in India.
Examples: IBM India, Maruti Suzuki, SBI life insurance, etc
Foreign Institutional Investor (FII) is similar to FDI in a way that this is also direct investment but investment in only
financial assets such as stocks, bonds etc. of a company located in another country.
Example: Any foreign company invests in the shares of Infosys (based in India).
cannot charge any money to make dormant or inoperative accounts as operative. The interest on amount of
money in saving accounts will be credited in account in case of inoperative account also.
• Freezing of account means the transactions in such account cannot be performed until further notice. The
payments will be stopped in such accounts and even cheques drawn before freezing are also not allowed to be
encashed by anyone. Only RBI, SEBI, Income-tax authorities, and court can give orders to freeze account and
not the respective banks.
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Negotiable Instruments
Negotiable instrument is a document which guarantees the payment of a specific amount of money, either on demand,
or at a set time, with the payer named on the document. A negotiable instrument can be transferred from one person to
another.
• According to Section 13 of the Negotiable Instruments Act, 1881, “A Negotiable Instrument means a
promissory note, bill of exchange or cheque payable either to order or to bearer.”
Marginal Cost of Funds: They are the funds which banks have to give to its customers and RBI instead of investing
them in other ways.
Para banking
Para banking activities are the activities carried out by the bank which are apart from its normal day-to-day activities.
Its not that bank can perform any activity other than daily activities, it can perform only those para banking activities
which are permitted by RBI.
Examples: insurance business, portfolio management services, to become pension fund managers, mutual funds
business, money market mutual funds, underwriting of bonds of PSUs, investment in venture capital funds, etc.
Bancassurance
Bancassurance as the term suggests is Bank + Insurance. Bancassurance means selling insurance product through
banks. It is one of the para banking activity which the RBI has allowed the banks to take up. For selling the
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insurance product, bank and insurance company come up in a partnership where the bank sells the insurance
company’s insurance products to its clients.
Some examples include:
SBI General Insurance Company Limited: joint venture between SBI and Insurance Australia Group (IAG).
SBI Life Insurance: joint venture life insurance Company between SBI and BNP Paribas Cardiff of France.
E-Lobby
E-Lobby is a facility which is now provided by banks so that their customers can do their banking transactions as per
their convenience 24×7 i.e. without any time restriction. E-Lobby provides the facility on bank holidays also.
Self service facilities which can be done at banking e-lobbies include: ATM withdrawals, cash deposits, card-to-card
transfers, mobile phone top-ups, railway booking, passbook printing, NEFT, opening of FD/RD accounts, SMS alerts,
cheque drop box, bill payments, mini statements, etc.
Debt Consolidation
In simple words Debt Consolidation is going for another loan to pay the existing loan.
Technical definition says that Debt Consolidation is a form of debt refinancing that entails taking out one loan to pay
off many others. Refinancing means replacement of an existing debt to be paid with another one.
Money laundering
It is an act of converting illegal money to legal money. A person who is found having money from illegal sources can
be made to go to prison, or any other liable punishment. So the persons or rather criminals try to convert their illegal
money to legal money so that their money appears clean which is known as money laundering.The act related is
Prevention of Money laundering Act 2002.A step to prevent money laundering is KYC (Know Your Customer)
policy. The KYC helps to ensure that banks’ services are not misused.
1.Automatic Route: Under this, the borrower is not to take any permission from RBI or GOI.
2.Approval Route: Under this, the borrower has to take approval from RBI or GOI.
Currency Chest :
• Currency chest is the place where currency is stored.
• It will be the select branches of scheduled banks, which are authorised by the RBI to facilitate distribution of
notes and coins
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Acronyms Abbreviations
ABEDA Arab Bank for Economic Development in Africa.
ACF Auto Correlation Function.
ACS Automated Clearing Systm.
AD Authorized Dealer.
ADB Asian Development Bank.
ADF Automated Data Flow
ADR American Depository Receipt.
AEPS Aadhaar Enabled Payments Switch
AFA Additional Factor Authentication
AFS Annual Financial Statement.
AGM Annual General Meeting.
AIC Agricultural Insurance Company.
AIF Alternative Investment Fund
ALCO Asset Liability Committee
ALM Asset Liability Management
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• All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are
covered under the Scheme.
Filing Complaint:
One can file a complaint before the Banking Ombudsman if the reply is not received from the bank within a period of
one month after the bank concerned has received one’s representation, or the bank rejects the complaint, or if the
complainant is not satisfied with the reply given by the bank.
Amount of Compensation:
The amount, if any, to be paid by the bank to the complainant by way of compensation for any loss suffered by the
complainant is limited to the amount arising directly out of the act or omission of the bank or Rs 10 lakhs, whichever
is lower.
• However Banking Ombudsman may award compensation not exceeding Rs 1 lakh to the complainant only in
the case of complaints relating to credit card operations for mental agony and harassment.
• If one is not satisfied with the decision passed by the Banking Ombudsman, one can approach the appellate
authority against the Banking Ombudsmen’s decision. Appellate Authority is vested with a Deputy Governor
of the RBI.
• Reserve Bank of India Act, 1934 is the legislative act under which the Reserve Bank of India was formed.
This act along with the Companies Act, which was amended in 1936, were meant to provide a framework for
the supervision of banking firms in India.
• RBI was set up under the recommendations of the Hilton Young Commission which submitted its report in the
year 1926, though the bank was not set up for nine years.
• The Act defines scheduled banks, as they are mentioned in the 2nd Schedule of the Act. These are banks
which were to have paid up capital and reserves above Rs.5 lakh.There are total 61 Sections in the RBI Act
1934.
Important Sections:
Section 3 States about the establishment and incorporation of RBI.
Section 4 Defines the capital of the Bank( five crores of rupees)
Section 6 Establishment of Offices, branches and agencies
Section 8 The composition of central board of Reserve Bank of India
Section 17 Defines manner in which the RBI can conduct business.
Section 18 Deals with emergency loans to banks.
Section 20 Defines obligation of the Bank to transact Government business.
Section 27 Bank shall not re-issue bank notes which are torn, defaced or excessively soiled.
Section 21 States the RBI must conduct the banking affairs for the central government and
manage public debt.
Section 22 Says that only RBI has the exclusive rights to issue currency notes in India.
Section 24 States that the maximum denomination a note can be Rs.10,000.
Section 26 Describes the legal tender character of Indian bank notes
Section 28 Allows the RBI to form rules regarding the exchange of damaged and imperfect
notes
Section 31 Says that in India only the RBI or the central government can issue and accept
promissory notes that are payable on demand. However, cheque, that are payable on
demand, can be issued by anyone
Section 42 Elaborates about cash reserves of scheduled banks to be kept with the Bank.
Section 42(1) Says that every scheduled bank must have an average daily balance with the RBI.
The amount of the deposit shall be more that a certain percentage of its net time and
demand liabilities in India.
Section 45-I (c) defines financial institution
Section 45-I(f) Defines non-banking financial company
Section 45(U) Defines repo, reverse repo, derivative, money market instruments and securities
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Section 5(c) Defines Banking Company- means any company which transacts the business of
banking in India.
Section 5(b) Defines "banking" means the accepting, for the purpose of lending or investment,
of deposits of money from the public, repayable on demand or otherwise, and
withdrawable by cheque, draft, order or otherwise.
Section 5(d) Defines "company" means any company as defined in Section 3 of the Companies
Act, 1956 and includes a foreign company within the meaning of Section 591 of
that Act.
Section 45 Application by RBI for Moratorium
Section 44A Amalgamation of Banking Companies
Section 38 to 44 Winding up of Banking Companies
Section 35A Giving directions to Banking Companies
Section 35 Inspection of books of accounts
Section 26 Submission of Returns of unclaimed Deposits
Section 25 Maintenance of Assets in India
Section 24 Maintenance of a percentage of liquid assets (SLR)
Section 23 Control on the opening of new business
Section 22 Licensing of banking companies
Sections 20 & 21 Restrictions on loans and advances
Section 19 Restrictions on holding of shares in other companies
Section 18 Maintenance of cash reserve by non-scheduled banks
Section 17 Transfer to Reserve Fund
Section 15 Limiting the payment of dividends
Sections 11 & 12 Requirements regarding minimum paid up capital and reserves
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• The Cabinet Committee on Economic Affairs (CCEA), take a call on the Minimum Support Prices (MSP) of
various agricultural commodities based on the recommendations of the Commission for Agricultural Cost and
Prices (CACP).
AADAHR CARD
Aadhaar number is a 12 digit random number, issued to the residents of India. It is provided by Unique Identification
Authority of India (UIDAI) after obtaining demographic information and biometric information of the citizen. The
first UID number was issued on 29 September 2010 to a resident of Nandurbar, Maharashtra.
Prompt Corrective Action (PCA) plan allow the RBI to place certain restrictions such as halting branch expansion and
stopping dividend payment.The provisions of the revised PCA framework will be effective from April 1, 2017. The
framework would be reviewed after three years.
The PCA is invoked when certain risk thresholds are breached. There are three risk thresholds which are based on
certain levels of asset quality, profitability, capital and the like.
Line of credit
Line of credit is when you can borrow money upon cap is fixed by the bank at which you can get credit. You don’t
need to draw the entire amount at once and you can choose to make use of only part of the credit line to suit your
needs.
• Also the interest calculated on the amount they spend, not on the entire credit line. When it comes to paying
back (repayment) consumers can also adjust their repayment amounts as needed, based on their budget or cash
flow.
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• Under the JLF framework for revitalizing distressed assets in the economy, even before a loan account turns
into an NPA, the new system helped identify the stress by segregating the accounts into three categories —
Special Mention Accounts (SMA)
1. SMA-0 ----if <30 days + sign of incipient stress
2. SMA-1 ---- loan overdue for 31-60 days
3. SMA-2----- if >60 days
Aallet app ‘State Bank MobiCash’ SBI & BSNL To allow users with Feature phone
as well as Smartphone to deposit
cash and withdraw funds from their
account through BSNL retail
outlets.
M Pesa Pay Vodafone To enable merchants and retailers
to receive payments from their
customers
eazypay ICICI Bank All-in-one acceptance
platform for merchants
to collect payments from their
customers
SIB Mirror+ South Indian Bank To enables the customers to
perform almost all banking
transactions from their smart
phones.
UCO Suvidha prepaid card UCO Bank For cash withdrawals, purchase at
Points of Sale (POS) or over the
Internet
Humanoid Robot IRA HDFC Bank, Mumbai To help the assist the customers in
banking activities.
Contactless Credit Card PNB Wave N Punjab National Bank (PNB) To waive the card across the terminal
Pay to complete the transaction process,
without the need to enter any PIN
number for transactions up to Rs 2,000
SBI Exclusif SBI It offers an electronic wealth center
that equips the customers with a
convenience and flexibility to track
their portfolio, conduct transactions
and make investments through digital
channels such as internet and mobile
Mission FINFIT Lakshmi Vilas Bank To offer the customers of the bank
financial planning and personal wealth
management services based on Robo
advisory
Citibank Online (CBOL) Citi Bank India become the first country in Asia
Pacific within the Citi network to have
this kind of service.
CBOL - instant chat services for
customers
Batuaa Oriental Bank of Commerce Launched to marks the 75th
Foundation Day of the bank.
To provide banking services through
app.
chatbot Eva HDFC Bank For customer services
Aadhaar Pay IDFC Bank India’s first biometric-based
payment system
FASTag service Karur Vysya Bank Preloaded tags affixed on vehicles
are valid at all toll plazas
throughout the country
Mera iMobile ICICI Bank To provide agricultural information
in 11 Indian languages for rural
people without internet connection.
Truecaller Pay’ ICICI Bank & Truecaller To provide quick and easy payment
methods to mobile phone users in
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India.
'Unnati' credit card SBI It will be issued to the customers
with a minimum balance of 25000
PoS Saral Nivesh Edelweiss Tokio It is the first product to be approved
by the Insurance Regulatory and
Development Authority of
India's guidelines on point of sale-
life insurance products.
Selfie Federal Bank To enables users to trade directly
from charts, among others
'Code For Bank' - hackathon SBI To come up with innovative ideas
and solutions for the banking
sector.
SPOK. HDFC Life An insurance email bot that can
read customer queries
within milliseconds and respond to
them.
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