2. INTRODUCTION
• A financial system is an important tool for a country that wants to develop economically. The reason
is that it helps in the creation of wealth by a way of investments. That is why there are different types
of financial services available to facilitate the requirement. One of the important ways for a country to
control financial transactions and services is through banks. Banking in India has been a backbone to
so many businesses in the past as well as in the present times. It started in the 18th century and is still
going strong. Different types of banks are Central banks, Commercial banks, Investment banks,
Cooperative banks, Postal banks.
• The major impact in the banking section was noticed during the time of ‘Swadeshi’ movement. Many
banks were established during this time from 1906 to 1911.
• Banks like Bank of Baroda, Corporation Bank, Bank of India, Canara Bank, etc were formed during
this time period. During that time many strong political leaders and business tycoons funded the
banks.
• In the initial years the three presidency banks, Bank of Bombay, Bank of Bengal, and Bank of
Madras, came together and amalgamated to form on a bank called Imperial bank of India. Till 1955,
the bank was private.
• Then the Imperial Bank of India was nationalized. It is now known everywhere as State Bank of
India. Thus, among all the banks existing today, State Bank of India is the oldest one.
3. RBI ACT, 1934
• Under the RBI Act of 1934, the Reserve Bank of India was
established in1935.
• The central office of the Reserve Bank of India was first established
in Kolkata.
• In 1937 it was established in Mumbai in its permanent form, and it
also extends to the whole of India. In 1936, this act and the companies
act were meant to provide a structure for the overseeing of banking
firms in India. The RBI Act, 1934 gives the lawful ground of the
functioning of the Bank, which started operations on April 1, 1935.
• In 1949, the bank, which was basically built up as shareholders
banks, was nationalized.
• RBI Act 1934
• In RBI Act 1934, the Bank is called Reserve Bank of India, which was
established by this act plus the Bank of the international statement
was made by the body of corporate construct with the said name by
the law of Switzerland.
• It is mentioned in RBI Act 1934 that under RBI Act 1934, the Bank
should be called the Reserve bank of India, which should be
established for the motive of taking over the management currency
from the central bank and taking the business of banking in line
with the provision of this act
4. RESERVE BANK OF INDIA (RBI)
• The Reserve Bank of India (RBI) is India’s central bank, which was created under the Reserve
Bank of India Act on April 1, 1935. The Reserve Bank of India is the country’s central bank and is
responsible for the supply of money in India and also the oversight of the Indian banking sector. It
also takes care of the payment of the nation and works for the country’s better economic
growth. The Governor sits at the Central Office, which is also where policies are made.
• The Reserve Bank of India has been wholly owned by the Government of India since 1949 when it
was nationalized.
• The chief objectives of RBI are to sustain the public’s confidence in the system, safeguard the
depositors’ interests, and facilitate cost-effective banking services like cooperative banking and
commercial banking to the people. As per the RBI Act 1934, the objective of RBI are as follows-
• To run the nation’s currency and credit system.
• To maintain reserves for securing monetary stability in India.
• To govern the issue of bank notes.
• To maintain financial stability or credit by engaging in effective activities and keeping itself free
from any political impact.
• To perform central banking functions by acting as Banker’s bank, Banker to government, and note-
issuing authority.
• To promote economic growth and support planned advancement of the economy of the country.
5. RBI COMPOSITION
Affairs of the RBI are regulated by a central board of directors elected by the Indian
government according to the Reserve Bank of India Act. These directors are elected for four
years. The directors are of these kinds-
• Official Directors: These are full-time directors. It includes Governors and less than five
Deputy Governors. The Governor of RBI in 2023 is Shri Shaktikanta.
• Non-Official Directors: These are further of two types-
• (a) Nominated by the government- It includes 2 government officials and 10 directors of
different fields.
• (b) Others- It includes 4 directors. Each of these directors belongs to 4 regional bodies.
• RBI has 4 zonal offices- Mumbai for the west, Kolkata for the east, Chennai for the
South, and New Delhi for the North. Along with this, the RBI has 11 sub-offices and 18
regional offices. Also, there are two training colleges. These are-
• College of Agricultural Banking at Pune
• Reserve Bank Staff College at Chennai
6. R O L E / F U N C T I O N S O F R B I
• Monetary Authority: As the monetary authority of India, the RBI implements and monitors monetary policies. It ensures
price stability in India concerning the country’s economic growth.
• Managing Foreign Exchange: FOREX Reserve of India is governed by the RBI. Along with this, the RBI stands responsible
for aiding the foreign trade payment and maintaining the Rupee’s valve outside the country.
• Regulator and Administrator of the Financial System: The RBI defines the detailed factors of the banking operations.
Methods such as branch expansion, bank mergers, liquidity of assets, issuing of licenses, etc., are responsible for maintaining
and functioning the banking and financial system of the country.
• The Issuer of Currency: RBI is responsible for providing the public with an adequate amount of currency notes and coins
and maintaining their quality. Also, it is in charge of issuing and exchanging coins and currency.
• Banker to Banks: The settlement of interbank transactions is the sole responsibility of the RBI. The employment of a clearing
house accomplishes it. Thus, the RBI serves as the bank’s standard banker.
• Developmental Role: The RBI supports and enhances the country’s developmental efforts.
• Banker and Debt Manager of the Government: The charge of all the banking transactions of the government is the RBI.
The Reserve Bank of India stands responsible for holding the cash holdings of the Government of India. Also, the RBI
manages the public debts on behalf of the state and federal governments and offers new loans.
• Oversees Market Operations: The RBI regulates and develops repo markets, money markets, and other market instruments.
It implements money market operations, foreign exchange, and government securities.
• Lender of last resort: It helps all banks in times of financial crises.
8. C O M M E R C I A L B A N K S
• A commercial bank is a kind of financial institution that carries all the operations
related to deposit and withdrawal of money for the general public, providing loans
for investment, and other such activities. These banks are profit-making
institutions and do business only to make a profit.
• The two primary characteristics of a commercial bank are lending and borrowing.
The bank receives the deposits and gives money to various projects to earn
interest (profit). The rate of interest that a bank offers to the depositors is known
as the borrowing rate, while the rate at which a bank lends money is known as the
lending rate.
•
9. SCHEDULE
BANKS
• The RBI grants a scheduled bank status to a financial institution
only if it meets certain criteria in the RBI Act of 1934 and the
Banking Regulation Act of 1949. Scheduled banks are those
listed in Schedule II of the Reserve Bank of India Act of 1934
and constitute the majority of banks operating under the central
bank. As per the rules, the bank’s paid-up capital and raised
funds must be at least Rs. 5 lakh.
• Scheduled banks are also members of clearing houses. They are
responsible for maintaining an average daily cash reserve ratio
with the central bank.
• The RBI permits scheduled banks to issue loans at bank rates.
The RBI has also laid specific management standards in RBI
directions for 2015. Some of these standards include the
selection of the CEO and other senior management personnel,
the preservation of capital adequacy, asset quality, and
profitability.
10. LIST OF SCHEDULE BANKS
Scheduled Commercial Public
Sector Banks in India
1. State Bank of India
2. Bank of Baroda (Including
Vijaya Bank and Dena Bank)
3. Bank of India
4. Bank of Maharashtra
5. Canara Bank (including
Syndicate Bank)
6. The Central Bank of India
7. Indian Bank (Including
Allahabad Bank)
8. Indian Overseas Bank
9. Punjab National Bank
(including Oriental Bank of
Commerce and United Bank of
India)
10. Punjab & Sind Bank
11. Union Bank of India (including
Andhra Bank and Corporation
Bank)
12. UCO Bank
Scheduled Private Sector
Banks in India
1. Axis Bank Ltd.
2. Catholic Syrian Bank Ltd.
3. City Union Bank Ltd.
4. Development Credit Bank
Ltd.
5. Dhanlaxmi Bank Ltd.
6. Federal Bank Ltd.
7. HDFC Bank Ltd.
8. ICICI Bank Ltd.
9. IndusInd Bank Ltd.
10. Kotak Mahindra Bank Ltd.
Scheduled Foreign Banks in India
1. AB Bank
2. Abu Dhabi Commercial Bank
3. American Express
4. Australia and New Zealand
Banking Group
5. Barclays Bank Plc
6. Bank of America
7. Bank of Bahrain and Kuwait
8. Bank of Ceylon
9. Bank of China
10. Bank of Nova Scotia
11. BNP Paribas
12. Citibank India
13. Crédit Agricole
14. Corporate and Investment Bank
15. Credit Suisse
11. NON-
SCHEDULED
BANKS
• Non-scheduled banks are private banking institutions that
offer banking services to the general public and businesses.
• Non-scheduled banks are those that are not included in the
second schedule of the RBI Act of 1934 and do not meet all
of the criteria under clause 42, but strictly adhere to the RBI's
rules.
• These banks are free to keep their CRR funds on hand as no
compulsion has been made by the RBI to deposit them in the
Reserve Bank of India.
• These banks have reserve capital of less than 5 lakh rupees.
• These banks may not have access to certain privileges and
benefits enjoyed by scheduled banks, such as membership in
the clearinghouse, obtaining a refinancing facility from the
RBI, etc.
• The bank must be a company, rather than a sole
proprietorship or partnership.
12. Difference Between Schedule Banks And
Non-Schedule Banks
BASIS FOR
COMPARISON
SCHEDULED BANKS NON-SCHEDULED BANKS
Meaning A scheduled bank means a banking
company with a minimum paid-up capital
of Rs. 5 lakh that does not jeopardies
depositors’ interests
Non-scheduled banks do not follow the
Reserve Bank of India’s rules or do not fall
under the category of scheduled banks
Second Schedule The second schedule includes these banks The second schedule does not include them
Cash Reserve Ratio Maintained with RBI. Maintained with themselves.
Borrowing Scheduled banks can borrow funds from
the RBI for routine banking functions
Non-scheduled banks are not permitted to
borrow funds from the RBI for routine
banking purposes
Returns Submitted regularly There is no such requirement to submit
periodic returns
Members of clearing
house
It can become a member of the clearing
house
It cannot become a member of the clearing
house
14. COOPERATIVE BANK
• Cooperative banks work on the principle of cooperation and are owned and
operated by their members. In order to support the financial needs of a community
such as a village or a specific community, people come together to pool resources
and provide banking services such as loans, savings accounts etc.
• How does a Cooperative Bank work?
Membership
Individuals or businesses who meet specific eligibility criteria can become members
by purchasing shares or making an initial deposit
Democratic Governance
Every member has equal voting rights regardless of the number of shares they hold.
Members elect a board of directors among themselves to oversee the bank’s
operations and make key decisions.
Capital Formation
Members contribute to the bank’s capital by purchasing shares or making deposits.
These funds serve as the primary source of capital for the bank’s lending activities
and other financial services.
15. FEATURES CO-OPERATIVE BANKING IN
INDIA
• The Co-operative Banks in India are governed as per the Banking Regulations Act 1949
and Banking Laws (Co-operative Societies) Act, 1955.
• These Banks have been opened with the motto of ‘no-profit-no-loss’ and thus, do not seek for
profitable ventures and customers only. As the name suggests, the main objective of Co-operative
Banks is mutual help.
• Given below are a few important features of Co-operative Banking in India:
• They work on the principle of ‘one person, one vote’. Since these banks are owned by the
members, a Board of Directors is chosen democratically and then they are responsible for
controlling the organization
• Farmers can avail agricultural loans on minimum interest rates from the Co-operative Banks
• Providing easy and accessible loans and credit benefits in the rural areas with scarce banking
facilities
• The annual profit earned is spent on financial reserves and required resources and a part of it is
distributed among the Co-operative members, as per the prescribed limitations
• These institutions play a critical role in last-mile credit delivery and in extending financial services
across the length and breadth of the country through their geographic and demographic outreach.
17. L I S T O F C O O P E R AT I V E
B A N K S
• Saraswat Cooperative Bank. ...
• Shamrao Vithal Cooperative Bank (SVC Bank) ...
• Abhyudaya Cooperative Bank. ...
• Cosmos Cooperative Bank. ...
• Bharat Cooperative Bank. ...
• TJSB Sahakari Bank Ltd. ...
• Janata Sahakari Bank Ltd. ...
• Kalupur Commercial Cooperative Bank.
18. R e g i o n a l R u r a l B a n k s ( R R B s )
• Regional Rural Banks (RRBs) in India are the scheduled commercial banks that
conduct banking activities for the rural areas at the state level. As the name
suggests, the Regional Rural Banks cater to the needs of the rural and
underprivileged people at the regional level across different states in the country.
1.The Regional Rural Banks or the RRB government-based banks operate at the
regional level in various states across the country.
2.The RRBs are entrusted to cater to the needs of the rural people in the backward
regions and bring Financial Inclusion at the primary level.
3.The main objective of the RRBs is to provide credit and other banking facilities to
the small, marginal farmers, agricultural laborers, small artisans, etc. in the rural
areas for boosting the rural economy.
4.At present, there are 43 RRBs in the country and each of them is sponsored by the
government of India in collaboration with the state government and sponsor bank.
19. R e g i o n a l R u r a l B a n k s ( R R B s )
1.The Regional Rural Banks, or RRBs, are the third layer of commercial banking
organization, after commercial and cooperative banks.
2.The RRBs were established as per the recommendations of the Narasimham Committee
to cater to the rural credit needs of the farming and other rural communities.
3.The main aim of the RRBs is to provide credit and other banking facilities to the small
and marginal farmers, agricultural laborers, and small artisans who form an evident part
of the development of the rural economy.
4.The RRBs are a new form of commercial banks, backed by commercially strong banks to
serve within a limited local area.
5.The RRBs were set up under the Regional Rural Bank Act of 1976. The Prathama
Grameen Bank was the first bank to be established on 02nd October 1975. The Syndicate
Bank became the first commercial bank to sponsor the Prathama Grameen Bank RRB.
20. O b j e c t i v e s O F R R B s
• To provide safety to the savings of customers
• To create credit and increase the supply of money
• To encourage public confidence in the financial system
• To mobilize the savings of public
• To increase its network so as to reach every segment of the society
• To provide financial services to all customers irrespective of their level of income
• To bring in social equity by providing financial services to every stratum of
society.
Vidarbha Konkan
Gramin Bank
Nagpur
Maharashtra Gramin
Bank
Aurangabad
21. DEVELOPMENT BANKS
• Development banks can be known as special industrial financial institutions. These banks were
mostly established after World War II in both developed as well as developing countries in the
world. Just like elsewhere, the development banks in India are responsible for accelerating the
economic development of the country. In the following banking awareness study notes on
development banks, we shall learn more about them in terms of meaning, types, features, and
more!
• Unlike other commercial banks, the development banks do not mobilize savings. Instead, they
invest the resources in a productive and efficient manner.
• These banks are expert financial bodies that perform the dual functions of granting medium and
long-term finances to private entrepreneurs and performing promotional roles for the economic
development of the country.
• The development banks are responsible to provide medium and long-term finances to the industrial
as well as agricultural sectors. As well, they finance both private and public sectors.
• Some of the most popular development banks in India are the Industrial Development Bank of
India (IDBI), the Industrial Credit and Investment Corporation of India (ICICI),
and Export-Import (EXIM) Bank of India, etc.
22. ROLE OF DEVELOPMENT BANKS
• Take up an entrepreneurial role: Developing countries are short on entrepreneurs who can start new businesses. It
might be due to a lack of knowledge and management skills. The task of bridging the entrepreneurship gap has been
allocated to development banks. They are in charge of locating investment opportunities, promoting industrial firms,
providing technical and managerial support, performing economic and technological research, conducting surveys,
and conducting feasibility studies, among other things. The development bank’s promotional function is critical for
speeding up the pace of industrialization.
• Commercial Banking: Development banks typically lend to industrial businesses on a medium- and long-term
basis. Commercial banks meet the units’ operating capital requirements. Commercial banks in emerging nations
have struggled to meet this challenge. The sector has not benefited from its typical strategy of dealing with lending
proposals and securities assistance.
• Gap Fillers in the Financial Sector: Development banks aid industrial firms in various ways, not just by providing
medium- and long-term loans. These banks buy the firms’ bonds and debentures, underwrite their shares and
debentures and guarantee loans from local and international sources.
• Securities underwriting: Development banks purchase industrial unit securities by direct subscribing, underwriting,
or both. The securities can also be obtained by working as a promoter or converting debts into equity or preference
shares. As a result, as you learn more about development banks, you may start building a portfolio of industrial
stocks and bonds. Banks for development have become a global phenomenon. Their functions are determined by the
economy’s needs and the country’s stage of development. They’ve established themselves as well-known financial
market categories. They play a critical role in developing industries in emerging and developing countries.
23. • Credit Guarantee: The small-scale sector cannot obtain adequate financial services due to a high level of
risk. Because these businesses lack sufficient collateral to secure loans, lending institutions are unwilling to
issue credit. Many nations, notably India and Japan, have established credit guarantees and credit insurance
schemes to address this issue.
• Refinancing Facility: Development banks provide lending institutions with a refinancing facility. There is no
direct loan to the business under this arrangement. Development banks give capital to lending institutions in
exchange for loans made to industrial firms.
• Examples of some Development banks in India
• *India’s Industrial Development Bank (IDBI)
• *India’s Industrial Credit and Investment Corporation (ICICI)
• *India’s Unit Trust (UTI)
• *Industrial Investment Bank of India (IIBI)/ Industrial Reconstruction
• *Bank of India (IRBI) (IIBI)
• *The Export-Import Bank of India (EXIM) and a Few Others.
24. INDUSTRIAL DEVELOPMENT BANK OF
INDIA(IDBI)
• The Industrial Development Bank of India, popularly known as IDBI, came into existence as a
Development Institution under the IDBI Act of 1964. It is headquartered in Bombay, Maharashtra.
• The IDBI is regarded as a public financial institution as per the Companies Act 1956. It continued
as DPI till 2004 when it was converted into a banking organization. The Industrial Development
Bank of India Act of 2003 was passed to convert the DPI into a bank.
• Under the name of the Industrial Development Bank of India Ltd., a new company was
incorporated as a government company under the Companies Act on 27th September 2004. Thus,
w.e.f. 01st October 2004, it came to be known as IDBI Ltd. it works as a bank in terms of the
Repeal Act.
• The IDBI Bank Ltd. was finally merged with IDBI Ltd. and was known as IDBI Ltd. with effect
from 02nd April 2005. It is a public sector bank as the Government of India owns more than 70%
shareholding of the bank.
25. OBJECTIVE OF THE IDBI
• Coordinating, supervising, and controlling the activities of Finacial Institutions
like ICICI, LIC, etc.
• The Collection of resources for other financial institutions and providing financial
assistance
• Planning and promoting key industries to enhance industrial growth
• To build a system that adheres to national priorities
26. INDUSTRIAL DEVELOPMENT BANK OF
INDIA (IDBI) FUNCTIONS
• IDBI played a crucial role in the pre-reform era in catalyzing industrial development in India on a
broader level. The Industrial Development Bank Of India’s Functions are as follows:
• The promotion and development of the industries to bridge the gaps between the industrial
structure are crucial functions of IDBI
• The preparation and floating of new projects for industrial development is an important activity
performed by the IDBI
• Research on market and investment, surveys, and studies to understand the complexity and
contribute towards industrial growth
• Purchasing shares that are concerned with industries
• The Coordination of activities performed by other financial institutions
• Extension of technical and administrative support for the expansion of industries
• Offering refinancing facilities to the Industrial Finance Corporation of India (IFCI ), Securities and
Futures Commission ( SFC ), and other financial institutions approved by the Government of India
• The IDBI also aids Foreign Exchange Services. The purchase of currencies, deposits outside the
country, swaps, etc., are also facilitated by the same
27. INDUSTRIAL FINANCE CORPORATION OF
INDIA (IFCI)
• Initially established in 1948, the Industrial Finance Corporation of India was
converted into a public company on 1 July 1993 and is now known as Industrial
Finance Corporation of India Ltd. The main aim of setting up this
development bank was to provide assistance to the industrial sector to meet their
medium and long-term financial needs.
• The IDBI, scheduled banks, insurance sector, co-op banks are some of the major
stakeholders of the IFCI. The authorized capital of the IFCI is 250 crores and the
Central Government can increase this as and when they wish to do so.
28. FUNCTIONS OF THE IFCI
• First, the main function of the IFCI is to provide medium and long-term loans and advances to
industrial and manufacturing concerns. It looks into a few factors before granting any loans. They
study the importance of the industry in our national economy, the overall cost of the project, and
finally the quality of the product and the management of the company. If the above factors have
satisfactory results the IFCI will grant the loan.
• The Industrial Finance Corporation of India can also subscribe to the debentures that these
companies issue in the market.
• The IFCI also provides guarantees to the loans taken by such industrial companies.
• When a company is issuing shares or debentures the Industrial Finance Corporation of India can
choose to underwrite such securities.
• It also guarantees deferred payments in case of loans taken from foreign banks in foreign currency.
• There is a special department the Merchant Banking & Allied Services Department. They look after
matters such as capital restructuring, mergers, amalgamations, loan syndication, etc.
• It the process of promoting industrialization the Industrial Finance Corporation of India has also
promoted three subsidiaries of its own, namely the IFCI Financial Services Ltd, IFCI Insurance
Services Ltd and I-Fin. It looks after the functioning and regulation of these three companies.
29. INDUSTRIAL CREDIT AND INVESTMENT
CORPORATION OF INDIA (ICICI)
• The full form of ICICI is Industrial Credit and Investment Corporation of India.
• ICICI was framed in 1955. Founded as a cooperative endeavor of the World Bank, the
Government of India, and delegates of Indian organizations, ICICI is the parent organization of
ICICI Bank. It is a principally laid out organization to give medium-term and long-haul project
support to Indian enterprises.
• After the progression of the monetary market in India, ICICI changed its business from a supplier
of just task money to an expanded monetary supplier. From that point forward, the Bank was
integrated as the Industrial Credit and Investment Corporation of India Bank, and later the name
was changed to ICICI Bank.
30. OBJECTIVES OF ICICI
• The most important objectives of the ICICI are as follows:
1.To provide financial services to the person
2.To promote economic development and growth
3.To promote social welfare and equity
4.To provide a platform for the corporate sector to come together and
collaborate
5.To provide financial support to small businesses in India.
6.To promote entrepreneurship and innovation.
7.To contribute to the growth of the Indian economy.
31. SMALL INDUSTRIES DEVELOPMENT BANK OF
INDIA (S I D B I )
• Small Industries Development Bank of India (SIDBI) is an independent financial
institution aimed at aiding the growth and development of Micro, Small and
Medium Enterprises (MSMEs) which contribute significantly to the national
economy in terms of production, employment and exports.
• SIDBI was established with the mission of facilitating and strengthening the flow
of credit to Micro, Small and Medium Enterprises and for addressing the
developmental and financial gaps in the ecosystem of MSMEs.
• It is a statutory body set up under an act of the Indian Parliament in 1990.
32. FUNCTIONS OF SIDBI
• It aims at emerging as a single-window to meet the developmental and financial needs of MSMEs in order to make
them globally competitive, strong, vibrant and to protect the institution as a customer-friendly financial body.
• It also aims at enhancing the wealth of shareholders through the modern technology platform.
• It is involved in the promotion and development of the MSME sector.
• It is the principal institution for the development, promotion and financing of the MSME sector and for coordination
of functions of the institutions engaged in similar activities.
• SIDBI retained its position in the top 30 Development Banks of the World in the ranking of The Banker, London.
• SIDBI also functions as a Nodal/Implementing Agency to various ministries of the Government of India viz., Ministry
of MSME, Ministry of Textiles, Ministry of Commerce and Industry, Ministry of Food Processing and Industry, etc.
• Financial Support of SIDBI to MSMEs
• SIDBI provides financial support to MSMEs in the following ways:
1. Indirect financing by way of refinancing the banks, refinancing financial institutions for onward lending to MSMEs.
2. Direct financing by way of service sector financing, receivable financing, risk capital and sustainable financing, etc.
• Apart from providing financial assistance, SIDBI focuses on the “credit plus approach” under which it facilitates
technology modernization & upgradation, cluster development, enterprise development, upgrading the skills and
support marketing activities.
33. N A B A R D
• National Bank for Agriculture and Rural Development or NABARD is the main
regulatory body in the country’s rural banking system and is considered as the peak
development finance institution which is established and owned by the government of India.
This bank aims to provide and regulate credit to the rural areas, which will be a first step
towards enhancing the rural development in the country.
• NABARD has been given many responsibilities related to the formulation of policies,
planning, and operations in agriculture and financial development. NABARD carries these
responsibilities efficiently and works towards promoting and developing man industries in
the rural areas like the agriculture industry, cottage industries, other small scale industries,
and rural crafts in an effort to create better infrastructure and better employment
opportunities for the people living in these regions.
• The Government of India established this bank considering all the guidelines of the National
Bank for Agriculture and Development Act of 1981. To put it in simple terms, you can say
that the National Bank for Agriculture and Rural Development or NABARD is the main and
specific bank of the country for agriculture and rural development.
34. FUNCTIONS OF NABARD
• NABARD has a decided set of functions meant to be fulfilled under a certain period by financing and
uplifting the industries. These functions of NABARD include planning, organising and controlling
agricultural activities. Here are the functions of NABARD:-
• Proving service to the rural public by financing and investing in a small-scale business that sells local and
handmade products that aim to gain profit and promote heritage.
• Formulating plans, policies, and activities to develop a strong base and capacity to finance several
industries at one time and keeping a check on them by managing records.
• Providing training to employees for productive, smooth, disciplined and consistent services in Investment
and advice to beginner industries.
• Establishing the coordination and connection among banks gives credit flow to the state and central
government and RBI to maintain transparency in policy formulation and regulation.
• Integrated Rural Development Programme counts under a high-priority project run by the government,
which includes refinancing accounts for poverty mitigation by offering the highest share in support.
• It maintains links with self-help groups that aim to uplift the poor people’s conditions and be an
independent lifestyle for them.
• NABARD runs a uniform inspection to ensure the welfare of rural areas and farmers.
• “VIKAS VAHINI” is a programme specially formulated for the development of farmers across rural
regions.
• After running several programmes in rural areas, it conducts studies and stops the downgoing points and
corrects them with measure and refinance the mission, which aims to restructure the growth and boost
35. ROLE OF NABARD
• Here is the role of NABARD:-
• NABARD is an apex organisation that monitors the rural area and forms cooperative banks to provide credit flow at
the lowest rates to support the poor population.
• The role of NABARD behind offering at low rates from RBI financed banks is to upgrade their financial problems.
• It is also called a refinancing organisation that promotes those projects which generate employee and skill
development programs in the rural sector and connects these projects to self-help groups.
• Another role of NABARD is to stay connected to RBI and government authorities to fulfil the target allotted
according to the specific period and benefit the rural public equally.
• NABARD has formed a special research centre for better techniques, strategies and policies for wholesome
consistent elevation, and it regularly monitors and takes corrective actions.
• ACHIEVEMENT OF NABARD
• Working with a positive attitude and following roles and functions of NABARD is showing results in the form
of achievements of NABARD, such are:-
• The new business initiative includes programmes like NABARD Infrastructure Development Assistance and Direct
Refinance Assistance to CCBs for Short-term Multipurpose Credit, which has collectively sanctioned 3,385 Crore of
finance.
• Business operations include production and Investment Credit and the Rural Infrastructure Development Fund, which
has sanctioned thousands of Crores and contributed to the development and financial independence.
36. DISCOUNT AND FINANCE HOUSE OF
INDIA (DFHI)
• The Discount and Finance House of India (DFHI) is a money market institution incorporated in
March 1988 and it commenced operation in April 1988.
• The prime objective of DFHI is to facilitate smoothening of the short-term liquidity imbalances by
developing an active secondary market for the money market instruments.
• It was established based on the recommendation of the Vaghul Committee.
• In 2004, the Reserve Bank of India (RBI) transferred its total holding to SBI Giltz Limited. Its new
name is SBI DFHI
• Major Functions on DFHI
• DFHI participates in transactions in all the money market segments.
• It borrows and lends in the call, notice and term money market, purchases and sells treasury bills
sold at auctions, commercial bills, CDs and CPs.
• DFHI quotes its daily bid (buying) and offer (selling) rates for money market instruments to
develop an active secondary market for all these.
• DFHI fills this gap by buying and selling these bills in the secondary market.
• The presence of DFHI in the secondary market has facilitated corporate entities and other bodies to
invest their short-term surpluses and to en cash them when necessary.
37. E X I M
EXIM Bank is popularly regarded as an ‘Export-Import Bank‘. It was established in the year 1982
under the Indian act of Export-Import Bank of India Act,1982 and has been set up to provide long-
term finance to exporters as well as importers to meet their financial needs related to international
trade of the country India. It is the biggest and the salient institution which is based on finance of
export for the investment and trade of foreign countries with the country’s economic growth.
The role and objectives of EXIM Bank are as follows;
• To ensure the export or import projections
• To encourage and facilitate the export of international and technical and merchant banking services
as well as their joint ventures
• To lengthen the LOCs and credit of buyers
• To make competition for exporters on the financial terms
• To provide timely and relevant information to exporters of India about their opportunities in
various export fields and areas
• To provide advice on currency related issues so that producers or manufacturers or India may
perform the cost effective exports and imports
• To look into Indian finance problems and give resolution policies for it
• To enhance and promote the trade of foreigners in our country India
38. FUNCTIONS OF EXIM BANK
The role of EXIM Bank are as follows;
• Financial export and import of services and goods from the country as exim trade.
• It helps in financing the export as well as import of machines.
• It also helps to refinance the bank services as well as other institutions for foreign financing trade or exim
trade.
• It helps in financing the export or import of services and goods from other countries also.
• It also provides financial assets for the business in foreign and also helps the business to join the joint
venture in foreign.
• It also helps in providing the finance for technical assets to exporters and importers.
• EXIM trade helps in functioning the export and import of Merchant Navy Banks
• EXIM Bank also plays a major role in writing shares, bonds, stocks as well as debentures involved in foreign
companies’ trade
• It also offers the LOCs and short-term loans to foreign governments and banks
• To provide finance in cooperative banks
• This bank provides the services of business advisory
• EXIM Bank also provides funds for foreign country’s projects
• To partner the industries of India in their competitive and superior globalization attempts
39. STOCK HOLDING CORPORATION OF
INDIA LIMITED (SHCIL)
Stock Holding Corporation of India Limited (SHCIL) is an Indian custodian
and depository participant, based in Navi Mumbai, Maharashtra.[2] SHCIL was
established in 1986 as a public limited company and is a subsidiary of IFCI. It is
also responsible for e-stamping system around India. It is also authorized by
Reserve Bank of India as Agency Bank to distribute and receive Govt. of India
savings/relief bond 2003 along with nationalized banks.
40. NATIONAL HOUSING BANK (NHB)
• National Housing Bank (NHB) was set up by an Act of Parliament in 1987. NHB is an apex
financial institution for housing.
• The broad functions of NHB as a part of its objective of building a strong, healthy, cost-
effective, and viable Housing Finance System include:
• (i) Supervision and grievance redressal regarding Housing Finance Companies (HFCs).
• (ii) Financing
• (iii) Promotion and Development.
• It is to be noted that NHB supervises HFCs while regulation of HFCs is with RBI.
41. OBJECTIVES OF NHB
• To promote a sound, healthy, viable and cost effective housing finance system to cater to all
segments of the population and to integrate the housing finance system with the overall
financial system.
• To promote a network of dedicated housing finance institutions to adequately serve various
regions and different income groups.
• To augment resources for the sector and channelize them for housing.
• To make housing credit more affordable.
• To regulate the activities of housing finance companies based on regulatory and supervisory
authority derived under the Act.
• To encourage augmentation of supply of buildable land and also building materials for
housing and to upgrade the housing stock in the country.
• To encourage public agencies to emerge as facilitators and suppliers of serviced land, for
housing.
• Providing, establishing, supporting or aiding the housing Finance institutions.
42. STATE FINANCE CORPORATIONS (SFCS)
• The State Finance Corporations (SFCs) are an integral part of institutional finance
structure of a country. Where SEC promotes small and medium industries of the states.
Besides, SFC help in ensuring balanced regional development, higher investment,
more employment generation and broad ownership of various industries.
• Functions of State Finance Corporations
• The various important functions of State Finance Corporations are:
• (i) The SFCs provides loans mainly for the acquisition of fixed assets like land, building,
plant, and machinery.
• (ii) The SFCs help financial assistance to industrial units whose paid-up capital and
reserves do not exceed Rs. 3 crore (or such higher limit up to Rs. 30 crores as may be
notified by the central government).
• (iii) The SFCs underwrite new stocks, shares, debentures etc., of industrial units.
• (iv) The SFCs grant guarantee loans raised in the capital market by scheduled banks,
industrial concerns, and state co-operative banks to be repayable within 20 years.
43. INVESTMENT BANK
• An investment bank is a financial institution that assumes the role of an intermediary in
elaborate and big-ticket monetary transactions. These include IPOs, mergers and
acquisitions, liquidation and even a take-over. These entities also act as financial advisors
or brokers for large institutional clients.
• Therefore, investment banks help businesses to raise funds via capital markets. Typically,
they facilitate:
• Raising capital debt
• Acquiring equity capital
• Insuring bonds
• Launching new products
• A few notable investment banks include Morgan Stanley, JPMorgan Chase, Credit Suisse,
Citigroup, Goldman Sachs, Deutsche Bank, and the Bank of America.
• In India, some of the leading investment banks include Avendus Capital, IDBI Capital,
Edelweiss Financial Services Limited, JM Financial Institutions Securities, and
MAPE Capital Advisors.
44. P R I N C I P A L F U N C T I O N S O F
I N V E S T M E N T B A N K I N G
1. Raising Capital
2. Brokerage services
3. Proprietary Trading
4. Research Activity
5. Sale and Trading
45. P R I VAT E S E C T O R B A N K
• The central part of a private bank’s equity is owned by either a group of
individuals or private companies. However, they need to adhere to the rules and
regulations of the central bank’s guidelines despite having their own set of
independent financial strategies. The trading of these banks is done on the stock
market. Most private sector banks provide excellent innovative service and
efficiency in operations. However, since they are profit-based financial
institutions, they provide efficient services at an additional cost.
• Commercial Banks became popular in the 1990s when the LPG policy was
founded. IndusInd Bank and Axis Bank are among the oldest banks in the private
sector in the country. Both were founded between 1993-and 1994 after the
government of India permitted them.
46. P U B L I C S E C T O R B A N K
• Public sector banks are those in which the government holds more than 50% of
the total stock. The government formulates all the financial guidelines for public
sector banks. The public sector banks operate under the government to inspire
trust in the depositors that their money is safe.
• India’s biggest public sector bank is the State Bank of India. Public sector banks
constantly work in the public interest by introducing schemes for customers’
benefit. They also charge less for their services than private banks. Besides
working in the public interest, nationalised banks in India also earn huge profits.
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48. N E E D F O R R E G U L AT I O N A N D
S U P E RV I S I O N O F B A N K S
49. BANKING REGULATION
GENERAL PRINCIPALS
• Minimum requirement
• Supervisory review
• Market Discipline
REASONS FOR REGULATIONS
• Safety and Soundness
• Monetary stability
• Efficient and competitive financial system
• Protect Consumers
• Maintain the integrity
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52. We are going to have a great year
learning together!
