In this presentation, I have covered the Banking sector. Our protagonist Harsh introduces money, gets an overview of Banking & NBFCs in India, discusses functions of RBI (India's central bank) & it's monetary policy, and analyses major issues concerning the banking sector. Rather than getting into minute technicalities, the objective is to spark an interest in the non-economist and give a broad overview of topics. Simplification of topics, making it engaging and visually illustrating the concepts was the biggest challenge of this presentation. Please share your valuable feedback for improvement.

1. I want gold.
So, I am coming to
take back
my KGF.
Investors will be assured of the
market value of gold at maturity
and periodic interest, but also,
decrease India's current account
deficit.
Wait Adheera. !!
Rather than physical gold, better buy
Sovereign Gold bonds from RBI.
Confused? Let's restart

2. The story of money begins with simple exchanges. People
exchanged item A for item B.
Double coincidence of wants - i.e.,
both parties needed to have something
which the other wanted. तभी exchange
होगा. So, money was invented.
What is money? Money is a medium of
exchange that measures the value of a
product and is durable, portable.
This system was known as Barter system.
While it was simple, it had many
shortcomings. One of them is
पैसा ही पैसा होगा बाबू
भइया !!
पर ये पैसे की शुरुआत
कै से हुई?
boy, give
me
wheat
Ok. give
me your
watch in
return
watch
w
heat
Intro to Money

3. Token coins - in these coins, face value > intrinsic value of the metal. E.g
Face value of this coin = Rs. 5
Value of metal used in making it = Rs. 3.69
So, money evolved from
Token coins
Tuglaq's token coin experiment
This is an example of Grisham's Law which says, Bad money
drives out good money, i.e., People will hoard precious money.
TAX

4. Fiat money and legal tender
Money printing
₹ में कमा के $ में उड़ाने
का क्या फायदा? हम
$ में कमा के $ में उड़ाएंगे
Fiat money = any money printed by a
central Bank. Eg - ₹, $, ¥, €
Legal tender = उस देश में, You have to,
mandatorily take it for any kind of
payment.
So, what is Demonetisation? it is an
act through which a note (500, 1000)
stops being a Legal tender, अर्थात,
आप उस नोट को किसी भी transaction में लेने
के लिए legally बाध्य नहीं हैं.
Shahid sir gives this famous dialogue. If
we take his dialogue literally, he cannot
use in USA as ₹ is not a Legal
tender in US while it is still Fiat money in
USA.
So,
scene at 1:04:18
Under Coinage act, 2011, coins
are issued by the Govt. of India.
Under RBI act,1934 RBI issues all
the currency notes.
This is a commermorative coin.
and not a legal tender.
So, anyone can refuse it for
transactions in India.

5. बैल बैल खेलना बंद करो
हर्ष भाऊ, ये बताओ कि
Bank aur NBFC
क्या हैं?
हर्षद भाई
देख, बैल मेरे
पास भी है.
भइला, चिंता मत
कर. मैं तेरे को
सब समझा दूंगा.

6. For economic activity, household
money is mobilised and given to
Business firms. This is done by
Financial intermediaries. They are of
2 types
Bank & NBFC
What are
Banks &
NBFC?
work at no profit
no loss principle
Like SIDBI,
NABARD etc.
Like HSBC
Most of the
finance companies
you know are this.
E.g.
Regional rural bank,
Local area Bank,
Small Finance Bank -
Payment Bank -
They give loan to specific set of people. E.g.
cannot give loans

7. Payment System
Payment Gateways
मुझे UPI, Visa
ये सब में अंतर ही
नहीं समझ आता
..
UPI is a payment
system, while
Visa is a payment
gateway...
If there was no Payment gateway, merchants would need different Point of sale
devices to accept payment of different banks.
They are regulated by RBI.
Some systems are developed
by RBI, some by National
Payment Corp. of India. etc.
A payment system is used to settle
financial transactions.

8. Money multiplier effect
Money doesn't become double.It can become 6x
Govt gives ₹100
to Sita
He invests ₹96
in Hdfc
She invests ₹100
in SBI
₹96 Loan to Raj
₹92.16 Loan to Sam
96-(4% of 96)=92.16
He invests ₹92.16
in Citi
If we continue doing this zig-zag, then if ₹100 is introduced by the Govt. in the economy,
and the reserve ratio is 4%, then in ideal conditions, economy will have ₹2500 in total.
This is known as Money multiplier effect. In real world India, money multiplier is around
6x, i.e., if Govt. introduces ₹100, ₹600 is created in the economy.
and so on....
CRR=4%
so loanable
amount ₹96

9. Like the Royal
mint of Spain, I
will rob the mints
under RBI.
No
Professor,
STOP.
Ok, then tell
my team, what
does the RBI
really do?
Reserve Bank of India

10. RBI controls the
govt. mints. We
can go there and
PRINT money.
RBI is essentially a
bank. That means
we can rob it.
So, RBI doesn't
make profit like
a regular bank.
What do you mean
RBI controls the
money supply of
Indian economy?
How does it do it?
manages currency,
money supply in
economy &
regulates commercial
banks
No, RBI is India's
central bank.
The central bank of a
country
Indian Govt. securities
Gold
Foreign govt securities
& their currency.
Profits made in issuing
currency.
RBI does make profit. It
has assets like
the interest on these
make up for RBI's profit.
if it is backed by assets like gold,
foreign currency etc.
RBI will buy these securities like a
customer. Govt will pay interest on it.
In return, RBI will print currency notes for
Govt.
RBI has autonomy and works as a separate
entity from Govt. So, RBI will print money
only if,
If the Govt. of India wants money, then it will
have to sell it's Govt. securities to RBI.

11. To increase economic activity, banks
give loan to people. So, people have
more money. But, supply of mobile is
limited to 2, but people are willing to pay
more. So, mobile price
RBI tries to reduce the Bank's loanable
amount. Less loans less money in
economy less inflation.
Who makes it?
Monetary Policy Committee (MPC) headed by RBI
Governor. It has members from both - RBI and Govt. of
India.
So, MPC will adjust money supply
& ensure that there is no inflation?
MPC will adjust money supply to control inflation, but,
A/c to law; RBI should maintain inflation b/w 2-6%.
मतलब महंगाई अच्छी है?
This is inflation.
RBI
RBI
RBI
This adjustment of money supply in the economy is called
Monetary Policy of RBI.
Monetary Policy of RBI
नहीं, controlled महंगाई अच्छी है.

12. They cannot lend it
or earn interest on it.
By law, Banks have to
keep around 4% of
deposits with RBI.
They may earn a
profit on it.
By law, Banks have to
invest around 18% of
deposits in cash, gold, RBI
approved securities.
Cash reserve ratio (CRR)
or any bank
give RBI 4 %
Buy govt. security,
gold of 18%
Statutory Liquidity Ratio (SLR)
Quantitative tools - used to decide कितना loan देना है.
Qualitative tools - used to decide किसे loan देना है.
RBI adjusts the monetary policy of the country, using 2 set of tools
Quantitative tools of Monetary Policy
Due to CRR, SLR money multiplier effect increases.
In the case of Bank run, i.e., failure of a Bank, they can be used to return
some money to depositors.
Q) What are the benefits of CRR and SLR? Why keep reserves?
.

13. for long term.
No collateral.
Banks borrow from RBI
RBI gives loan to Banks & NBFI for short period (14
days max). They give Non-SLR quota Govt security as
collateral.
RBI gives govt. bond as
collateral and in return,
take the surplus money
from Banks and NBFIs.
Bank rate
Repo rate
Reverse repo rate
long term
loans
money
Non SLR
govt. bond
money
govt. bond

14. Here, Banks can take
loan from RBI, even by
pledging the SLR
Quota Govt. Securities.
Here, RBI, buys & sells
Govt. securities to suck
or pump money into
market.
Marginal standing facility
money
govt. bond
Open market operation
money
If loan rates are increased, less people will take loan
Less people will take loans, hence, less money in market.
Less money in market, less demand of goods.
Q) How does RBI control inflation using repo rate?
If repo rate is it becomes costlier for Banks to borrow money, hence, with the limited
money they have, to keep same profit margins, they increase loan rates.
same logic applies for controlling inflation using CRR and SLR.
sell govt security - suck money from market
buy govt. security - pump money into market
buy govt. bond
money
sell govt. bond

15. The govt will pay
interest on it. Not
RBI.
If RBI doesn't have any
Govt. security, it can
issue Market stabilisation
Bonds and absorb extra
money from market.
No Govt. securities
needed as collateral.
Banks give their extra
money to RBI & earn
interest.
Market stabilisation scheme
Standing deposit facility
give extra money &
earn interest
money
i
n
t
e
r
e
s
t
o
n
b
o
n
d
s
perm
ission
to
issue
bond
govt. bond

16. Qualitative tools of Monetary Policy
Aren't you
forgetting
something?
Banker to Centre & State govt.
Acts as a Lender of Last resort to Banks.
Regulates new Fintech companies.
Foreign exchange manager.
RBI also,

18. Issue - Non transmission of monetary policy
Solution
Govt. RBI.
Remember, Repo rate = rate at which Banks & NBFC borrow money for 2-14 days from RBI.
Now, repo rate will be part of the interest rate calculation. So, as Repo rate , or
interest of new loans will change. This is called External Benchmark Method.

19. NPA is a loan for which payment remains overdue
for a period of 90 days.
E.g. Corporates take loan and cannot return it, this
forms NPA.
In this movie, Big B sir's
So, what is NPA?
Issue - The twin balance sheet problem
all 4 sons were (NPA)
Issue - Non Performing Assets (NPA)

21. Harsh thanks all the Superstars for
teaching him and helping him
understand the Concepts of Indian
Economy.
However, one more superstar is left.
One more issue is left.
Who?
PAUSE
PAUSE
PAUSE
AND
AND
AND
GUESS.
GUESS.
GUESS.

22. The end?
Oh God!!
DON is
alive..
एक बात हमेशा याद
रखना रोमा, डॉन
को पकड़ना मुश्किल
ही नहीं....
I will have to
stop economic
offenders like
Don. But, how?
This is a 20-digit alphanumeric code.
All corporates have to quote it while
taking loans from foreign jurisdictions.
Basically, it is an Aadhaar for corporates,
so that they don't mask their identity &
get loan from abroad.
अब Don की companies fraud नहीं कर पाएंगीं.
रुक जा डॉन!!
In 2011, Legal Entity Identifier system was
created by G20.
The end ?