Financial Services


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Financial Services

  1. 1. Financial Services <ul><li>Types of banks in India – their services Acceptance of deposits </li></ul><ul><li>Banks’ obligations to various stake holders </li></ul><ul><li>Bank lending activities – fund based and non fund based lending </li></ul><ul><li>Fee based services of banks </li></ul>
  2. 2. <ul><li>Types of banks in India: </li></ul><ul><li>Body corporate constituted special statutes </li></ul><ul><li>Company registered under Companies act, 1956 </li></ul><ul><li>Cooperative societies registered under Cooperative societies Act </li></ul><ul><li>Public Sector Banks: </li></ul><ul><li>All nationalised banks </li></ul><ul><li>State Bank of India </li></ul><ul><li>Regional Rural Banks </li></ul>
  3. 3. <ul><li>88 scheduled commercial banks in India </li></ul><ul><li>29 private sector banks </li></ul><ul><li>31 foreign banks </li></ul><ul><li>No of bank branches – 53000 </li></ul><ul><li>No of ATMs 17000 </li></ul><ul><li>Public sector banks : banking companies( acquisition and transfer of undertakings act 1970 and 1980) </li></ul><ul><li>Regional rural banks act, 1974 </li></ul><ul><li>Banking companies : A banking company is a company which transacts the business of banking ( section 5(e) of the banking regulation act 1949). Such company may be a company under 3 of Companies act or a foreign bank within the meaning of section 591 of companies act </li></ul>
  4. 4. e <ul><li>Cooperative banks : is a cooperative society regd either under the central Act, multi-Units cooperative societies act or under a State act governing co operative societies </li></ul><ul><li>governed by: a) the banking laws( application to cooperative societies) act </li></ul><ul><li>b) provisions of Bkg Reg act 1949 </li></ul><ul><li>c) provisions of RBI act 1934 </li></ul><ul><li>Reserve Bank of India act, 1934 : </li></ul><ul><li>1) to regulate issue of bank notes </li></ul><ul><li>2) for keeping and managing the reserves for securing monetary stability </li></ul><ul><li>3) to operate the currency and credit ststem in the country </li></ul>
  5. 5. <ul><li>RBI act deals with the following: </li></ul><ul><li>Incorporation, capital management and business of banks </li></ul><ul><li>Issue and management of bank notes </li></ul><ul><li>Managing foreign exchange business of banks </li></ul><ul><li>Collection and furnishing of credit information </li></ul><ul><li>Financial supervision of banks </li></ul><ul><li>Regulating acceptance of deposits by NBFCs </li></ul><ul><li>Audit and supervision of banks in India </li></ul><ul><li>Powers of RBI: </li></ul><ul><li>Power to licence </li></ul><ul><li>Appointment and removal of banking boards and personnel </li></ul><ul><li>Power to regulate the business of banks </li></ul><ul><li>Power to give directions </li></ul>
  6. 6. <ul><li>Power to inspect and supervise the banks </li></ul><ul><li>Powers regarding moratorium, amalgamation and winding up </li></ul><ul><li>Power to impose penalties </li></ul><ul><li>Services rendered by banks in India: </li></ul><ul><li>Section 6 of banking Regulation Act 1949 lays down the types of business banking companies may undertake </li></ul><ul><li>Acceptance of deposits </li></ul><ul><li>Granting of loans and advances </li></ul><ul><li>Discounting of bills and promissory notes </li></ul><ul><li>In addition to these banks engage themselves in a variety of activities under two groups </li></ul><ul><li>Agency services </li></ul><ul><li>Miscellaneous or general utility services </li></ul>
  7. 7. <ul><li>Agency services: </li></ul><ul><li>Buying and selling stock exchange securities on behalf of customers </li></ul><ul><li>Executing standing instructions </li></ul><ul><li>Collection of interest and dividends on stocks and shares ( on securities left with banks for that purpose) </li></ul><ul><li>Collection of rents or other dues on behalf of customers </li></ul><ul><li>Collection of cheques, drafts and bills </li></ul><ul><li>Offering remittance facilities </li></ul><ul><li>Acting as trustees, executors and attorneys </li></ul>
  8. 8. <ul><li>General utility services: </li></ul><ul><li>Providing specialised services to customers </li></ul><ul><li>Renting out lockers, accepting securities, deeds and other valuables for safe custody </li></ul><ul><li>Underwriting loans floated by Governments, quasi Government bodies, public bodies </li></ul><ul><li>Dealing in foreign exchange </li></ul><ul><li>Serving as referees as to the financial standing , business reputation an respectability of their customers </li></ul><ul><li>Issuing letters of credit, travellers cheques </li></ul><ul><li>Note exchange and refund as per Note refund rules of RBI </li></ul><ul><li>Collection of various bills and utilities such as telephone bills, electricity bills, water bills and so on </li></ul><ul><li>Merchant banking services </li></ul>
  9. 9. <ul><li>Trustees: </li></ul><ul><li>A trustee is a person in whose care the control of an estate generally by a deceased person under a will or trust deed is placed </li></ul><ul><li>Trustees have no individual powers. They cannot delegate their authority to any other person even to one of their own co-trustees </li></ul><ul><li>Executors: </li></ul><ul><li>Executor is one to whom execution of a trust is entrusted by a testator </li></ul><ul><li>Banks have to take extreme care in the matter of opening accounts in the name of executors and administrators. Accounts can be opened in the personal names of the executors/administrators with the addition of the words’ executors/administrators to the estate of …….’’ </li></ul>
  10. 10. <ul><li>Bank’s obligations to various stake holders: </li></ul><ul><li>Debtor – creditor relationship: relative rights and obligations </li></ul><ul><li>Trustee-beneficiary relationship: Banks when called upon to act as trustees have to act as such( when a customer asks a bank debit or credit his account for a particular purpose , and the bankers takes upon himself that role, he is said to act as a trustee </li></ul><ul><li>Section 31 of Negotiable instruments act, 1881 banks are under obligation to honour the customer’s cheques subject to certain conditions </li></ul><ul><li>Section 10 of NI act casts responsibility on the part of banks to make payment in due course( what is payment in due course?) </li></ul>
  11. 11. <ul><li>Section 131 of NI act gives protection to collecting banker only if collection is made in good faith and without negligence </li></ul><ul><li>Bankers should refrain from making payment with material alterations </li></ul><ul><li>Banks duty while returning the customers’ cheques( section 138 to 142) </li></ul><ul><li>- payee to give notice within 30 days of receiving information of dishonour on account of insufficiency of funds </li></ul><ul><li>- drawer of the cheque can make payment within 15 days of the receipt of notice </li></ul><ul><li>- the complaint is to be made within one month of the cause of action arising </li></ul>
  12. 12. <ul><li>Duty to maintain secrecy about the customer account status </li></ul><ul><li>Issuance of duplicate demand drafts, deposit receipts </li></ul><ul><li>Duty of furnishing credit information to fellow bankers </li></ul><ul><li>Duty of returning the securities upon settlement of loans as a bailee </li></ul><ul><li>Agent-principal relationship </li></ul><ul><li>KYC : obligation to verify the veracity of customer information and whereabouts </li></ul><ul><li>Who are the stakeholders: </li></ul><ul><li>Depositors Borrowers General public Fellow bankers </li></ul><ul><li>shareholders RBI FIs Intermediaries Govts Various superintending agencies such as NHB, IDBI, NABARD, EXIM Bank </li></ul>
  13. 13. <ul><li>Loans and advances by banks: </li></ul><ul><li>Demand loans </li></ul><ul><li>Term loans </li></ul><ul><li>Overdraft/cash credit </li></ul><ul><li>Bill finance </li></ul><ul><li>Supply bills </li></ul><ul><li>Packing credit </li></ul><ul><li>Bank Guarantee </li></ul><ul><li>Letter of credit </li></ul><ul><li>Types of borrowers: </li></ul><ul><li>Individuals </li></ul><ul><li>Sole proprietorship </li></ul><ul><li>Partnership firm </li></ul><ul><li>Corporates </li></ul>
  14. 14. <ul><li>What are the general precautions banks need to take while granting loans and advances? </li></ul><ul><li>Is it within my goals and my objectives ? </li></ul><ul><li>Is it helpful to the borrowers? </li></ul><ul><li>Is it beneficial to the society ? </li></ul><ul><li>Is it in terms of RBI guidelines? </li></ul><ul><li>Is it in tune with my credit policy? </li></ul><ul><li>Is it in terms of Government guidelines? </li></ul><ul><li>Is it market oriented? </li></ul><ul><li>Is it liquid enough? </li></ul><ul><li>Is it profitable to me? </li></ul><ul><li>Is it well secured ? </li></ul><ul><li>Is the Management capable of handling the project/purpose </li></ul>
  15. 15. <ul><li>Is the project technically feasible? </li></ul><ul><li>Is it financially viable? </li></ul><ul><li>Is the associated Risk manageable? </li></ul><ul><li>Steps banks need to take: </li></ul><ul><li>Pre sanction appraisal </li></ul><ul><li>Documentation </li></ul><ul><li>Post sanction follow up </li></ul><ul><li>Recovery measures – legal and non legal </li></ul><ul><li>Fund based and non fund based limits: </li></ul><ul><li>Term loans </li></ul><ul><li>Over draft </li></ul><ul><li>Bills discounting </li></ul>
  16. 16. <ul><li>Non fund based : </li></ul><ul><li>Bank guarantee </li></ul><ul><li>Letter of credit </li></ul><ul><li>List the fee based services offered by banks: </li></ul><ul><li>Credit card business </li></ul><ul><li>Merchant banking activities </li></ul><ul><li>FX services </li></ul><ul><li>Treasury management services </li></ul><ul><li>Insurance business </li></ul><ul><li>Investment banking services </li></ul><ul><li>Project counselling </li></ul><ul><li>Technology tie ups </li></ul><ul><li>Subsidiary services </li></ul><ul><li>Rehabilitation of sick units </li></ul><ul><li>Mergers and amalgamations </li></ul><ul><li>Cash management services </li></ul><ul><li>And many more --- find out them. </li></ul>