DefinitionA bank is a financial Institution and a financial intermediary thataccepts deposits and channels those deposits into lending activities,either directly or through capital markets. A bank connects customersthat have capital deficits to customers with capital surpluses.A banker or bank is a financial institution whose primary activity is toact as a payment agent for customers and to borrow and lend moneyBanking is one of the key drivers of the economy. Why?It provides the liquidity needed for families and businesses to invest forthe future. Bank loans and credit means families dont have to save upbefore going to college or buying a house, and companies can starthiring immediately to build for future demand and expansion.Heres how banking works. Banks provides a safe place to save excesscash, known as deposits. Instead of sitting uselessly under themattress, banks can turn every one of those Rupee into Wealth. Banksprimarily make money by charging higher interest rates on their loansthan they pay for deposits.
Origin of the wordThe word bank was borrowed in Middle English from MiddleFrench banque, from Old Italian banca, from Old HighGerman banc, bank "bench, counter".Benches were used as desks or exchange counters duringthe Renaissance by Florentine bankers, who used to make theirtransactions atop desks covered by green tablecloths.One of the oldest items found showing money-changing activity is a silverGreek drachm coin from ancient Hellenic colony Trapezus on the BlackSea, modern Trabzon, c. 350–325 BC, presented in the British Museum inLondon. The coin shows a bankers table (trapeza) laden with coins, a punon the name of the city.In fact, even today in Modern Greek the word Trapeza (Τράπεζα) meansboth a table and a bank.Another possible origin of the word is from the Sanskrit words ( )byaya (expense) and onka (calculation) = byaya-onka. This wordstill survives in Bangla, which is one of Sanskrits child languages.
Indian Banking ScenarioBanks in India can be categorized into Scheduled and Non-scheduled BanksScheduled BanksNon-Schedule BanksBanks in India can also be categorized as:1. Public Sector Banks2. Private Sector Banks3. Foreign Banks4. Regional Rural Banks (RRBs)
RBI: The Regulator The Reserve Bank of India was created with the central task of maintaining monetary stability in India. The Government on December 20, 1934 issued a notification and on January 14, 1935, the RBI came into existence, though it was formally inaugurated only on April 1, 1935. Main functions of RBI are Regulate the issue of banknotes2. Maintain reserves with a view to securing monetary stability and3. To operate the credit and currency system of the country to its advantage
Regulatory Framework in India REGULATOR ROLE RESERVE BANK OF INDIA (RBI) Banker to every Bank AMFI Regulates Mutual Fund Transactions INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY(IRDA) Regulates Insurance Transactions FEMA Regulates Foreign Exchange Transactions Regulates through Banking Practices WORLD BANK implementation worldwide to strengthen the International Banking Regulates through setting of norms for BASEL NORMS Risk Management in advances.SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) Regulates the Stock Market transactions Regulates Forward trading and treasury FORWARD MARKETS COMMISSION (INDIA) (FMC) transactions
Banking Functions and UnitsBanking Functions Target Audience Porducts Saving A/c,Salary A/c,FDR,RD,Fund Transfers Retail Banking Average Individual etc. Non fund based advances,LC,BG,PackingCommercial Banking SMLE Credit,Derivatives Current Account,Overdraft Facilities,Cash Credit Business Banking SME Loans Agriculturist and allied small Farm Equipment and Machinery Loans,Kisan Priority Banking traders Credit Card and Loans for Crop Aggregators No Frill Accounts for Poor, Loans and Advances Low Income segment, BPL, through Micro Finance companies and Landless Laborers and distribution machinery for Government Schemes Inclusive Banking Government Institutions E.g. SGSSY,SRY etc.Corporate Banking Large Enterprises Loan Sydication,Advances etcFinancial Institution Other Banking Institutions,Co- Banking op,Urban and RRBs Treasury Services, Call Money and FDRs
World Banking Scenario: Focus AreasReturning Shareholders valueFoster Financial InclusionContribute to GDP growthEffectively manager intermediation costEffectively allocate capital and maintain stability
Best Banks in the World Rank Assets CapitalCurrent Previous Bank US$m US$m 1 1 Deutsche Bank AG , Frankfurt am Main , Germany 2,804,332 3,084.10 2 2 BNP Paribas SA , Paris , France 2,546,693 33,274.59 Industrial & Commercial Bank of China Limited , Beijing , 3 3 China 2,458,597 55,454.17 4 4 Barclays Bank PLC , London , UK 2,426,889 22,499.22 5 5 JAPAN POST BANK Co Ltd , Tokyo , Japan 2,320,244 41,980.52 6 6 Crédit Agricole SA , Montrouge , France 2,233,521 9,711.03 7 7 The Royal Bank of Scotland plc , Edinburgh , UK 2,224,124 10,259.24 8 8 China Construction Bank Corporation , Beijing , China 1,951,046 39,715.81 9 9 Bank of China Limited , Beijing , China 1,879,280 44,344.24 10 10 Agricultural Bank of China Limited , Beijing , China 1,855,056 51,595.55 11 11 The Bank of Tokyo-Mitsubishi UFJ Ltd , Tokyo , Japan 1,840,587 20,533.97 JPMorgan Chase Bank National Association , New York 12 12 , USA 1,811,678 1,785.00 13 13 Banco Santander SA , Boadilla del Monte , Spain 1,621,778 5,772.97 14 14 Sumitomo Mitsui Banking Corporation , Tokyo , Japan 1,591,849 21,242.10 15 15 Lloyds TSB Bank plc , London , UK 1,534,253 2,443.34 16 16 Société Générale , Paris La Défense , France 1,530,870 1,256.97 17 17 UBS AG , Zürich , Switzerland 1,511,838 408.01 18 19 BPCE , Paris , France 1,475,178 20,750.29 19 18 Bank of America NA , Charlotte , USA 1,451,969 3,020.04 20 20 Citibank NA , New York , USA 1,288,592 751 21 21 HSBC Bank plc , London , UK 1,285,269 1,237.19 22 22 ING Bank NV , Amsterdam , Netherlands 1,245,516 680.32 Banking Institutions with Foot Prints in India are marked Bold
Indian Banking Wish List Indian Banking has a big potential while quoting "Top Ten Indian Banks are way behind the Biggest asset Bank in China" At a time when bankers across the world are being termed as London Whale, hedge-fund sharks and various other deadly creatures, Indian financial system remains intact despite its "boring banking" tag.