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1). Explain the business of banking? Banks are the intermediaries between investors and spenders .

the transformation of savings into investments and consumption played active role in financial system. In India all banks are under control of Central banking authority RBI which controls the different rates by using monitory policy. It supervises over commercial banks, NBFCs, PDs, FIs, Cooperative banks. In India banks are divided into Schedule banks and non schedule banks. Non-schedule commercial banks: - The paid-up capital is less than 2 lakh and not follow the RBI 1934 act is called as non-schedule commercial banks. Schedule commercial banks: - scheduled banks are divided as Public sector banks and Private sector banks. These banks follow Act, 1949 as a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 and paid-up capital is greater than 5 lack rupees. Banks gives the loans to priority sector like Agriculture and industrial development which helps in growth of financial system. In India for Agriculture development Indian Government Establish a Bank called NABARD, which controls and guide the all rural banks in India, these banks give priority to agriculture sector. By using these banks the central Govt schemes are going into rural areas effectively. In todays banking all the banks are doing retail banking by doing business with individual customers. in this retail banking customers have different products and services like home loans ,auto loans and education loans ,consumer loans ,personal loan ,credit cards ,safe deposit lockers, bank assurance products and different accounts.

2). What are the salient features of the RBI act 1934? The RBI act 1934 contained in the preamble as Whereas it is expedient to constitute a reserve bank for India to regulate the issue of bank notes and keeping of reserves with a view to securing monitory stability in India and generally to operate the currency and credit system of the country to its advantage. The salient futures of this act is 1. It Maintains the Monitory stability so business and economic life of the country can deliver the welfare gains of the mixed economy. 2. Financial stability so financial transactions can be safely and effectively executed.

3. It provides stable payment system so financial transactions can be safely and effectively executed. 4. It ensures the credit allocation from financial system for national economic priorities and social concerns. 5. It regulates the liquidity to control the price stability.

4). what are the legal requirements in setting up and conducting banking business in india? The RBI provided guidelines for licensing of new banks in the private sector on January 22, 1993. After a review of the experience gained on the functioning of the new banks in the private sector, in consultation with the Government, it has now been decided to revise the licensing guidelines.

Guidelines (i) The initial minimum paid-up capital for a new bank shall be Rs.200 crore. The initial capital will be raised to Rs.300 crore within three years of commencement of business. The overall capital structure of the proposed bank including the authorised capital shall be approved by the RBI. (ii) The promoters contribution shall be a minimum of 40 per cent of the paid-up capital of the bank at any point of time. The initial capital, other than the promoters contribution, could be raised through public issue or private placement. In case the promoters contribution to the initial capital is in excess of the minimum proportion of 40 per cent, they shall dilute their excess stake after one year of the banks operations. (In case divestment after one year is proposed to be spread over a period of time, this would require specific approval of the RBI). Promoters contribution of 40% of the initial capital shall be locked in for a period of five years from the date of licensing of the bank. (iii) While augmenting capital to Rs.300 crore within three years of commencement of business, the promoters will have to bring in additional capital, which would be at least 40 per cent of the fresh capital raised. The remaining portion could be raised through public issue or private placement. The promoters contribution of a minimum of 40% of additional capital will also be locked in for a minimum period of 5 years from the date of receipt of capital by the bank. (iv) NRI participation in the primary equity of a new bank shall be to the maximum extent of 40 per cent. In the case of a foreign banking company or finance company (including multilateral institutions) as a technical collaborator or a co-promoter, equity participation shall be restricted to 20 per cent within the above ceiling of 40 per cent. In cases of shortfall in foreign equity

contributions by NRIs, designated multilateral institutions would be allowed to contribute foreign equity to the extent of the shortfall in NRI contribution to the equity. The proposed bank shall obtain necessary approval of Foreign Investment Promotion Board of the Government of India and Exchange Control Department of RBI. (v) The new bank should not be promoted by a large industrial house. However, individual companies, directly or indirectly connected with large industrial houses may be permitted to participate in the equity of a new private sector bank up to a maximum of 10 per cent but will not have controlling interest in the bank. The 10 per cent limit would apply to all inter- connected companies belonging to the concerned large industrial houses. In taking a view on whether the companies, either as promoters or investors, belong to a large industrial house or to a company connected to a large industrial house, the decision of the RBI will be final. (vi) The proposed bank shall maintain an arms length relationship with business entities in the promoter group and the individual company/ies investing upto 10% of the equity as stipulated above. It shall not extend any credit facilities to the promoters and company/ies investing up to 10 per cent of the equity.The relationship between business entities in the promoter group and the proposed bank shall be of a similar nature as between two independent and unconnected entities. In taking view on whether a company belongs to a particular Promoter Group or not, the decision of RBI shall be final. (vii) Conversion of NBFCs into private sector banks An NBFC with a good track record desiring conversion into a bank should satisfy the following criteria : The NBFC should have a minimum net worth of Rs.200 crore in its latest balance sheet which will stand increased to Rs.300 crore within three years from the date of conversion. The NBFC should not have been promoted by a large Industrial House or owned/controlled by public authorities, including Local, State or Central Governments. The NBFC should have acquired a credit rating of not less than AAA rating (or its equivalent) in the previous year. The NBFC should have an impeccable track record in compliance with RBI regulations/directions and in repayment of public deposits and no default should have been reported. The NBFC desiring conversion into bank should have capital adequacy of not less than 12 per cent and net NPAs of not more than 5 per cent.

The NBFC on conversion to a bank will have to comply with Capital Adequacy Ratio and all other requirements such as lending to priority sector, promoters contribution, lock-in period for promoters stake, dilution of promoters stake beyond the minimum, NRI and foreign equity participation, arms length relationship, etc. as applicable to banks. Other Requirements (i) The bank shall be required to maintain a minimum capital adequacy ratio of 10 per cent on a continuous basis from the commencement of its operations. (ii) In order to ensure level playing field, a) the new bank will have to observe priority sector lending target of 40 per cent of net bank credit as applicable to other domestic banks, and b) the new bank will be required to open 25 per cent of its branches in rural and semiurban areas to avoid over concentration of their branches in metropolitan areas and cities on the same lines as new private sector banks established under guidelines laid down by RBI in January 1993, (iii) The promoters, their group companies and the proposed bank shall accept the system of consolidated supervision by the Reserve Bank of India. (iv) The new bank shall not be allowed to set up a subsidiary or mutual fund for at least three years from the date of commencement of business. (v) The headquarters of the proposed new bank could be in any location in India as decided by the promoters. (vi) The new bank shall make full use of modern infrastructural facilities in office equipments, computer, telecommunications etc. in order to provide cost-effective customer service. It should have a high powered Customer Grievances Cell to handle customer complaints. (vii) The new bank will be governed by the provisions of the Banking Regulation Act, 1949, Reserve Bank of India Act, 1934, other relevant Statutes and the Directives, Prudential regulations and other Guidelines/Instructions issued by RBI and the regulations of SEBI regarding public issues and other guidelines applicable to listed banking companies.

(5). Customer:A customer for a bank means who have the account in the bank. But the relationship is changed by those operations. If customer deposits money in bank the customer becomes a lender and the bank become a borrower. Here the relationship between banker and customer is debtor and creditor. If a bank lends the money to customer, the customer is borrower and the bank is the lender. The relationship between banker and customer is creditor and debtor Bank as trustee: - A trusty holds the money or assets and perform certain functions for the benefit of other person called beneficiary. Bailee-Bailor relationship Agent-principle relationship Lesser and lessee Indemnifier and indemnified 3).Why was the Banking Regulation Act, 1949 enacted? The Banking Regulation Act was passed as the Banking Companies Act 1949 and came into force from 16-3-1949. Subsequently it was changed to Banking Regulations Act 1949.by using this act RBI control the all operations regarding banking sector. in this act clearly specify the all banking operations and procedures. By this act RBI can control the banks and it can give new licenses to start banks in India with RBI guidelines. Bankining Regulation Act,1949 was enacted owing to safeguard the intrest of depositors ,control abuse of powers by bank personnel controlling the banks in particular and to the interest of Indian economy. some important section will given here. regarding control and regulation of Banking Sector in India. Requirements regarding minimum paid up capital and reserves: Sections 11 & 12 Prohibition of charge on unpaid capital: Section 14 Limiting the payment of dividends: Section 15

Section 15 prohibits every banking company from paying any dividend on its shares unless it has completely written off the capitalized expenses specified therein. Transfer to Reserve Fund: Section 17 Maintenance of cash reserve by non-scheduled banks: Section 18 Restrictions on holding of shares in other companies: Section 19 Restrictions on loans and advances: Sections 20 & 21 Licensing of banking companies: Section 22 Control on the opening of new business: Section 23 Maintenance of a percentage of liquid assets (SLR): Section 24 Maintenance of Assets in India: Section 25 Submission of Returns of unclaimed Deposits: Section 26 Submission of Return, Forms, etc., to RBI: Section 27 Powers to Publish Information: Section 28 aintenance of Accounts and Balance Sheets: Section 29 Audit of the Balance Sheet and Profit & Loss Account: Section 30 Submission of returns to RBI: Section 31
Inspection of books of accounts: Section 35 Giving directions to Banking Companies: Section 35A Moratorium under the orders of High Court (Suspension of Business) Section 37

(6).A General Lien :- Lien denotes the right of a creditor to retain possession of the goods and

securities owned by a debtor until the debt is repaid. The creditor has no right to sell the goods even though he retains possession thereof. The creditor may only retain the goods/property till the realization of the debt A General Lien is, therefore, a right to retain the goods and securities belonging to the borrower for all dues payable by him

A Bankers Lien is where the banker can sell the goods after giving a reasonable notice. A General Lien can also be an implied pledge. (6).B Right of set-off is an statutory right and is available to any creditor even in the absence of

express agreement. Right of set-off means, where a customer has credit balance in one of his accounts and debit balance in another, the banker has a right to adjust credit balance with the debit balance and to arrive at the net sum due. Such right is known as right of set-off. Set off is right to combine two or more accounts having debit and credit balance (in same or different branches). It is not defined in any Act. It can be exercised only where there is relationship of debtor & creditor and creditor & debtor simultaneously. The deposit and loan should be due and lawful (law of limitation does not apply). Available for the deposit of guarantor (after serving a recall notice on him). On a term deposit which has not matured, it is available but it can be exercised only when FDR matures. Right can be exercised before meeting the garnishee order or attachment order. It cannot be exercised, if the deposit is held as trustee, if held jointly (and loan is in single name), if held by partnership firm (loan in partners name).

(6).C POWER OF ATTORNEY:-

A "power of attorney" is a legal instrument whereby one person gives another person the authority to act on his or her behalf as his legal representative, and to make binding legal and financial decisions on your behalf. In Strouds judicial dictionary "power of attorney is defined extensively as an authority whereby one is set in the stead or place of another to act for him". A general power of attorney: The principal empowers the agent with the right to carry out all legal acts on his behalf without restricting it to a particular transaction or act, Gives the agent very broad powers to act on behalf of the Principal A special power of attorney: The authority is restricted to act only on certain matters or only a particular kind of transaction or to carry out a specific legal transaction for the Principal. The agent's power of attorney expires on the completion of the transaction

bank accounts, certificates of deposit, money market accounts: To add to or withdraw any amounts from any of my bank accounts, Certificates of Deposit, Money Market Accounts, etc. To make, execute, endorse, accept and deliver any and all cheques and drafts Execute or release such deeds of trust or other security agreements as may be necessary Deposit and withdraw funds Acquire and redeem certificates of deposit, in banks, savings and Loan. (6).D CHEQUE A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise on demand and it includes the electronic image of a truncated cheque ans cheque is electronic form. It contains Account holder name of bank for payment from his account,the branch on which it is drawn,date,payee (single or joint payee ),amount, crossed/not Characterstics:1. Cheque is an instrument in writing 2. Cheque contains an unconditional order 3.Cheque is drawn by a customer on his bank 4. Cheque must be signed by customer 5. Cheque must be payable on demand 6.Cheque must mention exact amount to be paid 7. Payee must be certain to whom payment is made 8. Cheque must be duly dated by customer of bank 9. Cheque has 3 parties : Drawer, Drawee & Payee Drawer : A drawer is a person, who draws a cheque. Drawee : A drawee is a bank on whom a cheque is drawn. Payee : A payee is a person in whose favour a cheque is drawn.

(7).A TYPES OF DEPOSITS Receiving of deposit is one of the primary functions of a commercial bank. Banks usually accept deposits from those people who can save and cannot profitably use their surpluses. There are three types of deposits like: I. Fixed deposit: Fixed deposit refers to a type of deposit which can be drawn on the expiry of a specific period. This type of deposits are paid at a higher rate of interest. II. Current deposit: Current deposit refers to a type of deposit which can be drawn at any time and in any amount. Generally current deposits are not paid any rate of interest. However, a very low rate of interest is paid if there is a condition that deposit amount will never fall a certain limit. III. Savings Bank deposit: These deposits encourage savings among the people. These deposits carry comparatively higher rate of interest but it is lower than fixed deposits. B. TYPES OF CUSTOMERS A bank deals with different types of customers like individuals,partnership companys,cooperative socitys. CUSTOMERS TO THE BANK IS 1 Minor account 2 joint accounts 3 HUF 4 Partnership firm accounts 5 Limited companies account 6 trust account 7 cooperative society account 8 Government account