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Project report

  2. 2. DECLARATION I hereby declare that the project titled-A study on “MICROFINANCE” submitted to silicon city college of management andcommerce (Bangalore University) for the award of BACHELORE OFBUSINESS MANAGEMENT course has been prepared under theguidance of Ms.Shailaja Pai Branch manager,Canara Bank Mahilabranch,Bangalore. This report has been submitted in partial fulfillment of therequirement for the award of Bachelor of Business Management toSilicon City College of management and commerce (BangaloreUniversity) and has not been submitted to any other University/Institution for the award of any degree.Place: BANGALORE (DEEPTHI.S)Date: Reg No:10Q8C18004
  3. 3. ACKNOWLEDGEMENT I take this opportunity to express my great sense of gratitudeto my parents and family who have been real source of inspiration andsupport for me. I am greatful to Prof. B.S.Venkatesh, Director of Silicon CityEducational Academy, who has been the back bone in completion ofthis project.I thank him for extending his co-operation. I express my sincere thanks to my internal guide Ms.SEEMASHETTY,who has been the torchbearer and has guided me for thesuccessful completion of this project. I also thank all the other facultymembers for guiding me. I would like to thank Ms.Shailaja Pai, Branch Manager,CanaraBank Mahila Branch of jaynagar 3rd block, for providing me anopportunity to do a project. I also thank Mr.Shivaraj,assistant,Canara Bank Mahila Branch,who inspite of busy schedule helped and guided me for the completionof this project. Lastly I thank all the staffs and employees for providing suchvaluable information which became basis for this project. (Signature)
  4. 4. SL.NO: CHAPTERS PAGE NO: INTRODUCTION: • Micro finance • Meanings • DefinitionsCHAPTER1 • Advantages • Disadvantages • Classifications • Contents • banking RESEARCH METHODOLOGY: • Research Design • Data collection • Primary Data • Secondary DataCHAPTER2 • Tools used for Data Collection • Scope of the study • Objectives of the study • Limitations of the study COMPANY PROFILE:CHARTER3 • Introduction and History • Board of Directors • Achievements & Awards
  5. 5. • Product Development • Mission and vision • Customer Relationship Management • Types of Insurance services • Risk Management DATA ANALYSIS & INTERPRETATION: • IntroductionCHAPTER4 • Types of analysis • Importance of Data Analysis • Tools for Data Analysed • Interpretation Of Data FINDINGS AND DISCUSSIONS: • Findings • SuggestionsCHAPTER5 • Results • Summary • conclusion TERMINALS: • AnnexureCHAPTER6 • Bibliography • Appendix
  7. 7. BRIEF HISTORY OF BANK A bank is a institution, which deals in money. It accepts deposits from the public and creates credit with a view to lend or invest. The word ‘bank’ is derived from the words ‘bancus’ or‘banquet’ that is a bench. The early bankers ,the jews in Italy transactedtheir business on benches in the market places, when a banker failed,his ‘bench’ was broken into pieces by the people which indicated thebankruptcy of the individual banker. but this explanation was turnedout on the ground that the Italian money changes as such were nevercalled bankers in the middle ages . some others say that the word‘banks’ originally derived from the German WORD ‘PACK’ meaning ajoint stock fund, which was italianised into ‘Banco’ when the Germanswere masters of a great part of Italy . According to professor RamaChandra Rao, “what ever be the origin of the word bank, it would tracethe history of banking in Europe from the middle ages”.A bank is a financial institution and a financial intermediatary thataccepts deposits and channels those deposits into lending activities,either directly by loaning or indirectly through capital markets. A bankis a connection between customers that have capital deficits andcustomers with capital surpluses.Due to their influence within a financial system and an economy, banksare generally highly regulated in most countries. Most banks operateunder a system known as fractional reserve banking where they holdonly a small reserve of the funds deposited and lend out the rest forprofit. They are generally subject to minimum capital requirements
  8. 8. which are based on an international set of capital standards, known asthe Basel accords.According to ancient European history, the Babylonians were theearliest people to develop a systematized banking system. It s said thattemples of Babylon were used as banks and as such the temples ofEphesus and Delphi were famous great banking institution. The antireligious feelings which developed afterwards led to the collapse ofpublic confidence in depositing money in temples and the priest ceasedto perform the banking business. Whenever peace and solidarity werethreatened, the spread of banking also was affected entirely. However,after the revival of civilization and with the development of social andeconomic institutions, money transactions also were revived.It was in the 12th century that some banks were established in Veniceand Genoa. These banks were simply receiving deposit and lendingmoney to the people. In fact they were not banks of the modern type.The origin of modern banking may be traced to money dealers inFlorence who received money in the form of deposits and lend it tobusiness people. At this time, Florence was the center of money marketin Europe.In England, money changing became an important function of bankersduring the reign of Edward III. Money changing refers to conversionforeign coins into British money this function was performed by theroyal exchanger on behalf of the Crown.In another development gold smiths of England prepared the groundfor modern banking in England during the period of queen Elizabeth.
  9. 9. the gold smiths used to receive valuables and funds of their customersand issue receipts acknowledging the same. These receipts in course oftime became promissory notes. The seizure of a huge sum of moneykept as safe custody by the city merchants at royal mint by thegovernment resulted in the establishment of public banking in England.As a result of this royal repudiation, the merchants began to entrusttheir cashiers with large sums but later they misappropriated theirmaster’s money for their own benefit. Finding that their employeeshad not treated them better than their king, the city merchants decidedto keep their cash with the goldsmiths.The main players in the bank are:1. Banker2. Customer1.Banker: According to sec5 {c} of the banking regulation act 1949, abanker is a person who undertakes business of banking.” A banker is adealer in debt, his own and other peoples”.2.Customer: As regards the customers, there is no legal definition butbased on various judgements on sec131/131A of NI act of 1881, acustomer means a person who seeks to open account which bankeraccepts with proper introduction. The relationship is not based onfrequency of transactions, and duration.also a person who availsservice like safe custody, remittance, locker facility etc. is notconsidered as a customer.
  10. 10. HISTORY OF BANKING Banking in one form or the other, was in existence even in ancient times. the writings of Manu and kautilya contain references to banking. The history of banking begins with the first prototype banks of merchants of the ancient world, which made grain loans to farmers and traders who carried goods between cities. Their began around 2000BC in Assyria and Babylonia. Later, ancient Greece and during the roman empire, lenders based in temples made loans and added two important innovations: they accepted deposits and changed money. Archaeology from this period in ancient china and India, also shows evidence of money lending activity. Banking in the modern sense of the word can be traced tomedieval and early renaissance Italy. To the rich cities in the north likeFlorence ,venice and Sialkot genoa. The bardi and Peruzzi familiesdominated banking in 14th century Florence, establishing branches inEurope. One of the most famous Italian bank was the medici bank,setup by Giovanni di biccide ‘medici’ in 1397. the development ofbanking spread from northern Italy through Europe and a number ofimportant innovatins took place in amsterdam during the dutchrepublic in 16th century, and in London in the 17th century. In germany,banking dynasties such as welser, fugger and berenberg have played a
  11. 11. central role over centuries. During the 20th century, developments intelecommunications and computing caused major changes to banksoperations and let banks dramatically increase in size and geographicspread. The late-2000’s financial crisis caused many bank failures,including of some of the worlds largest banks, and much debate aboutbank regulation. History of banking depends on the history of money- and ongrain-money and food cattle-money used from atleast 9000 BC, two ofthe earliest things understood as available to barter. Anatolian obsidianas a raw material for stone-age tools being distributed as early as12500BC, with organized trade occurring in the 9th millionnia. InSardinia one of the four main sites sourcing the material deposits ofobsidian with in the Mediterranean, trade of this were replaced in thethird millionnia by trade in copper and silver. The society adapted fromone fixed material as value deposits available for trade to another.However, modern banking is of recent origin. It came into existenceonly after the industrial revolution. The industrial revolution led to thegrowth of industries and commerce. In order to meet the rapid growthof financial requirement of industries and commerce, joint stock bankscame into exitance. So, joint stock banks or modern banks are of recentdevelopment.
  12. 12. NATURE OF BANKING BUSINESS The nature of banking business can be understood from thefollowing: 1. Intermediaries or middlemen: banks act as middlemen between those members of public who have sufficient funds to be deposited in commercial banks for earning interests and those who need funds, and so, are willing to borrow funds from banks on interest for investment in their business activities. 2. Dealers in debt or financial obligations: the varies types of deposits accepted by commercial banks from varies depositors are the debts or financial obligations incurred by the banks, and are their financial obligations or liabilities to the depositors, and the advances granted by them to borrowers are the debts incurred by the borrowers in favour of banks. 3. Creator of money: Banks are not only dealers in money but also creators of money. 4. Service industry:All the services provided by banks fall under service sector industry, they render a variety of services to the depositors as well as the general public. 5. Network of branches:banks are one of the orders form of financial institution and they have wide network of branches through which they provide their services across the world. Thus this is the nature of banking business.
  13. 13. BANKING IN INDIA Banking in India originated in the last decades first bankswere The General Bank of India, which started in 1786, and Bank ofHindustan, which started in 1770; both are now defunct. The oldestbank in existence in India is the State Bank of India, which originated inthe Bank of Calcutta in June 1806, which almost immediately becamethe Bank of Bengal. This was one of the three presidency banks, the other twobeing the Bank of Bombay and the Bank of Madras, all three of whichwere established under charters from the British East India Company.For many years the Presidency banks acted as quasi-central banks, asdid their successors. The three banks merged in 1921 to form theImperial Bank of India, which, upon Indias independence, became theState Bank of India in 1955. Merchants in Calcutta established the Union Bank in 1839,but it failed in 1840 as a consequence of the economic crisis of 1848-49.The Allahabad Bank, established in 1865 and still functioning today, isthe oldest Joint Stock bank in India.(Joint Stock Bank: A company thatissues stock and requires shareholders to be held liable for thecompanys debt) It was not the first though.
  14. 14. That honor belongs to the Bank of Upper India, which wasestablished in 1863, and which survived until 1913, when it failed, withsome of its assets and liabilities being transferred to the Alliance Bankof Simla. Foreign banks too started to app, particularly in Calcutta, inthe 1860s. The Comptoir dEscompte de Paris opened a branch inCalcutta in 1860, and another in Bombay in 1862; branches in Madrasand Pondicherry, then a French colony, followed. HSBC establisheditself in Bengal in 1869. Calcutta was the most active trading port inIndia, mainly due to the trade of the British Empire, and so became abanking center. The first entirely Indian joint stock bank was the OudhCommercial Bank, established in 1881 in Faizabad. It failed in 1958. Thenext was the Punjab National Bank, established in Lahore in 1895,which has survived to the present and is now one of the largest banksin India. Around the turn of the 20th Century, the Indian economy waspassing through a relative period of stability. Around five decades hadelapsed since the Indian Mutiny, and the social, industrial and otherinfrastructure had improved. Indians had established small banks, mostof which served particular ethnic and religious communities. The presidency banks dominated banking in India but therewere also some exchange banks and a number of Indian joint stockbanks. All these banks operated in different segments of the economy.
  15. 15. The exchange banks, mostly owned by Europeans,concentrated on financing foreign trade. Indian joint stock banks weregenerally under capitalized and lacked the experience and maturity tocompete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect ofbanking it seems we are behind the times. We are like some oldfashioned sailing ship, divided by solid wooden bulkheads into separateand cumbersome compartments." The period between 1906 and 1911, saw the establishment ofbanks inspired by the Swadeshi movement. The Swadeshi movementinspired local businessmen and political figures to found banks of andfor the Indian community. A number of banks established then havesurvived to the present such as Bank of India, Corporation Bank, IndianBank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing ofmany private banks in Dakshina Kannada and Udupi district which wereunified earlier and known by the name South Canara ( South Kanara )district. Four nationalised banks started in this district and also aleading private sector bank. Hence undivided Dakshina Kannada districtis known as "Cradle of Indian Banking". During the First World War (1914–1918) through the end of theSecond World War (1939–1945), and two years thereafter until theindependence of India were challenging for Indian banking. The yearsof the First World War were turbulent, and it took its toll with bankssimply collapsing despite the Indian economy gaining indirect boost dueto war-related economic activities.
  16. 16. POST-INDEPENDENCE: The partition of India in 1947 adversely impacted theeconomies of Punjab and West Bengal, paralyzing banking activities formonths. Indias independence marked the end of a regime of theLaissez-faire for the Indian banking. The Government of India initiated measures to play an activerole in the economic life of the nation, and the Industrial PolicyResolution adopted by the government in 1948 envisaged a mixedeconomy. This resulted into greater involvement of the state in differentsegments of the economy including banking and finance. The majorsteps to regulate banking included: The Reserve Bank of India, Indias central banking authority, was established in April 1935, but was nationalized on January 1, 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b). In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India". The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.
  17. 17. ADOPTION OF BANKING TECHNOLOGY The IT revolution had a great impact in the Indian bankingsystem. The use of computers had led to introduction of online bankingin India. The use of the modern innovation and computerisation of thebanking sector of India has increased many fold after the economicliberalisation of 1991 as the countrys banking sector has been exposedto the worlds market.The Indian banks were finding it difficult tocompete with the international banks in terms of the customer servicewithout the use of the information technology and computers. The RBI in 1984 formed Committee on Mechanisation in theBanking Industry (1984)whose chairman was Dr C Rangarajan, DeputyGovernor, Reserve Bank of India. The major recommendations of thiscommittee was introducing MICR Technology in all the banks in themetropolis in India.This provided use of standardized cheque forms andencoders. In 1988, the RBI set up Committee on Computerisation in Banks(1988) headed by Dr. C.R. Rangarajan which emphasized thatsettlement operation must be computerized in the clearing houses ofRBI in Bhubaneshwar, Guwahati, Jaipur, Patna andThiruvananthapuram. It further stated that there should be National Clearing of inter-city cheques at Kolkata,Mumbai,Delhi,Chennai and MICR should bemade Operational.It also focused on computerisation of branches andincreasing connectivity among branches through computers.
  18. 18. It also suggested modalities for implementing on-linebanking.The committee submitted its reports in 1989 andcomputerisation began form 1993 with the settlement between IBAand bank employees association. In 1994, Committee on Technology Issues relating to PaymentsSystem, Cheque Clearing and Securities Settlement in the BankingIndustry (1994) was set up with chairman Shri WS Saraf, ExecutiveDirector, Reserve Bank of India. It emphasized on Electronic Funds Transfer (EFT) system, withthe BANKNET communications network as its carrier. It also said thatMICR clearing should be set up in all branches of all banks with morethan 100 branches. Committee for proposing Legislation On Electronic FundsTransfer Electronic banking refers to DOING BANKING by usingtechnologies like computers, internet and networking,MICR,EFT so as toincrease efficiency, quick service,productivity and transparency in thetransaction.The recent developments in the banking are: 1. Mobile banking. 2. Tele banking. 3. E-banking. 4. Automated teller machine. 5. Electronic fund transfer. 6. Core banking. 7. Anywhere banking.
  19. 19. MEANING AND DEFINITION Bank is one of the service sector. Its main aim is to render servicenot a profit. Bank is an institution that deals with the money. Banks plays a vital role in shaping economic destiny of a nation. Theycollect the scattered savings of the community and make themavailable for the socially desirable and economically beneficialpurposes. They contribute to the growth and stability of economy byproviding finance to industrial and commercial activities.According to prof.kinley defines a Bank as“ An establishment whichmakes to individuals such advances of money as may be required andsafely made and to which individuals entrust money which is notrequired by them for use”.A bank performs two important functions:1.Accepting the deposits.2.lending the deposit to the needy people.According to Dr.H.L.Hart defines a banker as “one who, in the ordinarycourse of his business, honors cheques drawn upon him by personsfrom and for whome he receives money on current accounts”.According to this definition, the essential characteristics of a bank are:i.acceptance or receiving of current account.ii.payment of cheques drawn against those deposits or repayment ofthose deposits.
  20. 20. According to Sir John paget customer is difined as “To constitute acustomer, there must be some recongnisable course or habit of dealingin the nature of regular banking business.According to the Indian banking regulation act of1949 defines the termbanking company as “any company which transacts the business ofbanking in India”.According to the Indian banking regulation act of 1949 defines the termBanking as “Accepting, for the purpose of lending or investment, ofdeposits of money from the public, repayable on demand or otherwise,and withdrawal by cheques, draft, order or otherwise”. As per this act, the term banking includes not only the abovementioned important activities, but also several other activities, such asthe collection of cheques, drafts and bills, remittance of funds,acceptance of safe custody deposits, which are generally referred to assubsidiary services. From the above definitions, it is clear that a bank is aninstitution which deals with the public and lends money to the also performs a number of agency and general utility servicesto the customers and the general public as well.collectig and makingpayments on behalf of the customers, accepting safe custody deposits,underwriting shares and debentures of companies, issuing of letter ofcredit, travellers cheques etc..are some of the agency and generalutility services of a modern bank.
  21. 21. TYPES OF BANKS Banks may be classified into six types based on the functionsthey perform. They are: 1. commercial banks. 2. Industrial banks. 3. Agricultural bank. 4. Exchange banks. 5. Savings bank. 6. Central bank. 1.commercial banks: it is a bank that accepts deposits from the public and provide credit facilities to commerce and industry.since most of the deposits are repayable on demand or after a fixed period, they do not grant long- term loans.they confine themselves to short and medium- term laons. In addition to these primary functions of accepting deposits and lending funds, modern banks perform a number of agency and general utility functions. The real significance of the commercial banks lies in the fact that they are not merely dealers in money as they lend many times larger than the deposits.a large part of the money in circulation is in the form of bank money. This helps the economic activities of a country. 2.Industrial banks: it is also called as investment banks. Industrial banks are banks which provide long-term finance to industries. They are also called investment banks, as they invest their funds in subscribing to shares
  22. 22. and debentures of industrial concerns.industrial banks are notfound in all the countries of the world. In India there are noindustrial banks. Instead, special industrial finance corporationshave been set up for providing long term finance to industries.3.Agricultural banks:Agricultural banks are the banks which provide finance toagriculture. These banks are organized on co-operative basis.theyextend loans to the members at a relatively reasonable rate ofinterest. Agricultural banks in India are of two types a) agriculturalco-operative societies and b) land mortgage or land developmentbanks. Agricultural co-operative societies provide short term loansto the agriculturists for the purchase of fertilizers, pesticides,seeds,payment of wages etc. land development banks provide long termfinance to the farmers for the purchase of agricultural equipments,tractors, construction of wells, making permanent improvement oflands,etc.4.Exchange banks:Exchange banks specialize in financing the foreign trade.they supplythe necessary foreign exchange for the importers and exporters. Inmany countries, commercial banks themselves undertake foreignexchange business.5.savings bank:Savings banks are specialized institutions which induce people tosave something out of their income. They pool the small savings ofpoor and middle income sections of the societies. In India, the
  23. 23. savings banks business is performed by the commercial banks and post offices.7. Central banks: Central bank is a special institution which regulates the entire banking structure and monetary stability. It regulates the note issue. It functions in close co-operation with the government. It maintains internal and external values of currency. In short central bank is a apex bank of the country. The main functions performed by the central banks are: 1.issue of currency notes. 2. central banks act as the banker to the government. it accepts money to the account of state and central government, and makes payments on behalf,carries out their exchange, remittance and other banking operations and manages debts. 3.central bank has been entrusted with the responsibility of maintaining the external value of rupee and for this purpose bank holds gold and forex reserve. 4.controller of credit. 5. central bank act as a banker’s bank. Every commercial bank is required to keep with the central bank as cash balance a certain percentage of their time and demand acts as a leader of last resort to them.the banks can borrow money from the central bank during financial crisis by re-discounting eligible bills and against approved securities.
  24. 24. MANDATORY FUNCTIONS OF BANKSThe two mandatory functions performed by the banks are:1 primary function2 secondary functionPRIMARY FUNCTION1 receiving of deposits2 lending of funds3creation of credit4 remittance of funds1 receiving of deposits:The main type of deposits area)current depositsb)savings bank depositsc)fixed depositsd)recurring deposits2 lending of fundsLending of funds constitutes the main business of commercialbanks. Banks lend funds to the public by the way of :a)loans: a loan is a financial arrangement under which an advance isgranted by a bank to a borrower on a separate account called theloan account. When a loan is granted to the borrower at once in alumpsum either in cash or by the transfer to the credit of hiscurrent account.b)overdrafts: an over draft is a financial arrangement under which acurrent account holder is permitted by the bank to overdraw his
  25. 25. account, to draw more than the amount standing to his credit up to a agreed limit. c)cash credits: a cash credit is a financial arrangement under which a borrower is allowed to advance under a separate account called as cash credit account up to a specified limit called the cash credit limit. In the case of a cash credit, the borrower need not withdraw the whole amount at once in one lumpsum. He can withdraw the amount in installments as and when he needs money. d)discounting of bills of exchange: discounting of bill is an arrangement under which a bank takes a bill of exchange maturing with in a short period of 60days or 90days from an approved customer and pays him or credit his current account immediately the present value of the bill.then, on the due date the bill the bank receives the face value of the bill from the acceptor of the bill. In case the bill is dishonored by the acceptor the bank recovers the amount from the customer who has discounted the bill.3 creation of credit: Credit creation is one of the very important function of bank. Banksare basically manufacturers of money. Creation of credit meansexpansion of bank deposits by giving loans and advances.4 remittance of funds:Banks help their customers in transferring funds from one place toanother by issuing bank draft, mail transfer etc;
  26. 26. Secondary functions1 group one:agency function:They are ;a)purchase and sale of securitiesb)acting as trustees, executor, administrator.c)payment and collection of subscriptions, dividend, salaries, pensionetc;d)acting as attorney2 group two:general functions:They are :a)travelers cheque:these cheques are usually useful for those whotravel frequently. These cheques can be purchased by anyone and thepurchaser is supposed to deposit money to the issuing bank equivalentto the amount of travellers cheque.b)merchant banking:it includes variety of services, which are providedby non banking agencies and professionals. A number of activitiesundertaken by merchant bankers like feasibility studies to identifyprojects, helping in entrepreneurs to get industrial licenses, helpingexpansion and diversification program of companies.c)safe custody of valuabeles:bank provides safe custody to assets likeshares, debentures, bonds, fixed deposits receipts, jewellery etc; bankcharge certain amount as bank charges for providing the facility of safecustody to the customer.
  27. 27. d)teller system under this, the teller is authorize to receive cash andmake payment upto limited amount without reference to the ledgerbalance or the specimen signature.e) gifts cheques:bank also sell gift cheque against payment in cash orby debit to accounts.the gifts cheques are usually issued in fixeddenominations. These cheques are usually given as gift and these canbe drawn even by non account holders.f)credit cards: these cards are basically issued to current and savingsaccount holders, free of charge. The holders of credit cards are able topurchase gooda and services upto a certain amount without makingimmediate payment.g)tax consultancy: banks provide consultancy services to enable the taxpayers to pay tax on time.h)underwriting of securities:banks takes the job of underwriting aportion of the issues of public undertakings.they also underwrite sharesand debentures of joint stock company.I)housing finance:banks advice loans directly to the parties or advancehousing loans indirectly to state housing boards or urban developmentcorporations.j)factoring:it is an agreement between bank institution and businessconcern.k)leasing finance:it is a method of financing equipment is a mechanism where in a person can through a bankacquire an asset for its used by paying a pre-determined amount called“rental” over a period of time.
  28. 28. L)letter of credit:it refers to letter issued by the importer bank in fovourof the exporter authorizing him to supply goods and draw bills upto acertain amount.m)foreign exchange activities:banks perform a following activities withrespect of foreign trade.i)important packing facilities.ii) issue ofsolvency certificate.iii)dissemination of trade information.etc.n)consultancy functions:banks undertake the number of consultancyservices like helping small scale industries in providing informationabout availability of assistance like marketing, technical and financialetc.
  29. 29. NEED AND IMPORTANCE OF BANKS OR BANKING:The need and importance of bank or banking are:1. Mobilisation of savings: banks mobilize the small savings of thepeople and make them available for the socially desirable sectors. Thusthey contribute for the capital formation.2. Financing industry: banks provide finance to the industries.theyprovide short term, long term and medium term loans to industries.3. Finance trade: the commercial banks provide finance both forinternal and external trade. They provide loans to retailers,wholesalers, importers, exporters for meeting their financialrequirements.4. development of capital market: commercial banks underwrite theshares and debentures of public limited companies. They have alsogone in for mutual funds. This has further strengthened the capitalmarket.5. financing agriculture: commercial bank provide finance for theagricultural purpose.they provide loans to trade in agriculturalcommodities.they also provide finance for the small and marginalfarmers.6. financing consumer activities: commercial banks provide finance toconsumers for the purchase of houses, vehicles, consumer durables.thishelps in raising the standard of living of the people.
  31. 31. DEFINITION OF FINANCE: Finance is defined in numerous ways by different groups ofpeople. Though it is difficult to give a perfect definition of Financefollowing selected statements will help you deduce its broad meaning.1. In General sense,"Finance is the management of money and other valuables, which canbe easily converted into cash."2. According to Experts,"Finance is a simple task of providing the necessary funds (money)required by the business of entities like companies, firms, individualsand others on the terms that are most favourable to achieve theireconomic objectives."3. According to Entrepreneurs,"Finance is concerned with cash. It is so, since, every businesstransaction involves cash directly or indirectly."4. According to Academicians,
  32. 32. "Finance is the procurement (to get, obtain) of funds and effective(properly planned) utilisation of funds. It also deals with profits thatadequately compensate for the cost and risks borne by the business."