Banking and Insurance

Evolution of commercial banking in India

Ramayana and Mahabharat, Munu smriti period
Two functions: accepting deposits and lending money
Moghul period: metalic money
1786: English agency house had established the bank of
bengal at calcutta.
1969: nationalization of 14 banks
1980: nationalization of 6 banks
From 1992: issued licenses to private sector banks
Currently, total 12 from 27 public sector banks in India,
effective from 1 April, 2020.
Total 117 commercial banks in India.
Currently, total 12 from 27 public sector banks in
India,
Total 117 commercial banks in India.
22 private sector banks
40 foreign banks with branches in India
22 foreign banks with representative offices in India
43 regional rural banks in India
31 state cooperative banks
53 urban cooperative banks
Banker
Any company which transacts the business of
banking- means the accepting of deposits of money
from public/ lending to public and for investment
in securities.
The deposit is either payable on demand or after
time-period.
Demand deposits are payable, either by
cheque/draft or withdrawal order.
Bank customer
Having some kind of account with a bank
Account can either be deposit or loan account
Duration of relationship is not material
Account can be operative one or inoperative
(Dormant) kind
Dealing with the bank should be banking-business
Relationship with the bank could be either debtor or
creditor
Customer could be either an individual/ firm/limited
company/association of persons or institution
Traditional banking functions
Receiving of money on deposit
Fixed, saving and current deposits
Lending of money
Chief source of profit for commercial banks
Form of loans, cash credits, bills discount facilities
Transferring money from place to place
Demand drafts, telegraphic transfers, mail transfers
Miscellaneous functions
Safe custody of valuables
Issue of various forms of credits: letter of credit, traveller’s
cheques, furnishing guarantees on behalf of customers
Providing fee based services
Forms of deposits
Demand deposits
Current deposits
Saving deposits
Call deposits
Term deposits
Fixed deposits
Recurring deposits
Principles of sound lending
Liquidity
Profitability
Spread of risks- diversification
Purpose
Security
Types of credit facilities
Fund based
By allowing overdrafts
By sanctioning cash credit limit
By way of demand loan: upto 12 months
By granting term loan: 3 years to 5 years (for housing:
20 years)
By purchasing/ discounting bills
Non- fund based
Letter of credit
Letter of gaurantees
Schedule and non schedule banks
Scheduled Banks are the banks that are included
in the Second Schedule of the Reserve Bank of
India Act, 1934. The banks that satisfy the criteria
laid down vide section 42(6)(a) of the RBI Act are
included in the schedule. Every Scheduled
bank has the eligibility for debts/loans at
the bank rate from the RBI.
Scheduled Commercial Banks can be further divided
into four groups:
Public Sector Banks: This includes:
SBI & Associates
Nationalized Banks
Other Public Sector Banks
Private Banks
Foreign Banks
Regional Rural Banks
Non-scheduled banks by definition are those which
are not listed in the 2nd schedule of the RBI act,
1934. Banks with a reserve capital of less than 5 lakh
rupees qualify as non-scheduled banks.
Unlike scheduled banks, they are not entitled to
borrow from the RBI for normal banking purposes,
except, in emergency or “abnormal circumstances."
Commercial banks
Scheduled banks
State bank of India
Associate banks
Nationalized banks
Private banks
Foreign banks
Regional rural banks
Urban cooperative banks
Local area banks
Non- scheduled banks
A scheduled bank, in India, refers to a bank which is
listed in the 2nd Schedule of the Reserve Bank of
India Act, 1934. Banks not under this Schedule are
called non-scheduled banks. Scheduled banks are
usually private, foreign and nationalised banks
operating in India.
Types of banks
Central bank is the supreme monetary institution of the
country. This Bank is pivot of the entire banking system of a
country. It is generally set up by the Govt. of the country to
undertake central banking functions in the country. Reserve
Bank of India is the central bank of our country.
Commercial Banks are those banks which perform all kinds
of ordinary banking business such as accepting deposit,
advancing loans ,etc. Some of the commercial banks in India
are:-
 State Bank of India
 Punjab National Bank
 Bank of India
Co-operative banks refers to those group of
institutions which are organised on the principles of
cooperation. Co-operative banks are set up under the
Co-operative Societies Act. This banks are engaged in
ordinary banking business of accepting deposits of
money from the public and granting loans to the needy
borrowers.
Development Banks are specialized multipurpose
financial institutions. These banks provide medium term
and long term finance, promote entrepreneurship, etc.
Some of the developments banks of India are:-
Industrial Development Bank of India(IDBI)
National Bank for Agricultural & Rural
Development(NABARD)
Industrial Finance Corporation of India(IFCI)
Investment Banks are those banks which specialise in
providing medium and long term financial assistance
to business and industry. These banks are also known
as industrial banks as they are mainly concerned with
industrial finance.
Agricultural Banks are those banks which provide
credit to farmers for both short term as well as long
term need. They inject life into lifeless agriculture,
resulting in enhance productivity which benefits both
the farmers and the country.
Exchange banks are those banks which are primarily
engaged in transactions involving foreign exchange.
These are also known as foreign exchange banks and
they specialize in financing foreign trade.
International Banks are special banks created to deal
with international financial matters. These banks
operate at the international level and occupy a very
important place in the banking structure of the world.
Some the international banks are :-
 International Monetary Fund(IMF)
 Asian Development Bank(ADB)
 International Bank for Reconstruction & Development
Bank(IBRD) or World Bank.
Savings Banks are those banks which are primarily
engaged in collecting savings of the general public.
The main object of these banks are to promote savings
habit among the middle and lower income sections of
the society and thus mobilize small savings for capital
formation.
Opening of saving account

KYC (Know Your Customer) information.

Information about the Savings Bank account you wish
to open and the facilities you would want in the
account.
Form 60, if you do not have Permanent Account
Number (PAN) of Income Tax.
Form DA-1 (optional), if you wish to make a
nomination (recommended).
ACCOUNT OPENING PROCESS

Step 1: Fill the Customer Information Section.

Step 2: Fill the Account Information Section.
Step 3: Read the Savings Bank Rules.

Note :- For each person who wishes to open the account,

you will need to provide:
2 Recent passport-size colored photographs.
KYC documents as mentioned in the AOF.
Modes of creating charge on assets
Security in banking terms and specifically in relation
to a bank loan refers to any asset on which a charge is
created by a bank in its favour; where any default
occurs, i.e., the borrower (loan taker) is not able to pay
the loan amount back, then this asset is the Bank’s
refuge!
Types of charge
Mortgage
Immovable Properties
Land and Building
Possession of: Borrower…i.e., the one who has taken the loan.
Pledge
Movable goods or property
Share Certificates/NSC Certificates/Gold jewellery
Possession of: Lender, i.e., the Bank = Pledgee
Hypothecation
Movable goods or property
Plant and Machinery/ Automobiles
Possession of: Borrower
Lien
Paper security
Shares/Debentures/Mutual Funds/ Bonds
Personal Liability
Is nothing but personal guarantee
By 3rd parties
Thank you…