SAVINGS ACCOUNT : you need to be introduced by someone. Bank gives around 3 to 4 % p.a. CURRENT ACCOUNT: It is basically used for business purpose by businessman. They can withdraw any amount. Bank provides around 1% interest. FIXED DEPOSITS: To keep fixed amount deposit in bank at higher rates of interest comparing to other accounts. Can take a loan if required against loan or have the facilities of premature loans. RECURRING ACCOUNT: To start with certain amount and adding on a same amount every month according to customer’s capacity. Customer can’t reduce the amount at any point of time.
Meaning of BankingBank is an institution which acts as themediator between those people who havesurplus money and those who are in need ofmoney.The process of banking includes bothLending and Borrowing. The medium ofadvertisement conveys to the customer therequirement of the bank.
COMMERCIAL BANKINGFunctions of Commercial banks:ACCEPTANCE OF DEPOSITS TYPES OF DEPOSITS SAVINGS ACCOUNT FIXED DEPOSITS CURRENT RECURRING ACCOUNT ACCOUNTADVANCING OF THE LOANS. ISSUING OF TRAVELLERS CHEQUES. PROVIDIING ATM & CREDIT CARDS FACILITY ETC. SAFE DEPOSIT VAULTS. COLLECTING VARIOUS BILLS. OPENING OF DEMAT ACCOUNT. HOME BANKING. CREDIT CREATION.
CENTRAL BANKINGCentral bank is an apex bank which has overall control of banking system inthe economy. Every country must have one bank as a central bank.In India RBI is Central Bank.Functions of Central Banks. Monopoly of note issue. Banker of the bank. Banker Agent & Advisor to the government. Lander of the last resort. Custodian of foreign Exchange. Central clearing house. Publication of statistical information. Control of credit.
Monetar y PolicyIntroduction:Monetary policy is one of those macroeconomicconcepts which is more frequently talked but notprecisely defined. There is no fixed objectives ofmonetary policy. They have been changing over theyearsDefinitions:1.According to H.G.Johnson,” monetary policy is apolicy employed by the central bank to control thesupply of money as an instrument for achieving theobjectives of general economic policy”
2.According to Paul Einzig, ”Monetary policy refers to the deliberate and conscious credit control measures adopted by central bank of a country designed to ensure a more efficient operation of the monetary system”Objectives of Monetary policy:1.Stability of external value of currency: During the Gold standard time a currency was convertible into gold according to pre- determined rate to maintain the external value of the currency (expanding credit during inflow of gold and contracting credit during outflow of gold)
2.Stable price level: Next objective is to ensure a stable price level internally irrespective of the impact of the external value of the currency3.Maintenance of full employment: World wide Depression produced mass unemployment. Keynes suggested the Govt to carry out this policy to arrest the unemployment situation. It is commonly called as economic stability4.Rapid economic growth: During the middle of 1950s rapid economic growth has been added to the objectives in US,UK,Japan and Russia to recover the economy from IInd WW.
5.BOPs equilibrium: During 1960s it has been added by most of the affected countries6.Maintenance of stable interest rate: A reduction in interest rates would force banks to lower their lending rates (Repo rate) and borrowing rates (Reverse Repo rates). Due to financial sector reforms, RBI has moved towards a market oriented interest rate scenario7.To control inflation: Controlled expansion of money supply with the public and the banking system would contain the inflationary pressures in the economy
Instruments of Monetary policyQuantitative Qualitative MethodsMethods 1.Fixation of Margin1.Bank Rate Policy Requirements2.Open Market 2. Consumers CreditOperations 3.Control through Directives3.Cash ReserveRatio 4. Moral Suasion 5.Rationing of Credit 6.Direct Action
Positive Aspects:1.Control of inflation2.Economic growth3.Healthy competition4.Increase in bank deposits5.Capital formation
Negative Aspects:1.Huge budgetary deficit2.Lack of bankinginfrastructure3.Management problems ofbanks & FIs4.Problem of black money5.Existence of unorganizedmoney market6.Changing Govt policies