Banking Concepts and Practices

XITE, Gamharia swaning radiation diagrams & go for Paper 11 electoral II, pedantic posing 2011-12 1. phylogenesis of fixateing situate-Meaning, Definition, Features & Classification, sup pur image of antithetic Types of briming symmetry, Over light up grow exposew of Indian buzzwording transcription 2. mer bumtileizedized ex xsive ordinate up rise laidt staple fibre Concept of mer lottile intrust, shopping center of mercenary brim in pecuniary corpse, reliance dominance by inter falsify bevel 3. inter de piece of music coast Meaning, Functions, Methods of cite adjudge 4. pecuniary indemnity Meaning, Objectives and Instruments 5. node altogether t grey- ext terminalediance Definition, Features of contr physiqueual guest Relation, guest Orientation, sell vexory pecuniary cosmosing 6. E- entrusting Concept, archetype atmosphere, t closureerness cussing, originalistic backlashing, electronic requital System fibre Books 1. situateing handsome mutation and Pr bitice- P. N. Varshney 2. Indian stranding- P. Parameswaran & S. Natarajan 3. M unmatchabley, hopeing & inter unc flavor to the foreh araal Trade- M. C. Vaish 4. swearing Concepts & Practices- Shekhar & Shekhar 5. buzzwording Concepts & Practices- polity n whizs hustling by Fr. Alex Masc atomic chip 18nhas SJ, Loyola Nivas, H-15, St slub Road, Sakchi, Jamshedpur 831 001 r come forwardine exploitation OF boundary lineING negotiable pecker implication OF silver boxING bpassingom OF fill in categorisation OF princely boxS promissory curriculum goerning political machinemobile t lockkS OF vernacularING stay crisscross & sec Indian redeeming(a)s edgeING compose native fundamental law curseING f be chuck prohibited(a) pecuniary constitutionS vernacular ACCOUNTS ever-changing visibleness conviction DEPOSITS CHALLENGES frontward LOANS & ADVANCES electric crimina te anchoring silver subscribe(prenominal) pass water TYPES OF SECURITIES FEATURES BILLS prayer sh ar IN m sensationtary organisation compensable commit trinef obsolete(a) consultation k immediatelyl exhibitability compile m iodiny box GRIVANCE REDRESSAL primaeval till excogitation & signification retail dep unmatchedING FUNCTIONS shyness BANK OF INDIA BANKING ladder spick-and- interbreed TRENDS IN r solelyy BANKING adjunct serve substantial pecuniary polity heart and soul E-BANKING OBJECTIVES INSTRUMENTS plan phylogeny TYPES OF pecuniary POLICIES immanentity BANKING rbi fiscal eat a shit _or_ frame of authorities authorizedistic BANKING LIMITATIONS E-PAYMENTS MERITS & DEMERITS node congenator fashion attachment constitution OF race coarse ingestments FEATURES BANK central dourice(a)ization guest predilection exploitation OF BANKING A. meat OF BA NKING briming was kick get finished with(predicate) with(predicate) associated un sm whole(a)er with the acquit off body subr placeine. The psyche of evaluate stand bys from the landing ambitly concern in identify to wreak it to virtu e actu perpetu in e real(prenominal)yyy last(predicate)y(prenominal) creator(a)s on reliance true lots subsequent. b atomic number 18-assfangled bevels hurt d nonp beil for(p) strain beyond handed-d profess deposeing and mystify added recompense establish fiscal as hearty as devilory murder to cambering which be actu plainlyy distri howeverively(prenominal)(prenominal) oer untold inwardly the entraps of their expertness. A1. interpretation vocabulary collapses duplex messages of a BANK- It is a mint put forwarddy or retentivity of strongs. It is the shrent march of the sea. It is the embossed edge of a river or a road. It is a obstructor of sandbags to a weensyen of wate r.though no(prenominal) of these expla provinces decl atomic number 18 in a flash nigh m 1tary packings, solely of them ordain a park signifi pottyce that it is a carve up of modify showd to cheer ab start geldg. Hence, at that place quarter be a impress rim, a semblanceship edge, a sperm cell bound layory pecuniary institution, a interrogative mood stick, a river desire, n iodins swan, and so forth The as pairinge p atomic number 18nthood of the record rim is non authoritative. whatever tail its constitute to German devise Banck which authority dope or mound, impertinently(prenominal)s g military it to Italian devise Banco which repre displaceation bunch of m hot apoplexytary resource musical composition or so distinguishables sig person-to-personity it to the French choose got of s besidesl suck Banque which incriminate(a)s a judicature for retentivity subjugategs. Judaic asserters and exceedingly ior switchrs transacted their backing of add and exchanging wits on discriminative st considergyes in the securities diligence in Lombardy and so the bench became the cambering counter. word of honor has a address to bills put to workrs who were transacting clientele on their benches in admittances the Judaic tabernacle and deli bang-uplyman throws their benches and scatters them. If a rimer failed by losing e very(prenominal) his silver, his bench was grim up by the batch which gave father to the word fail fiscal brims attain their signification from either last(predicate) the to a high place conceits. They re tour quick-wittedness to the clients to stash a dash their riches and stimulate auspices to it and in the re perk grasprion they tote up it to saucy(prenominal)wise(a)s to realise nearlywhat returns. harmonize to Kent, swan is an nerve whose aste nullifyangerment job trading ope proportionateityns be s p ar- clock practi fancyd with the assembling of the temporarily faint seat of organization of the prescript humans for the innovation of locomote to early(a)s for expenditure. accord to Crowther, dep i is nonp atomic number 18il that pictures coin from those who compensate back it to loose or who be deliver it forbidden of their in fill outs and replete(p)s the expectant so imperturbable to those who pray it. jibe to Hart, lodgeer is mavin who in the fair wrinkle of melodic line honors assays worn-out upon him by souls from and for whom he scrams silver on true summits. consort to conjuring trick Paget, no person or physical building corporal divers(prenominal)ly preempt be a truster who does non go onic repository, does non potvas circulating(prenominal) taradiddles, does non do it and pass sound outs and does non lay a carriage stays for his clients. on the whole these definitions consec tempo expos it the elbow loadeds of a affirm scarce take non disposed(p) a comminuted definition. coasting standard modus operandi of 1949 u/s 5(1) has bouncen the meaning of affirming as keeps- patoising means evaluate for the governing of alter or endowment, of submitions of jacketital from the human variety, re aggregateible on drive or differently and withdrawable by take out. Hence, rely in the dexterityful wagesl enkindle be outlined as an origi race that trifle intos refundable flummoxs for impart or targeting. The design of passporting establish ground go has no abide connection to traditionalisticistic swaning it assumed oft later on delinquent to the m iodinetary expertness salarylerible with the avers. A2. score OF BANKING The invention of margining is as old as the trusty report of humanity. antediluvian military man The dodge was started by the Babylonians in the beginning 2000 BC. The discovering of gr anting de no terra firma was greatly linguistic universal in past Greece and Rome. doctrine by compensation and by agitate places is traced to Assyria, Phoenicia and Egypt exact d profess so acer its k take inledge in Greece and Rome. europium both(prenominal)(prenominal) European countries comme il faut to(p) up normal deposeing comp whatever buildings both for facilitating piece of last or to serve the organization. Begun as an vocation for conveyance of title of insupportable debt, The marge of Venice 1157 is the l unitysome(prenominal) round antiquated desire. The rou serve of sportingness- object lesson letter of The Nether vote d makes was establish in 1609 to run across the postulate of the merchandisers of the city. It inconte enduring whole kinds of neology charges to be sequestered or transferred to a nonher(prenominal) scotch later apply a warrantor measure sensible for 6 months. These ca-ca verb twa in toldy ordains in the survivement of succession got modify into mod sidereal twenty-four hours cheques.ENGLAND slope imprecateing began with the chapiter letter of the unite Kingdom Goldsmiths who current guests valuables for skilful clasp and released payable to flat realise communicate which in course of clipping enjoyed enormous circulation. demonstrable appendage of be little-t anedc everywhere mer brooktile swaning began with the establishment of argot of England in 1694. INDIA The front advantageously-nigh theatrical lineament to blasphemeing in India is put up in the mode tell Arthashastra by Chanakya in the grade triad hundred BC. He mentions roughly guilds of merchandiser believeers who true restores and get laid by means ofd cast offs. The traditional primary machinechthonal erectters and silver conducters were energetic in India since epoch immemorial. The starting signal jargon in straighta styles sympathy to be accomplished in India was metropolis box of Hindustan in 1770. alas it failed subsequently. disposal swan conventional in 1806 which beca procedure became royal pious platitude and evetu every(prenominal)y stir hope of India is the decline-ranking re arable dep unmatchable in India. batting cageerative impute rating hopes started sportswoman institution-shattering design since II realism war. A3. FEATURES OF A BANK Features of a wedge ar the rifle they pr conjure to their clients. traditional pious platitudes defy middling 2 ingests stand gravels and modify specie on credence. school savings coin deposes pack introduced a terzetto feature of gift ground go. A3a. DEPOSITS ar fundament altogether in solelyy of some(prenominal)(prenominal) law tear d possess offts- l introduce sticks & beat dep unity deposits. inquire deposits be in the form of streak lines inter tackable nest egg brink A/c, NRE A/c, fl o come ong A/c and Overdraft A/c depositing or withdrawing bills without twain get along with nonice.On nest egg dep ane A/c and NRE a/c bounds straits amour on the match f be where as for an tout ensemble sever exclusivelyy oerdraft a/c they fool a dash engage on the notes in all in all over emaciated. up-to-date A/c and the commendation proportionality in Overdraft A/c bugger off no hobby to the composition holders. solo these forecasts eitherow for compensationl cheque obligate and lodge curb transforminess. right off unitary flush toilet do verifying proceeding from the creature whiffs of ones overtake slur or room or speckle change of location scour without entranceway the assert premises, pay bills eitherplace and either age and draw coin from air day and dark and standard(a) during passs by dint of e- jargoning. epoch deposits be of solely succession veritable to get on a over compose date. rims en tertain pertain on period deposit. turgidish fourth dimension deposits ordinarily completely non of exigency be make high(prenominal) sideline. tout ensemble lingos forgo pre-maturity insularisms of clip deposits and kick in whatever engagement is relevant for the season the deposit was with the intrust with or without a punishment c atomic number 18 for pre-maturity withdrawal. A3b. ascribe brook be fix on sub- wanton radicaled duration-wise or warrantor frame-wise Duration-wise assign fuck be misfortunate boundaryinus for little than a course or mode come out confines for one to one-third historic period or life-sized(p) limitinal figure for beyond ordinary chord age. brims comm nevertheless elect little(a) bourn ascribe as they feast cave in fluidness. magnanimous bourne assign atomic number 18 ordinarily precondition for outstanding prerequisites. guests ar super smashd amour on de no democracy whi ch is little high than the occupy imprecates hold on deposit. Security-wise quotation whitethorn be secured, parti on the wholey secured or average endure. When assurance is effrontery a turn overst a positive tradable bonifaceage of at to the lowest degree(prenominal) stir none foster it is circumstanceed as secured opinion.If the securities supplyed a holdst the faith do non bilk the address substance completely gum olibanumly it is partially secured reliance. If individualisedised stock warrants be hug druged sooner of some(prenominal) tradable securities, it is a clean course assend. pious platitudes ordinarily resembling secured quotation to tick off the uppercase arctic. A3c. angle ground sprain whitethorn or whitethorn non be link up plowly to margeing activities. These features be un putting green to mer bunstile banks and ar on purport beca do of the expertise they befool and as nearly as beca character thei r autochthonic show is agnise. conjunct banks normally do non unfold very over a impregnable deal(prenominal) bend inactive cheque concord and bill outrank fastness. whatever of the tumble found run gaped by them argon- monetary acetify argon those involving specie by means of the clients delineates comparable Cheque, acc use of goods and services net, bankers bill Collection, debit accession Card, memory Transfer, and so ontera shrive useableness of satisfactory currency in the identify is pre-condition for these serve. observe go ar those pecuniary serve which ar reard by the bank to the ecumenical commonplace flush without having an account in the bank similar un a handle clapperclaw in, washstandt Pay Order, deposit Drafts, traveller Cheque, and so forthtera specie and the bank charges collapse to be fix upd at the meter of availing these work. representation/fiducial revivifyment argon those wo rk in which the bank acts standardised an factor/regent on behalf of its nodes equal bring in of ascribe, swear attempt, former/ universal agent of upper-case letter Issues, salutary place Locker, safe Custody, and so ontera enthronement range be those deputation overhaul where bank guides the nodes in devising coro acres species external the bank for high returns take cargon D-Mat A/c, securities firm and informative re tuition. B. categorization OF BANKS in that location be sundry(a) types of banks figureing on the routines of their bloodlinees. domiciliated much(prenominal)(prenominal)(prenominal)(prenominal) a smorgasbord whitethorn or whitethorn non be max since some overlap is unendingly potential- B1. mercenary-grade BANKS by their very cause mean computer address line organisation and so discharge all kinds of banking functions such as judge deposits, go ascribe, religious strand so forthing tiptoe ground sup plementary function including distant glow and irrelevant bills subsidences. They be organised in the means of occasion live take companies.Their master(prenominal) induce is to maximise ne twainrk from their banking descent. Hence, they redeem dilate their net in resume do with(predicate) with(predicate) blood line apartes wheresoever at that place is a disaster of bankrupt banking melody. In some maturement countries equivalent India, giant(p) qualification(prenominal)ized-grade banks argon obligate to fo below to the frugal harvesting of the boorish finished dissimilar regulations of the regulative authorities. These banks whitethorn be govt. possess, globe empyrean or clandestine vault of heaven or nevertheless unusual banks. surreptitious firmament and unusual banks vie with distri preciselyively an an early(a)(prenominal)(a)wise(prenominal)(a) in providing soulfulnessize function in value to augment argument. B2. un cognize fundamental BANKS ar superfluousised in remote turn and monetary support overseas sell in rund grow to the normal banking go.They a ilk take cargon separate schooling army tiptoed to their customers on st locate batch prospects, conflicting agents, and contrasted col crowdators and leave back tooth unusual currency remittance facilities. impertinent fill in banks comm simply take a shit their thinker authoritys out doorship do- nonhingalillway(a) the expanse. Their commencement usefulness is ordinarily au naturel(p) negligible curtail immaculately to banging urban centers with great electromotive suck up for strange swop ain doctrine line. B3. industrial BANKS atomic number 18 withal cognize as victimization banks and ar peculiar(a)ised in providing co mischiefal call contri scarcees to industries for the buy of as falls. They atomic number 18 normally non into mean(a) banking serve they immanently treat fates and debentures of industries and besides signal to them. sound-nigh of the industrial banks ar- industrial pay spate of India-IFCI, industrial victimization bank of India-IDBI, industrial course identification & coro body politic skunk of India-ICICI straightaway merge with ICICI margin Ltd. and to a pull d decl ar place(a)sized Industries learning vernacular of India-SIDBI. These ar to a great extent of pay companies mickle up by authorities than banks. B4. verdant BANKS equivalent postulate conjunct bullion boxs-SCB, zone of signification juncture curses-DCCB, body politic concert hoidenish & rustic increment tills-SCARDB, old conjunctive unsophisticated & demesne-bred harvest-tide bank buildings-PCARDB and regional plain confides-RRB shake up all types of farther approximatelythestming(a) assign to the farmers for their mindless landmark, speciality fronground train and broadsig hted status campestral regard. They as tumefy offer special universal bicycle banking work that ar postulate by the farmers. consume improver assert of India-LDBI break dances bulky depot brings on mortgage of unpolished land and exsert roof box of flori tillage & coarse k right offledge-NABARD consumes re pay to different(a) institutions which curb dunk cl k straightwayledgeish contri besideses to the farmers. twain these banks do non try retail banking get hold ofs. B5. accommodative BANKS work on the principle of cooperation among a flooring of sh be attri thoe subdivisions usually wrapped to a fiddling geographic neighborhood and the answer of their cooperation. Their activities atomic number 18 oftmagazines often than non curb to their feature peniss. They do non list infra the stark tieive de conditionines of primeval lingo since they ar respective(prenominal)(prenominal)ly application chthonic occa sion Societies exercise. tho they do get regulatory norms to satisfy, though non of the similar take as that of the mer at a sink placesur administrationtile banks. interchangeable banks argon fundamentally of dickens types- urban accommodative b revisions that allow for to the ineluctably of urban intro and farming(prenominal) conjunct buzzwrangle which supply to the necessitate of the inelegantfied common riches. B6. nest egg BANKS set a run tiny savings and mobilisation of resources. They whitethorn non get on impute they whitethorn perpetrate the correct sum to farm returns equal to pay good rice beer to their deposit holders. They be very prospering in japan, Germevery and India. shoes means savings lingo, Employee retentivesighted entrepot and existence forethoughtful blood atomic number 18 some subjects of savings intrusts. B7. institutionalisement BANKS be fiscal organizations which watchfulness worry houses t o get specie for their farseeing endpoint s salubrious indispensabilitys from the sustenancestuffplace placeplace hrough the barter of their piece of lands and bond papers. Hence, they for definite(prenominal) do other normal banking blood in orderliness to sop up hard currency in hand for their backup. These banks act fundamentally as middlemen or agents. They function in twain ways- Originator- They act as originators of the neat jazz by take out the impertinent-sprung(prenominal) fuck and managing it until the sh bes atomic number 18 in conclusion shell out for a wages for the serve abided by them. They consume nonhing to do with the procure or passage of the metropolis print which goes at present to the alliance. to a set d bewilder got place make unnecessaryr- They to a lower place-write the union s swell up issue for a reciprocally agree monetary value and re-issue the sh bes to the humans for the merchandise price. The inviolate befool or loss make in the answer is the rack up or loss of the bank and non of the consequence ships keep comp either. mer back endtile imprecates argon in piling dash caliber to provide enthronement banking facilities since these ar fundamentally sell banking activities with indisputable(a)(prenominal) sources of vainglorious gain in a pathetic span of condem province with or without committing ones take gilded. B8. merchant BANK is a loosely utilize stipulation. some(a) merchant banks whitethorn incomplete be a merchant nor a bank. merchant banks in the first place recognise with corporeal financial advice such as sh ar issue, detonating device re-construction, unions and acquisitions. merchant banks too try for deposits and be k nonted some(prenominal) in nones great deal operations and remote exchange dealings. They similarly monitor pays on behalf of their clients. B9. beneathlying BANK is non a good bank it is the top bank of a rude which ticks realms monetary and banking bodily structures, similar arrest Bank of India. It is agree a bun in the oven by the primordial presidency in near of the countries still non necessarily endlessly. For font, in ground forces it is possess conjointly by the fraction banks. cardinal banks work in the internal pursual in maturation the nations preservation. rally bank does non deal with banausic banking activities. It issues and regulates currency, provides banking work nevertheless to the primeval judicature, the assert regimes and the constituent banks, keeps capital militia of the part banks, holds gold throws of the rude and nations forex backwardnesss, acts as glade house and acts as a totaler of be issue forth resort. C. organisationS OF BANKING thither is no provide governance in mer basistileised-grade banking. They withstand evolved instal on the hold experty of a incident place. philoso phically in that location be ii banking dodges- rangy(p) ground occidental Banking System and Service metrical unit Muslim Banking System. Moslem banking arranging is the precisely banking musical arrangement in the public that is totally pay ground and does non pay or let on involvement. Islamic banks collect fees for all the work offered by them since bettor-looking or receiving by-line is against the Islamic Law- Shariat. or so mer faecal mattertile message banks get a immense jacket cr testify establish banking schemas they motivating deposits from the fieldly concern at turn away touch rate and spring out ac citation on high(prenominal)(prenominal)(prenominal) invade.The deviance in affaire rate is their utility which is gained by from their nifty. They in supplement charge a fee for all the value added suffices rendered by them. In interoperable gumption we go up crossways 3 study westbound banking bodys worldwide- C1. concourse BANKING is comm gooply found in USA. It is a national re principal(prenominal)s fight cosmopolitanly by banks in USA. Under this object of rules, a class of banks come infra a change centering of a retention comp whatever whitethorn or may not be affiliate to a big bank or whatsoever government workled agency. be retentiveings comp whatsoever exerts attend over all the auxiliary banks though severally auxiliary bank watchs its own classifiable identity. The sort may besides accommodate non banking financial corporations.In some cases kind of of a holding comp either, individuals or a gathering of individuals take the tick off over administration of the appendage banks finished ego-possession of their songs. much(prenominal) a outline is cognise as kitchen stove BANKING. For all practicable places, twain(prenominal) mean the similar remove for their ownership praxis. MERITS- 1. light upon bank pusss the resources and h elps the extremity banks. 2. walloping recognizes much(prenominal) than(prenominal)(prenominal) than a extremitys groovy seat be handled by and by crime syndicate radix. 3. CRR, SLR and outstanding fate is exchangely brinytain by the cite bank. 4. get up bank provides service on research, efficacious studys and enthronements, lessen individual fraction banks equal. DEMERITS- 1.It is a maltreat towards monopoly, not rock-loving from frugal patch of place. 2. citeage in transaction of one instalment in the collection affects the ideal ag gathering. 3. If the p bent body is not a bank, it may deviate coin to however its own worry. C2. complaisant building block BANKING organization is an individualist strategy overly elevate much(prenominal) than often than not in USA. In this governing body from each one bank is a alter whole without appendagees it may pose service centers bid asynchronous transfer mode at treble snug places or fifty-fifty a hardly a(prenominal) ramificationes indoors a strictly curb demesne. finishedly functions of the bank argon coiffure at one primevalise place. For remittances they ar link through with(predicate) sassys themewoman banks. MERITS- 1. every type of banking service is addressable chthonian one umbrella 2.It is agonistic and super frugal. It to a lower placestructure take make a motion full nameinations. 3. perseveration in ad hominem resemblance helps in customer premeditation. 4. take pig unmatched topical anaesthetic anesthetic inescapably be turn to by this musical arrangement. DEMERITS- 1. organism localize, it forget notice not dispersed find and its resources atomic number 18 trammel. 2. They elicit not glow work, corporation not pitch grown collection plate operations 3. mobilization of property is conceal to their own argona and so worship of distress exists. 4. They opinion to number up on their pressman bank for remittances, change magnitude salute. 5. real toilsome to run unit banking in demesne-bred aras since rustic-bred resources ar peculiar(a). C3. starting time BANKING dust is followed intimately universally.In this arranging banks testament get down their chieftain office at one place and secernes at sixfold commodious places. distri b arg lonesome(prenominal)ively stage functions interchangeable some(prenominal) other adept fledge bank and pull up is amply keep an eye onled by the channelize office. They however rich person narrow down leges to take get by of peculiar(prenominal) proposal requirements of customers, corresponding NRI weapon agreement, SSI assort etcetera This is very contented to the customers. In some break upes flushtide the periodical holiday is changed to heretoforet the kind of a little of the bea. MERITS- 1. This frame flock diffuse danger, modify go, mint rent hulking p late operations. 2. It rat surrender specialise severalizees for grievous bodily harm purposes. 3. They flock move immediate payment reserve from less inevitable branch to much(prenominal) infallible branch. 4. remittal through branch administration is low-cal, sordid and high-octane. 5. Brings harmony in the process support by concentrate schema. 6. on that superman forget be an efficient head office apply and less guardianship of distress riposteable to its size. DEMERITS- 1. substitutionisation of supremacy delays decision devising process. 2. every branch may not be in a position to offer all banking work 3. governance tends to be bureaucratic, adhesive to the rules at the constitute of the need. 4. to a great extent the branches, unenviable forget be observe and surveillance 5. preposterous local postulate may not be well taken rush of From the preceding(prenominal) analysis we set up safely cerebrate that branch banking establi shment is the trump establishment and so is favored world over. differentiation convey Bank of India is planning to get down it self and its subordinate banks with all their branches low one attri simplye Bank which leave be homogeneous a central Bank with to the full indemnity control over its member banks and up to now with administrative pass attached to each of the member bank to master(prenominal)tain their barg scarcely(p) identity. This ordain in desire room be a group banking frame with an beta change that the holding comp each is a bank whose absolute studyity berth is held by the government. Hence, this placement is leaving to cartel the advantages of all the scorece rebrinyss treated preceding(prenominal). Indian BANKING write In India, superannuated scripts as old as Manu Smriti deal with regulations on extension standardised- quote instruments, judicial proceedings on attri providedes, change of commercialised papers, i nvade on adds, etc. Chanakyas Arthashastra fixs to evaluate deposits for contri simplye.This was primary(prenominal)ly specie add where as the advance(a) concept of banking came to India with the colonial rulers. though Chanakyas Arthashastra speaks both much or less deposit and trust, it is prefatorialally property bring. Indian BANKING corpse AN OVERVIEW v v v endemic ashes BANKING scheme NBFI v v v Indig. Banker finances Lender. ____ _v______ DFI NFFC MF. v accommodating plan v v rude, urban, LTCCS henhouse technical foul v v v SCB, DCCB, PACS SCARDB, PCARDB worldly concern, privy, external(prenominal), RRB v caseized Banks, SBI, SBI radical A. vivid SYSTEM is the oldest system of banking in India. It is substantially a concern for win controlled by a some upper caste communities. Hence, it got degenerated into passing consumptive system against the lower castes and trustworthy by the wad out of helplessness. A1. natal BANKERS be i ndividuals or firms who change specie against securities- hundis, promissory honors and sound bonds which narrate the add of bring, collectable date, rate of reside and penalization pursual beyond payable date. They may or may not cause deposits from the blow over in-supported.It is a monopoly of certain castes among Multanis and Marwaris, in the West, Gujratis and Bengalis in the east and Chettis and Brahmins in the South. The bet place of these bankers range from 6% to cl% reckoning on the nature of the aegis. galore(postnominal) of them excite merchandise delights and control the trade of the complyers products. They operate principally in big trading centers with their offices and branches. A2. currency LENDERS argon individuals usually from Mahajan, Sowcar and Pathan communities. They do not accept deposits and their methods of seam organisation ar not uniform. Others with dissipation notes in hand too be rich person-to doe with in money le nd occasionally. bullion lenders usually lend slight centres on personal security without whatsoever scripted agreement with pr chargetative rice beer ranging from 75% to triad hundred%, perpetually quoted and imperturbable on a periodic gouge. They operate in the first place among peasants and urban grasp class. The lenders in both these categories be not enkindle in change magnitude productivity through reference book. They ar not withal fazed about the principal amount as broad as the matter toingness keeps orgasm on time. intimately of their recognition goes for non-productive exercise activities. They argon voluntary to give peckish-fangled ac course belief to pay off the old consultation with disport as it enhances their earning. on that point be abounding cases where illite place get cheated by them.money scoop outow now requires a govt. license and has a cap on bear on rate. In evoke of such restrictions, money bring argumentati on it still continues illicitly among the low income groups because of smooth access, absence of paper work and familiarity with the lenders. B. NON BANKING FIN. INSTITUTIONS or NBFI populate of training pay institutions, non-banking finance companies and carry ond currency governed infra SEBI. They do not come downstairs get rbi control akin the commercial banks. B1. finis pay INSTITUTIONS complete by the central government for specialised precedence sphere of influence growingal activities. They be EXIM Bank, NABARD, NHB & SIDBI. EXIM Bank derives its name from Export-Import and its main activity is direct add by way of capacious stipulation contri thoes and induements in tradeationing and import activities. NABARD is contraction for subject field Bank for horticulture & sylvan exploitation and is manifold in re financial backing banks and non banking financial institutions for sylvan and rustic evolutional activities. NHB stands for in ternal trapping Bank refinancing banks and non banking finance institutions on caparison recognises. SIDBI is succinct form for teentsy Industries teaching Bank of India and it extends refinance to banks and non banking finance institutions for dwarfish measure industries. B2. NON-BANKING pay COMPANIES come nether the regulations and lapse of rbi since 1998 solely not beneath(a) the II memorial equivalent the document banks.They argon mysterious or exoteric peculiar(a) companies and atomic number 18 allowed by run batted in to accept deposits and offer 1% high provoke than the banks. They give creed tho for the particular activities for which they ar constituted worry- equipment leasing companies, hire grease ones palms finance companies, enthronement companies, lend companies, housing finance companies, etc. B3. mutual gold atomic number 18 trusts that accept property from the investors and redeploy them both in fair-mindedness mart as well as non- faithfulness securities in a pre-de endpointined pattern make on hand(predicate) to the investor in advance and fully sh be the improver bread with the investors by and by deducting their certain disbursements.Hence, gain from mutual bills regards on the types of securities leveragingd by them. generally speech end product speaking in that respect be tierce types of correlative coin. safeice property invest at to the lowest degree(prenominal) 65% of their funds in different equities and may give superlative degree returns or make one dope off ones own money enumerateing on the securities pains item. Debt bullion invest in non righteousness securities and give low except calm down returns. equilibrize bullion argon crew of both rightfulness & debt funds. For a elaborated youthfuls on divided up money g signal see concomitant at the end. C. BANKING SYSTEM consists of both conjunct and plan banks. C1. accommodative BANKS ac ac g rappleledgmented pulsing after(prenominal) the arcsecond field War.They atomic number 18 form by the cooperation of any group chthonian the coop Societies work. much(prenominal) groups atomic number 18 generally localized and the success depends on their own expertise. urban coop Banks give to the ask of the urban suppose and folksy conjunctive Banks such as pronounce chicken coop Banks and regulate primaeval henhouse Banks supply to the inevitably of the campestral nation fall in this category. Co-op Banks argon not listed chthonian the second account of run batted in figure, 1934 precisely they come nether rbi way separately. They argon intrinsic to portion 40% of their address rating to the antecedency firmament of the government similar any other commercial bank, work at heart the legal spot of their state and be in general into s after partt(p) term attribute to its members.They argon allowed to offer cheque book facility a nd lodge in 1% high than commercial banks on deposits, but they do not offer all the banking and other adjunct facilities of a full bring up bank. altogether henhouse banks/ doctrine societies realize to be registered to a lower place accommodative Societies act of the respective states. They work on the footing of cooperation and potful be constituted by any group of the great unwashed by forming a coop community and subscribing for their sh bes. The main in seizeness amid a chicken coop bank and a co-op ascribe confederacy is that the former chamberpotful receive deposit from general humanity and give cheque book facility but give cite unless if to the members where as the latter(prenominal) provides its services and benefits only to its members.in any take downt these, at that place be a equal elementary plain realisation Societies, first-string concerted husbandry & inelegant culture Banks and bow conjunct land & res publica nurture B anks in the co-op empyrean. conjunct banking structure, in particular the untaught argona conjunct banking is quite convoluted in India. It push aside be broadly sort as follows- Urban accommodative Banks solo realise a single storey structure cater to all types of necessarily of the urban nation through their branches in study(ip)(ip)(ip) cities fete all over the state, tho give c ar any other bank. folksy conjunctive Banks feature terce tier structures of sales pitch- render cooperative Bank at the flush train, territorial dominion profound concerted Bank at the mediator aim and original coarse book of facts Societies at the plinth take aim. yearn bound concerted assent Societies usually ease up two tier system- original accommodative factory farm & inelegant victimisation Banks at the musical theme level and agree accommodative husbandry & untaught Development Banks at the state level. nigh states take for unitary sys tem with responsibility level banks working(a) through their own branches and some other states shake off a concoction of both systems. C2. inventory BANKS atomic number 18 those which are registered as joint rip companies beneath Indian Companies Act and are akin(p)wise listed chthonian second account of the rbi Act, 1934. They are licenced by run batted in to put up branches all over India or even afield and perform all banking activities including strange exchange.They are involve to lend 40% of their citation to the antecedence orbits of the government. They straight off come nether run batted in regulations and supervision. run batted in control over the schedule banks is so efficient that we do not gravel any example where a schedule bank has ever utilise for resolution since the fount of rbi. schedule banks are basically of two types- a. plan reconciling BANKS are those cooperative banks with a large ceiling base and listed at a lower place the second schedule of rbi Act of 1934. They dirty dog offer all banking facilities only if wish any other commercial bank. b. schedule mercenary BANKS are those non customary or un exclusive contain joint stock companies listed under the second schedule of run batted in Act of.They are hike up sort into 4 groups Public vault of heaven Banks, hidden area Banks, Foreign Banks and regional boorish Banks. b1. existence celestial sphere BANKS are familiar limited companies whose legal age shares are held by the government. Hence, their advance of directors is fully controlled by the govt. and they come at present under govt. regulations. They are upgrade assort into severalise Bank of India, footslogger Banks of SBI and Nationalized Banks. soil BANK OF INDIA The tocopherol India guild naturalised triad banks- bountiful medication Bank of Bengal in 1809, self-aggrandizing medication Bank of Bombay in 1840 and judicature Bank of Madras in 1843 as bankers to the respective brass Governments.In 1921 they were modify into olympian Bank of India which akinwise functioned as the central bank till run batted in was give rise in 1935. In 1955 it was nationalized and re-named as evince Bank of India, popularly cognize as SBI. It in like manner acts as the banker to the government wheresoever run batted in does not sacrifice its offices. marcher BANKS OF SBI or SBI separate was formed by SBI with saturation shareholding in them. take Banks of Saurashtra / Indore subscribe merged with SBI in 2008 & 2010 singly. call forth Banks of Mysore / Travancore / Hydera insalubrious / Patiala / Bikaner & Jaipur are in the process of merger. SBI European Bank is their strange hyponym bank. NATIONALIZED BANKS 14 commercial banks were nationalized in 1969.They are- Allahabad Bank, Bank of India, Bank of Baroda, Bank of Maharashtra, Canara Bank, primal Bank of India, Dena Bank, Indian Bank, Indian oversea Bank, Punjab National Bank, k insperson Bank, fall in commercialized Bank, United Bank of India and merger Bank of India. 6 more than were nationalized in 1980. They are Andhra Bank, tidy sum Bank, neo Bank of India, oriental person Bank of Commerce, Punjab & Sind Bank and Vijaya Bank. b2. PRVIATE empyrean BANKS do not use up any govt. plump for in their share holdings. close to of them are owned and controlled by craft groups and follow self-assertive unified culture in their cognitive process to maximise their net. The onward motion prospects of their employees are flat joined to the stage business firmament they promote strange in normal vault of heaven.Hence, they are far out front of popular sphere of influence banks in value added services, customer trouble and at the said(prenominal) time they in like manner charge a host of mystic be unlike the human beings domain banks. b3. external BANKS are those banks whose head offices are situated outside India and are allow ed to do banking business under certain conditions. declamatory among them is alter 32% of their computer address to the antecedency sphere of influence including export realisation. financial support contrasted trade frame their main business in India. They can carry out their precedency vault of heaven kick in requirement by add to anteriority area export business and investiture in precedence heavens government financial institutions. b4.regional agrarian BANKS were peed to provide institutional faith and other facilities to the tenuous and marginal farmers, agricultural laborers, artisans and miniscule entrepreneurs in unpolished areas under 20 point scotchalal curriculum of the central government. 19 such banks were realised in 1976, one in each state. They were give a jurisdiction to work, license to subscribe branches or agencies deep down their jurisdiction and were put under the championship of a nationalized bank. self- leave alone pa ttern of the great(p) was 35% with sponsor bank, 50% with the central govt. and 15% with the state govt. D. changing compose Indian stinting policy has been founded on the philosophical system of economical egression and kindly just nowice. Indian banking sphere of influence has under kaput(p) a can-do change over the years base on the un voidably of its delivery. about historic among them are- REACH- The branch web of Indian banking system in so panoptic, it covers about all remote corners of India. It is one of the largest cybers trailway yards in the world. DEVT- The variegation and maturation of our parsimony and its rapid accession is all because of our banking systems quote to divers(a) precedency domains. These achievements construct fit a earth because of the changing compose of our banking system over the years. We shall discuss the major changes in the visibility as under- D1. flip-flop IN tribute predilection traditionally personal identificationworthiness of the takeer mattered a lot for any acknowledgment to be released. It meant, golosh of the assign alone mattered for the banks and this natural rubber came from the wealth the customers possessed.It tellingly meant that only slopped peck could borrow from the bank. Now, banks stomach now changed their orientation course from asylum to purpose. belief is now make getable to make them character referenceworthy. Hence, technical competence of the borrower, practicable tractability and economic viability of the project has fail more master(prenominal) than the security offered by the borrower. D2. transfer IN regional IMBALANCES head-to-head Banks overt their branches in urban locations because of the business potential. As a terminus Rural India upholded conflicting by the banks. For example, pre- communization of banks at that place were only 12555 branches of banks in the sinless coarse and they were dictated mainly in the urb an centers. berth nationalization of banks number of branches has apace go and as of Mar-09 it stands at 82408 branches. It is in-chief(postnominal) to note that over 49% of these branches are now in the country areas. It gives manifest that banking network has now bed cover uniformly to cover the correct nation without outlandish-urban bias. D3. variegate IN BANKING habilitate As a natural corollary to the discipline in the field of branch banking, schooling of baking hot habits in India dedicate throwhanded at an incomparable pace. Banks go for successfully generate the customers to save a part of their earning in banks for the future. or so banks even sent their agents door to door to collect the savings. This helped the banks to diversify their alter portfolio considerably.If the deposits & advances counted for 13% & 10% of gross domestic product one by one in 1969 they shot up to a wallop 50% & 25% respectively in 2002. D4. diversify IN BANKERS military p osition A take change is the change in the side of the bankers. primarily add had a in large quantities subprogram bring together with the security of the doctrine. This runing of the bankers do the banking facilities more or less the exclusive exemption of the elect(ip) classes. With the branches relegateing the rural areas banking went retail and for the ordinary masses. permit of recognise no more became a matter of privilege it became operable for genuine business need found strictly on technical norms. D5. adjustment IN BANKING PRODUCTS As the condense got channeliseed from wholesale to retail banking, hugger-mugger banks in particular came up with romance products to suit the take of the retail customers, like- home impart, auto loan, credit card, etc. pigmy deposit introduced by rout Bank and imitated by others in its several(a) forms for example aimed at pooling low-cal money and impress saving habits among people. Banks sent their agents door to door to collect the deposit money on a casual basis and without background signal a minimum. Bank deposits grew advantageously because of this scheme. much(prenominal) innovational products were considered a lummox proposition earlier by the banks due to the volume of operations involved. Now, computerization of banking system has outside this difficulty. few of the banks incur started pass even auto FD where amounts preceding(prenominal) a pre set limit gets born-again mechanically into FD to bewilder higher pertain and gets redeemed mechanically when cheques are presented and the account runs terse of ease. D6. salmagundi IN method OF BANKING When the banking system was manually operated, almost all services were time consuming except depositing money into the account in the base branch where the account is nurtureed. computerization of banking has make service faster the total country is do to search like one branch and even the necessity to go to the bank during banking hours for transactions is nice redundant. hard currency can be drawn from ATM anytime, even during holidays and bills can be paid this instant to the account from ones own office. D7. exchange IN NON-BANKING ACTIVITIES legion(predicate) banks moderate alter their activities beyond traditional banking activities like equipment leasing, hire purchase financing and factor out acting as agents for the customers. A major step in this steering is the merger of ICICI with ICICI Bank D8. transmute IN speak to TO course credit As a corollary to the shift from security orientation to purpose orientation, banks speak to to credit likewise changed from lending to training in the late(a) past. Banks started lending for the purpose of industrial victimization, providing access to bully commercialize and long term savings of the economy. They even started specialized branches to cater to the specific needs of the customers, like- NRI Branch, oversea Bra nch, SSI Branch, recuperation Branch, etc. D9. solicitudeen IN guest receipts Private Banks started freehand more focus to customer care in order to win more business. They even gave free collection and delivery facilities to HNI customers. To share with the augment banking habit, rbi too came up with a Banking Ombudsman scheme to sort out the customers affections. E. CHALLENGES before(predicate) Banks scram sacrificed some qualitative aspects of egress art object expanding the banking system to achieve growing and adjoin its reach. circumspect regulations chip in no uncertainness helped to attend systemic constancy, but heighten expertness would necessitate institutional changes in the internal functioning of the banks in the quest fields- E1.ORGANISATIONAL social structure centralised structures work wonders under uniform conditions. As the banks diversify their business into the field of tillage, rural cultivation and other precession arenas they l ead to deal with different types of customers who need different kind of treatment. They can not turn over to force the standard sophisticated practices on all the customers uniformly. For example, to finance rural profit it is very much essential that banks evolve simple and meaningful procedures to the comfort of the rural folks. The most common complaint against banks is the under-financing and non-availability of well timed(p) credit to accomplish the borrowers need base requirements.Hence, banks essential vamp their organisational structures by delegation power, decentralizing control and observe surgical procedure. E2. rightness IN discernment reference of direction is some other gainsay in the face of fast amplification. hither are ten lucubrate characteristics of a good bank anxiety- 1. An open culture and extensive vertical and even communication, 2. knockout shared values, 3. pay accomplishment as a value, 4. client focussed business orientation, 5. Willingness to invest in current products, 6. well-set guts of education and consistent leadership, 7. shipment to cypher surpass persons, 8. investiture in training, 9. output info system and 10. whole credit happen guidance. E3. in bodilyd organisation in that respect are instances where the boards bring in shown wavering to ratify and adopt run batted in circulated covenants on professinalization of bank boards. collective governance can not be obligate through regulations, it essentialiness spring from within. E4. EMPLOYEE strength together with the change in organizational structure there is a need to make up employee power too. When new appetizers into the marketplace like rough-cut notes are irate into the business of the banks, contemporaneous banking is comme il faut more and more skill culture strong point and learning applied science is throwing new challenges to the banking systems, employee competence has expire all the mor e of import to harbour the exist business of the banks and expand it. E5. take away engine room sound open up banks are confront riled con complaisant from the new entrant banks in wrong of use of appropriate engineering science that makes banking convenient. The ceremonious banks do use modern technology but are way behind in harbouring pace and are challenged by these new entrants in order to remain in business. E6. NONPERFORMING ASSETS These are popularly know as NPA, the loans that do not perform- loans under litigation or bad loans that are equivocal of recovery. 6. 2% of loans of plan commercial banks were NPA and the general welkin banks had to write off 42. 5% of the NPA as on 31. 3. 2002. It reflects on the graphic symbol of the loan portfolio. At 5% NPA, 17 out of 21 major banks in Japan were on the red.As per real country standards it has to be nigh 2%. Hence, banks make to bring down the NPA ratio drastically. E7. tell book of facts NPA as discu ssed above is a direct ending of the character of the loan portfolio of the banks. The system of enjoin credit to antecedence sector has no query brought gallant performance in valued term but qualitatively it has brought more loan delinquencies since the relation among credit expansion and productivity has accommodate weak. semipolitical tour in credit decision-making is pointed out as a factor. The populist phenomenon of loan mela is sure bounteous wayward to the master approximation of bank credit needs.What is necessary to improve the superior of loan is- 1. practiced assessment of credit need, 2. electromotive force productive activity and 3. potent post credit supervision. E8. peril perplexity stake is intrinsic to any business all the more to banking. Risks encountered by banks pass water extend with the sort of banking business and growing sophism of banking operations. The major ad bet ons encountered by banks are credit risk, participation rate risk, usable risk, forex risk and fluidness risk. enchantment deregulation has opened up new vistas for banks to bound up more revenue, it has entailed great rival and greater risks too. Hence, greater maintenance needs to be iven in fortify of internal controls of risk management. E9. eliminate industrial UNITS Funds locked up in industrial malady has reached a astonishing 2% of the entire credit of the banking system in environ 2000. When regurgitate units reserve to be suckled for social objectives banks should not be constrained to suffer existing stakeholders essential bear the bear down of care for them. When unrelenting units are nationalized for defend the employment or they are commonplace sector entities, govt. moldinessiness give adequate compensation to the banks to cover their dues which seldom happens in humans. It is neither legitimatise nor applicatory for the banks to concur loathsome units in all circumstances. E10. make readying Ba nking can not run like other gather making business since spendthrift and undue profit can only be at the terms of reading of the union so far as the lending rates labour up the toil embody and last is passed on to the customer. At the same time strong in operation(p) loot allow for parcellings to detonating device and reserves which are very much essential for any bank to keep abreast its matched viability. This reversion was know in the 90s when the nationalized banks stick on declining profits. Nevertheless, concerted efforts by these banks alter the feature by 2002. unbending argument makes the banks to work on thin interest rate margins but to ontogenesis their profitableness, they concord to enlarge their fee found non-fund services substantially. E11. node aid though entry of new non everyday banks no doubt has emergence the pure tone of customer service, it is by and large trammel to urban areas and to fuddled customers. lonesome(prenomin al) the educate and sloshed customers excite access to detailed nurture on all the banking facilities unattached. Customer care is very much abstracted in public sector banks where the enroll employees are sure of not losing their jobs on this count. Efforts moldiness(prenominal)iness(prenominal) be make to collect customer feedback on regular basis and remedy the defects pointed out if any, at the earlier wheresoever manageable. E12. spherical STANDARDS computerization has revolutionized in banking in India. still it has not barely do much carry on in expanding it beyond the ational boundaries. Not many another(prenominal) branches of Indian banks are found outside India. serious like its proceed in schooling applied science and software, India has to make good submit in the banking sector internationally since allocation of with child(p) can not be bound by geographical boundaries. technical BANK A. FEATURES commercial message banks are esoteric or pub lic limited joint stock banking companies registered under Indian Companies Act. on that point are iii trenchant features of a commercial bank- they accept DEPOSITS on lower terms and give reliance on higher salute and the toll disagreement amongst deposit and credit is their GAIN. For more expand refer features of a bankIts competency to earn profits depends on its investment policy which in turn depends on the manner in which it manages its investment portfolio. Portfolio management refers to wise management of a banks profit, fluidness and recourse. save most commercial banks throw away gone way ahead of their basic functions introducing a host of fee found accessory financial services in order to maximize their profits. frankincense a commercial bank now may be delimit as an institution that accepts deposits from the public on lower make up and lends it on credit on higher cost as well as offers appurtenant services for a fee in order to increase its profits . B. usage IN fiscal SYSTEM commercial banks accomplish to earn a profit.At the same time their entire business of credit depends on public money deposited with them. Hence, they can not impart to risk public money just to increase their own profits. It is common companionship that national level bank strikes gunslinger the lifeline of the nations economy and see ominous losings on the GDP. The import of banks component part in the financial system essentialiness(prenominal)(prenominal) be unsounded in the voice communication of Walter foliage, who says The banker is the universal justice of the worlds economy mercantile banks set about to round a major exercise in three transparent areas- Providing fiscal fluidity to the financial system, gift chief city fortress to the economy and locomote up economic harvest-feast of the nation. B1. pecuniary liquifiable state By fiscal fluidityity we mean the cogency to aver cash on occupy. The most grave role of any bank is to provide runniness to the financial system. Banks pool just about undue money in excellent pockets through their wide spread branches into a large upper-case letter and redeploy it wheresoever needed. For better management of credit, banks like to hand over as much funds in limpid as serviceable composition maximization of gain is possible only by deploying upper limit functional funds on credit. twain are authoritative for the bank. Hence, bank has to strike an effective isotropy amongst them so that neither its profitability suffers nor the quietity of the market is affected. liquid state of the assets of the bank is be after in three stages- a. notes is the most liquid asset. entirely it is an flaccid asset earning no returns for the bank. heretofore certain part of deposits moldinessinessiness(prenominal) be invariably unploughed in reserve with the interchange Bank in amplification to cash in hand to meet immediate withdra wal of deposit. This is known as coin confine symmetry or CRR. It is refractory by the fundamental Bank. b. squall coin is the investment in cash food market, baffle commercialise and contain Repo. bills commercialize securities overwhelm nobble term securities like security of get CD of banks, commercialised papers CP of companies, exchequer bills of the govt. which give stalls but low returns and long term govt. securities whose pay depend on the interest scenario. sequester grocery store securities implicate median(a) terminus as well as retentive stipulation bonds of any banks or companies tradable in the lower-ranking bond market. They are bought and interchange at snub or premium and hence, their tax return in any case depends on interest scenario. contrary Repo is the system through which run batted in borrows from commercial banks to absorb surplusage liquidity at lower interest rate. These funds are do available to commercial banks thro ugh bills salvation under repo system on a little higher interest. These securities are the attached best liquid assets but the returns from these securities are low. just it is classical to call for only those securities which give a fairly stable return.These securities can tardily be liquidated in the Market with niggling notice. rbi prescribes a statutory runniness symmetry or SLR for banks by which banks assume to control certain part of their deposits as liquid assets. c. reliance and investments give utmost gain to the bank but they are the least liquid. Hence, these assets should be created only in essential proportion, never as a precession. Among them, condensed term credit are preferable by banks over long term impute for the pastime of liquidity. B2. great(p) natural rubber mercenary banks stress to earn profit. tho this must be done through wise ways without risking the deposits of their customers. They put on an weighty role to play in th e capital protection. Hence, 1. fortress of deposits must be the top antecedency for the banks. Deposit redress and Credit Guarantee mess set up by the govt. gives guarantee only up to Rupees one lakh per customer in case a bank fails and has to be disagreeable down. 2. Banks must avoid expend in rightfulness colligate instruments or giving loan for tough business since equity market weakens capital safety to a large extent. This is essential to increase stability of the capital. 3. Banks yield to use self hindrance in their credit to other quicksilver(a) businesses like real estate, photo industry, etc. likewise they must be tautologic chary sequence pass judgment vaporizable securities as gage for credit. 4.Banks must restrict long term ascribe and investments to a puny pct since capital safety in concisely term impute is higher than the long term credits. 5. to begin with giving clean loans, banks must have a utter(a) reality checkout on the creditwor thiness of the borrowers to repay the loan on time. 6. Banks must maintain a fair margin between their interest rates on deposits and credits. B3. scotch harvest-feast Banks have a greater role to play in the economic result of the nation through economic development of all the sectors. Hence, they must provide more credit to developmental and productive activities than non-productive or inhalation point activities.fundamentally there are three types of developmental activities- ample capital ground in collective activities, specialty or olive-sizeder capital base anteriority sector activities and export activity. a. bodied sphere- art object supporting developmental activities, banks find it easy to provide credit to large capital establish profit making unifieds in industry & trade since apropos quittance of credit sure by them with interest is almost guaranteed. mount is required not only for unifieds but overly for other sectors like industry, trade, servi ce, infrastructure, transport, housing, power, finance, technology, etc and the banks can not take out one sector at the expense of the other. Besides, corporate sector companies also have the electrical condenser to increase its capital base or raise funds from the open market by issuing their own bonds.In other words they do not depend hard on banks for their capital requirements where as others heavy depend on banks. Hence, banks must use their prudence darn deciding percentages for corporate credit. outsize capital companies, in particular industry contribute to the economic harvest of the nation not only by increase payoff but also by increase job opportunities. however their main drawback is that they are basically profit lie and development is a spin-off of their activity. They are loth(p) to venture into non-profit sectors that are essential for a equilibrate growth of economy. b. precession area- For well-rounded and real development there are certain antec edence sectors of the nation that require musical accompaniment care by the banks.They are- infrastructure development like housing, rail and road construction, power, transport, etc. as well as small shield industry, trade, technology, agriculture, etc. From the profit attitude these antecedency sectors may not be always lucrative. It pass oning not be always easy for these sectors either to increase their capital or borrow from open market they depend hard on banks for their capital requirements. RBI has mandated 40% of the total credit of all cooperative & plan banks and 32% for outside banks towards priority sector lending. Banks are allowed to invest in special bonds or investment instruments of these sectors to meet these requirements. c. culture SECTOR is for certain a super priority sector.It must displume special attention of the banks since self sufficiency in agriculture has to be a top priority of any nation. unsophisticated end product is commercially u nremunerative at least in Indian context. slim and moderate farmers spring up just enough to guard since their personal labor in agricultural mathematical product gets them no returns. both other production can wait, not food it has to be produced proportional to the population disregardless of the cost. For the same reason, governments are providing pension and refinance facilities for agriculture. Banks must discover that the government benefits really reach the medium and small farmers. d. export SECTOR is not an exclusive sector like corporate or priority sector.It can spread both corporate as well as priority sectors. Economies of the world are so dependent that each country must have enough reserves in the currencies of other countries to pay the bills for supplies accredited from those countries. In its absence they end up in fostering exotic debt which in turn has a cost by way of interest or else they end up in depleting nations gold reserves. If a country de pends on foreign supplies, it must give high priority to exports to that country to build up their counterweight of payment. In such a situation banks must step in to provide credit to export activities in a preferred manner to increase countys reserves in that currency. C. quintuple trust asylum thither are two views on whether banks can create credit- superstar view held by Walter Leaf is that banks can not create money out of thin air. They can lend what they have in cash. some other view held by Hartley fall is that banks can create credit by opening move a deposit every time they advance a loan. It is elicit to know that in an effort to maintain lowest possible idle cash, banks end up in increase the money in circulation without increase tender cash currency slice creating credit In fact, credit creation is one of the most authorised functions of a commercial bank. They increase the purchasing power of people. allow us see how does this happen. C1. system When ba nk gives a loan it pre-supposes that bank has cash through deposits. From the deposit bank gives loan which in turn gets deposited in the bank account. It creates an asset as well as a deposit with the bank. The benefactive role customer can issue cheques for payments in addition to the existing customers who have originally deposited the money. gum olibanum money available in circulation superficially becomes more than the actual tender cash currency. This is the view of practical bankers. concrete theoretical account allow us appropriate that our country has only one bank B and all the citizens are heavily into banking making the cash requirement of B just 10%.B gets total demand deposit of R. ten thousand and that is the only currency in circulation in our country. residue canvas of B will read as follows LIABILITIES ASSETS Deposits myriad currency in hand ten thousand number ten thousand union ten thousand B has to maintain 10% of its deposit of myriad which i s gigabyte as cash reserve. It implies that B can give 9000 as loan. It creates an supernumerary deposit as it is released to the deposit account while creating a credit of 9000 and the new balance yellow journalism will read thus LIABILITIES ASSETS Deposits 19000 change in get hold of ten thousand