Banking sector

information
 Some relevant terms

Core Banking Solutions (CBS):

In this all the branches of the bank are connected together and the customer can
access his/her funds or transactions from any other branch.

Demat Account:
The way in which a bank keeps money in a deposit account in the same way the
Depository Company converts share certificates into electronic form and keep them in a
Demat account.

Dishonour of Cheque:
Non-payment of a cheque by the paying banker with a return memo giving reasons for
the non-payment
 Some relevant terms

EFT – (Electronic Fund Transfer):

In this we use Automatic teller machine, wire transfer and computers to move funds
between different accounts in different or same bank.

Kiosk Banking:
Doing banking from a cubicle from which food, newspapers, tickets, etc are also
sold

Market Capitalization:
The product of the share price and number of the company’s outstanding ordinary
shares.

Mortgage:
It is a kind of security which one offers for taking an advance or loan from someone.
 Some relevant terms

Plastic Money:
Plastic money is a name given to Credit cards, Debit cards, ATM cards and International
Cards issued by banks

Point of Sale (PoS):

PoS refers to a location at which a payment of a card transaction occurs

Prime Lending Rate (PLR):

Rate of interest at which a bank gives loan to its most reliable customer i.e., customer
with ‘zero risk’ (Risk free rate)

Monetary Policy:
it refers to the Central Government policy with respect to the quantity of money in the
economy, the rate of interest and the exchange rate
 Some relevant terms

Virtual Banking:
Internet banking is sometimes known as virtual banking. It is called so because it has no
bricks and boundaries

Wholesale Banking:
It is similar to retail banking with a slight difference that it mainly focuses on the financial
needs of the institutional clients and the industry.
Difference between co-operative and
commercial banks
Commercial bank
 Meaning: - Offers banking services to individuals and
businesses.
 Governing Act: - Banking Regulation Act, 1949
 Area of operation: - Larger
 Motive of operation: - Profit
 Borrowers: - Account holders
 Main operation: - Accepting deposits from public
and granting loans to individuals and businesses
 Interest rate on deposits: - less
Co-operative bank
 Meaning: - A bank set up to provide finance to
agriculturists, rural industries and to trade and industry
of urban areas (but up to a limited extent)
 Governing Act: - Co-operative societies Act 1965
 Area of operation: - Smaller
 Motive of operation: - Service
 Borrowers: - Member shareholders
 Main operation: - Accepting deposits from members
and the public, and granting loans to farmers and
small businessmen
 Interest rate on deposits: - higher
  There are 54 scheduled urban co-operative
banks in India. (https://www.rbi.org.in/)

Number of co-  There are 1490 non-scheduled urban co-

operative banks in India.
operative (https://www.rbi.org.in/)
 There are 13 non-scheduled state co-operative
banks in India banks in India. (https://www.rbi.org.in/)
 There are 20 scheduled state co-operative
banks in India. (https://www.rbi.org.in/)
List of Non-Scheduled State Co-operative Banks

Sr. No Name of State Co-operative Bank

1 Andaman and Nicobar State Co-operative Bank Ltd.

2 Arunachal State Co-operative Apex Bank Ltd.

3 Assam Co-operative Apex Bank Ltd.

4 Chandigarh State Co-operative Bank Ltd.
5 Delhi State Co-operative Bank Ltd.
6 Jammu and Kashmir State Co-operative Bank Ltd.

7 Jharkhand State Co-operative Bank Ltd.

8 Manipur State Co-operative Bank Ltd.
9 Meghalaya Co-operative Apex Bank Ltd.
10 Mizoram Co-operative Apex Bank Ltd.
11 Nagaland State Co-operative Bank Ltd.
Source:- RBI
12 Sikkim State Co-operative Bank Ltd.
13 Tripura State Co-operative Bank Ltd.
Asset growth
of UCB’s
Asset growth of UCB’s(Contd.)

 As we can see from the graph in the previous

slide(https://rbi.org.in/Scripts/PublicationsView.aspx?id=18062) the
average asset growth rate over the last 10 years has been 12.48%. The
asset growth rate reached its peak in FY 2009-2010, when it reached 18%,
after that the asset growth rate experienced a sharp fall in the next FY. In
recent years though, UCBs’ growth in assets has decelerated to close to its
long run average
Tier wise distribution of
UCBs
Tier wise distribution of
UCBs(Contd.)

 According to
RBI(https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=4970&Mode=0)
any bank with deposits below Rs.100 crore operating in a single district or
deposits below Rs.100 crore operating in more than one district and the
branches are in contiguous districts and deposits and advances of
branches in one district separately constitute at least 95% of the total
deposits and advances respectively of the bank or banks with deposits
below Rs.100 crore, whose branches were originally in a single district but
subsequently, became multi-district due to reorganization of the district
may also be treated as Tier 1. Any other co-operative bank will be treated
as Tier 2 co-operative banks.
Distribution of UCBs by deposits and
advances
Liabilities and assets of UCBs
 Small Finance Banks

The Small Finance Bank (SFB) is a private financial institution intended to further the objective
of financial inclusion by primarily undertaking basic banking activities of acceptance of deposits and
lending to un-served and underserved sections including small business units, small and marginal
farmers, micro and small industries and unorganized sector entities, but without any restriction in the
area of operations, unlike Regional Rural Banks or Local Area Banks.

Small Finance Banks were created pursuant to the announcement in Union Budget 2014-2015,
presented on July 10, 2014. RBI issued the Guidelines on 27 November 2014 for licensing and
regulation of SFBs. On 16 September 2015, RBI decided to grant “in-principle” approval to 10
applicants to set up small finance banks under the Guidelines issued on November 27, 2014.
 Pune Vehicles
While the population stands at approximately 3.5 million (35 lakh), the number of registered
vehicles for the area is now 3.62 million (36.2 lakh)
Compared with 2017, the number of four-wheelers registered increased from 5.89 lakh to
6.45 lakh in 2018 and the number of registered two-wheelers shot up from 24.97 lakh to 27.03
lakh
In percentage terms, the registration of four-wheelers in 2018 notched a growth of 9.57 per
cent and two-wheelers by 8.24 per cent over 2017.
Consequently, Pune RTO's revenues overshot the target of Rs 862.32 crore by 118.38 per cent
to net Rs 1,021.56 crore.

Vehicles Sr. No Type No. of vehicles

9%
6% Four 1 Four 6,45,683
14% Wheelers Vehicles
12% 2-wheelers 2 Two 2,73,147
Vehicles
59% Autoricksha 3 Autoricksha 53,227
ws ws
4 Taxi- cabs 28,344
5 Heavy 38,598
Vehicles
 Goods and Services Tax (GST)

GST is an Indirect Tax which has replaced many Indirect Taxes in India. GST is one indirect
tax for the entire country. Under the GST regime, the tax is levied at every point of sale. In
the case of intra-state sales, Central GST(CGST) and State GST(SGST) are charged. Inter-
state sales are chargeable to Integrated GST.
There are 3 taxes applicable under this system: CGST, SGST,IGST.
1. CGST: Collected by the Central Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
2. SGST: Collected by the State Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
3. IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil
Nadu)
4. UGST : Collected by the Central Government for Union Territory sale. (Eg : Chandigarh to
Goa)
 GST SLABS

Tax Slab Products Difference Between Old Reason

rate and new GST Rate

0% Food grains , rice, wheat, etc. Similar rates as the current To help rural population and control inflation
level

5% Spices, Tea, mustard oil, etc. Lower than current rate To make goods affordable and reduce cascading effect of
taxes.

12% Processed food items Applicable GST likely to be To make goods affordable and reduce cascading effect of
lower than current taxes.
combined tax

18% Soaps, oil, toothpaste, Previously charged at 25% To make goods affordable and reduce cascading effect of
refrigerator and smartphones and above taxes.

28% Luxury cars, Tobacco Previously taxed between As these goods are expensive, these products drive more
products, etc 27-31% revenues for states.
 GST Collection
GST or goods and services tax collections stood at Rs. 1,02,503 crore in the month of
January, the government said on Saturday. The official GST data for the entire first
month of calendar year 2019 came days after the government notified the
collections to have crossed the Rs. 1 lakh crore mark. At Rs. 1,02,503 crore, GST
revenue last month was up 8.2 per cent compared with the previous month, and
14.1 per cent compared with January 2018, according to government data.

Source:- https://www.gst.gov.in/
 Overview

The Indian banking system consists of 27 public

sector banks, 26 private sector banks, 46 foreign
banks, 56 regional rural banks, 1,574 urban
cooperative banks and 93,913 rural
cooperative banks, in addition to cooperative
credit institutions. Public-sector banks control
more than 70 per cent of the banking system
assets, thereby leaving a comparatively smaller
share for its private peers.
 Difference between Savings and Current
Account

Savings Accounts

• A savings account is designed with the primary purpose to help you save.
• This type of account allows the holder to deposit money as is convenient, on which the holder can
earn interest.
• A Savings account may be opened by an individual or jointly and requires the holder to usually
maintain a pre-specified amount as minimum balance.
• Interest rates earned on Savings Accounts range anywhere between 4% to 6%. These accounts do
usually carry the facility of issuing cheques.

Current Accounts

• Current Accounts derive their name from the purpose they are suited for, regular transactions.
• This type of account is more suited for users like firms, companies, public enterprises, businessmen,
etc.
• Currents accounts do not earn any interest due to the fluidity they offer.
• Current accounts usually do not carry a limit on the number of transactions which can be made.
 Difference between Fixed Deposits and Recurring
Deposits

Fixed Deposits

Fixed deposit is a one time investment of Deposition of Money in Bank

for a period. And it get a fix rate of interest on that amount. It’s have
not any type of risk on amount.

• Purpose: To enable investors to mobilize idle savings and earn with a

higher rate of interest than regular savings bank accounts.
• Duration: Fixed deposit accounts can be opened for a minimum of 7
days, to a maximum of 10 years.
• Eligibility: All resident Indians and Hindu Undivided Families (HUFs) are
eligible to open a fixed deposit account.
• Compound Interest and Impact of Compounding Frequency: Interest
on investments made in a FD compounds, and earns interest on the
new balance after each compounding.
 Difference between Fixed Deposits and Recurring
Deposits

Recurring Deposits

Recurring Deposit is a kind of term deposit. This deposit have for certain time of period. It also get a fix
rate of interest on that amount. Mean in this deposit we deposit a certain amount every month for a
certain period.

• Purpose: To inculcate a regular habit of savings among the public.

• Duration: Recurring Deposit accounts can be opened for a minimum of 6 months, and a maximum
of 10 years.
• Eligibility: All resident Indians and Hindu Undivided Families (HUFs) are eligible to open this account.
RD accounts can also be opened for minors by their parents or legal guardians.
• Compound Interest and Impact of Compounding Frequency: Most banks that offer Recurring
Deposit usually compound interest on a quarterly basis. Compound interest is interest that is added
to the principal amount so that from then on, the interest that has been added also earns interest.
This addition of interest to the principal is called compounding.
 Repo Rate, Reverse Repo Rates

Time Period 4th Apr 19 7th Feb 19 5th Dec 18 5th Oct 18 1st Aug 18
Repo 6.00 6.25 6.50 6.50 6.50
Rate(%)
Time Period April 19 Jan 19 Oct 18 Jul 18 Apr 18
Reverse 5.75 6.25 6.25 6.00 5.75
Repo
Rate(%)
Repo Rate

• Repo Rate or the repurchase rate is the interest at which the RBI lends money to the Bank by
exchange of securities.
• Repo Rate is used by monitory authorities to control inflation.
• For example, when the repo rate increases, borrowing from the RBI becomes more expensive.
• In the event of inflation, RBI increases repo rate as this acts as a disincentive for banks to borrow
which ultimately reduces the money supply in the economy and thus helps in increasing inflation.

Reverse Repo Rate

• Reverse Repo rate is the interest rate at which the central bank (RBI) borrows money from banks.
• An increase in the reverse repo rate means that the commercial banks will get more incentives to
 SLR vs CRR
BASIS FOR
CRR SLR
COMPARISON
Meaning CRR is the percentage of The bank has to keep a certain
money which the bank percentage of their Net Time
has to keep with the and Demand Liabilities in the
Central Bank of India in form of liquid assets as specified Key Differences between CRR and SLR
the form of cash. by RBI.

• CRR is the percentage of money, which a bank has to keep with

RBI in the form of cash. On the other hand, SLR is the proportion
Form Cash Cash and cash equivalents(ex. of liquid assets to time and demand liabilities.
Gold)
• The next difference between these two is that CRR is maintained
in the form of cash while the SLR is to be maintained in the form
of gold, cash and government approved securities.
• CRR regulates the flow of money in the economy whereas SLR
ensures the solvency of the banks.
Effect It controls excess money It helps in meeting out the
flow in the economy. unexpected demand of any
• CRR is maintained by RBI, but RBI does not maintain SLR.
depositor by selling the bonds. • The liquidity of the country is regulated by CRR while SLR governs
the credit growth of the country.

Maintainence with Central Bank of India i.e. Bank itself.

RBI.

Regulates Liquidity in the economy. Credit growth in the economy.

 NEFT vs IMPS vs RTGS

NEFT: NEFT is an electronic fund transfer system which operates on a DNS (Deferred
Net Settlement) basis which settles transactions in batches. At present, there are 11
settlements between 8 am and 6:30 pm between Monday and Saturday except
2nd and 4th Saturday as well as bank holidays.

RTGS : In RTGS the transactions are settled individually and not in batches. The
transaction is processed immediately after it is executed throughout the RTGS
business hours. The RTGS window is open from 8 am to 4 pm between Monday and
Saturday except 2nd and 4th Saturday as well as bank holidays. The minimum limit
on transfer of funds at a time is Rs 2 lakhs.

IMPS: It is an instant payment service available for money transfer to bank accounts
in India. It is ideal for transactions with small amount. The main feature of IMPS
service is that it is available 24/7 including Sunday and bank holidays throughout
the year, which makes is particularly helpful during emergencies.
Advances

Cash Credit
Cash Credit is an arrangement by which the customer is allowed to borrow money up to a certain limit
known as the ‘cash credit limit’.

Overdraft
Overdraft is an arrangement between a banker and his customer by which the latter is allowed to withdraw
over and above his credit balance in the current account up to an agreed limit. This is only a temporary
accommodation usually granted against security.

Loan
A sum of money which is borrowed, often from a bank, and has to be paid back, usually together with an extra
amount of money that you have to pay as a charge for borrowing.
The loans may be repaid in installments or at the expiry of a certain period. The loan may be made with or without security.