Banking mp

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Banking mp

  1. 1. BANKING
  2. 2. BANKING FIVE DIFFERENT MARKETS  1) MONEY MARKET  2) STOCK MARKET  3) FOREX MARKET  4) COMMODITY MARKET  5) REAL ESTATE MARKET
  3. 3. BANKINGSYLLABUS FUNCTIONS OF THE BANK VARIOUS KINDS OF DEPOSITS VARIOUS KINDS OF ADVANCES CRR, SLR, LENDABLE RESOURCES BILL CULTURE/ BILL FINANCE (CHORE COMMITTEE) TANDON COMMITTEE
  4. 4. BANKINGSYLLABUS FINANCIAL SECTOR REFORMS INCOME RECOGNITION ASSET CLASSIFICATION PROVISIONING NORMS CAPITAL ADEQUACY
  5. 5. BANKINGSYLLABUS BASEL COMMITTEE NORMS ENTRY OF FOREIGN BANKS / PRIVATE BANKS, ETC. INTERNATIONAL BANKING FUNCTIONS OF RESERVE BANK OF INDIA
  6. 6. BANKING BANKING IS DIFFERENT FROM MONEY-LENDING BUT THE TWO TERMS CARRY SAME SIGNIFICANCE TO THE LAYMAN.
  7. 7. BANKING THE WORD “BANK” IS SAID TO BE OF GERMANIC ORIGIN, COGNATE WITH THE FRENCH WORD “BANQUE” AND ITALIAN WORD “ BANCA” BOTH THESE WORDS MEAN “BENCH” THE JEWISH MONEY-CHANGERS USED TO DO THEIR BUSINESS SITTING ON A BENCH IN MARKET.
  8. 8. BANKING SIMILARLY THE WORD “BANKRUPT” IS BELIEVED TO HAVE BEEN ORIGINATED FROM FRENCH WORD “BANQUE-ROUTE” AND ITALIAN WORD “BANCA-ROTTA” MEANING “BROKEN BENCH”. MONEY CHANGER USED TO BREAK HIS BENCH WHEN HE FAILED.
  9. 9. BANKING BANKING EXISTED IN INDIA IN ONE FORM OR THE OTHER FROM TIMES IMMEMORIAL. AMONG EARLIEST BANKS ESTABLISHED WERE, BANK OF BENGAL, BANK OF BOMBAY, BANK OF MADRAS KNOWN AS “PRESIDENCY BANKS”.
  10. 10. BANKING ALL THESE BANKS WERE AMALGAMATED TO FORM IMPERIAL BANK OF INDIA WHICH WAS SUBSEQUENTLY CONVERTED INTO STATE BANK OF INDIA.
  11. 11. BANKING IN EARLY PHASE INDIGENOUS BANKERS, NIDHIS AND MONEYLENDERS ACTED AS BANKERS. THEY WORKED ON ESTABLISHED NORMS AND TABOOS OF THE COMMUNITY.
  12. 12. BANKING IN THE INITIAL STAGES BANKING COMPANIES WERE REGISTERED UNDER THE COMPANIES ACT. HOWEVER WITH GROWTH OF JOINT STOCK BANKING IN FIRST QUARTER OF 19TH CENTURY, IT BECAME NECESSARY TO CODIFY RULES AND REGULATIONS.
  13. 13. BANKING THUS EMERGED THE BANKING REGULATION ACT IN 1949. BANKING LEGISLATION ACT AIMS AT  PROTECTING INTEREST OF DEPOSITORS  ENSURING CONTROL OVER CREDIT  STREAMLINING PROCEDURES  EVOLVING UNIFORM BANKING PRACTICES  DEVELOPING BANKING ON SOUND LINES.
  14. 14. BANKING SECTION 5 C OF THIS ACT DEFINES A BANKING COMPANYAS “A COMPANY WHICH CARRIES ON THE BUSINESS OF BANKING.”
  15. 15. BANKING SECTION 5 B DEFINES BUSINESS OF BANKING AS “ ACCEPTING, FOR THE PURPOSE OF LENDING OR INVESTMENT, DEPOSITS OF MONEY FROM THE PUBLIC, REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWABLE BY CHEQUES, DRAFTS OR OTHERWISE.”
  16. 16. BANKING MAIN PROVISIONS OF ACT  1) BUILT IN SAFEGUARDS  2) POWERS AND COSEQUENTIAL FUNCTIONS AND RESPONSIBILITIES OF RBI.
  17. 17. BANKING BUILT IN SAFEGUARDS RELATE TO  1) ORGANISATION  2) MANAGEMENT  3) OPERATIONS OF A BANKING COMPANY.
  18. 18. BANKINGORGANISATIONALSAFEGUARDS 1) PERMITTED BUSINESS 2) HOLDING IMMOVABLE PROPERTY 3) FORMATION OF SUBSIDIARY COMPANIES 4) USE OF WORD ‘BANK’, ‘BANKING COMPANY’, ‘BANKER’ AND ‘BANKING’
  19. 19. BANKINGORGANISATIONALSAFEGUARDS 5) PAID UP CAPITAL AND RESERVES 6) CHANGE OF NAME
  20. 20. BANKINGOPERATIONAL SAFEGUARDS 1) MAINTENANCE OF CASH RESERVES AND ASSETS 2) GRANT OF UNSECURED LOANS AND ADVANCES 3) OPENING OF NEW BRANCHES
  21. 21. BANKINGMANAGERIAL SAFEGUARDS 1) PREPARE ANNUAL ACCOUNTS IN THE FORMS PRESCRIBED UNDER THE ACT 2) THE ACCOUNTS ARE TO BE AUDITED BY A QUALIFIED AUDITOR. 3) PUBLISH AND SEND COPIES TO RBI 4) DISPLAY AT IT’S OFFICES.
  22. 22. BANKINGFUNCTIONS 1) PRIMARY FUNCTIONS 2) AGENCY FUNCTIONS 3) GENERAL UTILITY FUNCTIONS
  23. 23. BANKINGPRIMARY FUNCTIONS ACCEPTANCE OF DEPOSITS LENDING MONEY BORROWING MONEY MAKING INVESTMENTS
  24. 24. BANKINGAGENCY FUNCTIONS COLLECTION AND PAYMENT OF CHEQUES COLLECTION AND PAYMENT OF BILLS REMITTANCE OF FUNDS COLLECTION OF GOVERNMENT TAXES
  25. 25. BANKINGAGENCY FUNCTIONS UNDERTAKING ADMINISTRATION OF ESTATES AS EXECUTORS AND TRUSTEES.
  26. 26. BANKINGGENERAL UTILITY FUNCTIONS ISSUING OF GUARANTEES ISUING OF LETTERS OF CREDIT DEALING IN FOREIGN EXCHANGE DEALING IN BULLION SAFE DEPOSIT VAULT SAFE CUSTODY OF ARTICLES
  27. 27. BANKINGGENERAL UTILITY FUNCTIONS MERCHANT BANKING ACQUIRING, HOLDING AND DEALING WITH PROPERTIES AS SECURITY FOR ADVANCES. ISSUING AND ENCASHING GIFT CHEQUES ISSUING CREDIT / DEBIT CARDS
  28. 28. BANKER-CUSTOMERRELATIONSHIP 1) DEBTOR AND CREDITOR 2) BAILER-BAILEE 3) PRINCIPAL-AGENT 4) TRUSTEE-BENEFICIARY
  29. 29. BANKER-CUSTOMERRELATIONSHIP DEBTOR AND CREDITOR – IN CASE OF DEPOSIT ACCOUNT BANKER IS A DEBTOR AND CUSTOMER IS A CREDITOR
  30. 30. BANKER-CUSTOMERRELATIONSHIP BAILER-BAILEE – IN CASE A SEALED BOX IS DEPOSITED WITH THE BANK FOR SAFE CUSTODY, THE CUSTOMER IS A BAILER AND THE BANK IS A BAILEE.
  31. 31. BANKER-CUSTOMERRELATIONSHIP PRINCIPAL-AGENT – IN CASE OF COLLECTION AND PAYMENT OF CUSTOMER’S CHEQUES / BILLS, THE CUSTOMER IS A PRINCIPAL AND THE BANK IS AN AGENT.
  32. 32. BANKER-CUSTOMERRELATIONSHIP TRUSTEE-BENEFICIARY – IF A BANK IS ASKED TO MANAGE THE PROPERTY OF A TRUST, THE BANK IS A TRUSTEE AND THE TRUST IS THE BENEFICIARY.
  33. 33. DEFINITION OF CUSTOMER NO STATUTORY DEFINITION IS AVAILABLE. WE HAVE TO DEPEND ON JUDICIAL PRONOUNCEMENTS. WORD CUSTOMER DERIVES FROM ‘CUSTOM’ MEANING HABIT OF RESORTING TO SAME PLACE OR PERSON TO DO BUSINESS.
  34. 34. DEFINITION OF CUSTOMER ONE WHO MAINTAINS SOME SORT OF DEPOSIT ACCOUNT STATE OF ACCOUNT IS IMMATERIAL BY FREQUENTLY PURCHASING DRAFTS OR CASHING CHEQUES ONE DOES NOT BECOME A CUSTOMER
  35. 35. DEFINITION OF CUSTOMER A CUSTOMER OF ONE BRANCH IS NOT A CUSTOMER OF ANOTHER BRANCH OF THE SAME BANK. BANKER- CUSTOMER RELATIONSHIP EXISTS BETWEEN TWO BANKS, IF ONE HAS AN ACCOUNT WITH THE OTHER
  36. 36. CONTRACTUALRELATIONSHIP THE BANKER IS ENTITLED TO USE MONEY WITHOUT BEING CALLED UPON TO ACCOUNT FOR SUCH USE. LIABILITY TO RETURN THE AMOUNT THE BANKER CAN NOT CLOSE CUSTOMER’S ACCOUNT WITHOUT GIVING HIM NOTICE.
  37. 37. CONTRACTUALRELATIONSHIP BANKER IS OBLIGED TO KEEP TRANSACTIONS OF CUTOMER SECRET, EXCEPT UNDER SPECIAL CIRCUMSTANCES BANKER ENJOYS A RIGHT OF LIEN. IT IS A LIMITED PLDEGE EXCEPT IN CASE OF ARTICLES RECEIVED FOR SAFE CUSTODY
  38. 38. CONTRACTUALRELATIONSHIP BANKER’S RIGHT OF SET OFF BANKER HAS A RIGHT FOR APPROPRIATION OF ACCOUNTS BANKER IS ENTITLED TO INTEREST ON LOANS AND COMMISSION FOR OTHER SERVICES.
  39. 39. CONTRACTUALRELATIONSHIP TERMINATION OF RELATIONSHIP  i) VOLUNTARY  ii) BY PROCESS OF LAW 1) DEATH OF CUSTOMER 2) BANKRUPTCY 3) INSANITY OF CUSTOMER 4) GARNISHEE ORDER
  40. 40. EXERCISETRUE OR FALSE 1) THE BANKER IS A PRIVILEDGED DEBTOR IN AS MUCH AS HE NEED NOT REPAY HIS DEPOSITORS UNLESS A DEMAND IS MADE ON HIM. 2) BANKER IS AN AGENT WHEN HE ARRANGES SALE OF SHARES ON BEHALF OF HIS CUSTOMER
  41. 41. EXERCISETRUE OR FALSE 3) THE BALANCE IN THE ACCOUNT OF THE WIFE CAN BE DISCLOSED TO THE HUSBAND, BUT NOT VICE VERSA 4) BANKER CAN EXERCISE RIGHT OF SET OFF WITHOUT NOTICE TO THE CUSTOMER
  42. 42. EXERCISETRUE OR FALSE 5) RIGHT OF SET OFF CAN BE EXERCISED IN RESPECT OF BILLS DISCOUNTED BUT NOT YET DUE. 6) IF BANKER FINDS THE ACCOUNT OF THE CUSTOMER UNDESIRABLE OR UNREMUNERABLE, HE CAN CLOSE THE ACCOUNT AND REMIT THE BALANCE BY A CHEQUE.
  43. 43. EXERCISETRUE OR FALSE 7) THE BANK HAS GRANTED OVERDRAFT FACILITY; THE ACCOUNT IS IN CREDIT BALANCE. THE BANKER IS A CREDITOR OF THE CUSTOMER 8) THE BANKER IS A BAILEE WHEN HE PAYS SUBSCRIPTION ON BEHALF OF CUSTOMER
  44. 44. BANKING REGULATION ACT GOVERNMENT OF INDIA PASSED A COMPREHENSIVE BANKING REGULATION ACT IN 1949 FOR SAFEGUARDING THE BUSINESS OF BANKING COMPANIES.
  45. 45. BANKINGCLASSIFICATION OF BANKS CLASSIFICATION OF BANKS CAN BE DONE IN MANY WAYS. BASED ON FUNCTIONING  COMMERCIAL BANKS  CO-OPERATIVE BANKS  DEVELOPMENT BANKS  RESERVE BANK OF INDIA
  46. 46. BANKINGCLASSIFICATION OF BANKS COMMERCIAL BANKS  SCHEDULED BANKS  NON-SCHEDULED BANKS
  47. 47. BANKINGCLASSIFICATION OF BANKS SCHEDULED BANKS  ONE WHICH IS REGISTERED IN THE SCHEDULE OF RBI.  COME UNDER PURVIEW OF VARIOUS CREDIT CONTROL MEASURES OF RBI.  REQUIRED TO MAINTAIN CERTAIN MINIMUM BALANCE WITH RBI.  ENTITLED TO BORROW FROM RBI.
  48. 48. BANKINGCLASSIFICATION OF BANKS SCHEDULED BANKS  INDIAN SCHEDULED BANKS  FOREIGN SCHEDULED BANKS SCHEDULED BANKS  PUBLIC SECTOR COMMERCIAL BANKS  PRIVATE SECTOR COMMERCIAL BANKS
  49. 49. BANKINGCLASSIFICATION OF BANKS PUBLIC SECTOR COMMERCIAL BANKS  STATE BANK OF INDIA AND ITS SUBSIDIARIES; 20 NATIONALISED BANKS;
  50. 50. BANKINGCLASSIFICATION OF BANKS PRIVATE SECTOR COMMERCIAL BANKS  OTHER INDIAN SCHEDULED BANKS THAT DO NOT FALL IN THE ABOVE GROUP
  51. 51. BANKINGCLASSIFICATION OF BANKS NON-SCHEDULED BANKS  THOSE WHICH ARE NOT INCLUDED IN SCHEDULE OF RBI  THEY ARE NOT ENTITLED TO BORROWINGS AND REDISCOUTING FACILITIES FROM RBI
  52. 52. BANKINGCLASSIFICATION OF BANKS BASED ON OWNERSHIP  NATIONALISED BANKS  PRIVATE BANKS  FOREIGN BANKS  CO-OPERATIVE BANKS
  53. 53. BANKINGEVOLUTION & GROWTH DISTINCT PHASES IN BANKING SYSTEM  PRIOR TO 1948 - EVOLUTIONARY PHASE  1949-1968 - FOUNDATION PHASE  1969- 1984 - EXPANSION PHASE  1985- 1990 - CONSOLIDATION PHASE  SINCE 1990 - REFORMATORY PHASE
  54. 54. BANKINGEVOLUTION & GROWTH EVOLUTION PHASE  REGULATIONS WERE BEING INTRODUCED  ROLE CONFINED TO ATTEND TO CREDIT NEEDS OF SELECTED AND LIMITED SEGMENTS OF ECONOMY  OPERATIONS WERE INFLUENCED BY COMMERCIAL PRINCIPLE AND NOT BY DEVELOPMENT FACTOR.  FAILURE OF BANKS WAS COMMON.
  55. 55. BANKINGEVOLUTION & GROWTH FOUNDATION PHASE  EMPHASIS ON LAYING FOUNDATION FOR SOUND BANKING SYSTEM  AS A CONSEQUENCE BANKING REGULATION ACT WAS PASSED  TRANSFORMATION OF IMPERIAL BANK OF INDIA INTO STATE BANK OF INDIA  STRONG STRESS ON CLASS BANKING BASED ON SECURITY THAN ON PURPOSE
  56. 56. BANKINGEVOLUTION & GROWTH EXPANSION PHASE  NATIONALISATION BANKS  14 IN 1969  6 IN 1980  EXPANSION AT PATHBREAKING PACE  APPRX 50000 BRANCHES WERE SET UP  INEFFICIENCY AND LACK OF CONTROL  QUALITY BECAME A CASUALTY
  57. 57. BANKINGEVOLUTION & GROWTH  DIRECTED LENDING  INTEGRATED RURAL DEVELOPMENT PROGRAMME  VARIOUS SCHEMES ANNOUNCED BY GOVT.  BIRTH OF REGIONAL RURAL BANKS IN 1975 AND NABARD IN 1982  TRANSFORMATION FROM CLASS BANKING TO MASS BANKING.
  58. 58. BANKINGEVOLUTION & GROWTH CONSOLIDATION PHASE  EXTENSION OF EARLIER PHASE  IMPROVING HOUSEKEEPING, CUSTOMER SERVICE, CREDIT MANAGEMENT, STAFF PRODUCTIVITY AND PROFITABILITY.  BANKS ENDED UP IN CONSOLIDATING LOSSES RATHER THAN THE GAINS.
  59. 59. BANKINGEVOLUTION & GROWTH REFORMATORY PHASE  UNPRECEDENTED ECONOMIC CRISIS ENGULFED THE ECONOMY  INDIA ALMOST DEFAULTED ON ITS INTERNATIONAL COMMITMENTS  INTERNATIONAL CREDIT RATING DOWNGRADED  BREAKDOWN OF FISCAL DISCIPLINE
  60. 60. BANKINGEVOLUTION & GROWTH REFORMATORY PHASE (CONTD)  HENCE TO REDRESS THE IMBALANCES VARIOUS MACRO ECONOMIC STRUCTURAL REFORMATORY MEASURES WERE UNDERTAKEN BY GOVERNMENT IN THE FIELD OF TAX SYSTEM, INDUSTRIAL POLICY, FINANCIAL SECTOR AND FOREIGN TRADE.
  61. 61. BANKING IN VIEW OF THIS BANK TRANSACTIONS ARE BROADLY CLASSIFIED IN FOLLOWING 3 WAYS  1) CASH TRANSACTIONS  2) TRANSFER TRANSACTIONS  3) CLEARING TRANSACTIONS
  62. 62. BANKING MOST VULNERABLE AND RISKY AREA  THEFT  FORGED NOTES  SOILED NOTES  SHORT RECEIPT  EXCESS PAYMENT
  63. 63. BANKING CASH TRANSACTIONS ARE BALANCED ON DAILY BASIS AS UNDER: CLOSING CASH = OPENING CASH + CASH RECEIPTS DURING THE DAY – CASH PAYMENTS MADE DURING THE DAY
  64. 64. BANKING TO PREVENT FRAUDS, THE PARCTICE OF MAINTAINING A SCROLL OF ALL CASH RECEIPTS IS FOLLOWED BY THE BANK. AN OFFICIAL (NOT ATTACHED TO CASH DEPARTMENT) WILL KEEP A RECORD OF ALL CASH RECEIPTS
  65. 65. BANKING AT THE END OF THE DAY THIS WILL BE TALLIED WITH CASH DEPARTMENT THIS ENSURES THAT ALL THE CASH TENDERED BY THE CUSTOMERS IS ACCOUNTED FOR.
  66. 66. BANKING AS AN ABUNDANT PRECAUTION (FOR HIGH VALUE TRANSACTIONS), SAME TRANSACTION IS PASSED THROUGH SECOND OFFICIAL. ARMED GUARDS ARE PLACED BURGLAR ALARMS ARE PLACED.  THE BUTTONS ARE KEPT IN STRATEGIC PLACES IN BRANCH PREMISES.  DIRECTLY CONNECTED TO NEAREST POLICE STATION
  67. 67. BANKING CASH RECEIVED FROM CUSTOMERS IS IDLE MONEY FOR THE BANK. AFTER KEEPING SUFFICIENT CASH FOR DAY TO DAY OPERATIONS, THE BRANCHES DEPOSIT THE EXCESS CASH WITH THE NEAREST CURRECY CHEST THERE BY THEY EARN INTEREST.
  68. 68. BANKING IF THE AMOUNT OR FUNDS ARE TRANSFERRED FROM ONE ACCOUNT TO ANOTHER ACCOUNT IN THE SAME BRANCH OR ANOTHER BRANCH OF THE SAME BANK. TRANSFER SCROLL IS MAINTAINED DEBIT TRANSFER AND CREDIT TRANSFER MUST TALLY.
  69. 69. BANKING WHEN A CUSTOMER DEPOSITS A CHEQUE IN HIS ACCOUNT WHICH IS DRAWN ON ANOTHER BANK, THEN IT NEEDS TO BE CLEARED BEFORE CREDITING THE AMOUNT TO THE ACCOUNT OF THE CUSTOMER. INWARD CLEARING AND OUTWARD CLEARING
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