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Under guidance of Mr. Abhijeet Singh Brij Kishore Gupta MBA 2nd Sem.

Flow of Presentation
Commercial Bank
Types of Commercial Bank

Types of loans granted by commercial banks Functions of Commercial banks Investment Institutions Life Insurance Corporation of India (LIC)

Unit Trust of India (UTI)


General Insurance Corporation of India (GIC) Mutual Fund
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Commercial Bank
A commercial bank is a type of financial intermediary

and a type of bank.


After the great depression and the stock market crash of

1929, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities.
Since the two no longer have to be under separate

ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.
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Contd.
Commercial banking refer to a bank or a division of a

bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public .

It raises funds by collecting deposits from businesses and

consumers via checkable deposits, savings deposits, and time (or term) deposits. It makes loans to businesses and consumers. It also buys corporate bonds and government bonds. Its primary liabilities are deposits and primary assets are loans and bonds. distinguish it from an investment bank.

Commercial bank is the term used for a normal bank to

Types of Commercial Bank


Commercial Banks Scheduled Banks Non Scheduled Banks

Indian Banks

Foreign Banks

Public Banks

Private Banks
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Scheduled Banks
Scheduled bank is one which is registered in the second schedule of the Reserve Bank of India Act 1934. The following conditions must be fulfilled by a bank for inclusion in the scheduled bank:
1.

The banker concerned must be in business of banking in India.


It is either a company defined in Section 3 of the Indian Companies Act 1956, or corporation or a company incorporated by or under any law force in any place outside India or an institution notified by the Central Government in this behalf.
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2.

3.

The paid capital and collected funds of bank should not be less than Rs. 5 lac.

4. Any activity of the bank will not adversely affect the

interests of depositors.

Every Scheduled bank enjoys the following facilities. Such bank becomes eligible for debts/loans on bank rate from the RBI. Such bank automatically acquire the membership of clearing house.

Scheduled Banks may be classified into two groups 1. Indian Scheduled Banks 2.Foreign Scheduled Banks 1.

Indian Scheduled Banks: The Indian Scheduled Banks are those which have their registered offices in India and are registered in the second schedule of the RBI. Indian Scheduled Banks may be distinguished in two part. A.Public sector B.Private Sector

A. Public Sector Banks: It Covers the following SBI group

State Bank of India, with its seven associate banks command the largest banking resources in India. SBI and its associate banks are: o State Bank of India o State Bank of Bikaner & Jaipur o State Bank of Hyderabad o State Bank of Indore o State Bank of Mysore o State Bank of Patiala o State Bank of Saurashtra o State Bank of Travancore
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Other Public Banks are-

Allahabad Bank , Andhra Bank , Bank of Baroda , Bank of India , Bank of Maharashtra , Canara Bank , Central Bank of India , Corporation Bank , Dena Bank , Indian Bank , Indian Overseas Bank , Oriental Bank of Commerce , Punjab & Sind Bank , Punjab National Bank , Syndicate Bank , Union Bank of India , United Bank of India , UCO Bank , Vijaya Bank

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B. Private Sector

Axis Bank, Federal Bank , HDFC Bank , ICICI Bank, IDBI Bank, ING Vysya Bank, YES Bank etc.
2.

Foreign Scheduled Banks: Foreign Scheduled Banks comprise those commercial banks which are registered in the second schedule of the RBI but have their registered office outside India. ABN AMRO, American Express Bank , Bank of America , Citibank, Deutsche Bank , HSBC, JPMorgan Chase Bank
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Non - Scheduled Banks


Banks which are not included in the Second Schedule of

the RBI, are known as non -scheduled banks. They may be classified into four groups:

Banks with paid-up capital and reserves in excess of Rs. 5 lakhs. 2. Banks with paid-up capital and reserves ranging between one lakh of rupees and five lakhs. 3. Banks with paid-up capital and reserves ranging between Rs. 50,000 and Rs. 1,00,000. 4. Banks with paid-up capital and reserves below Rs. 50,000.
1.
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Types of loans granted by commercial banks


Secured loan

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.
Mortgage loan

A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. Commercial banks, however, is given security - a lien on the title to the house - until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
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Unsecured loan

Unsecured loans are monetary loans that are not secured against the borrowers assets. These may be available from financial institutions under many different guises or marketing packages: credit card debt personal loans bank overdrafts credit facilities or lines of credit corporate bonds

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Functions of Commercial banks


Repository Functions of Commercial Banks:

As repository of savings, commercial banks provide to their customers a range of financial investment such as Current deposit Savings deposit Fixed deposit
Deployment Function of Commercial Banks:
major function of the commercial banks is employment

of funds in different sectors of the economy.


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Commercial banks utilize their funds by granting loans and advances investing them in industrial securities underwriting industrial issues. A major portion of the funds is employed by commercial

banks in loans. Bank loans can be divided into 4 partsLoans and advances Overdraft Cash Credit Bills discounting
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Commercial Bank Manufacture Money:


Commercial bank create money out of their lending and

investing operations. Banks utilized the deposits which they get from the people by loaning them and investing them in securities.
Miscellaneous Function:

Processing of payments by way of telegraphic transfer,

EFTPOS (Electronic Fund Transfer at Point Of Sale), internet banking or other means.

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Issuing bank drafts and bank cheques. Providing documentary and standby letter of credit,

guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures.
Safekeeping of documents and other items in safe

deposit boxes.
Currency exchange.

Payment of Insurance premiums, rents, income-tax,

school fees etc.


Collection of cheques, bills, salaries, dividend, interest

etc. on behalf of the customer.


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Investment Institutions
are the most popular form of financial intermediaries,

which particularly catering to the needs of small savers and investors. They deploy their assets largely in marketable securities.
The financial institutions are LIC UTI GIC Mutual Funds
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Life Insurance Corporation of India (LIC)


was established in 1956 as a wholly-owned corporation of

the Government of India. It was formed by the Life Insurance Corporation Act,1956, with the objective of spreading life insurance much more widely and in particular to the rural area. Its investment policies has been designed after providing a thoughtful consideration to cardinal principles of safety, diversification of investment in terms of types of securities, number and types of enterprise, maturities and regions. It also extends assistance for development of infrastructure facilities like housing, rural electrification, water supply, sewerage, etc. In addition, it extends resource support to other financial institutions through subscription to their shares and bonds, etc.
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Contd
The main tenets of investment policy of the LIC are Investment policy should be that the funds shall be

invested in such a manner, as to safeguard and promote to the maximum extent possible the interest of the policyholders. securities, industries and regions.

Investments should be dispersed over different classes of


The corporation should act purely as an investor and not

assume the role of an operator or speculator and try to take advantage of temporary fluctuations in the market prices. careful investigation of the project from financial, economic, technical, managerial and social angles.

The corporation would underwrite security issues after

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Unit Trust of India (UTI)


was set up as a body corporate under the UTI Act, 1963,

with a view to encourage savings and investment. It mobilises savings of small investors through sale of units and channelizes them into corporate investments mainly by way of secondary capital market operations. Its primary objective is to stimulate and pool the savings of the middle and low income groups and enable them to share the benefits of the rapidly growing industrialisation in the country. In December 2002, the UTI Act, 1963 was repealed with the passage of Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002, paving the way for the bifurcation of UTI into 2 entities, UTI-I and UTI-II with effect from 1st February 2003. 22

Objectives of UTI
To mobilize savings of the community by offering

savers the triple benefits of safety, liquidity and profitability of investments.


To channelize the pooled savings into productive

outlets.
To give every one a chance to indirectly own shares and

securities in a large number of select companies and to enable the investors to share in the widening prosperity consequent on industrial growth.
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General Insurance Corporation of India (GIC)


was formed in pursuance of the General Insurance

Business (Nationalisation) Act, 1972(GIBNA ), for the purpose of superintending, controlling and carrying on the business of general insurance or non-life insurance.
Initially, GIC had four subsidiary branches, namely,

National Insurance Company Ltd , The New India Assurance Company Ltd , The Oriental Insurance Company Ltd and United India Insurance Company Ltd.

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But these branches were delinked from GIC in 2000 to

form an association known as 'GIPSA' (General Insurance Public Sector Association).


The insurance premium charged by the GIC is in

proportion to the potential loss.


The GIC policies are generally for shorter period of time

and there is no guarantee of renewal of policy on the same terms or on any terms.

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Mutual Fund
A mutual fund is an institutional device through which

investors pool funds of savers to invest in a diversified portfolio of securities, thus spreading and reducing risk.
It is an investment vehicle through which small and large

investors pool their funds under the direction of an investment manager.


These funds are invested in wide variety of securities in

such a way as to minimize risk while ensuring steady return.


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Types of Mutual Funds


Stock Funds Bonds Funds Balanced Funds Offshore Funds Specialized Funds Leverage Funds Taxation Funds

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Stock Funds

These funds invest primarily in common stock. There is a broad range of common stock funds- from those that invest solely in the new, un-established companies.
Bond Funds

Bond funds obviously employ their funds in bounds so as to ensure and fixed income to their investors.
Taxation Funds

Mutual Funds designed to provide tax exemption benefits to the investors, whether in the domestic or foreign capital market, are called taxation funds.
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Offshore funds

The subscription to these funds is mobilized from international financial markets for investment in the economics and capital markets of specific country.
Specialized Funds

These funds are directly invest in a specialized group of securities.


Leverage Funds

Leverage funds are common stock funds whose main objective is to maximize capital appreciation.

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Balanced Funds

Balanced funds combine bonds and/or preferred

stock with the ownership of common stock, usually at some pre-determined percentage relationship.
Several balanced funds keep one-half of the

portfolio in common stocks and one-half in bonds and preferred stocks.

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