A financial institution is an organization that provides financial services such as accepting deposits, granting loans, insurance, and offering investment products. They act as intermediaries to channel funds from investors and savers to those who need funding. Financial institutions include banks, insurance companies, non-banking financial institutions, and housing finance institutions. They play an important role in facilitating the flow of money through the economy.

3.  It is an institution
 Provides financial services
 Transfers funds from investors to companies
in need of funds
 Services are generally provided by acting as
financial intermediaries
 Facilitates the flow of money through the
economy
 Regulated by the Government

4.  Banks – accept deposits and grant loans
 Insurance Companies - corporate entities that
sell protection policies to their clientele from
potential misfortunes
 Non – Banking Financial Institutions (NBFCs) –
provide banking services without meeting legal
definition of a bank
 Housing Finance Institutions (HFIs) – provide
home loans and home insurance
 All India Financing Institutions (AIFIs) – group
composed of Development Finance
Institutions(DFIs) and Investment Institutions

5.  Financial Intermediary
 Catalytic Agent
 Creator of Money
 Promoter
 Counselor
 Maintaining Liquidity and Accepting Deposits
 Forex Transactions
 Trade Services
 Investment Planning
 Corporate Advisory Services

6.  A Bank can be defined in terms of
 Economic functions it serves
 The services it offers to customers
 The legal basis for its existence
A Bank is any Business offering deposits
subject to withdrawal on demand and making
loans of a commercial or business nature.

7.  Commercial Banks
 Financial Institutions
 Non – Banking Finance Companies
 Cooperative Institutions

8.  Public Sector Banks- Regulated by statues of
Parliament and some important provisions
under Section 51 of the Banking Regulation
Act, 1949
 Private Sector Banks- broadly categorized
into New(aggressive, professionalized and
fast growing) and Old(typically smaller,
specific regional bias and less than
satisfactory performance)

9.  Foreign Banks- required to invest an assigned
capital of USD 25 million upfront, at the time
of opening their first branch in India
 Regional Rural Banks (RRBs)- created for rural
credit delivery and to ensure financial
inclusion. Their Capital Base is held by
Central Government, The Relevant State
Government and the Bank that sponsors them
in the ratio of 50:15:35 respectively.

10.  All India FIs- EXIM Bank, NABARD, NHB, SIDBI,
etc.
 Investment Institutions- LIC and GIC deploy
their long-term investments
 State/Regional Level FIs- comprises of State
Financial Corporations(SFCs) and State
Industrial and Development
Corporations(SIDCs)
 Other Public FIs- generally include NFBCs

11.  Deposit Taking(NBFC-D)- are subjected to
prudential regulation
 Non-Deposit Taking(NBFC-ND)- almost
unregulated
 Residuary NFBC(RNBFC)
 Housing Finance Companies(HFCs)- regulated
and supervised by National Housing
Bank(NHB)
 Mortgage Guarantee Companies- Asset
financing companies, loan companies and
investment companies

12.  Broadly categorized into Urban Co-operative
Credit Institutions and Rural Credit
Institutions
 Urban Co-operative credit institutions is
again categorized into Scheduled UCBs and
Non- Scheduled UCBs
 Rural Co-operative Credit Institutions
consists of State Co-operative Banks, District
Central Co-operative Banks, Primary
Agricultural Credit Societies, etc.

13.  Bank Rate/Discount Rate – Rate at which Central
Bank lends to Commercial Banks
Current Bank Rate is 9.00%
 Base Rate -The base rate is the minimum rate of
interest that a bank will lend money at as per RBI
guidelines. This is like floor interest rate below
which RBI will not allow banks to lend money to any
one. Current Base Rate range is between 10.00% to
10.50%
 Repo Rate - The rate at which the RBI lends money
to commercial banks. Current Repo Rate is 8.00%
 Reverse Repo Rate - The rate at which
the RBI borrows money from commercial banks.
 Current Reverse Repo Rate is 7.00%

14.  Cash Reserve Ratio (CRR) - the amount of funds that
the banks have to keep with the RBI. Current CRR is
4.75%
 Statutory Liquidity Ratio(SLR) - ratio of liquid assets
to demand and time liabilities is known as Statutory
Liquidity Ratio. Current SLR is 24%
 Marginal Standing Facility - The Reserve Bank of India
in its monetary policy for 2011-12, introduced the
marginal standing facility (MSF), under which banks
could borrow funds from RBI at 8.25%, which is 1%
above the liquidity adjustment facility-repo rate
against pledging government securities. Current MSF
Rate is 9%

15.  Carrying out Currency Exchanges
 Discounting Commercial Notes and Making
Business Loans
 Offering Savings Deposits
 Supporting Government Activities with Credit
 Safekeeping of Valuables and Certification of
Value
 Offering Checking Accounts (Demand
Deposits)
 Offering Trust Services

16.  Financial Advising
 Managing Cash
 Offering Equipment Leasing
 Making Venture Capital Loans
 Selling Insurance Policies
 Offering Retirement Plans
 Offering Mutual Funds and Annuities
 Offering Risk Management and Hedging
Services