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Bank
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- 2. Meaning of Bank •An old joke attributed to Bob Hope says “a bank is a financial institution where you can borrow money only if you can prove you don’t need it.” • Banks are the principal source of credit (loanable funds) for millions of individuals and families and for many units of government and businesses 2
- 3. Meaning of Bank •A bank can be defined in terms of (1) the economic function it serves, (2) the service it offers its customers, or (3) the legal basis for its existence. (1) Converting deposits into loans (2) Various services offered (3) Definition given by legal authority 3
- 4. Meaning of Bank •Prof. Kinley “ A bank is an establishment which makes to individuals such advances of money as may be required and safely made, and to which individuals entrust money when not required by them for use.” 4
- 5. Types of Banks •Commercial banks Sell deposits and make loans to businesses and individuals • Money center banks Large commercial banks based in leading financial centers • Community banks Small, locally focused commercial and savings banks • Savings banks Attracts savings deposits and make loans to business and individuals 5
- 6. Types of Banks •Cooperative banks Help farmers, ranchers and consumers acquire goods and services • Mortgage banks Provide mortgage loans on new homes but do not sell deposits • Investment banks Underwrite issue of new securities from customers • Merchant banks Supply debt and equity capital to business 6
- 7. Types of Banks •Industrial banks State chartered loan companies owned by financial or non-financial corporations • International banks Commercial banks operations in more than one nation • Wholesale banks Large banks serving corporations and Government • Retail banks Small banks serving primary households and small businesses 7
- 8. Types of Banks •Limited purpose banks Offer narrow menu of services such as credit card companies • Bankers’ banks Supply services (for eg: cheque clearing) to banks • Minority banks Focus on customers belonging to minority groups • National banks Function under a federal charter 8
- 9. Types of Banks •State banks Function under a state charter • Insured banks Maintain deposits backed by FDIC • Member banks Part of Federal Reserve System • Affiliated banks Wholly or partly owned by holding company 9
- 10. Types of Banks •Virtual banks Offer services only via Internet • Fringe banks Offer payday, cash checks or pawn shops (eg: branchless banking) • Universal banks Offer all financial services available in today’s marketplace 10
- 11. Leading Competitors withBanks • Savings associations Sell saving deposits and grant home mortgage loans and household credit to individuals and families • Credit unions Collect deposits and make loans to members as non- profit associations sharing a common bond • Money market funds Collect short term liquid funds and invest in securities of short durations • Mutual funds Sell shares to public against investment in stocks, bonds and other securities 11
- 12. Leading Competitors withBanks • Hedge funds Sell shares to upscale investors • Security brokers and dealers Buy and sell securities on behalf of customers • Investment banks Provide professional advice Raise funds in financial marketplace Make business acquisitions Trade securities 12
- 13. Leading Competitors withBanks • Finance companies Offer loans by borrowing funds in the open market • Financial holding companies (FHCs) Credit card companies, insurance and finance companies, security broker/dealers operating under one umbrella • Life and property/casualty insurance companies Insurance companies 13
- 14. Services Offered byBanks (For Centuries) • Carrying out currency exchanges • Discounting commercial notes (making loans by selling account receivables) and making business loans • Offering savings deposits • Safekeeping of valuables and certification of value • Supporting government activities with credit 14
- 15. Services Offered byBanks (For Centuries) • Offering checking accounts (demand deposits) • Offering trust services Managing financial affairs and property of individuals and firms (For eg: Trustees for wills, Managing Deceased person estate against claims, Safekeeping of valuable assets, Pension plans for business, etc) 15
- 16. Services Offered byBanks (in the past century) • Granting consumer loans • Financial advising • Managing cash • Offering equipment leasing • Making venture capital loans • Selling insurance policies • Selling and managing retirement plans 16
- 17. Services Offered byBanks (in the past century) • Dealing in securities: offering security brokerage and investment banking services • Offering mutual funds, annuities and other investment products • Offering merchant banking services • Offering risk management and hedging services 17
- 18. Trends affecting allFIs • Service proliferation • Rising competition • Government deregulation • An increasingly interest sensitive mix of funds • Technological change and automation • Consolidation and geographic expansion • Convergence and globalization 18
- 19. Trends affecting NepaleseBanks • Mergers • Liquidity scenario • E-banking (Branchless banking, Mobile banking, Internet banking) • Investment in productive sectors like hydropower and tourism 19
- 20. • Checking thesampling process • Preparation of questionnaire • Pilot survey • Fix procedures • Use of competent manpower • Provide information • Provide training • Use of experts • Checking data processing and analysis