Evaluation of banking Money banking and finance pptx

Money banking and finance

1. PRESENTATION Presented to Presented by Department Subject Dr. Sabahat Riaz Muhammad Tallha , Nabeel Tariq SIEBF Money banking and finance

2. Topic EVOLUTION OF BANKING

3. Function OF A COMMERCIAL BANK Basic Functions. The basic functions of a commercial bank are (a) accepting of deposits and (b) advancing of money

4. Types of accepting deposits Current Account Saving account Fixed deposit account

5. Making loans The second major function of a commercial bank is to make loans to businessmen, traders, exporters, households, etc. These loans are made against documents of title to goods, marketable securities, personal security of the borrowers, etc., etc. Of all the functions of a modern bank, advancing or lending is by far the most important. The advances comprise a very large portion of a bank’s total assets. The strength of a bank is primarily judged by the soundness of its advances.

6. The lending of money may be in any of the following forms. Loans Cash credit Overdraft Discounting of bills

7. Secondary Functions: The secondary functions of a bank are classified as (a) S and (b) Agency Functions.

8. Special Financial Services: The business of today is highly competitive. It is not enou accept deposits and make loans. Banks are now offerin currency exchange, issue of letters of credit, banka 4 commercial banks are also offering ATMs (Automated Teller Fund Transfer (EFT).

9. Agency Functions: Collection of Cheques Collection of Dividends Purchase or Sale of Securities Execution of Standing Instructions Acting as Trustee or Executor

10. ROLE OF COMMERCIAL BANKS IN THE ECONOMIC
DEVELOPMENT OF A COUNTRY Commerc a country. If the banking system in a country is effective, efficient and disciplined, it brings about a rapid growth in the various sectors of the economy. The economic significance of commercial banks is given in brief.

11. ROLE OF COMMERCIAL BANKS IN THE ECONOMIC
DEVELOPMENT OF A COUNTRY Banks promote capital formation Investment in new enterprises. Promotion of trade and industry Development of agriculture. Balanced development of different regions. Influencing economy activity Implementation of monetary policy. Monetization of the economy Export promotion cells.

12. CLASSIFICATION OF BANKS Types of Banks on the basis of sphere of activities: The commercial banks are classified into various types on the basis of their spheres of activities, ownership, domicile etc. The main types of banks in Pakistan are as under

13. CLASSIFICATION OF BANKS Central Bank Commercial Banks. Exchange Banks. Exchange Banks. Saving Banks Agricultural Banks Industrial Banks

14. Classification on the basis of ownership The banks are classified, on the basis of ownership, into three categories i.e., ( i ) Public sector banks, (ii) Private sector banks, (iii) Cooperative banks.

15. Classification on the basis of ownership Public sector banks. They are owned and controlled by the government such as National Bank, Habib Bank etc. Private sector banks. These are owned by corporations such as MCB, ABL, City Bank etc. Cooperative banks. Cooperative banks are established mainly to provide short and medium term loans for rural development in general. In Pakistan, these banks are set up under the Cooperative Society Act of 1925 in the country.

16. TEST OF EFFICIENCY OF A GOOD BANK The efficiency or performance of a commercial bank is judged as to how it manages its assets and liabilities in order to earn highest possible profit. In technical term, we can say that the efficiency of a bank is judged from its portfolio Management. A manager while managing the assets and liabilities of a bank has the following four main concerns.

17. Concerns of a banker The main concerns of a banker are as under: Liquidity management : Liquidity means the relative case and speed with which an asset can be converted into cash. The banker has to keep a portion of its total deposits in the form of cash or in a form that can be easily and quickly converted into cash to pay its depositors on demand. The liquidity is necessary for maintaining confidence of the depositors of the bank. Asset management: Another important consideration for an efficient banker is. To minimize the risk of default or the failure of the borrower to repay the loan. The risk of default can be reduced by investing in assets which have a low rate of default. The loans should be given to a large number of individuals or businesses and not a few. The diversification of loan advances keeps the assets of the bank safe and secure.

18. Concerns of a banker Liability management : Liability management is an important concern for an efficient banking. A prudent banker should try to acquire funds from the money market at low cost. They should not depend on current deposits as the primary source of bank funds. Instead they should aggressively set target goals for their assets growth. For example, the funds can be acquired from loan markets which involve lesser transaction costs.I Managing Capital adequacy: An efficient banker must decide the amount of capital he needs and then make efforts to acquire the needed capital at minimum possible cost.

19. Thank You