The document provides information about banking, functions of commercial banks, types of banks, role of banks in economic development, central banking and the Reserve Bank of India, credit control methods, black money, demonetization, and their impacts. It defines banking and commercial banks, lists their primary functions like accepting deposits and lending funds. It also discusses central banking, defining the RBI and its functions like note issue, banker's bank, and credit control. It explains quantitative and qualitative credit control methods. It defines black money, its causes in India, and measures to fight it like demonetization in 2016.

1. N.DHINAKARAN
ASSISTANT PROFESSOR OF ECONOMICS
VIVEKANANDA COLLEGE
TIRUVEDAKAM WEST
MADURAI
Course Title : Money and Banking
Course Code: 01CT31

2. UNIT- IV:
Banking: Meaning – Types- Functions of
Commercial Banks - Commercial Bank and
Economic Development - Credit Creation – Black
Money and Demonetization and Its impact. Central
Bank: Functions - Methods of Credit Control -
Quantitative and Qualitative Methods

3. BANK
• Meaning:
• A bank is a business organisation which deals in money, i.e., borrowing
and lending of money. In this borrowing and lending of money it makes
profit.
• Definition:
• According to Banking Regulation Act 1949 “ Banking means the accepting
for the purpose of lending or investments of deposits of money from the
public, repayable on the demand or otherwise and withdraw by cheque,
draft, order to otherwise”.

4. FUNCTIONS OF COMMERCIAL BANKS
• 1.Primary Functions
• 2.Secondary Functions
• 1.Primary Functions
• 1. Acceptance of Deposits from Public
• 2. Lending of Funds
• 3. Use of Cheque system
• 2.Secondary Functions
• 1. Agency Functions
• 2.General Utility Functions

5. Primary Functions
1. Acceptance of Deposits from Public
• A. Current Account Deposit or Demand Deposits
• B.Savings Accounts
• C. Fixed Deposits or Time Deposits
• D. Recurring Deposits Accounts
2. Lending of Funds
• I. Over Draft
• II. Cash – Credit Loan
• III. Discounting Bills of Exchange or Hundies
• IV. Money at Call
• V. Short – term Loans
• VI. Transfer of Money
• VII. Consumer Credit

6. • 3. Use of Cheque System
• I. Bearer Cheque
• II. The Crossed Cheque
• Secondary Functions
• A. Agency Functions
• 1. Collection of Payment of various items
• 2.Purchase and sale of securities
• 3.Income Tax consultant
• 4. Payment of Premia
• 5. Transfer of funds

7. • General Utility Service
• 1. Locker Facilities
• 2. Traveller Cheque and Letter of Credit
• 3. Business information and Statistics
• 4. Purchase and sale of Foreign Exchange

8. Types of Banks
Commercial Banks
Exchange Banks
Industrial Banks
Agricultural Banks
Cooperative Banks
Savings Banks
Central Bank

9. Role of Commercial Bank in Promoting Economic Development
Mobilizing
 Financing Industry
Financing Trade
Financing Agriculture
Financing consumer activities
Financing Employment Generating Activities
Help in Monetary Policy

10. Central Bank or Reserve Bank of India
• Introduction
• The Central Bank is a Apex institution
• The Central Bank also known as the Reserve Bank of India
• The RBI set up in 1935 and nationalised in 1949.
• The Central Bank run for promote financial and economic stability.
• The RBI run for welfare of the country not for profit making banks like
ordinary banking.

11. DEFINITION
• According to Dr. Naseem A. Azad the Central bank is the bank which
control the whole economy of the nation and has a monopoly of note
issue and rate over all the banks of country.

12. Functions of Central Bank
• 1. It act as a note issuing Agency
• 2. It act as the banker to state
• 3.It acts as the Banker’s bank
i) Custodian of Cash Reserves of Commercial
Banks
• ii)Lender of the Last Resort
• iii) Clearing Agent
• 4.In controls Credit
• 5.It Manages Exchange Rate
• 6. Promote Economic Development

13. Methods of Credit Control
Quantitative
Qualitative
1. Bank Rate
2. Repo Rate
3. Reverse Repo Rate
4. Cash Reserve Ratio
5. Statutory Liquidity Ratio
6. Open Market Operation
1.Margin Requirement
2. Rationing of Credit
3.Moral Suasion

14. What is 'Black Money?'
• Black money is money earned through any illegal activity controlled
by country regulations. Black money proceeds are usually received in
cash from underground economic activity and, as such, are not taxed.
Recipients of black money must hide it, spend it only in the
underground economy or attempt to give it the appearance of
legitimacy through money laundering.

15. Causes of Black Money in India
Prohibition causes black money
Public Expenditure
Political Funding encourages black money
Inflation leads to black money
Deficiencies of the Tax System pays way for black money
Quotas, Controls and Licences generates black money
Generation of Black Income in the Public Sector
Inadequacy of Powers creates black money
Ineffective Enforcement of Tax Laws gives way for black money
 Lack of Publicity leads to black money
 Deteriorated Public Morality causes black money
 Demonstration Effect causes black money

16. Fight against domestic black money
Income Disclosure Scheme 2016
PAN has been Mandatory for high value transactions
Amendment to Benami Property Prohibition Act 2016
Demonetisation of Rs 500 and Rs 1000 notes:
Promotion of cashless transaction
Operation Clean Money
Tax Administration measures
Constitution of the Special Investigation Team on Black Money
 The Central Economic Intelligence Bureau and Financial Intelligence
Unit
Government imposed penalty on real estate cash transactions above Rs
20000

17. Meaning of Demonetisation
•The act to cease a currency unit or put an
official stop on its status as a legal tender
is known as demonetisation (alternate
spelling: demonetization).

18. Advantages of Demonetisation
Eradicate the use of fake currency.
Tackle with corruption due to currency upholds.
Withdrawal of old currency and bring unaccounted money back into the
banking system by a considerable increase in bank deposits. With this the idle
money becomes productive.
Encourage digital payment modes to reach the target of a cashless society.
Reduction of illegal activities.
Reduced tax avoidance by encouraging higher tax payments.

19. Disadvantages of Demonetisation
Inconvenience to the public.
Huge economic cost to the nation.
Disruption of business activities.
Decrease in sales, particularly cash based sales.
Labour / Wage payment issues.
Additional printing and distribution cost of new currency.
Problem situation for small-scale business operations that deal in cash.