BANKING PRACTICES

ORIGIN OF BANKING

The term bank is either derived from old Italian

word ‘banca’ or from a French word ‘banque’
both mean a Bench or money exchange table. In
olden days, European money lenders or money
changers used to display
(show) coins of different
countries in big heaps
(quantity) on benches or
tables for the purpose of
lending or exchanging.
 MEANING

A bank is a financial institution which deals with

deposits and advances and other related services.
It receives money from those who want to save in
the form of deposits and it lends money to those
who need it.
 DEFINITION

Banking Regulation Act of 1949 defines banking as:

“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”.
CHARACTERISTICS OF BANKING
1. Dealing in Money
2. Individual / Firm / Company
3. Acceptance of Deposit
4. Giving Advances
5. Payment and Withdrawal
6. Agency and Utility Services
7. Profit and Service Orientation
8. Ever increasing Functions
9. Connecting Link
10. Banking Business
11. Name Identity
 IMPORTANCE OF BANKING

1. Banks mobilise small, scattered and idle savings of the

people, and make them available for productive purposes
2. By offering attractive interests, Banks promote the habit of
thrift and savings
3. By accepting savings, Banks provide safety and security to
the surplus money
4. Banks provide convenient and economical means of
payments
5. Banks provide convenient and economical means of
transfer of funds
6. Banks facilitate the movement of funds from unused
regions to useful regions
7. Banking help trade, commerce, industry and agriculture
by meeting their financial requirements
8. Banking connect saving people and investing people.
9. Through their control over the supply of money, Banks
influence the economic activities, employment, income level
and price level in the economy.
 Savings Bank Account

A savings bank account is a basic type of bank account

that allows individual's/public to deposit money, keep it
safe, and withdraw funds, all while earning interest.
 FEATURES OF SAVINGS BANK A/C

 Promote savings.
 There is no restriction on the number and amount of deposits.
 Withdrawals are allowed subject to certain restrictions.
 The money can be withdrawn either by cheque or withdrawal
slip of the respective bank.
 The rate of interest payable is very nominal on saving accounts.
 Saving account is of continuing nature.
 A minimum amount has to be kept.
 No loan facility is provided against saving account.
 Electronic clearing System (ECS) or E-Banking.
 Payment of equated monthly installments (EMI) for loans
through SB A/c.
PROCEDURE FOR OPENING BANK ACCOUNTS

Choose a Bank

Approach any bank of choice

Fill up Bank Account Opening Form

Give References
Submit Bank Account Opening Form and
Documents
Officer will verify the Bank Account
Opening Form

Deposit initial amount

 LOAN

Loan in simplest terms can be explained as a thing that is

borrowed, especially a sum of money that is expected to
be paid back with interest.

The act of giving money, property, or other material

goods to a another party in exchange for future
repayment of the principal amount along with interest
or other finance charges is called loan.
 CLASSIFICATION
OF
LOANS

OPEN- CLOSED-
SECURED UNSECURED
ENDED ENDED
 TYPES OF LOANS

Term Loan Policy Loan

Personal Loan Loan against Property

Education Loan Home Loan

Vehicle Loan Pay Day Loan

Construction Equipment
Gold Loan
Loan
Credit Card
Business Loan
 LENDING POLICY

A set of guidelines and criteria developed by a bank and

used by its employees to determine whether an
applicant for a loan should be granted or refused the
loan. 
 PROCEDURE FOR APPLYING LOAN

Visit Bank & Meet Fill the

Choose a Bank
its Officer Application Form

Verification of Document
Background Check
Documents Collection

Loan Approval Process Fee

Sanction Letter
Process Payment

Loan Agreement Processing the

& Disbursal Property Documents
 CIBIL

India’s first Credit Information Bureau (India) Limited

incorporated in the year 2000.
It is a repository of factual information on the credit
history and repayment records of commercial and
consumer borrowers.
Established by the Government of India and the RBI.
The legislation has enabled banks to submit data to CIBIL
without obtaining borrower’s consent.
 History of CIBIL
2000: Credit 2004: Credit bureau
Information Bureau services are launched in
(India) Limited was India (consumer)
incorporated

2007: CIBIL Score, 2006: Commercial

was introduced. bureau operations
commenced.

2011: CIBIL Score

2010: CIBIL Detect, is made available to 2017: TransUnion
CIBIL Mortgage individual acquired a 92.1%
Check consumers. stake in CIBIL.
 Objectives of CIBIL

To provide comprehensive credit information by

gathering credit related information regarding
commercial and consumer borrowers.
To maintain a database of this information and selling it
in the form of credit reports to a closed user group of
members.
 Members of CIBIL

Credit Institutions.
Insurance Companies.
Companies providing cellular or telephone services.
Credit Rating Agencies.
Asset Reconstruction Companies.
Telecom Companies.
 How does CIBIL operates?

Collects, collates and disseminates credit information

of borrowers from its Members (who are actually credit
grantors).

This information is supplement by CIBIL with public

domain information.

Allows the credit grantors to have access to its

database to search and gain a complete picture of the
payment of a credit applicant.
 How does CIBIL operates?

 Reports can be obtained from CIBIL only by members

who contribute all the data about the borrowers.

 CIBIL collects commercial and consumer credit-related

data and collects such data to create and distribute
credit reports to Members.

 CIBIL does not grant or deny credit.

 CIBIL REPORT

A CIBIL report is a single

unified document that
provides a detailed
overview of borrower’s
credit history across
different lenders over a
significant period of time.

It is a comprehensive report that provides details of an

individual’s or corporate entity’s borrowing history and
repayment record.
 CONTENTS OF CIBIL REPORT

 Personal details of an applicant (name, age, gender and address)

 Employment details and earnings
 Number of hard enquiries made by potential lenders on receipt
of the loan/credit card application
 Records of previous and current loans along with the payment
record
 Any defaults on loan
 The details of settled loans, if any
 Total credit limit and the amount spent monthly (Credit
Utilisation Ratio)
 Any credit card payment defaults
 Credit Score
 CREDIT SCORE

CIBIL Credit Score is a three-digit number ranging from

300 to 900, which acts as a measure of credit
worthiness. The score is derived after taking into
consideration credit history and details found in CIBIL
report, which is maintained as record by Transunion
CIBIL.
 Factors Affecting CIBIL Score

Credit history.

Missing of due dates.

Utilization of credit.

Multiple credit applications.

Increasing credit card limit frequently.

Credit composition.

Amount of outstanding debt.

 How to Improve CIBIL Score?

On-time, every-time payments.

Debt consolidation.

Utilize balance transfer opportunities.

Aim for 30% Credit Utilization or Less.

Limit Requests for New Credit.

Keep Old Accounts Open and Deal With Delinquencies.

Benefits of CIBIL to Credit Grantor

Provide access to better credit information.

Automated decisioning system.

Assists in evaluating and monitoring repayment ability

and payment diligence.

Lowers defaults risk.

Allows credit grantors to price the risk appropriately.

 Benefits of CIBIL to Borrower’s

Provides faster access to credit.

Reduces cost of borrowing for borrowers with good credit records.

Reduces subjectivity in the credit assessment process.

Encourage borrowers to maintain greater self discipline in

acquiring financial commitments.

Allows borrowers to build reputational collateral y following
correct repayment behaviour.