BANKING ENVIORMENT -II.pptx for banking sales

This is helpful for your banking sector

1. How does money supply affect interest rates? Higher interest rates translate to a lower supply of money in the economy. Since the supply of money depletes, it raises borrowing costs, which makes it more expensive for consumers to hold debt.

2. The Evolution of Banking in India Banking in India has evolved remarkably,undergoing significant changes in its structure, operations and services, over the years. From its humble beginnings in the colonial era to the modern digitally-connected banks with a glocal footprint, the Indian banking sector is vital to the nation’s economy. We’ll glance at the journey of banking in India, through public and private sector banks including: 

3. Key factors Financial Intermediation:  At its core, banking refers to the process of financial intermediation. Banks are intermediaries between depositors and borrowers. Banks mobilise savings from individuals and businesses through various deposit products such as savings accounts, fixed deposits and recurring deposits.    Safety of deposits:  Among the foundations of banking, is the assurance of safety for depositors. The Reserve Bank of India (RBI), the central banking institution, regulates and supervises banks to maintain the stability of the financial system.   Credit and capital formation:  Banks facilitate credit creation, which stimulates economic activity and capital formation. By extending loans to individuals, businesses, and industries, banks facilitate investment and entrepreneurship.  

4. Key Factors Payment and Settlement System:  Banking includes a payment and settlement system that enables smooth transactions and commerce. From the issuance of cheques and demand drafts to the development of digital payment systems, such as Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT) and Unified Payments Interface (UPI), banks ensure the secure transfer of funds between participants.   Financial inclusion:  In recent years, banking has expanded its scope to focus on financial inclusion. The Government of India (GOI) and banks together have undertaken several initiatives to provide banking services to the unbanked and under-served sections of society. Schemes like the Pradhan Mantri Jan Dhan Yojana (PMJDY), Direct Benefit Transfer (DBT) and other microfinancing programs have helped include a marginalised population into the formal banking system.

5. The evolution of banking in India - key milestones Banking in India can be traced back to the early 19th century to the Presidency Banks that functioned during the British rule. These marked the beginning of formal banking in pre-independence India. 1806: The Bank of Bengal is established 1840: The Bank of Bombay is established  1843: The Bank of Madras is established These three Presidency Banks primarily catered to European businesses and the colonial government. Nationalisation and public sector banks Post-independence, many reforms swept through the Indian banking sector. To consolidate the banking sector and establish a central banking authority, the Reserve Bank of India (RBI) was established in 1935 and nationalised in 1949. The RBI is India’s central bank, responsible for monetary policy, currency circulation and supervisory activities. Another landmark moment was in 1969 when the GOI nationalised 14 major banks to enhance credit flow and promote economic development. The establishment of large public sector banks, such as State Bank of India (SBI), Punjab National Bank (PNB) and Bank of India (BOI) then helped expand banking across the country.

6. Liberalisation and the entry of private banks The 1990s witnessed another paradigm shift in Indian banking with economic liberalisation opening up the sector to private players. The move aimed at bringing efficiency and modernisation to the banking landscape. This marked the  entry of private sector banks including  ICICI Bank, HDFC Bank and Axis Bank, among others. Digital transformation 21st century technologies again completely changed banking in India, largely for the better. Banks began online banking services, giving customers the convenience of “anytime-anywhere” banking.  The introduction of Electronic Funds Transfer (EFT) systems like National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS) enabled swift and secure fund transfers. Automated teller machines (ATMs) made banking services more accessible. The Aadhaar biometric identification system facilitated the opening process for a bank account via a simplified KYC (know your customer) procedure.  Smartphones and the internet led to mobile banking applications and digital wallets. Customers could access financial services through their mobile devices. 

7. What Is a Fiduciary in bank What Is a Fiduciary? A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests. A fiduciary may be responsible for the general well-being of another (e.g., a child’s legal guardian), but the task often involves finances—for example, managing the assets of another person or a group of people. Money managers, financial advisors, bankers, insurance agents, accountants, executors, board members, and corporate officers all have fiduciary responsibility. 

8. Fiduciary duties Trustee and beneficiary (the most common type) Corporate board members and shareholders Executors and legatees Guardians and wards Promoters and stock subscribers Lawyers and clients Investment corporations and investors Insurance companies/agents and policyholders

9. WHAT IS SOCIAL BANKING? The term 'social banking' has been around since the 1950s, and traditionally referred to sustainable investment. Now, however, the term is more likely to mean banking through social media, peer-to-peer (P2P) lending or the development of online financial communities. These types of lending are seen as a democratisation of finance, and are often presented as solutions to problems that the traditional banking system can't or won't address. Giving mortgages to recent grads and swapping overdraft charges for low-rate loans isn't what you’d expect from a financial institution

10. What is a Bank and its main function? A Bank is a financial institution and its main function is to accept deposits from the public and lend those deposits in the form of loans for the development of Agriculture, Industry, Trade, and Commerce.  Banks play an important role in providing loans to generate profits and manage risks. This will generate economic growth and build a good relationship with customers. Providing loans will support the fulfillment of essential needs of consumers and businesses.

11. Services Offered by Banks: In India, Banks provide various services. Here we have provided a list of services provided by banks. Loan advancements Cheque payments Debit cards Credit cards Bills of Exchange discounting Collecting and paying the credit instruments Bank Guarantee Consultancy Funds remittance

12. Important Functions of Bank: Primary Functions: The primary functions of bank are  Accepting Deposits, and Granting Advances. Secondary Functions: The secondary functions of bank are providing  Agency Functions and Utility Functions. Periodic Payments Portfolio Management Periodic Collection Other Agency Functions

13. The primary functions of bank are explained below in detail.  Accepting Deposits: Saving Deposits Fixed Deposits Current Deposits Recurring Deposits Granting Advances: Overdrafts Cash Credit Loans Discounting of Bills Secondary Functions of Bank: Agency Functions: Transfer of Funds Collection of Cheques

14. Utility Functions: Draft Facility Locker Facility Underwriting Project Reports Forex Service Third Party Products Demat Accounts Social Welfare Programmes Other Utility Functions.

15. List of Different Types of Banks in India: Central Bank of the country Cooperative Banks Commercial Banks Regional Rural Banks Local Area Banks Financial Institutions in India (Specialized Banks) Small Finance Banks Payments Banks

16. Central Bank of the Country: The Reserve Bank of India is the central bank of the country. Central Bank regulates all the other banks present in India. Each country has a central bank that regulates all the other banks in that country.  The basic functions of the Reserve Bank of India are as follows, To regulate the issue of banknotes, and Keep reserves in order to secure monetary stability in India. To operate the currency and credit system of India. To provide a modern monetary policy framework to meet the requirements of an increasingly complex economy. To control the price stability with the objective of growth. maintains the banking accounts of all scheduled banks. r Banks Private Sector Banks Foreign Banks Non scheduled commercial Banks The functions of Commercial Banks are classified into two types primary and secondary. Primary Functions of Commercial Banks: Deposit Acceptance Lending Money Overdraft facility Loans & Advances Cash Credit Secondary Functions of Commercial Banks: Agency functions Credit Creation

17. Commercial Banks are the profit making institutions of the country that accepts deposits from the general public and lends money in the form of loan to individuals like normal people, entrepreneurs, businessmen, etc. The main aim of commercial banks is to earn a profit by the interest from the given loans. Commercial Banks are regulated by the central bank, the Reserve Bank of India which is the supreme financial authority of India.

18. The main functions of the Reserve Bank of India are as follows, Monetary Authority Regulator and supervisor of the financial system Manager of Foreign Exchange Issuer of currency Developmental role Regulator and Supervisor of Payment and Settlement Systems.  Banker to the Government: RBI performs merchant banking functions for the central and the state governments and also acts as their banker. Banker to banks:

19. BANKING REGULATIONS The Reserve Bank of India (RBI) is the governing body for regulating and supervising the banks. Banking Regulation Act, 1949 is an Act that provides a framework for regulating the banks of India. The Act came into force on 16th March 1949. This Act gives RBI the power to control the behaviour of banks. Banking Regulation Act, 1949 is an Act that provides a framework for regulating the banks of India. The Act came into force on 16th March 1949. This Act gives RBI the power to control the behaviour of banks. This Act was passed as Banking Companies Act, 1949. It did not apply to Jammu and Kashmir until 1956.

20. The RBI Act, 1934, The RBI Act, 1934, stands as a robust legal framework that governs the Indian banking system and the operations of the Reserve Bank of India. By understanding the main sections of this act, including Section 3, Section 4, Section 17, Section 21, and Section 35A, we gain insights into the roles, responsibilities, and powers of the central bank.

21. What are the laws governing the Reserve Bank of India? The Reserve Bank (Transfer to Public Ownership) Act, 1948 (62 of 1948). The Banking Companies Act, 1949 (10 of 1949). The Repealing and Amending Act, 1949 (40 of 1949). The Reserve Bank of India (Amendment) Act, 1949 (44 of 1949).

22. SEBI The Securities and Exchange Board of India ( SEBI) is the regulatory body for securities and commodity market in India under the administrative domain of Ministry of Finance within the Government of India. It was established on 12 April 1988 as an executive body and was given statutory powers on 30 January 1992 through the SEBI Act, 1992. SEBI's new norms for Securities exchanges mandates that it should have minimum net-worth of ₹ 1 billion and an annual trading of ₹ 10 billion. The Indian Securities market regulator SEBI had given the recognized Securities exchanges two years to comply or exit the business.

23. NORMS SEBI's new norms for Securities exchanges mandates that it should have minimum net-worth of ₹ 1 billion and an annual trading of ₹ 10 billion. The Indian Securities market regulator SEBI had given the recognized Securities exchanges two years to comply or exit the business. The SEBI is managed by its members, which consists of the following: The chairman is nominated by the Union Government of India. Two members, i.e., Officers from the Union Finance Ministry. One member from the Reserve Bank of India.

24. WHY SEBI Some criticize SEBI for that they say is a lack of transparency and direct accountability to the public for an institution with such enormous powers. The Securities and Exchange Board of India was established in its current incarnation in April 1992, following the passage of the Securities and Exchange Board of India Act by the nation's parliament.

25. What is Financial System ? For economic transformation of a country, the financial system is the key for the institutional and functional vehicle. Finance assists in reducing the gap between the present and the future, and covers every aspect like channelization and effective usage of savings and making an efficient investment. It formulates the base, the sets and the tone for the accomplishment of wider national objectives.

26. Functions of Financial System To Connect the Investors with the Savers :  The key function of a financial system is to bridge the gap between the one who saves money and the one who needs the funds. Thereby, the financial system helps in channelizing the savings in an effective manner to reap the best possible outcome. Assistance in Selection of a Project :  A good financial system helps in selection of an optimum project for investment purpose. Alongside, it also constantly monitors the outcome of the project. It facilitates in the payment process for goods and services and the movement of the products to different industries and geographical areas. Risk Allocation :  A good financial system assists in the optimum distribution of the risk component. It restricts and controls the investment in the form of savings in a particular risky venture. The basic idea is to set a tolerance limit and to ensure that investments are made only within the prescribed limits.

27. Functions of Financial System Reduction in the Borrowing and the Transaction Cost :  A sound financial system creates an ideal financial scenario that reduces the cost of the transactions. By reducing the cost, the returns for the investors are likely to rise. The borrowing cost is similarly reduced. So, this builds the habit of saving among the society. Liquidity Promotion In a financial system, the key function is to have adequate resources of money for the manufacturing of goods and services. In case of a production firm, the money should not fall short. Here, the term "money" and "monetary resources" signify liquidity. Liquidity in liberal sense is that form of the asset that can be readily converted into cash.

28. INDIAN FINACIAL SYSTEM Evolution of Indian Financial system can be classified into 3 phases: – Pre Independence Phase (Before 1947). Post-Independence Phase (1947-1991). The Liberalization era (1991 and beyond). During this phase, there was a large number of banks present in India which was around 600. Fortification of the institutional structure. Participation of financial institutions in corporate management. The organization of the Indian financial system, since the mid-eighties in general, and the launching of the new economic policy in 1991 in particular, has been characterized by profound transformation.

29. What are financial sector reforms? Financial Sector Reforms are the steps taken to change the banking system, capital market, government debt market, foreign exchange market, etc. An efficient financial sector enables the mobilization of household savings and ensures their proper utilization in productive sectors. In India, a decade old on-going financial reforms have transformed the operating environment of the finance sector from an administrative regime to a competitive market base system. Since mid-1991, a number of reforms have been introduced in the financial sector in India.

30. What are the three types of financial reform measures? On a general understanding, there are three groups of reform measures that are used to handle the problems faced by the financial sector. These are that of removal of financial repression, rehabilitation of the banking system and lastly, deepening and development of capital markets.

31. What is Risk and Return in Financial Management? When it comes to investing, risk and return come hand-in-hand – you cannot have one without the other. As an investor, typically, you need to take on more investment risk in order to realize higher investment returns. While this is not always the case, in general, investors should expect this relationship to hold. If an investor is unwilling to take on investment risk, they should not expect returns above the  risk free rate of return

32. The Risk-Return Relationship  In general, higher investment returns can only be generated by taking on higher investment risk. However, this does not hold in every single scenario. For example, by diversifying a portfolio of investment assets, a comparable return can often be generated with less risk than an undiversified investment portfolio. The risk-return trade-off is a foundational investment principle. There are many different types of investments and asset classes, such as money market securities, bonds, public equities, private equity, private debt, and real estate, to name but a few. All of these asset classes come with varying levels of investment risk.

33. Return Explained A return (also referred to as a financial return or investment return) is usually presented as a percentage relative to the original investment over a given time period. There are two commonly used rates of return in financial management. Nominal rates of return that include inflation Real rates of return that exclude inflation An investment return can come in a wide range of forms, including  capital gains ,  interest ,  dividends , or rental income in the case of real estate. Again, these investment returns are usually presented as a percentage.

34. THANK YOU Prof. Vinod David NIIT, University Neemrana, Rajasthan