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1. Important Banking Related Terms


Cheque: Cheque is a negotiable instrument containing conditional order to pay sum of money to the
person mentioned on it or to the bearer of the instrument.
Crossing: Two parallel lines drawn on the top left corner of the cheque
Account Payee Cheque: Account payee cheque can be routed only through accounts
Postdated Cheque: The date on the check beyond todays date then cheque becomes postdated.
Stale Cheque: A cheque which has completed the stipulated validity period of the cheque is called as the
stale cheque (The validity period of 6 months as at present)
Mutilated cheque: It is a damaged cheque
Bounced Cheque: It is nothing but an ordinary bank check that any bank can refuse to encash or pay
because of the fact that there is no sufficient balance in the bank account of the originator
At Par cheque: It is payable anywhere in India
Multi city cheque: A cheque which is payable in any branch of a particular bank
Travellers Cheque: Cheques issued by a bank and function as cash but are protected against loss or theft
when travelling.
Money Laundering: Conversion of money which is illegally obtained
Linked Account: Any account linked to another account in the same bank where funds can be transferred
electronically between accounts and carry out other specified services as well
Consumer durables loans: Loan granted by banks for purchasing of white goods
Collateral: A borrower needs to provide some kind of security to the bank in case of high ticket loans,
such security is called collateral
Floating Rate: An interest rate that is referenced to a market rate and is revised as per the change in the
interest rates in the economy. When interest rates in the economy rise, floating rates rise and vice versa
2. Types of Banks in India
Exchange Rate: Rate at which the domestic currency can be converted into foreign currency and vice
versa

Inflation: Decreasing the value of money in this state money loses the value hence prices will go up
Deflation: Opposite to inflation here money will have more value and hence product loses the value
Electronic Clearing Service (ECS): It is a service provided by the banks to facilitate direct debit from
your bank account towards an investment account (such as a mutual fund SIP) and/or paying regular loan
EMIs.
Billing Cycle: A billing cycle is a time period that covers the credit statement that usually lasts for 25
days
Bridge Loan: It is also known as swing loan, which is basically a real estate loan or a home loan, where
the current residence/real estate is pledged by the borrower as collateral in order to purchase a new
residence
Debit cum ATM Card: Customer can deposit and withdraw cash by means of magnetic ATM Card
Core Banking: A centralized database with online connectivity to branches, internet as well as ATM
network which has been adopted by almost all major banks of the country
Bank assurance: When the banks entertain in dealing with insurance business then it is called as bank
assurance
NRNR (Non Resident Non Repatriable A/c ) : Under this account Principal amount in not
permissible to repatriate but interest can be.
3.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

Issues currency notes

Deputy Governors: H R Khan, Dr Urjit Patel,


R Gandhi and S S Mundra

Acts as bankers bank

Maintain foreign exchange reserves

Maintains CRR and SLR

Head office: Mumbai


Functions:

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

3. 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.
List of Banks in India
Banks are of three types

Under Public sector banks

(1) Public Sector Banks

(1) Nationalized Banks

(2) Private Sector Banks

(2) State Bank of India and their


subsidiaries

(3) Foreign Banks


(3) Regional Rural Banks
Important Details about Nationalized Banks in India
Sl.NO

Name of the Bank

Chairman

Head Office

Year of Commencement

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

Rajiv Kishore Dubey Bangalore

1906

Central Bank of India

Shri. Rajeev Rishi

Mumbai

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
Commerce

Shri S.L. Bansal

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
Jain

Mani pal

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.
Kamath

Bangalore

1931

19

IDBI bank

Mr. M.S. Raghavan

Mumbai

July, 1964

20

Dena Bank

Shri. Ashwani Kumar Mumbai

1938

21

ECGC

Shri N Shankar

30th July, 1957

Bank

of

Sudhir

Kumar

Upendra

Mumbai

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.
Sl.NO

Name of the Bank

Chairman

Head Office

Year of Commencement

State Bank of India

Arundhati
Bhattacharya

Mumbai

1st July, 1955

State
Bank
Hyderabad

of

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


Pratip Chaudhuri Jaipur
& Jaipur

1963

State
Bank
Travancore

of

12th September, 1945

State
Bank
Saurashtra

of

State Bank of Indore

Pratip Chaudhuri Thiruvananthapuram

Merged into SBI on 13th August, 2013


Merged into SBI on 2010

4.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

Established on: 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 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
5.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 are 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.
6.E-Banking: E- banking refers to electronic banking. It is like e-business in
banking industry. E-banking is also called as virtual banking or online banking. Ebanking is a Result of the growing expectations of bank customers. E-banking
involves information technology based banking. Under this IT system the banking
services are delivered by way of a computer-controlled system. This system involves
direct interface with the customers. The customers need not to visit bank premises
Popular services covered under E-banking
1. Automated teller machine

6. Cheque truncation system

2. Credit card

7. Mobile banking

3. Debit card

8. Internet banking

4. Smart card

9. Telephone banking

5. Electronic funds Transfer system


Automated teller machine: ATM is designed to perform the most important function of bank. it is
operated plastic card with its special features. The plastic card has replaced cheque Personal attendance of
the customer banking hours restrictions and paper based verification. These are debit cards. An ATM is an
electronic funds Transfer terminal capable of handling cash deposits Transfer between accounts balance
enquires, cash withdrawals and pay bills. It may be online or Offline. Any customer processing ATM card
issued by the shared payment network system can go to any ATM linked to shared payment networks and
perform his transactions
Credit card/ Debit card: The Credit card holder is empowered to spend wherever and whenever he
wants with his Credit card within the limits fixed by his bank. Credit card is a post paid card. Debit card
considered as a prepaid card with usage facility limited to the balance in the linked deposit account of the
cardholder. An individual has to open an account with the issuing bank which gives debit card with a
Personal identification number. When he makes purchases he enters his pin on shops pin pad. When the
card is slurped through the electronic terminal it dials the acquiring bank system -either master card or
VISA that validates the pin and finds out can never overspend because the system rejects any transactions
which exceeds the balance in his account. The bank never faces a default because the amount spent is
debited immediately from the customers account.
Smart card: Banks are adding chips to their current magnetic stripe cards in order to enhance security
and offer new services that are called smart cards. Smart cards allow Thousands of times of information
storable on magnetic stripe cards. In addition these cards are highly secure, more reliable and perform

multiple functions. They hold a large amount of Personal information ranging from medical and health
history to Personal banking and personal preferences.
Services of E-banking : E-banking provides a multitude of services that are as follows
1. Bill payment service: E-banking facilitates the payment of electricity bills, telephone bills, Credit
card, and insurance premium bills. And the bank does not charge customers for online payments
2. Fund Transfer: You can Transfer any amount from one account to another of the same or any another
bank. Customers can send money anywhere in India.
3. Credit card customers: With internet banking customers cannot only pay their credit card bills online
but also get a loan on their cards. In case of loss of the credit card an online reporting can be done.
4. Investing through internet banking :Now, FD can be opened on line through funds Transfer and
investors with interlinked demit account and bank account can easily trade in the stock market.
5. Recharging prepaid mobile: By just selecting the operator name entering the mobile number and the
amount of Recharge the mobile phones can be back in action within few minutes.
6. RTGS fund Transfer: RTGS is an inter-Bank funds Transfer system. Where are Transferred as end
when the transactions are tiggered.
7. Shopping: Online Shopping can also be done with a range of all kind of products. Railway and air
tickets can be bought through the internet banking.
8. Online payment of taxes. A customer can pay various taxes on line including excise and service tax
direct tax etc.
Electronic funds Transfer: Electronic funds Transfer provides for electronic payments and collections.
EFT is safe secure, efficient and less expensive than paper check payments and collections . RBI EFT is a
scheme introduced by RBI to help banks offering their customers money Transfer service from account to
account to any branch to any other bank branch in places where services are offered.
Internet banking: Through internet banking you can check your transactions at any time of the day and
as many times as you want to. Where as in a traditional method you get quarterly statements from the
bank. If the fund Transfer has to be demand outstation where the bank does not have a branch the bank
would demand outstation charges. Whereas with the help of online banking.
Mobile banking transaction: Now banks have started offering mobile banking and telemarking to their
customers. The expansion in the use and geographical reach of mobile phones has created new
opportunities for banks to use this mode for banking transactions and also provide an opportunity to
expand banking facilities to the excluded sections of the society.

7. Financial Inclusion
Financial inclusion or inclusive Financing is the delivery of financial service at affordable costs to
sections of disadvantaged and low income segments of society. Or we can say that financial inclusion
may be defined as the process of ensuring access to financial inclusion in timely and adequate Credit
when needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.
Unrestrained access to public goods and services is the sine qua of an open and efficient society. It is
argued that as banking services are in the nature of public good it is essential that availability of banking
services and payment services to the nature of public good it is essential that availability of banking and
payment services to the entire population without discrimination should be the prime objective of public
policy. the term Financial inclusion has gained importance since the early 2000s and is a Result of
findings about Financial inclusion and it direct correlation to poverty. Financial inclusion is now a
common objective for many central banks among the Developing nations
Financial inclusion offers people the following things
1. Access to Financial markets
2. Access to Credit markets
3. Financial literacy
Objectives of Financial inclusion
1. Access at a reasonable cost for all households and enterprises to the range of Financial services for
which they bankable including savings , short and long term credit , leasing and factoring , mortgages ,
insurance , pensions, payment , local money Transfers and international remittances.
2. Sound institutions guided by appropriate internal management systems, industry performance standards
and performance monitoring by the market as well as sound prudential regulation wherever required.
3. Financial and institutional sustainability as a means of providing access to Financial services over time.
4. Multiple provider of financial services wherever feasible so as to bring cost effective and a wide variety
of alternatives to customers
Financially excluded sections largely comprise of the following activities.
1. Marginal farmers

4. Self Employed and unorganized sector


enterprises

2. Landless laborers
5. Urban slum dwellers
3. Oral lessees
6. Migrants

7. Ethnic minorities and society excluded groups

9. Women

8. Senior citizens
The north east eastern and central regions of India contain most of the financially excluded population.
Benefits of inclusive financial growth
The benefits of inclusive financial growth can be described
1. Growth with equity:- In the path of becoming super power we the Indians need to achieve the growth
of our country with equality. It is provided by inclusive finance.
2. Getting rid of poverty:- To remove poverty from the Indian context everybody will have to be given
access to formal Financial services . Because if they borrow loans for business or Education or any other
purpose then that will pave the way for their Development.
3. Financial transactions made easy:- Inclusive finance will provide banking related Financial
transactions in an easy and speedy way.
4. Safe savings along with Financial services:- People will have safe savings along with other allied
services like insurance cover, entrepreneurial loans payment and settlement facility etc.
5. Increasing National income:- boosting business opportunities will definitely increase GDP that will
be reflected in our National income growth.
6. Becoming global player:- Financial access will attract global market players to our country that would
Result in increased Employment and business oppurtunities.
8.NEGOTIABLE INSTRUMENT
There are certain documents used for payment in business transactions and are Transferred freely from
one person to another. Such documents are called negotiable Instruments like cheque, bank draft, bill of
exchange, promissory notes etc. Thus we can say negotiable Instruments are a transferable document
where negotiable means transferable and Instrument means document. According to section 13 of the
negotiable Instruments act 1881. A negotiable Instrument means promissory note bill of exchange or
cheque payable either to order or to bearer.
Features of a Negotiable Instrument
1. It is a written document
2. A negotiable Instrument payable to bearer is transferable merely by delivery whereas a Negotiable
Instrument payable to order is transferable by endorsement and delivery.
3. The holder of a Negotiable Instrument can sue upon it in his own name.

4. Its works in the same manner as money and like money it may also be transferred from one person to
another.
5. The Transferor does not need to give notice to any person at the time of transferring the Instrument.
6. It is the simplest and most convenient mode of assignment of a debt.
7. The tittle to the Instrument received by a bonafide transferee is not affected by defect in the title of the
transferor.
A. Negotiable Instruments

B. Non Negotiable Instruments

1. Promissory note

1. Money order

2. Bill of exchange

2. Postal order

3. Cheque

3. Deposit receipt

4. Exchequer bill

4. Share certificate

5. Circular note

C. Quasi Negotiable Instruments

6. Dividend warrant

1. Bill of lading

7. Share warrant

2. Dock warrant

8. Bearer debenture

3. Carriers receipt

9. Bank note

4. Letters of credit

10. Bank draft

5. Railway receipt
Types of Negotiable Instruments

According to the negotiable Instruments act 1881 there are just three types of Negotiable Instruments
example promissory note, bill of exchange and Cheque. However many other documents have also been
recognized as negotiable instruments on the basis of custom and usage like treasury bills, share warrant
etc. They possess the features of Negotiability
Promissory note: A promissory note is an Instrument in writing containing an unconditional
undertaking signed by the maker to pay a certain sum of money to or to the other of a certain person.
This type of a document is called a promissory note.
Features of promissory note
1. A promissory note is unconditional
2. It is always in writing a verbal promise to pay a specified sum of money is not a promissory note.

3. It is made and signed by the debtor.


4. A promissory note is made as payable in the Currency of the country
5. A promissory note drawn for a specified duration should be adequately stamped According to its value.
6. A promissory note should be drawn for the payment of a specified sum.
Bill of exchange: A bill of exchange is an Instrument in writing, unconditional order signed by the maker
directing a certain person to pay a certain sum of money only to or to the other of a certain person or to
the bearer of the Instrument.
Features of bill of exchange
1. A bill must be in writing, duly signed by its drawer accepted by its drawee and properly stamped as per
Indian stamp act.
2. It must contain an order to pay words like please pay rs.5000 on demand and oblige are not used.
3. The order must be unconditional.
4. The order must be to pay money and money alone.
5. The sum payable mentioned must be certain or capable of being made certain.
6. The parties to bill must be certain.
Cheque
A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand. It is an unconditional order in writing be drawn by a customer on his bank.
Requesting the specifying bank to pay on demand a certain sum of money to a person named in the
cheque or to the bearer or to the order of a stated person.
A cheque being a bill of exchange must possess the following requirements.
1. A cheque must be drawn upon a specified
banker

4. A cheque must be an unconditional order to


pay a certain amount of money.

2. A cheque must be payable on demand.

5. A cheque be dated.

3. A cheque must be signed by the drawer.


Types of cheque
1. Open cheque:- A cheque is called open when it is possible to get cash over the counter at the bank.
2. Crossed cheque:- Since open cheque is subject to risk of theft it is dangerous to issue such cheques.
This risk can be avoided by issuing other types of cheque called crossed cheque.

3. Bearer cheque:- A cheque which is Payable to any person who presents it for payment at the bank
counter is called bearer cheque.
4. Order cheque:- An order cheque is one which is payable to a particular person. In such a cheque the
word bearer may be cut out or cancelled and the word order may be written. The payee can transfer an
order cheque to someone else by singing his or her name on the back of it..
Quasi Negotiable Instruments
Quasi Negotiable Instruments are those Instruments which can be transferred by endorsement and
delivery but the transferee does not get a better tittle that of the transferor. Therefore they cannot be
classified as negotiable Instruments and hence the negotiable Instruments act is not applicable to them.
Some Financial Institutions
Securities Exchange Board of India (SEBI): It is regulatory authority of stock exchanges and protects
investors from fraudulent dealings. It was established in April 1988 and awarded statutory status by Act of
parliament in 1992.
Chairman: UK Sinha

Headquarters: Mumbai

Insurance Regulatory & Development Authority (IRDA) : It is apex body formed under Sec.4 of
IRDA Act 1999 to protect the interests of the policyholders to regulate promote and ensure orderly
growth of the insurance industry in India
Financial Stability & Development Council : This is the apex financial regulator of our country.
Headed by Finance Minister, it coordinates and regulates to four financial regulators of the country i.e.
RBI,SEBI,IRDA and PFRDA to ensure that all of them operate and function in harmony to promote the
growth and stability of Indian Economy.
Indian Banks Association (IBA) : It is the official association of all the banks operating in India. It acts
as a bridge between banks on one hand and government and staff unions on the other. Presetly Mr. K.R.
Kamath, CMD of Punjab National Bank is Chairman of IBA.
Non-Banking Financial Company (NBFC): These are companies which have functions similar to
banking like accepting deposits and making loans. However they do not have license for banking,
although they are regulated by RBI.
Deposit Insurance & Credit Guarantee Corp.(DI&CGC) : It is a wholly owned subsidiary of RBI
which provides an insurance cover of Rs.1lakh per depositor per bank in case of bank failure.It also
provides guarantee of repayment amount in default of small loans given by banks.
Export Credit Guarantee Corporation of India (ECGC): ECGC is a Govt. body which provides
export credit insurance facilities to exporters and banks in India. It encourages Indian exporters by giving
them credit insurance covers.
Banking Codes and Standards Board of India: It is a industry watch dog set up by RBI to monitor and
assess the compliance with codes and minimum standards of service to individual customers, as
prescribed by the RBI.
Credit Information Report: A Credit Information Report is a factual record of a borrowers credit
payment history compiled from information received from different credit grantors. Its purpose is to help
credit grantors make informed lending decisions-quickly and objectively.
Credit Rating: Credit Rating is an assessment of the probability of default on payment of interest and
principal on a debt instrument. In simple words, it ranks the company or countrys ability to meet their
debt obligations.
9.Indian Currency
Name of the Indian Currency: The Indian Currency is called the Indian rupee and the coins are called
paisa. One rupee consists of 100 paisa.

Present denominations of bank notes in India: At Present notes in India are issued in the denomination
of Rs.5, 10, 20, 50, 100, 500 and 1000. These notes are called bank notes as they are issued by the RBI.
The printing of notes in the denominations of Rs.1 and Rs.2 has been discontinued as these
denominations have been coinised. However such notes issued earlier are still in circulation. The printing
of notes in the denomination of Rs.5 had also been discontinued however it has been decided to
reintroduce these notes in order to meet the gap between the demand and supply of coins in this
denomination.
Present available denomination of coins in India: Coins in India are available in denominations of 50
paisa, one rupees , two rupees , five rupees and ten rupees up to 50 paisa are called small coins and coins
of rupee one and above are called rupee coins.
Can bank notes and coins be issued only in these denominations: Not necessarily. The RBI can also
issue notes in the denominations five thousand rupees and ten thousand rupees or any other denomination
that the central Government may specify. There cannot through be notes in denominations higher than ten
thousand rupees in terms of the current provisions of the RBI act 1934. Coins can be issued up to the
denomination of Rs.1000
The role of the RBI in Currency management: The RBI manages Currency in India. The Government
on the advice of the RBI decides on the various denominations. The RBI also coordinates with the
Government in the designing of bank notes including the security features. The RBI estimates the quantity
of notes that are likely to be needed denomination wise and places the indent with the various security
presses through the Government of India. The notes received from the security presses are issued and a
reserve stock maintained. Notes received from banks and Currency chests are examined. Notes fit for
circulation are reissued and the others are destroyed so as to maintain the quality of notes in circulation.
The RBI derives its role in Currency management on the basis of the RBI act 1934.
The role of Government of India: The responsibility for coinage vests with Government of India on the
basis of the coinage act 1906 as amended from time to time. The designing and minting of coins in
various denominations is also attended to by the Government of India.
Who decides on the volume and value of bank notes to be printed and on what basis: The RBI
decides upon the volume and value of bank notes to be printed. The quantum of bank notes that needs to
be printed broadly depends on the annual increase
In bank notes required for circulation purposes replacement of soiled notes and reserve requirements.
Who decides on the quantity of coins to be minted: The Government of India decides upon the quantity
of coins to be minted.
How does the reserve bank reach the Currency to people: The RBI manages the Currency operations
through its offices located at Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Jaipur, Kanpur, luck now,
Mumbai, Nagpur, New Delhi, Patna, and Thiruvananthapuram? These offices receive fresh notes from the
note presses. Similarly the RBI offices located at Kolkata, Hyderabad, Mumbai and New Delhi initially
receive the coins from mints. These offices then send them to the other offices of the reserve bank. The

notes and rupee coins are stocked at the Currency chests and small coins at the small coin depots. The
bank branches receive the bank notes and coins from the Currency chests and small coin depots for
further distribution among the public.
What is a Currency chest: To facilities the distribution of notes and rupee coins the RBI has authorized
select branches of banks to establish Currency chests . These are actually storehouses where bank notes
and rupee coins are stocked on behalf of the reserve bank. At Present there are over 4422 Currency chests.
The Currency chest branches are expected to distribute notes and rupee coins to other bank branches in
their area of operation.
What is a small coin : Some bank branches are also authorized to establish small coin depots to stock
small coins. There are 3784 small coin deposits spread throughout the country.
What happens when the notes and coins return from circulation: Notes and coins returned from
circulation are deposits at the offices if the reserve bank. The reserve bank then separates the notes that
are fit for reissue and those which are not fit for reissue. The notes which are fit for reissue are sent back
in circulation and those which are unfit for reissue are destroyed after processing and shredding. The
same is the case with coins. The coins with drawn are sent to the mints for melting
From where can the General public obtain bank notes and coins: Banks notes and coins can be
obtained at any of the offices of the reserve bank and at all branches of banks maintaining Currency
chests and small coin deposits.
Why are Rs.1, Rs.2, and notes not being printed: volume wise the share of such small denomination
notes in the total notes in circulation was as high as 57 percent but constituted only 7 percent in terms of
value. The average life of these notes was found a year. The cost of printing and servicing these notes was
thus not commensurate with their life. Printing of these notes was therefore discontinued. These
denominations were Therefore coinised However it has been decided that notes in the denomination of
Rs.5 be re-introduced so as to meet the gap between the demand and supply of coins in this denomination.
Soiled and mutilated notes: soiled notes are notes which have become dirty and limp due to excessive
use. Mutilated notes are notes which are torn disfigured burnt, washed, eaten by white ants etc. A double
numbered note cut into two pieces but on which both the numbers are in fact is now being treated as
soiled note.
Can such notes be exchanged for value: Yes soiled notes can be tendered at all bank branches for and
exchange obtained.
How much value would one get in exchange of soiled or mutilated notes: Full value is payable against
soiled notes. Payment of exchange value of mutilated notes is governed by the reserve bank of India rules
1975. These rules have been framed under section 28 of the RBI 134.
What if a note is found to be non-payable: Non-payable notes are retained by the receiving banks and
sent to the reserve bank where they are destroyed.

Where soiled mutilated notes accepted are: All banks are authorized to accept soiled notes across their
counters and pay the exchange value. They are expected to offer these services even to non-customers. All
public sector bank branches and Currency chest branches of private sector banks are authorized to
adjudicated and pay value in respect of mutilated notes. The RBI has also authorized all commercial bank
branches to treat certain notes in two pieces as soiled notes and pay exchange value.
Special features Introduced in the notes of Mahatma Gandhi series: The new mahatma Gandhi series
of notes contain several special features the notes issued earlier these are:
Latent Image : A vertical band behind on the right side of the mahatma Gandhi portrait which contains
which contains latent image showing the denominational value 20, 50, 100, 500, 1000 as the case may be.
Introduction
India has had more than a decade of Financial sector reforms during which there has been substantial
Transformation and liberalization of the whole Financial system
Objectives of Financial sector reforms in India.
1. Reforms Financial repression that existed earlier
2. Create an efficient productive and profitable Financial sector industry
3. Enable price discovery particularly by the market determination of interest rates that then helps in
efficient allocation of resources
4. Provide operational and function autonomy to institutions
5. Prepare the Financial system for increasing international Competition
6. Open the external sector in a calibrated fashion
Narasimham committee report 1991 &1998
The narasimham committee was set up in order to study the problems of the indian Financial system and
to suggest some recommendations for improvement in the efficiency and productivity of the Financial
institution
The committee had given the following major recommendations:
1. Reduction in SLR and CRR : The committee recommeded the Reduction of the higher proportion of
the statutory liquidity ratio and cash reserve ratio . Both of these ratios were very high at that time. The
SLR the was 38.5 percent and crr was 15 percent . This high percentage of SLR and CRR meant locking
the bank resources for govt uses. SLR was recommeded to be from 38.5 to 25 percent and CRR from 15
percent and 3.5 percent

2. Phasing out of directed Credit programme : in india since Nationalization directed Credit
programmes were adopted by the Government . The committee recommed Phasing out of this
programme. This programme compelled banks to earmark their Financial resources for the needy and
poor sectors at concessional rates of interest
3. Interest rate determintaion: The committee felt that the interest rates in india were regulated and
controlled by the authorities . The committee recommeded eliminating Government controls on interest
rates and Phasing out the concessional interest rates for the priority sector.
4. Structural re organizations of the banking sector: The committee recommeded that the actual
number of public sector banks need to be reduced. Three to four large banks including SBI should be
developed as international banks. Eight to ten banks having nationwide presence should concerntrate in
the National and unverisal banking services.
Local banks should concerntrate on region specific banking . Regarding RRBs it recommeded that they
should focus on agr culture and rural financing
5. Establishment of the ARF and tribunal: The proporation of bad debts and non performing assets of
the public banks and Development Financial institute was veey alarming in those days. The committee
recommeded the Establishment of an assets reconstruction fund . This fund would take over the
proporation of the bad and doubt ful debts from the banks and Financial institutes. It would help banks to
get rid of bed debts.
6. Removal of dual control : The committee recommeded the stopping of this system. it considered and
recommeded that the RBI should be the only main agency to regulate banking in india
7. Banking autonomy : The committee recommeded that the public sector banks should be free and
autonomous. Banking technology upgradation would thus be easy.
Narasimham committee report II 1998
In 1998 the Government appointed yet another committee under the chairmanship of Mrt.Narasimham. It
better known as the banking sector committee. It was told to review the banking reform progress and
design a programme for further strengthening the Financial system of india the committee focused on
various areas such as capital adequacy bank mergers bank legislation,
It submitted its report to the Government in April 1998 with the following recommendations:
1. Strengthening the banks in india
2. Narrow banking
3. Capital adequacy ratio

4. Bank owership
5. Review of banking laws
Apart from these major recommendations the committee has also recommended faster computerization ,
technology upgradation , training of staff, depoliticizing of banks, professionalism in banking , reviewing
bank recruitment etc.
10.FUND TRANSFER SYSTEMS
There are two ways for transferring funds

RTGS (Real Time Gross Settlement)

NEFT (National Electronic Fund Transfer)


Real Time Gross Settlement (RTGS)

RTGS is one of the fastest mode of fund transfer in India through banking channel

RTGS is nothing but transferring of money in real time on gross basis from one bank to other
without netting. This RTGS is mainly used for large transactions, Minimum amount to be
remitted through this RTGS is 2 Lakhs and there is no any upper limit

Through RTGS system, money will be remitted for beneficiary account within 2 hours of
receiving the fund transfer message

Main advantage of fund transferring through RTGS is remitting bank will receive the
conformation message from RBI that money have been transferred to beneficiarys account

Timings for Transferring Funds through RTGS:


Normal Days: 09:00 hours to 16:30 hours
Week Days: 09:00 hours to 14:00 hours
Processing/Service Charges for RTGS Fund Transfer
Inward Transactions: No Charge
Outward Transactions: Rs.2lakhs to Rs.5lakhs: Rs.30/Above Rs.5lakhs: Rs.55/Essential Information for RTGS Fund Transfer

Amount to be remitted

Remitting Customers account number which is to be debited

Name of the beneficiary bank and branch

Name of the beneficiary customer

Account number of the beneficiary customer

Sender to receiver information

IFSC (Indian Financial System Code) of the receiving branch

This RTGS fund transfer is not available for all branches of banks in India; one can check the availability
of RTGS system through http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB0112.xls.
National Electronic Fund Transfer (NEFT)
NEFT is an electronic fund transfer system on DNS (Deferred Net Settlement) basis through netting. This
NEFT will be done in 12 settlements
Timings for Transferring Funds through NEFT:
Normal Days: 08:00 am to 07:00 pm
Week Days: 08:00 am to 01:00 pm
Processing/Service Charges for NEFT Fund Transfer
Inward Transactions: No Charge
Outward Transactions:
Up to Rs.10, 000: Rs.2.50/- + Service Tax
Rs.10, 000 to RS.1lakh: Rs.5/- + Service Tax
RS.1lakh to RS.2lakhs: Rs.15/- + Service Tax
Above RS.2lakhs: Rs.25/- + Service Tax
ADVANTAGES:

Remitter need not send the cheque or DD to the beneficiary

Beneficiary need not visit the bank for depositing

Beneficiary need not to worry about the loss / theft of physical instruments

Cost effective

Credit confirmation of the remittances sent by SMS or email

Remitter can initiate the remittances from home/ place of work through Internet Banking also

Secure

Essential Things for NEFT Fund Transfer:

Both originating and destination bank branches should be a part of the NEFT system

Name of the beneficiary bank and branch

Name of the beneficiary customer

Account number of the beneficiary customer

Account type of the beneficiary customer

IFSC (Indian Financial System Code) of the beneficiary bank


11.Indian Financial System Code (IFSC)

IFSC (Indian Financial System Code) is an alpha-numeric code that uniquely identifies bank branch
participating in the NEFT system.
IFSC is an 11-digit code with the first four Alpha characters representing the bank, and the last 6
characters representing the branch. The 5th character is 0 (Zero)

In this IFSC code SBTR0000143, SBTR represents bank name State Bank of Travancore, Last 6
digits 000143 is the branch code
USES:
Main aim of using this IFSC code is to identify the originating/destination banks and branches and also to
route the messages to the concerned banks/branches appropriately

Automated Teller Machine (ATM)


Automated Teller Machine (ATM) is a computerized machine that provides the customers the facility of
checking balance, withdrawing and transferring the funds without visiting the branch of the bank
Important Points to Remember:
Technology Used: Broadband Integrated Service Digital network (BISDN)
Operating systems used in ATMs Primarily: Windows XP Professional and Windows XP Embedded
Communication Mode: Both Data and Voice
Operates on: layer 2 in OSI Model (Data Link Layer)
Connection Mode: Point-to-Point
Size of ATM Cells: 53 Bytes (48 bytes of data and 5 bytes of header information)
Facilities available at ATMs

Account Information

Cash Deposit

Regular bills payment

Purchase of Re-load Vouchers for Mobiles

Mini/Short Statement

Loan account enquiry

There are two types of cards supported by ATM

ATM Debit Card

Credit Card

ATM Debit Card:


ATM Debit Card is card given by bank to access your account easily using a machine called Automated
Teller Machine (ATM). Debit cards can be used for shopping purposes, without carrying the money. You
can use Debit cards while purchasing, but you must have money in your account. Purchased amount will
be deducted immediately from your account.

Credit Card: Credit card is different from debit card, in debit card you must have money for using it. But
for using credit cards, its not necessary. If you use credit card for purchasing purposes it does not deduct
your money immediately.
Bank will pay the vendors and sends the bill to the customer every month.
MICRO, SMALL AND MEDIUM ENTERPRISES (MSME)
In accordance with the provision of MSMED Act, 2006, the Micro, small and Medium Enterprise are
classified as follow:
1. Manufacturing Enterprises The enterprise engaged in the manufacturing of goods pertaining to any
industry specified in the first schedule to the industries (Development and regulation Act,1951) or
employing plant and machinery in the process of value addition to the final product having a distinct
name or character or use. The manufacturing Enterprise is defined in terms of investment in Plant &
Machinery.
2. Service Enterprises: The enterprise engaged in providing or rendering of services and are defined in
terms of investment in equipment.
Manufacturing Sector

Investment in Plant & Machinery


Enterprises

Micro Enterprises
Does not exceed 25lakhsSmall Enterprises
More than 25 lakhs but less than 5 croreMedium Enterprises
More than 5 crore but less than 10 crore
Service Sector

Enterprises

Investments in equipments

Micro Enterprises

Less than 10lakhs

Small EnterprisesMore than 10lakhs less than 2crores


Medium EnterprisesMore than 2crores less than 5crores

TYPES OF MONEY

Commodity Money - Commodity money value is derived from the commodity out of
which it is made. The commodity itself represents money, and the money is the
commodity. For instance, commodities that have been used a Medium of exchange
include gold, silver, copper, salt, peppercorns, rice, large stones, etc.

Representative Money - is money that includes token coins, or any other physical tokens
like certificates, that can be reliably exchanged for a fixed amount/quantity of a
commodity like gold or silver.

Fiat Money - Fiat money, also known as fiat currency is the money whose value is not
derived from any intrinsic value or any guarantee that it can be converted into valuable
commodity (like gold). Instead, it derives value only based On government order (fiat)

Commercial Bank Money - Commercial bank money or the demand deposits are claims
against financial institutions which can be used for purchasing goods and services.

FINANCIAL INCLUSION
It is the delivery of financial services at affordable costs to vast sections of disadvantaged and
low income groups
Financial inclusion involves
1) Give formal banking services to poor people in urban & rural areas.
2) Promote habit of money-savings, insurance, pension-investment among poor-people.
3) Help them get loans at reasonable rates from normal banks. So they dont become victims in
the hands of local moneylender.
Some Important initiatives for financial inclusion:
1) Lead banking scheme (LBS).
2) No frills account.
3) BSBDA
4) Business Correspondents (BC) system.
5) Swabhiman Campaign

6) PMJDY
Lead Bank Scheme
The Lead Bank Scheme, introduced towards the end of 1969, envisages assignment of lead roles
to individual banks (both in public sector and private sector) for the districts allotted to them. A
bank having a relatively large network of branches in the rural areas of a given district and
endowed with adequate financial and manpower resources has generally been entrusted with the
lead responsibility for that district. Accordingly, all the districts in the country have been allotted
to various banks. The lead bank acts as a leader for coordinating the efforts of all credit
institutions in the allotted districts to increase the flow of credit to agriculture, small-scale
industries and other economic activities included in the priority sector in the rural and semiurban areas, with the district being the basic unit in terms of geographical area.
No Frill Account
'No Frills 'account is a basic banking account. Such account requires either nil minimum balance
or very low minimum balance. Charges applicable to such accounts are low. Services available to
such account is limited. In what can be described as a watershed Annual Policy Statement, the
RBI in 2005-06 called upon Indian banks to design a no frills account a no precondition, low
minimum balance maintenance account with simplified KYC (Know Your Customer) norms.
But All the existing No-frills accounts opened were converted into BSBDA in compliance with
the guidelines issued by RBI in 2012 .
BSBDA
RBI in 2012 came out with fresh guidelines and asked banks to offer a Basic Savings Bank
Deposit Account which will offer following minimum common facilities to all their customers.
These guidelines includes:(a) This account shall not have the requirement of any minimum balance.
(b) The services available in the account will include deposit and withdrawal of cash at bank
branch as well as ATMs; receipt/credit of money through electronic payment channels or by
means of deposit/collection of cheques drawn by Central/State Government agencies and
departments;
(c ) While there will be no limit on the number of deposits that can be made in a month, account
holders will be allowed a maximum of four withdrawals in a month, including ATM
withdrawals; and
(d) Facility of ATM card or ATM-cum-Debit Card.
Business Correspondent

Business correspondents are bank representatives. They personally goes to the area allotted to
them and carry out banking.

They help villagers to open bank accounts.

They help villagers in banking transactions. (deposit money, take money out of savings
account, loans etc.)

The Business Correspondent carries a mobile device.

The villager gives his thumb impression or electronic signature, and gets the money.

Business Correspondents get commission from bank for every new account opened,
every transaction made via them, every loan-application processed etc.

Recently on Financial Inclusion


The Reserve Bank of India (RBI) has constituted a committee with the objective of working out
a medium-term (five-year) measurable action plan for financial inclusion. The terms of reference
will include reviewing the existing policy of financial inclusion, including supportive payment
system and customer protection framework, taking into account the recommendations made by
various committees set up earlier.
It will also study the cross-country experience in financial inclusion to identify key learnings,
particularly in the area of technology-based delivery models, that could inform policies and
practices. The committee will also suggest a monitorable medium-term plan for financial
inclusion in terms of its various components like payments, deposit, credit, social security
transfers, pension and insurance.
Deepak Mohanty, RBI executive director, will chair the committee.
Reserve Money (M 0)
Currency in circulation + Bankers deposits with the RBI + Other deposits with the RBI = Net
RBI credit to the Government + RBI credit to the commercial sector + RBI's claims on banks +
RBI's net is foreign assets + Govemments currency liabilities to the public - RBI's net nonmonetary liabilities.
M1
Currency with the public + Demand deposits with the banking system + 'Other' deposits with the
RBI
M2

M1 + Savings deposits of ofce savings banks.


M3
M1+ Time deposits with the banking system
= Net bank credit to the Government + Bank credit to the Commercial sector + Net foreign assets
of the banking sector + Goveinments currency liabilities to the public - Net non-monetary
liabilities of the banking sector.
M4
M3 +All deposits with post office savings banks (excluding National Savings Certificates)
Bhartiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
The Reserve Bank established BRBNMPL in February 1995 as a wholly-owned subsidiary to
augment the production of bank notes in India and to enable bridging of the gap between supply
and demand for bank notes in the country.
1) Type of assets
The assets portfolio of the banks is required to be classified as
(1) standard assets(2) sub-standard assets(3) doubtful assets and(4) loss assets.Standard asset is
one that does not disclose any problems and which does not carry more than normal risk attached
to the business .An asset which has been classified as NPA for a period not exceeding 12 months
is considered as sub-standard asset.Doubtful asset is one which has remained NPA for a period
exceeding 12 months.An asset which is considered uncollectible and loss has been identified by
the bank or internal or external auditors or the RBI inspection and the loss has not been written
off is regarded as loss asset.
2) Core Banking Solutions (CBS)
Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank
are connected to a central host and the customers of connected branches can do banking at any
breach with core banking facility.
3) Prime Lending Rate
The minimum short-term interest rate charged by commercial banks to their most creditworthy
clients. It is a reference interest rate used by banks for its lending purposes.
4) Parties of a Cheque:
There are three parties to the cheque

1-Drawer or Maker
2-The bank (Drawee) - on whom the cheque is drawn (i.e. the bank with whom the account is
maintained by the drawer)
3- Payee Payee is the person whose name is mentioned on the cheque to whom or to whose
order the money is directed to be paid.
5) Special Drawing Rights (SDRs)
It is a reserve asset (known as Paper Gold) created within the framework of the International
Monetary Fund in an attempt to increase international liquidity, and now forming a part of
countries official forex reserves along with gold, reserve positions in the IMF and convertible
foreign currencies.
6) Negotiated Dealing System
The Negotiated Dealing System (NDS) for electronic dealing and reporting of transactions in
government securities was introduced in February 2002. It facilitates the members to submit
electronically, bids or applications for primary issuance of Government Securities when auctions
are conducted. NDS also provides an interface to the Securities Settlement System (SSS) of the
Public Debt Office, RBI, Mumbai thereby facilitating settlement of transactions in Government
Securities (both outright and repos) conducted in the secondary market.
7) NDS OM (Order Match)
In August, 2005, RBI introduced an anonymous screen based order matching module on NDS,
called NDS-OM. This is an order driven electronic system, where the participants can trade
anonymously by placing their orders on the system or accepting the orders already placed by
other participants. NDS-OM is operated by the Clearing Corporation of India Ltd. (CCIL) on
behalf of the RBI.
8) What is Asset Management Companies?
A company that invests its clients' pooled fund into securities that match its declared financial
objectives. Asset management companies provide investors with more diversification and
investing options than they would have by themselves. Mutual funds, hedge funds and pension
plans are all run by asset management companies. These companies earn income by charging
service fees to their clients.
9) "Soiled Note:" means a note which, has become dirty due to usage and also includes a two
piece note pasted together wherein both the pieces presented belong to the same note, and form
the entire note.

(ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed of


more than two pieces.
10) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk,
washed, altered or indecipherable but does not include a mutilated banknote.
A) Some points related to Interest Rates on Bank Accounts

1) Interest on Savings A/c is calculated on daily balance basis.


2) Now, All Scheduled Commercial Banks (Excluding RRBs) have the discretion to
offer differential interest rates based on whether the term deposits are with or
without-premature-withdrawal-facility, subject to the following guidelines:
i. All term deposits of individuals (held singly or jointly) of 15 lakh and below
should, necessarily, have premature withdrawal facility.
ii. For all term deposits other than (i) above, banks can offer deposits without the
option of premature withdrawal as well.
iii. Banks should disclose in advance the schedule of interest rates payable on
deposits i.e. all deposits mobilized by banks should be strictly in conformity with the
published schedule.

B) Taxation of Savings Bank Interest rates:

Unlike interest on fixed deposits, interest earned on savings bank accounts is not
subject to Tax Deduction at Source. However, this does not mean the interest
earned on Savings accounts is completely tax free. It is exempt upto Rs. 10,000 in a
year, and if the interest you earn from Savings accounts crosses this threshold, it
becomes subject to tax.
C) Senior Citizens Savings Scheme, 2004:
A Scheme which is giving a higher interest rate to the senior citizens, if they make
deposits in the banks.

The salient features of the Senior Citizens Savings Scheme, 2004 are given
below:

Tenure of the deposit account


Rate of interest
Investment to be in multiples of
Maximum investment limit
Minimum eligible age for investment
Premature closure/withdrawal facility
Modes of holding
Applicability to NRI, PIO and HUFs

Union Government unveils Indradhanush Mission for PSBs


i. Union Government has launched a seven pronged plan called Indradhanush
Mission to revamp functioning of public sector banks (PSBs). It was launched by
Union Finance Minister Arun Jaitley in New Delhi.

Facts about Indradhanush Mission

The seven shades of Indradhanush mission include appointments, destressing PSBs, capitalisation, empowerment, framework of accountability
and governance reforms.

It seeks to achieve the objective of economic growth revival through


improving credit and minimising the political interference in the functioning of
PSBs.

Appointments: Selection of non-executive chairman in remaining 6 state


owned PSBs till November 2015. Appointing MD & CEO of two PSBs as early
as possible.

Bank Board Bureau (BBB): It will be a body of eminent professionals to


be selected within 6 months i.e. February 2015. It will become functional from
Financial year 2016-17 i.e. form 1st April 2016.

Capitalisation: Infuse 25,000 crore rupees of capital into debt-laden banks


in this fiscal in phased manner. Out of this 20,000 crore rupees would be
injected in August 2015. Rest 5,000 crore rupees will be performance based
allocation to be allocated in the last quarter of 2016.

De-stressing PSBs: To develop vibrant debt market for PSBs in order to


reduce lending pressure on banks. Strengthen asset reconstruction of
companies.

Empowerment: Provide greater flexibility in hiring of manpower in PSBs.

Framework of accountability: It will seek to streamline vigilance process


for quick action in case major frauds and also include connivance of staff.

Governance reforms in PSBs: Next Gyan Sangam (also known as the


Bankers Retreat) will be held from 14 to 16 January 2016. Employee Stock
Option Plan (ESOP) will be initiated for top management.

Union Government to form Bank Board Bureau


i. Union Government has decided to set up a Bank Board Bureau (BBB) to monitor
key performance indicators of two dozen public sector banks (PSBs). It was
announced by Union Finance Minister Arun Jailtley as part of a seven-pronged
revamp plan for PSBs dubbed as Indradhanush (rainbow) plan.

Facts about Bank Board Bureau

Bank Board Bureau (BBB) will start the functioning from next financial year
i.e. from 1st April 2015 and the selection of its member will start in the next
six months.

It will replace existing system Appointments Board in which appointments for


top level jobs at PSBs are made by an appointments committee led by the
Reserve Bank of India (RBI) Governor.

Composition: The BBB will be a body of eminent professionals and shall


consist of only one government official. It will be six members body with at
least 3 former bankers, 2 professionals and secretary, department of financial
services representing government.

Functions: Give recommendations for appointment of full-time Directors as


well as non-Executive Chairman of PSBs.

Give advice to PSBs in developing differentiated strategies for raising funds


through innovative financial methods and instruments and to deal with issues
of stressed assets.

Guide banks on mergers and consolidations.

Payment Banks : A Step Closer Towards Financial Inclusion


Good Morning Readers,
A debate sparked on Wednesday about the RBI giving License to the Payment
Banks. This might sound new to you, but yes there is a different catageory called
Payment Banks. Payments bank licence will allow companies to collect deposits
(initially up to Rs 1 lakh per individual), offer Internet banking, facilitate money
transfers and sell insurance and mutual funds. It is new stripped-down type of
banks, which are expected to reach customers mainly through their mobile phones
rather than traditional bank branches.

The objectives of setting up of payments banks will be to further financial inclusion


by providing small savings accounts and payments/remittance services to migrant
labour workforce, low income households, small businesses, other unorganised
sector entities and other users. Such banks will ensure more money comes into the

banking system and will help reach out to people in rural areas. Moreover, the
payments bank licence will enable the network of 1,54,000 post offices (including
1,30,000 rural post offices) to offer banking services to the masses in the country.

List of the companies who got the license to run payment banks :

Aditya Birla Nuvo Ltd

Airtel M Commerce Services Ltd

Cholamandalam Distribution Services Ltd

Department of Posts

Fino PayTech Ltd

National Securities Depository Ltd

Reliance Industries Ltd

Dilip Shantilal Shanghvi

Vijay Shekhar Sharma

Tech Mahindra Ltd

Vodafone m-pesa Ltd

The next question that arrives in ones mind is that what is the need of payment
bank and "Kya baaki banks kam hain" but there is only one answer to all the
questions that this step is one of the major step towards Financial Inclusion. These
banks have limited services as compared to the other banks. Let's see what these
banks can or can't do :

They cant offer loans but can raise deposits of upto Rs. 1 lakh, and pay
interest on these balances just like a savings bank account does.

They can enable transfers and remittances through a mobile phone.

They can offer services such as automatic payments of bills, and purchases
in cashless, cheque less transactions through a phone.

They can issue debit cards and ATM cards usable on ATM networks of all
banks.

They can transfer money directly to bank accounts at nearly no cost being a
part of the gateway that connects banks.

They can provide forex cards to travellers, usable again as a debit or ATM
card all over India.

They can offer forex services at charges lower than banks.

They can also offer card acceptance mechanisms to third parties such as the
Apple Pay.

This is for the first time in the history of India's banking sector that RBI is giving out
differentiated licences for specific activities. RBI is expected to come out with a
second set of such licences for small finance banks and the process for those
is in its final stage. The move is seen as a major step in pushing financial inclusion
in the country.

Its a step to redefine banking in India. The Reserve Bank


expects payment banks to target Indias migrant labourers, low-income households
and small businesses, offering savings accounts and remittance services with a low
transaction cost. It hopes payments banks will enable poorer citizens who transact
only in cash to take their first step into formal banking. It could be uneconomical for
traditional banks to open branches in every village but the mobile phones coverage
is a promising low-cost platform for quickly taking basic banking services to every
rural citizen. The innovation is also expected to accelerate Indias journey into a
cashless
economy.
The most prominent figure among those left out is Kishore Biyani, founder and CEO
of Future Group. Indeed, Biyani throwing his hat in the ring was out of sync with the
group's moves over the past few years. He had sold his stake in public listed
financial services firm Future Capital (now Capital First) and has also been looking to
rewind holding in insurance JVs to focus on the core retail business.MG George
Muthoot and others, from Muthoot Finance, the largest gold financing company in
the country, too missed on the list of firms which got nod for payments bank
licences. There is a set of firms such as Dhoots-controlled DTH company Videocon
d2h Ltd that was not considered for the licence. The group had sought to enter
financial services as a business through its DTH firm, which is now listed on
NASDAQ. Among others, NSE Strategic Investment Corporation Ltd, a part of
national bourse NSE and realtor Kalpataru Corporation also missed on the
opportunity to add a new business line. While mobile wallets have been one of the
fastest growing segment, RBI granted approval only to Paytm (the applicant was its

co-founder Vijay Shekhar Sharma). Its peers like Oxigen, MobiKwik, Citrus and
ItzCash lost out on the opportunity to become payments bank, at least for now.
Indias domestic remittance market is estimated to be about Rs. 800-900 billion and
growing. With money transfers made possible through mobile phones, a big chunk
of it, especially that of the migrant labour, could shift to this new platform. Payment
banks can also play a crucial role in implementing the governments direct benefit
transfer scheme, where subsidies on healthcare, education and gas are paid directly
to beneficiaries accounts. Also, this is the first time since banks were nationalized,
that private sector business groups have bagged the RBIs nod for banking services.

WEDNESDAY, 2 SEPTEMBER 2015

BANKS BOARD BUREAU: Another Initiative for PSBs


Dear Readers,
Today we are providing you a brief on Banks Board Bureau which is recently announced by our Finance
Minister, for the PSBs. This can be asked in the General Awareness section. We hope that you will like
this post.

Taking the first step towards a holding company structure for public sector banks (PSBs), the government
announced the setting up of a Banks Board Bureau (BBB), where each bank would be monitored on the
basis of "key performance indicators".

The Banks Board Bureau will recommend appointment of directors in public sector banks
(PSBs) and advice on ways of raising funds and dealing with issues of stressed assets.
The financial services secretary Hasmukh Adhia said that the political interference in the
functioning of banks must cease. The BBB would replace the existing appointments board
for PSBs. He also said that BBB will also be a link between the government and banks and
will be engaged with banks to evolve strategies for them.
The bureau will be a six-member board comprising three from the private sector and three
government nominees, while the chairman "will be a distinguished banker or regulator".

Banks have a requirement for Rs.180,000 crore over the next four years to meet their capital
requirements. Of this, the government will provide Rs.70,000 crore. They have to raise
Rs.1.1 lakh crore from the market. The BBB will advise the banks on ways of raising fund.
Also the government plans to provide Rs.25,000 crore capital each in the current and next
fiscal year, while Rs.20,000 crore would be provided during 2017-18 and 2018-19.

Facts about Bank Board Bureau


1) Bank Board Bureau (BBB) will start the functioning from next financial year i.e. from 1st
April 2016 and the selection of its member will start in the next six months.
2) It will replace existing system Appointments Board in which appointments for top level
jobs at PSBs are made by an appointments committee led by the Reserve Bank of India (RBI)
Governor.
3) Composition: The BBB will be a body of eminent professionals and shall consist of only
one government official. It will be six members body with at least 3 former bankers, 2
professionals and secretary, department of financial services representing government.

4) Functions: Give recommendations for appointment of full-time Directors as well as nonExecutive Chairman of PSBs.
5) Give advice to PSBs in developing differentiated strategies for raising funds through
innovative financial methods and instruments and to deal with issues of stressed assets.
6) Guide banks on mergers and consolidations.

Read more: http://www.bankersadda.com/2015/09/banks-board-bureau-another-initiative.html#ixzz3keLOBJKb

A Brief on ONE RANK ONE PENSION SCHEME


Dear Readers,
Today we are providing you a brief on the recently approved scheme by the Union
Government named One Rank One Pension Scheme. We really hope that you all will like this
post.

The Union Government announced One Rank One Pension (OROP) scheme for exservicemen. The scheme was pending for nearly four decades.

Lets discuss What really this means?

What is One Rank, One Pension?


The one rank, one pension rule means that retired soldiers of the same rank and length of
service will receive the same pension, regardless of when they retire.

As of now, the date of retirement determines the amount of pension. With each Pay
Commission coming up with its recommendations every 10 years, the military veterans who
retire early, receive less pension as compared to those who retired later with the same rank
and length of service
Under OROP, a sepoy who retired in 1995, for instance, would get the same amount of
pension as the one who retired in 1996.
"In simple terms, OROP implies that uniform pension be paid to the Armed Forces personnel retiring in
the same rank with the same length of service, regardless of their date of retirement. Future
enhancements in the rates of pension would be automatically passed on to the past pensioners. This
implies bridging the gap between the rate of pension of current and past pensioners at periodic intervals,"
said Defence Minister Manohar Parrikar while making the announcement.

Who will benefit from OROP?


Ex-servicemen drawing pensions will benefit from the OROP scheme, especially those who
retired before 2006. Why? Because at present, pensioners who retired before 2006 draw less
pension than their counterparts and even their juniors. The scheme will benefit all three
services -- air force, navy and army.

Details of OROP
1) The benefit will be given with effect from 1st July, 2014. The present government
assumed office on 26th May, 2014 and therefore, it has been decided to make the scheme
effective from a date immediately after. Arrears will be paid in four half-yearly instalments.
2) All widows, including war widows, will be paid arrears in one instalment.
3) To begin with, OROP would be fixed on the basis of calendar year 2013.
4) Pension will be re-fixed for all pensioners retiring in the same rank and with the same
length of service as the average of minimum and maximum pension in 2013. Those drawing
pensions above the average will be protected.
5) Personnel who voluntarily retire will also be covered under the OROP scheme.
6) In future, the pension would be re-fixed every 5 years.
7) It has also been decided that a One Member Judicial Committee would be constituted
which will give its report in six months.

Read more: http://www.bankersadda.com/2015/09/a-brief-on-one-rank-one-pension-scheme.html#ixzz3lDRpMsSc