Reserve Bank of India:

RBI is the Central Bank of India, which acts as a banker to the government
It is also called as Bankers bank, because all banks will have accounts with RBI. It provides
funds to all banks hence it is called as BANKERS BANK
RBI was established by an act of Parliament in 1934
It has four zonal offices at Mumbai, Kolkata, Chennai and Delhi and 19 regional offices
Current Governor: Dr. Raghuram Rajan
Deputy Governors: H R Khan, Dr Urjit Patel, R Gandhi and S S Mundra
Head office: Mumbai
Functions:
Issues currency notes
Acts as bankers bank
Maintain foreign exchange reserves
Maintains CRR and SLR
Its affairs are regulated by 21-member central board of directors: Governor (Dr. Raghuram
Rajan), 4 deputy Governors, 2 Finance Ministry representatives, 10 Government-nominates
directors,4 directors to represent local boards

Policy Rates, Reserve Ratios, Lending and Deposit Rates as

of July 15, 2014
Bank Rate: 9:00%
Repo Rate: 8:00%
Reverse Repo Rate: 7:00%
Cash Reserve Ratio (CRR): 4%

Statutory Liquidity Ratio (CRR): 22.00%

Base Rate: 10.00%-10.25%
Savings Deposit Rate: 4%
Term Deposit Rate: 8.00%-9.5%
Currency notes other than one rupee notes are issued by RBI
The initial share capital for RBI was Rs. 5 Crores

Scheduled Commercial Banks:

Scheduled Commercial banks are
State Bank of India and its associates (State bank of India has got 7 subsidiaries they are State
bank of Hyderabad, State bank of Mysore, State bank of Travancore, State bank of Indore, State
bank of Sourashtra, State bank of Bikaneer, State bank of Jaipur
Nationalized Banks
Private Sector Banks
Regional Rural Banks
Urban Cooperative Banks
State Cooperative Banks

Public Sector Banks:

State Bank of India and associate banks + 20 nationalized

banks are called public sector banks

Nationalized Banks:
Nationalized banks are the banks which are owned and run by government of India
There are total of 20 nationalized banks
In 1969, 14 banks were nationalized

In 1980, 6 banks were nationalized

Nationalized banks are Allahabad bank, Andhra bank, Bank of Baroda, Bank of India, Bhartiya
Mahila bank, Canara bank, Central Bank of India, Corporation bank, Dena bank, IDBI bank,
Indian bank, Indian Overseas bank, Oriental Bank of Commerce, Punjab National bank, Punjab
& Sind bank, Syndicate bank, UCO bank, Union bank of India, United bank of India, Vijaya
bank

Private Banks:
Private Banks are the banks which are owned and run by individuals
Private banks are split into two groups by financial regulators in India they are
Old Private sector banks: The banks which were not nationalized at the time of bank
nationalization that took place during 1969 and 1980 are known as old private sector banks.
New Private Sector Banks: Banks which came in operation after 1991, with the introduction of
economic and financial sectors reforms are called new private-sector banks
These banks were formed as per RBI guidelines 1993
These banks should have a minimum net worth of Rs.200 Crores
The promoters holding should be a minimum of 25% of the paid-up capital
Within 3 years of the starting of the operations, the bank should offer shares to public and their
net worth must increased to 300 Crores.
New private-sector banks in India are Axis Bank, Bank of Punjab, Centurian Bank, Development
Credit Bank, SBI Bank, ICICI Bank, IndusInd Bank, Kotak Mahindra Bank, Yes Bank, Times
Bank (Merged with HDFC Bank Ltd.), Global Trust Bank (Merged with Oriental Bank of
Commerce), Balaji Corporation Bank Limited

Foreign Banks:
Banks which are foreign originated are called foreign banks

Regional Rural Banks (RRBS)

Regional rural banks were established on 26th September, 1975

RRBS comes under scheduled commercial banks

Main aim of RRBs is financial resources for rural/semi-urban areas and providing loans to small
and marginal farmers, agricultural labourers and rural artisans.
RRB works under supervision of NABARD (National Bank for Agricultural and Rural
Development)
Functions of RRBs:
Providing banking facilities to rural and semi-urban areas
Carrying out government operations like disbursement of wages of MGNREGA workers,
distribution of pensions etc.
Providing Para-Banking facilities like locker facilities and credit cards
Share Capital in RRBs: Central Government: 50%
Sponsored bank: 35%
State government: 15%

Co-operative Banks:
The main purpose of co-operative banks is to co-operate small scale industries, and to provide
small loans

Industrial Banks:
The main purpose of Industrial banks is provide big loans to large scale industries,
Some of the Industrial banks are IDBI bank, Industrial bank of India etc.

Some Basic Economic Terms

Interest Rate Swaps: An interest rate swap is the transfer of contractually agreed between two counterparties
of their respective interest rate obligation. Interest rate swaps are commonly used as a means of converting
fixed rate to floating rate debt and vice versa.

Operating Ratio: A ratio that shows the efficiency of a companys management by comparing
operating expense to net sales. Calculated as
Operation ratio = Operating expense/net sales
Wholesale Price Index (WPI): WPI is taken into consideration while calculating the inflation. A change has
recently been made in the WPI. Its present base year will be taken as 2004-05 earlier it was 1993-34. Base year
mean (2004-05 = 100). Total articles taken into consideration will be 676 earlier these were 435.676 include
102 Primary Articles, 19 fuel & power, and 555 of Manufacturing Products. Earlier WPI was calculated on
Weekly basis but now it is calculated on Monthly Basis. First time inflation was calculated in August 2010 (on
new system).
Consumer Price Index (CPI) : Most advanced nations base their policies on retail price inflation but India
uses wholesale price inflation, CPI is largely a segmental and is superior to the WPI, CPI capture consumption
price both at urban and rural centers, as in WPI 676 items are covered and base year is taken as 2004-05 and
for macroeconomic policies. Whereas in CPI 320 items are taken from (CPI-IW) CPI industrial workers and
260 items are taken from both CPR rural laborers and CPI agricultural laborers and the base year for
calculation is taken as 2010.
Coupon Rate: Specified interest rate on a fixed maturity security fixed at the time of issue. The coupon rate of
a bond is the amount of interest paid per year as a percentage of the face value or principal.
NRO (Non Resident Ordinary a/c) : In this account , a person cannot repatriate income without RBI
approval but can remit Interest thereof.

NRNR (Non Resident Non Repatriable A/c ) : Under this account Principal amount in not permissible to
repartriate but interest can be.
NRE (Non Resident External) : In this account Funds and interest both can be remitted without RBI
permission. On NRE deposits the maximum ceiling is Libor rate + 175 basis points (Now there is no such
Ceiling).
NPA (Non Performing Assets) : Interest or Installment of Principal remains overdue for a period of more than
90 days in respect of a Term Loan/ overdraft/ Cash credit.
Teaser Rate of Interest : This rate is typical low then the prevalent rate in the market. This is just to allure the
customer. This rate is charged only for a little time. And after that it gradually touch the index rate or even
more than that. This is a technique to attract customers.
Appropriation Bill : It is presented to parliament for its approval, so that the government can withdraw from
the Consolidated fund the amounts required for meeting the expenditure charged on the Consolidated Fund. No
amount can be withdrawn from the Consolidated Fund till the Appropriation Bill is voted is enacted.
Call Money: Itner Bank call market is a part of the domestic money market from where banks borrowed and
lent for one day called as Money at call and for a period more than 1day & upto 14days is called Short notice
or Notice money without any collateral security. Money lend for 15days or more is called Term
money.Normally funds are borrowed for 1 day and upto 3 days on weekends just to balance the Cash Reserve
Ratio.
Nostro Account: When national bank is opened in foreign with currency is known as Nostro a/c. e.g. State
bank india branch in USA.
CIBIL {Credit Information Bureau (India) Limited} : An effective mechanism for exchange of information
between banks and Financial Institutions for curbing the growth of NPAs.
Currency War: This is the other form of Protectionism. In this the tendency of every nation is that the value
of their currency should not appreciate. The big example of this is CHINA that is holding their currency since
2008. It could be a cause of future Trade war.
Capital Budget: It consists of capital receipts and payments. It also incorporates transactions in the Public
Account. It has two components Capital Receipts and Capital Expenditure.

Repo Rate: Repo rate means a purchase and sale of agreement. It is a contract to buy securities and then sell
them back at an agreed future date and price. It is thus revenue for short term investment of surplus funds.
From RBI point of view it is called a short term lending and from banks point of view it is called short term
borrowing.
Reverse Repo rate : Reverse Repo Rate is an instrument of borrowing funds for a short period and involves
selling a security and simultaneously agreeing to repurchase it at a stated future date for slightly higher price.
From RBI point of view it is called a short term borrowing and from banks point of view it is called a short
term lending.
Group Company : As per RBI for the purpose of FDI, two or more enterprise which , directly or indirectly ,
are in position to exercise 26% or more of voting rights in other enterprise or appoint more than 50% of the
members of the board of directors in the other enterprises.
Branch Vs Subsidiary: A subsidiary is a separate legal entity from the parent company, although owned by
parent company, has a same legal identity as its parent company , from liability , on the other hand branch is
not a separate legal entity of the parent company and liability wise there is no limit to the parents companys
liability , RBI has permitted to Foreign Banks to change from Branch Mode to the Wholly Owned
Subsidiaries.
NFS (National Financial Switch): It facilitates interconnectivity between banks switches and interbank
payment Gateway for authentication & routing the payment details of various E-commerce & E-Govt.
activities (Retail Banking). Now NFS has been overtaken by NPCI (National Payment Corporation of India).

SLR (Statutory Liquidity Ratio): This is a minimum Reserve which every bank has to maintain with itself in
the most liquid form to meet any demand of the depositors. Normally Government securities are purchased to
maintain SLR.
Prime Lending Rate (PLR): The term originally indicates the rate of interest at which a bank lends to favored
customers, i.e. those with high credibility, though this is no longer always the case. Some variable interest rates
may be expressed as a percentage above or below prime rate.
Sub Prime Rate: In India when money is lent below the PLR is known as Sub Prime Rate whereas in USA
when money is lent at rate above the PLR is known as Sub Prime rate.
Base Rate: As per recommendation of Mr. Deepak Mohanty of RBI to bring a complete transparency in
Banks lending system, in Indian Banking system the loan were sanctioned to the large corporate houses even
below the PLR and some time it were fixed very low without any justification. A Base rate recommends that
no bank will lend any money below the base rate. With this there shall be no extra benefits to the large
corporate houses. Base rate will be beneficial for the regulator RBI. Now all Banks will either lend at Base rate
or will park money with RBI, under LAF system. Base rate has been implemented from 1st july, 2010.
GDRs (Global Depository Receipts): It is a dollor denominated instrument, an easy way of raising funds
from foreign countries. It is a mechanism that allows foreign investor to invest in Indian Companies.
Represents a certain number of equity shares on Indian companies. GDRs are issued by depository usually
American Banks & Indian shares are held by custodian in India (like ICICI). Traded in stock exchanges in
Europe or in US or both.
IPO (Initial Public Offer): 1st sale of stock by a company to the public .IPOs offer issued by smaller younger
co. seeking the capital to extend. It can also be done by large company.
FPO (Follow on Public Offer ) : A public company already listed on an exchange, a supplementary shares
made by a company that is already publicly listed & has gone thru the IPO process, it is also called as
secondary public offering subsequent to the companys IPO.
Zero Liability Protection: It is a bank guarantee. If your card is lost or stolen you may not be responsible for
unauthorized purchases made with your card if you report the theft promptly. The Zero liability protection
facility is free & automatically available on all bank consumer Credit Cards.
Vostro Account: When a foreign Bank is opened in the India with Indian Currency is known as Vostro account
e.g. Standard Chartered Bank in India.
SWAPS: It is a transaction where the bank purchases or sells the foreign currency simultaneously, for different
maturities, say purchases of spot and sale of forward or vice versa. Swap contracts obligate 2 parties to swap or
exchange certain specified intervals. Swaps are not the instruments for raising funds rather they allow better
management of existing funds.

List of Banks in India

Banks are of three types
(1) Public Sector Banks
(2) Private Sector Banks
(3) Foreign Banks
Under Public sector banks
(1) Nationalized Banks
(2) State Bank of India and their subsidiaries
(3) Regional Rural Banks
Important Details about Nationalized Banks in India

Sl.NO

Name of the Bank

Chairman

Year of
Head Office Commenceme
nt

Allahabad Bank

Shubhalakshmi
Panse

Kolkata

1865

Andhra Bank

B.A. Prabhakara

Hyderabad

20th November,
1923

Bank of Baroda

S.S. Mundra

Baroda
(Vadodara)

20th July, 1908

Bank of India

V R Iyer

Mumbai

7th September,
1906

Bank of Maharashtra Narendra Singh

Pune

1935

Canara Bank

Bangalore

1906

Central Bank of India Shri. Rajeev Rishi Mumbai

Rajiv Kishore
Dubey

21 December,
1911

Corporation Bank

Shri S.R. Bansal

Mangalore

1906

Indian Bank

T.M. Bhasin

Chennai

1907

10

Indian Overseas Bank Shri M. Narendra Chennai

February 10th,
1937

11

Oriental Bank of
Commerce

New Delhi

February 19th,
1943

12

Punjab National Bank Shri K.R Kamath

New Delhi

1895

13

Punjab & Sind Bank

SH. Devinder
Singh

New Delhi

1908

14

Syndicate Bank

Shri Sudhir Kumar

Mani pal
Jain

1925

15

UCO Bank

Shri Arun Kaul

Mumbai

6th January,
1943

16

Union Bank of India

Shri D. Sarkar

Kolkata

11th November,
1919

17

United Bank of India

Ms. Archana
Bhargava

Kolkata

1950

18

Vijaya Bank

Shri. H.S. Upendra

Bangalore
Kamath

1931

19

IDBI bank

Mr. M.S.
Raghavan

Mumbai

July, 1964

20

Dena Bank

Shri. Ashwani
Kumar

Mumbai

1938

21

ECGC

Shri N Shankar

Mumbai

30th July, 1957

Shri S.L. Bansal

Important Details about State Bank of India and their Subsidiaries

State Bank of India has 5 associate banks State Bank of Bikaner & Jaipur, State Bank of
Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore. State
Bank of Saurashtra and State Bank of Indore are merged into SBI. On October 7th, 2013
Arundhati Bhatacharya is appointed as the first lady chairperson for SBI.

Year of
Commenceme
nt

Sl.NO

Name of the
Bank

Chairman

State Bank of India

Arundhati
Mumbai
Bhattacharya

1st July, 1955

State Bank of
Hyderabad

Pratip
Chaudhuri

Hyderabad

8th August,
1941

State Bank of
Mysore

Pratip
Chaudhuri

Bangalore

2nd October,
1913

State Bank of
Patiala

Pratip
Chaudhuri

Patiala

1st April, 1960

State Bank of
Bikaner & Jaipur

Pratip
Chaudhuri

Jaipur

1963

State Bank of
Travancore

Pratip
Chaudhuri

12th
Thiruvananthapura
September,
m
1945

State Bank of
Saurashtra

Merged into SBI on 13th August, 2013

State Bank of
Indore

Merged into SBI on 2010

Head Office

Important Points about NABARD

NABARD is an apex development bank in India established on 12 July, 1982 with an aim of providing
services to rural India by increasing the credit flow for evaluation of agriculture & rural non form sectors.
It was set up by the Reserve Bank of India (RBI) under the chairmanship of Shri B. Sivaraman.
NABARD is a development bank for providing and regulating credit and other facilities for the promotion and
development of cottages, small scale industries, development of agriculture, village industries, handicrafts and
other rural crafts
With a view of promoting rural development and securing rural areas, NABARD is entrusted with
1.

Providing refinance to lending institutions in rural areas

2.

Bringing about or promoting institutional development and

3.

Evaluating, monitoring and inspecting the client banks

RBI sold its stake in NABARD to the Government of India, which now holds 99% STAKE. NABARD is
active in developing financial inclusion policy.
Important Points about NABARD
Head Quarters: Mumbai
Established on: 12 July, 1982
Chairman: Dr. Harsh kumar Bhanwala
NABARD completed its 25 years on 12 July, 2007
NABARD is active in developing Financial Inclusion

It is Indias specialized bank developed by Shivaramans committee to provide credit in rural areas. It replaced
the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve bank of
India, and Agricultural Refinance and Development Corporation (ARDC).
NABARD undertakes the monitoring and evolution of projects will be refinanced by it
It provides training for the institutions working for the rural development.
NABARD keeps a check on client institutions
It regulates the cooperative banks and RRBs

It takes measures for improving credit delivery system, monitoring, schemes credit institutions, and training of
personnel
Helps the state governments in reaching their targets of providing assistance to eligible institutions in
agriculture and rural development

BANKING OMBUDSMAN
Banking Ombudsman is a quasi judicial authority functioning under Banking Ombudsman Scheme 2006.It
provides independent, expeditious and inexpensive forum to aggrieved/Un-satisfied Bank customers. RBI
introduced this Scheme under powers granted U/s 35-A of Banking Regulation Act.
Complaints are accepted only if they ar e made within one year after the complaint has received the

reply from bank.

Types of Complaints :
1.

Non-payment or inordinate delay in the payment or collection of cheques, drafts ,bills etc.

2.
Non-acceptance, without sufficient cause, of coins tendered and for charging of commission for this
service.
3.
Non-acceptance without sufficient cause of small denomination notes tendered for any purpose and for
charging of commission for the service.
4.

Failure to issue or delay in issue, of drafts pay orders or bankers cheque.

5.

Non-adherence to prescribed working hours.

6.

No payment or delay in payment of inward remittances.

7.

Failure to honor guarantee or letter of credit commitments.

8.
Failure to provide or delay in providing a banking facility promised in writing by a bank or its direct
selling agents.
9.
Delays, non-credit of proceeds to partiesaccounts, non-payment of deposit or non-observance of the
Reserve Bank directives, if any applicable to rate of interest on deposits in any savings, current or other
account maintained with a bank.

10. Delays in receipts of export proceeds, handling of export bills, collection of bills etc. for exporters
provided the said complaints pertain to the Banks operations in India.
11. Refusal to open deposit accounts without any valid reason for refusal.
12. Levying of charges without adequate prior notice to the customers.
13. Non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/debit card
operations or credit card operations.
14. Non-disbursement or delay in disbursement of pension to the extent the grievance can be attributed to the
action on the part of the Bank concerned but not with regard to its employees.
15. Refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government.
16. Customers should have complained to the concerned Bank first and wait for one month. Complaint to
Ombudsman can be writing or in electronic mode.

Award :
Ombudsman can give maximum award upto Rs.10 Lacs.
Appeal :
Any party can file appeal within 30 days on receiving appeal award or the Ombudsman rejecting his complaint
to Appellate authority. If the appeal is the bank, it should be made with approval of CMD or ED or CEO only.