The document discusses banking, defining it as a licensed financial institution that accepts deposits, lends money, and conducts financial transactions. It categorizes banks into scheduled banks, commercial banks, cooperative banks, and foreign banks, detailing their functions and differences. Additionally, it describes the primary, secondary, and ancillary functions of banks, including deposit acceptance, loan advancement, and various financial services.

1. WELCOME
Panchal Dhrumil Indravadan
Subject: Engineering Economics and Management
Branch: Computer Engineering (B.E.)
Semester: 3rd Sem
Year: 2018-19

2. Topic
Banking

3. Contain
• Meaning
• Types of bank
• Functions of Bank

4. Bank

5. Banking
• Bank: A bank is a licensed and regulated financial
institution that lends money, accepts deposits and
carries out other financial transactions for its
clients.
• E.g. Axis, HDFC, Union, SBI, BOB etc…
• Banking: Financial activities done by bank is called
Banking. The development of banking as a financial
institution is important development of the
monetary system.

6. Banking
• As per Banking Regulation Act, 1949, banking is
defined as
“Banking relates to the acceptance of deposits from
the public for the purpose of lending and
investments, repayable on demand or otherwise
and withdrawal by cheque, draft, and order or
otherwise.”

7. Types of Bank

8. Scheduled Banks
• A scheduled bank, in India, refers to a bank which is
listed in the 2nd Schedule of the Reserve Bank of
India Act, 1934.
• Schedules banks can be further classified into two
parts:
1. Commercial Banks
2. Cooperative Banks
• The major difference between these two is their
holding pattern.

9. Commercial Bank
• Commercial banks can be further classified into
four parts:
1. Public Sector Banks
2. Private Sector Banks
3. Regional Rural Banks
4. Foreign Banks

10. Public Sector Banks
• Public sector banks are owned and operated by the
Government.
• Government owns majority of the equity share
capital (at least 51% or more) and their shares are
listed at the recognized stock exchanges of India.
• Main objects of public sector banks are planned
economic development and server to the people
rather than earn profits.

11. Cont…
• Currently 27 public sector banks are working in
India out of which 21 are nationalized banks and 6
are State Bank of India and its associate banks.
• E.g. SBI, BOB, PNB, Canara Bank, CBI, Indian Bank,
etc.
• Dena Bank: Devkaran Nanjee

12. Private Sector Banks
• Private sector banks are owned and operated by
private institutes.
• They are free to operate as per market forces but
they have to follow all rules & regulations of
banking specified by RBI.
• A greater share is held by private players and not
the government.
• Currently 30 private sectors banks are working in
India.
• E.g. Axis Bank, Kotak Mahindra Bank etc.

13. Cont…
• ICICI Bank: Industrial Credit and Investment
Corporation of India Bank
• HDFC Bank: Housing Development Finance
Corporation Bank

14. Regional Rural Banks
• Regional rural banks were brought into operation with
the objective of providing credit to the rural and
agricultural regions and were brought into effect in
1975 by RRB Act.
• These banks are restricted to operate only in the areas
specified by government of India.
• These banks are owned by State Government and a
sponsor bank.
• This sponsorship was to be done by a nationalized bank
and a State Cooperative bank.
• E.g. Saurashtra Gramin Bank, Baroda Gujarat Gramin
Bank, Dena Gujarat Gramin Bank etc.

15. Foreign Banks
• The foreign banks are registered or incorporated in
their home country not in India.
• They have several branches in India.
• Currently 40 foreign banks are working in India.
• E.g. City Bank – New York (US)
• Standard Chartered Bank – London (UK)
• HSBC: HongKong and Shanghai Banking Corporation
Bank – Hong Kong (China)

16. Scheduled Co-operative Banks
• Co-operative banks are controlled, owned, managed
and operated by cooperative societies and came into
existence under the Cooperative Societies Act in 1912.
• These banks are located in the urban as well in the rural
areas.
• Although these banks have the same functions as the
commercial banks, they provide finance to farmers,
salaried people, small scale industries, etc. and their
rates of interest of interest are lower as compared to
other banks.

17. Cont…
• Currently 52 Urban & 16 State cooperative banks
are working in India.
• E.g. The Kalupur Commercial Cooperative Bank Ltd.,
Rajkot Nagrik Sahkari Bank Ltd., etc.

18. Functions of Banking
• There are mainly three types of function:
1. Primary Functions (Banking Functions)
2. Secondary Functions
3. Ancillary Functions

19. Primary Functions
• They are the main functions of a bank.
a) Acceptance of Deposits
b) Advances of Loans
c) Bill Discounting
d) Factoring and Forfaiting

20. Acceptance of Deposits
• The bank collects deposits from the public. These
deposits can be of different types:
i. Saving Account
ii. Current Account
iii. Fixed Deposit Account

21. Saving Account
• Savings account is an interest yielding account for
an individual or family members.
• Deposits in savings account are used for saving
money and sake of safety.
• This facility is given to small saver and normally for
a short period of time.
• The rate of interest is low, at present around 4%.
Savings account holder can access facilities like
Cheque Book, ATM Card, Internet Banking, etc.
• Company or firm cannot open saving account.

22. • Current account is operated by businessmen for a
company firm business house.
• Many more facilities are offered in current account
compared to saving account but no interest is paid.
• The account holders can get the benefit of overdraft
facility.
• An individual cannot open current account.
• Service charges are higher compared to saving
account.
Current Account

23. Fixed Deposit Account
• Lump sum amount is deposited at one time for a
specific period.
• Higher rate of interest is paid, which varies with the
period and amount of deposit.
• Withdrawals are not allowed before the expiry of
the period. Those who have surplus funds for long
term go for fixed deposits.

24. Advances of Loans
• The bank advances loans to the business
community and other members of the public.
• The rate charged is higher than what it pays on
deposits. The difference in the interest rates
(lending rate and the deposit rate) is its profit.
1. Loans
2. Cash Credits
3. Overdraft

25. Loans
• It is normally for short term say a period of one
year or medium term say a period of five years.
• Now a days, banks do lend money for long term.
Repayment of money can be in the form of
installments spread over a period of time or in a
lump sum amount.
• The rate of interest may be slightly lower than what
is charged on overdrafts and cash credits.
• Loans are normally secured against tangible assets
of the company. E.g. Car Loan, Home Loan, etc.

26. Cash Credits
• Cash credit is a form of working capital credit given
to the business firms.
• Under this arrangement, the customer opens an
account and the sanctioned amount is credited with
that account.
• The customer can operate that account within the
sanctioned limit as and when required.
• It is made against security of goods, personal
security etc.

27. Cont…
• Reserve Bank discourages this type of facility to
business firms as it imposes an uncertainty on
money supply.
• Hence this method of lending is slowly phased out
from banks and replaced by loan accounts.
• Cash credit system is not in use in developed
countries.

28. Overdraft
• This type of advances are given to current account
holders. No separate account is maintained.
• All entries are made in the current account.
• A certain amount is sanctioned as overdraft which
can be withdrawn within a certain period of time
say three months or so.
• Interest is charged on actual amount withdrawn.
• An overdraft facility is granted against a collateral
security.
• It is sanctioned to businessman and firms.

29. Bill Discounting
• The bill discounting is a mode of bank lending in the
form discounting of time bills before maturity at
the prevailing rate of interest.

30. Factoring and Forfaiting
• The factoring is a mode of bank lending to the high
rated clients and companies against their book-
debts before the maturity.
• The forfaiting is the factoring of the book debts
related to foreign dealers of exports and imports.

31. Secondary Functions
1. Collection of Money
2. Payments of Money
3. Internet money transfer and e-banking
4. Merchant banking
5. Dematerialize account service

32. Collection of Money
• As an agent the bank collects cheques, drafts,
promissory notes, interest, dividends etc., on behalf
of its customers and credit the amounts to their
accounts.

33. Payments of Money
• Certain payments payable by the bank clients to
outside parties are directly made by the banks to
the concerned parties under due intimation to
clients.
• Such payments to be made on behalf of clients
include insurance premium, utility bills, fees, rents,
taxes, etc.

34. Internet money transfer and e-banking
• The bank transfers money from one place to
another through electronic media. These facilities
transfer the funds quickly and at negligible costs.

35. Merchant banking
• Merchant Banking is a combination of Banking and
consultancy services.
• It provides consultancy to its clients for financial,
marketing, managerial and legal matters.
• It helps a businessman to start a business.
• It helps to raise finance.
• It helps to expand and modernize the business.

36. Cont…
• It helps in restructuring of a business.
• It helps to revive sick business units.
• It also helps companies to register, buy and sell
shares at the stock exchange.

37. Dematerialize account service
• In the modern developed share market
transactions, the purchase and sale of shares and
securities are made on dematerialized based
(electronic entry).
• The bank provides the demat account services to
those clients who are dealing in shares and other
financial assets.

38. Ancillary Functions
• The ancillary functions of the commercial banks are
financial functions relating to the money and credit
management.
I. Locker (Safe Deposit Vaults)
II. ATM
III. Credit Card & Debit Card
IV. Issue of Letter of Credit
V. Issue of Pay Orders
VI. Portfolio Management
VII. Dealing in Foreign Exchange
VIII.Electronic Money Transfer

39. References
• Inspiration from Prof. Disha Patel Ma’am
• Notes of EEM
• Text book of EEM
• Images from Google images
• Some our own knowledge

40. Thank You