Management of Banks 1696920130_6524f242bf0d7.pptx

Management of Banks and financial institutions

1. MANAGEMENT OF BANKS & FINANCIAL INSTITUTIONS

2. DEFINITIONS Banking as per Banking Regulation ACT 1949 means “the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or other wise”.

3. DEFINITIONS Banking company means “any company which transacts the business of banking in India”. Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause.

4. S&P GLOBAL MARKET INTELLIGENCE'S ANNUAL GLOBAL BANK RANKING

5. STRUCTURE OF BANKING IN INDIA

6. CURRENT BANKING SCENARIO - INDIA Currently India has 12(reduced from 27) Public sector banks and RBI is the central authority that manages all the nationalized banks in India. 22 private sector banks,3 Local Area Banks, 10 Small finance banks (SFB). 6 Payments banks 44 Foreign banks, 45 Regional Rural Banks(RRB)

7. Public Sector Bank Headquarter Tag Line 1. Punjab National Bank New Delhi The Name you can Bank Upon 2. Indian Bank Chennai Your Tech-friendly bank 3. State Bank of India Mumbai With you all the way, Pure Banking Nothing Else, The Nation’s banks on us 4. Canara Bank Bangalore Together we can 5. Union Bank of India Mumbai Good people to bank with 6. Indian Overseas bank Chennai Good people to grow with 7. UCO Bank Kolkata Honors Your Trust 8. Bank of Maharashtra Pune One Family One Bank 9. Punjab and Sind Bank New Delhi Where Service Is A Way Of Life 10. Bank of India Mumbai Relationships beyond Banking 11. Central Bank of India Mumbai Central To you Since 1911, Build A Better Life Around Us 12. Bank of Baroda Gujarat India’s International Bank

8. BANKING: THE EVOLUTION, ORIGIN AND GROWTH OF BANKING The practice of safe-keeping and savings flourished in the temple of Babylon as early as 2000 B.C. Inception of banking from Merchants & Goldsmiths. Word ‘Bank’ derived from Italian word ‘Banca’ (Banco-Bench). 

9. OVERVIEW OF BANKING SYSTEM IN INDIA

10. EARLY PHASE FROM 1770 TO 1935 Bank of Hindustan – 1770: (1829-1832) General Bank of India – 1786 (1791) The East India Company established Bank of Bengal (1806), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called them Presidency Banks . 1920 – merged all the above banks and became Imperial Bank of India.

11. EARLY PHASE FROM 1770 TO 1935 In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1885 and 1913, Bank of India Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India was formed in 1935 under RBI Act,1934.

12. PRE-NATIONALIZATION (1935-1969) The Reserve Bank of India was set up on the recommendations Royal Commission on Indian Currency and Finance also known as the Hilton-Young Commission. Nationalization of Imperial Bank of India in 1955, with extensive banking facilities on a large scale especially in rural and semi-urban areas.

13. PRE-NATIONALIZATION (1935-1969) 1955: Nationalization of State Bank of India. 1955 Industrial Credit and Investment Corporation of India Ltd. (ICICI) was incorporated at the initiative of World Bank, the Government of India and representatives of Indian industry 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks.

14. NATIONALIZED BANKS IN INDIA Allahabad Bank: Founded in 1865, this is one of the oldest established joint stock banks in India. Allahabad Bank was nationalized on July 19, 1969. Andhra Bank: founded in the year 1923 & nationalized in April 1980 . Bank of Baroda :was established in 1908 & was nationalized in 1969. Bank of India :was established in the year 1906 and was nationalized in the year 1969 Bank of Maharashtra: was founded in the year 1935 & nationalized in the year 1969

15. NATIONALIZED BANKS IN INDIA Canara Bank: It was established in the year 1906 and was nationalized in the year 1969 Central Bank of India: founded in the year 1911 and was nationalized in 1969. Corporation Bank established in the year 1906 nationalized in the year 1980 Dena Bank: as founded in 1938 by Devkaran Nanjee and was nationalized in 1969. Indian bank : founded on 15 August 1907 & was nationalized in 1969

16. NATIONALIZED BANKS IN INDIA Indian Overseas Bank : established in the year 1937 and was nationalized in 1969 Oriental Bank of Commerce was founded in 1943 & nationalized in the year 1980. Punjab and Sind Bank was founded in 1908 & was nationalized in the year 1969 Punjab National Bank was founded in 1894 & was nationalized in the year 1969 Syndicate Bank: established in 1925 & was nationalized in the year 1969

17. NATIONALIZED BANKS IN INDIA UCO Bank: United Commercial Bank was established in 1943 & nationalized in 1969. Union Bank of India: This bank was initiated in 1919 and was nationalized in 1980 United Bank of India : was founded 1950 and was nationalized in 1969 Vijaya Bank: was established in 1931 & was nationalized in the year 1980

18. POST NATIONALIZATION (1969-1990) Emphasis on credit to ‘priority sectors’ and emergence of food credit’ (that is, credit for the procurement of food grains). PM initiated the second spate of bank nationalization. This time about six banks were nationalized and the Government of India controlled over 90 percent of the banking business in the country. Public sector banks in India rose to approximately 800% and deposits and advances took a huge jump by 11,000%.

19. MODERN PHASE (1990-PRESENT) In 1991, under the chairmanship of M Narasimham, a committee was setup by his name which worked for the liberalization of banking practices. New banks came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, UTI Bank (now re-named as Axis Bank), ICICI Bank and HDFC Bank.

20. MODERN PHASE (1990-PRESENT) In 1994, Private sector banks were permitted to commence operations in India. To raise the capital to meet the capital adequacy norms through capital market route, provided the government holding does not fall below 51%. FDI/FII limits on investments in shares of private sector banks were raised to 51% in 2001. Foreign banks with restriction on branch opening and operation were allowed to enter on selective basis in 2004. More liberal entry for foreign banks was proposed after April 2009.

21. KEY RECOMMENDATIONS BY NARASIMHAM COMMITTEE Reduction in the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) Redefining the priority sector Deregulation of Interest rates

22. SCHEDULED BANK It is a bank that is listed under the second schedule of the RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have to fulfill certain conditions such : As having a paid up capital and reserves of at least 0.5 million. Satisfying the RBI that its affairs are not being conducted in a manner prejudicial to the interests of its depositors. BANK LIST April 13, 2020

23. SCHEDULED BANK Every Scheduled Banks enjoys following facilities; 1. Scheduled Banks are eligible for obtaining debts/loans on bank rate from the RBI. 2. Scheduled Banks automatically acquires the membership of the clearing house. 3. It get the facility of the rediscount of first class exchange bills from RBI. This facility is provided by the RBI only if the Scheduled Banks deposit average daily cash with the RBI.

24. NON-SCHEDULED BANK The banks which are not included in the list of the scheduled banks are called the Non- Scheduled Banks. Non- Scheduled Banks are also not eligible for having loans from the RBI for day to day activities but under the emergency conditions RBI can grant loan to them. Akhand Anand Co-operative Bank Limited Alavi Co-Operative Bank Limited Amarnath Co-Operative Bank Limited Amod Nagrik Sahakari Bank Limited

25. COMMERCIAL BANKS Commercial banks may be defined as, any banking organization that deals with the deposits and loans of business organizations. It issue bank checks and drafts, as well as accept money on term deposits.   It also act as moneylenders, by way of installment loans and overdrafts and also allow for a variety of deposit accounts, such as checking, savings, and time deposit.

26. TYPES OF SCHEDULED COMMERCIAL BANKS Public Sector Banks- majority stake is held by the Government of India Private Sector Banks -majority of share capital of the bank is held by private individuals. Foreign Banks: These banks are registered and have their headquarters in a foreign country but operate their branches in our country. Regional Rural Banks : established under the provisions of an Ordinance promulgated on the 26th September 1975 and the RRB Act, 1976 with an objective to ensure sufficient institutional credit for agriculture and other rural sectors.

27. CO-OPERATIVE BANKS It is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. The primary financiers of agricultural activities, some small-scale industries and self-employed workers. Co-operative banks function on the basis of “no-profit no-loss”.

28. CO-OPERATIVE BANKS Primary Urban Co-op Banks Primary Agricultural Credit Societies District Central Co-op Banks State Co-operative Banks Land Development Banks

29. TYPES OF BANKS Organized and unorganized banking Scheduled and Non-scheduled banks Indigenous Bankers Central Bank Commercial Bank  Development Banks Co-Operative Banks Land Mortgage Banks Regional Rural Banks National Bank for Agricultural and Rural Development (NABARD) Exchange Banks Exim Bank Small finance banks

30. TYPES OF BANKS Indigenous Bankers: these are private firms or individuals who operate as banks and as such both receive deposits and give loans. The system of indigenous banking in India dates back to ancient times. Four main sub-groups Gujarati Shroff's, Shikarpuri or Multani Shroff's, Chettiars of the South, and Marwari Kayas of Assam

31. TYPES OF BANKS Central Bank: which controls a country’s money supply and monetary policy. It acts as a bank to other banks, and a lender of last resort. India Reserve Bank of India (RBI) is the Central Bank. Development banks are specialized financial institutions. To promote economic development, development banks provide medium term and long term loans the entrepreneurs at relatively low rate of interest rates. Examples: IDBI,ICICI,IFCI

32. DEVELOPMENT BANKS Industrial Finance Corporation of India (IFCI), 1948 Industrial Credit and Investment Corporation of India (ICICI), 1955 Industrial Development of Bank of India (IDBI), 1964 State Finance Corporation (SFC), 1951 Small Industries Development Bank of India (SIDBI), 1990 Export Import Bank (EXIM) Small Industries Development Corporation (SIDCO) National Bank for Agriculture and Rural Development (NABARD).

33. COMMERCIAL BANKS DEVELOPMENT BANKS Provide short term loans. Provide long term loans. Accept deposits from the public. Accept deposits from commercial banks, Central and State governments. Direct finance to customers. Provide refinancing facilities to commercial banks. Plays an important role in the money market. Play an important role in hire purchase, lease finance, housing loan. Public sector banks have their share capital contributed by the government while private sector banks have share capital contributed by the public. Central and Statement governments contribute capital. Promote savings among the public and help commercial activities. They promote economic growth of the country.

34. TYPES OF BANKS Land Mortgage Banks : The Land Development Banks (LDBs) are essentially co-operative institutions. All the LDBs are registered under the Co-operative Societies Act. They grant loans against the security of land or other agricultural property. They charge very high rates of interest. States like Bihar, Gujarat, Maharashtra, and Uttar Pradesh have a unitary structure of the LDBs. Other states have a federal structure.

35. TYPES OF BANKS National Bank for Agricultural and Rural Development (NABARD) This bank was established in 1982 in India in view of providing the rural credit to the farmers. It is an apex institution which co­ordinates the functioning of different financial institutions working in the field of rural credit.

36. TYPES OF BANKS Exchange Banks :These banks are engaged in buying and selling foreign exchange. These banks help the growth of international trade Exim Bank :is the premier export finance institution in India, established in 1982 under Export-Import Bank of India Act 198.It is popularly known as ‘Export Import Bank’. Such banks provide long term financial assistance to the exporters and importers.

37. TYPES OF BANKS Small finance banks : The main customers of small finance banks include micro industries, small and marginal farmers, unorganized sector entities and small business units. These are licensed under Section 22 of the Banking Regulation Act, 1949 and are governed by the provisions of RBI Act, 1934 and FEMA Payment banks: This is a relatively new model of bank in the Indian Banking industry. It was conceptualized by RBI and is allowed to accept a restricted deposit. The amount is currently limited to Rs.1 Lakh per customer. They also offer services like ATM cards, debit cards, net-banking and mobile-banking .

38. BANKING SYSTEM Branch Banking Unit Banking Group Banking Mixed banking Correspondent Banking Investment Banking Retail & Wholesale Banking Universal Bank­ing

39. BRANCH BANKING Branch banking is a banking method wherein a bank operates in more than one place to provide banking services to customers, through its branches. Rate of interest will be fixed by the head office, and directed by the central bank. It has a central office called as the head office and other offices which are set up at different locations to serve the customers are called as branches.

40. BRANCH BANKING MERITS DEMERITS Economies of Large Scale operations Delays in Decision-making Proper use of capital High operating and maintenance expenses Risks-spreading Economy Unhealthy Competition among branches Easy and cheaper transfer of funds Regional imbalances Greater Safety and Liquidity: Emergences of non profitable branches Diversification of Operations Danger of mismanagement Proper Utilization of Funds Effective Central Bank Control

41. UNIT BANKING Unit banking is that system of banking in which there is a single small banking company, that provides financial services to the local community. A unit bank has no branches at all and for the purpose of providing facilities related to remittance and collection of funds Rate of interest is not fixed and the bank has its own policies and norms.

42. UNIT BANKING MERITS DEMERITS Efficient Working Failure to Spread Risks & high risk Strong personal relations Limited Resources Quick decision Non-diversified Services Local Utilization of Deposits No Economies of Large Operations Less Irregularities Lack of Fund Mobility Low Overhead Cost Depends upon the correspondent banks for remittance of funds More Operational Freedom Does not Provide Complete Banking Service

43. GROUP BANKING Group banking is a type of multiple office banking consisting of two or more banks under the control of a holding company, which itself may or may not be a bank. Individual banks may be unit banks, or banks operating branches or a combination of the two. Participating banks retain their own boards of directors which are responsible to the supervising and regulatory authority and depositors for the proper operation of the bank.

44. GROUP BANKING MERITS DEMERITS Centralized Administration by parent company/Bank Lack of effective management Pooling of Resources Rigid control Do not need large Cash Reserves Chain Reaction Increase in Efficiency Less facilities Economies of Large Operations  Guidance of experts

45. MIXED BANKING Mixed banking is an approach where banks undertake both commercial and industrial banking by providing short term as well as long term loans. Under the British banking system, the commercial banks give short- term loans to commerce and industry. Mixed banks perform the usual banking functions and also provide industrial finance. Shroff committee recommended that Indian banks can indirectly help industrial sector.

46. MIXED BANKING MERITS DEMERITS Provide Initial Capital Against the Liquidity Principle Underwrite Shares and Debentures  Heavy Losses Higher Profits Fear of Overinvestment Help in Feasibility Reports Scope for over lending Help in Industrialization Threat to stability of banks Expertise Advice to Customers

47. CORRESPONDENT BANKING SYSTEM Correspondent banks are financial institutions that act as an agent on behalf of other financial institutions, usually foreign banks. It may perform Treasury services, manage foreign exchange, manage international investments and facilitate international trade and finance on behalf of the foreign bank. The correspondent bank charges the foreign bank for these services.

48. CORRESPONDENT BANKS MERITS DEMERITS Rapid Movement of Funds Take excess advances on the basis of the deposits of their correspondent country banks Help in Providing Finance Operate against the principles of safety and liquidity Help in Transfer of Funds Help in Foreign Exchange Transactions Increase in Mobility of Credit

49. INVESTMENT BANKING Investment banking is a special segment of banking operation that helps individuals or organizations raise capital and provide financial consultancy services to them.  Bank of America, Citigroup Investment Banking, and JP Morgan, SBI Capital markets Ltd are some of the largest investment banks in India.

50. WHOLE SALE & RETAIL BANKING   Wholesale banking refers to that banking which targets corporate or big customers and their main focus is providing services to corporate clients. Loans such as loan for setting industry, machinery advance, export credit are some of the examples of loans given in wholesale banking.

51. RETAIL BANKING Retail banking refers to that banking which targets individuals and the main focus of such banks is retail customer. Loans such as car, housing, educational, personal loans are some of the examples of loans given in retail banking.

52. UNIVERSAL BANKING Universal Banking is making available all banking services and products under one roof. In other words, universal banking is a supermarket of financial services, where the bank customer can get all banking products and services at one place under a single roof. This type of banking started in Germany around the end of the 19th century.

53. MERITS DEMERITS Investors' Trust Different Rules and Regulations Economics of Scale Effect of failure on Banking System Resource Utilization monopoly power in the market. Diversification of activities Conflict of Interest One-stop Shopping

54. CENTRAL BANK A central bank is a financial institution that is responsible for overseeing the monetary system and policy of a nation or group of nations, regulating its money supply, and setting interest rates. India- Reserve Bank of India (RBI) USA – Federal Reserve (FED) UK – Bank of England Switzerland- Swiss National Bank UAE Central Bank of United Arab Emirates China- People’s Bank of China Japan- Bank of Japan 19 Member States of EU (Germany, Italy, France etc. European Central Bank Russia- Bank of Russia

55. The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as: "to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth."

56. SHRI SHAKTIKANTA DAS, IAS Retd., Former secretary, department of revenue and department of economic affairs, ministry of finance, government of India assumed charge as the 25th governor of the reserve bank of India effective December 12, 2018. Dr. M. D. Patra 15.01.2020 onwards Shri Mahesh Kumar Jain 22.06.2018 onwards Shri B.P. Kanungo 03.04.2017 onwards DEPUTY GOVERNORS GOVERNORS-RBI

57. The Reserve Bank of India performs the supervisory function under the guidance of the Board for Financial Supervision (BFS) was constituted in November 1994 as a committee of the Central Board of Directors of the Reserve Bank of India under the Reserve Bank of India (Board for Financial Supervision) Regulations, 1994. In April 2018, a Sub-committee of the BFS was constituted, under Para 11 & 12 of the Reserve Bank of India (BFS) Regulations, 1994. Performs the functions and exercises the powers of supervision and inspection under the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949, in relation to Payments Banks, Small Finance Banks, Local Area Banks, small Foreign Banks, select scheduled Urban Co-operative Banks, select Non-Banking Financial Companies and Credit Information Companies. The Sub-committee is chaired by the Deputy Governor in charge of supervision and includes the three Deputy Governors and two Directors of the Central Board as Members.

58. LEGAL FRAMEWORK Acts administered by Reserve Bank of India Reserve Bank of India Act, 1934 Public Debt Act, 1944/Government Securities Act, 2006 Government Securities Regulations, 2007 Banking Regulation Act, 1949 Foreign Exchange Management Act, 1999 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Chapter II) Credit Information Companies(Regulation) Act, 2005 Payment and Settlement Systems Act, 2007 Payment and Settlement Systems Regulations, 2008 and Amended up to 2011 and BPSS Regulations, 2008 The Payment and Settlement Systems (Amendment) Act, 2015 - No. 18 of 2015

59. LEGAL FRAMEWORK Other relevant Acts Negotiable Instruments Act, 1881 Bankers' Books Evidence Act, 1891 State Bank of India Act, 1955 Companies Act, 1956/ Companies Act, 2013 Securities Contract (Regulation) Act, 1956 State Bank of India Subsidiary Banks) Act, 1959 Deposit Insurance and Credit Guarantee Corporation Act, 1961 Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 Regional Rural Banks Act, 1976 Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 National Bank for Agriculture and Rural Development Act, 1981 National Housing Bank Act, 1987 Recovery of Debts Due to Banks and Financial Institutions Act, 1993 Competition Act, 2002 Indian Coinage Act, 2011 : Governs currency and coins Banking Secrecy Act The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003 The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993

60. FUNCTIONS OF THE RESERVE BANK OF INDIA Monetary Authority Issuer of currency Banker to Government Custodian of Cash Reserves of Commercial Banks Custodian of Country’s Foreign Currency Reserves Lender of Last Resort Central Clearance and Accounts Settlement Controller of Credit Developmental role

61. COINS & NOTES IN CIRCULATION

62. BANKING REGULATION ACT The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India. Passed as the Banking Companies Act 1949, it came into force from 16 March 1949 and changed to Banking Regulation Act 1949 from 1 March 1966. In 1965 it was amended to make it applicable to cooperative banks and to introduce other changes

63. BANKING REGULATION ACT The Banking Regulation Act 1949 is a legislation in India that regulates all banking firms in India. Initially, the law was applicable only to banking companies. But, 1965 it was amended to make it applicable to cooperative banks and to introduce other changes. There are total 55 Sections in the Banking Regulation Act, 1949.  

64. BANKING REGULATION ACT Section 7 - Use of words “bank”, “banker”, “banking” or “banking company” Section 10BB: Power of Reserve Bank to appoint [chairman of the Board of directors appointed on a whole-time basis or a managing director] of a banking company. Section 11: Requirement as to minimum paid-up capital and reserves Section 12:  Regulation of paid-up capital, subscribed capital and authorized capital and voting rights of shareholders Section 21: Power of Reserve Bank to control advances by banking companies Section 21A: Rates of interest charged by banking companies Section 22(1): Licensing of banking companies Section 23: Restrictions on opening of new, and transfer of existing, places of business.

65. BANKING REGULATION ACT Section 36AE : Power of Central Government to acquire undertakings of banking companies in certain cases Section 44A: Procedure for amalgamation of banking companies. Amalgamation of two banking companies is under the provisions of Section 44A of the Banking Regulation Act, 1949. Amalgamation of a banking company with a non-banking company is governed by sections 391 to 394 of the Companies Act, 1956. Section 47A: Power of Reserve Bank to impose penalty  Section 49A: Restriction on acceptance of deposits withdrawable by cheque

66. RESERVE BANK OF INDIA ACT, 1934 Reserve Bank of India Act, 1934 is the legislative act under which the Reserve Bank of India was formed. This act along with the Companies Act, which was amended in 1936, were meant to provide a framework for the supervision of banking firms in India. Section 17 – Explains the way in which RBI will work  Section 18 – Describes emergency loans to banks Section 21 – Asserts that RBI needs to conduct the banking duties of the central banking

67. RESERVE BANK OF INDIA ACT, 1934 Section 22 – Grants the power to RBI to issue the currency Section 24 – States that the highest denomination note could be Rs.10,000 Section 28 – Empowers the RBI to form laws concerning the exchange of damaged and imperfect notes Section 31 – Describes that in India only the RBI / the central government can issue and accept promissory notes that are due on request Section 42(1) – States that every scheduled bank need to hold an average daily balance with the RBI

68. NBFI Non banking financial institutions(NBFI) is a heterogeneous group of institutions that caters to a wide range of financial requirements and can be broadly divided into financial institutions ( FI) and non banking financial companies (NBFC).

69. EXIM Bank Export-Import Bank of India – Established in 1982 Controlled by Government of India (100%) Provides Loan/credit/finance to exporters and importers Promotes cross border trade and investment NABARD National Bank for Agriculture and Rural Development – Established in 1982 Controlled by → GoI (99.3%) + RBI (0.7%) Regulatory authority of Cooperative banks + RRBs Manage Rural infra. Development fund (RIFD) Finances State cooperative banks (SCB), RRBs, MFIs, Cottage/handicraft (SHG) etc. All India Financial Institutions (AIFI)

70. SIDBI Small industries development bank of India – Established in 1990 Controlled by SBI, LIC, IDBI other public sector banks, insurance companies etc. Manages SEDF (Small enterprises development fund – Funded by Foreign banks < 20 branches if PSL not met) Provides finance to State Industrial Development Corporation (SIDC), State finance corporations, MSME sector and banks NHB National Housing Bank – Established in 1988 Apex institution for housing finance in India Controlled by RBI (100%) Provides finance to banks and NBFCs for housing projects Manages RESIDEX index (Housing sector-inflation index)

71. PRIMARY DEALERS The Primary Dealers system in the government securities market was introduced by the RBI in 1995. Primary dealers are registered entities with the RBI who have the license to purchase and sell government securities. The role of Primary Dealers is to:  (i) commit participation as Principals in Government of India issues through bidding in auctions  (ii) provide underwriting services  (iii) offer firm buy – sell / bid ask quotes for T-Bills & dated securities  (v) Development of Secondary Debt Market Examples → Morgan Stanley, Goldman Sachs, JP Morgan Chase, Standard Chartered Bank, HSBC + SBI, Kotak Mahindra etc.

72. NBFC Non-Banking Financial Company  and it refers to a company that has been registered under the Companies Act, 1956. These non-banking financial companies engaged in the business of loans and advances, acquisition of shares, stocks, bonds, debentures and securities. Financial institutions that provide banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license. As defined under Section 45 I (a) of the RBI Act, 1934, a company can only register itself as NBFC if it is already incorporated and has a minimum net owned fund of Rs. 2 crores RBI is entrusted with the responsibility of regulating and supervising some of the NBFCs by virtue of powers vested under Reserve Bank of India Act, 1934.

73. FINANCE - NBFC NET PROFIT AS PER THE LATEST PROFIT & LOSS ACCOUNT AVAILABLE. Company Name Last Price Change % Change Net Profit (Rs. cr) Bajaj Finance 2,828.90 -28.85 -1.01 4,881.12 Muthoot Finance 1,086.70 1.40 0.13 3,018.30 Shriram Trans 689.35 -1.10 -0.16 2,501.84 Bajaj Holdings 2,549.90 -70.20 -2.68 1,826.87 Manappuram Fin 151.30 -1.25 -0.82 1,230.30 Shriram City 671.25 -8.65 -1.27 1,000.52 M&M Financial 167.65 -1.15 -0.68 906.40 Sundaram Fin 1,455.55 25.35 1.77 723.95 Spandana Sphoor 543.75 -7.85 -1.42 336.69 L&T Finance 65.75 -1.15 -1.72 266.81 https://www.moneycontrol.com/stocks/marketinfo/netprofit/bse/finance-nbfc.html

74. NBFCs are classified into two categories: Deposit-taking Non-Banking Financial Company [NBFC-D] Non-Deposit taking Non-Banking Financial Company [NBFC-ND]

75. FUNCTIONS OF NBFI Transfer of funds from the savers to the investors. Large size of the asset portfolios  Reduction of risk through portfolio diversification Promoting savings in the country. Earn profits by investing the mobilised savings

76. RECENT TRENDS IN INDIAN BANKING SECTOR

77. DIGITALIZATION IS CHANGING BANKING- BY WORLD ECONOMIC FORUM March 2020  survey  by Lightico found that 82% of customers were concerned about visiting their branch in person and that 63% of those polled were now more willing to try digital applications. New technologies will drive banking transformation over the next 5 years   Cloud technology Software as a service (Saas ) Artificial intelligence will separate the winners from the losers in banking example, are using advanced investment algorithms to strengthen their portfolio management Banks will overhaul their business models to create digital ecosystems 80% of respondents believe that banking will become part of a platform of services. And 45% are committed to transforming their business models into digital ecosystems

78. CHANGING DYNAMICS IN BANKING INDUSTRY

79. BANKS WILL ENHANCE SERVICES WITH EXTERNAL APIS Banks have made use of application programming interfaces for years, but APIs will increasingly be used to enable new services. As The Financial Brand notes, APIs “provide the gateway for innovative, contextual solutions that would be difficult to offer without open banking.” 50% of global Tier 1 and Tier 2 banks will offer at least five external APIs. Banks are increasingly partnering with financial technology companies via open APIs. Part of that will be driven by regulatory requirements.

80. MOBILE BANKING WILL BECOME MORE FRICTIONLESS Mobile banking will continue to accelerate past standard banking in customer preference as their digital, user and customer experiences become more enriched and data-informed. This will include consumer-to-business frictionless digital banking, consumer-to-consumer one-click payments, new crypto currency opportunities, password-free biometrics, locational services and offers, and conversational interfaces.

81. ARTIFICIAL INTELLIGENCE WILL IMPROVE THE CUSTOMER EXPERIENCE Artificial intelligence will help banks automate processes and improve the customer experience. Robots are 50 to 90 percent less costly than offshore or onshore employees, and that banks will increasingly invest in AI to become more efficient while still maintaining strong customer service. There is a growing demand to maintain lean operations while delivering exceptional customer experience at lower costs. Over the next two or three years, banks will add AI capabilities to their apps

82. SECURITY WILL BECOME MORE ROBUST VIA BIOMETRICS Banks will increasingly seek ways to add new layers of security to their services. Spending will rise by 20 percent on next-generation security-based authentication methods, as banks strive to build “digital trust” with their customers. Customers have become more comfortable authenticating payments on their smartphones via thumbprints. Banks will extend that to facial recognition and voice prints. As customers become overwhelmed with trying to remember numerous passwords, biometric authentication methods will help simplify security processes and provide more secure methods of authentication.

83. IOT WILL BE DEPLOYED ON SMALL SCALE There will be more proof-of-concept deployments next year, as banks pick a few high-traffic branch locations to test IoT technologies. Banks need to see how customers will react to sensors in branches. For example, a customer could walk into a branch and a bank could use beacons or sensors to authenticate a customer via their biometrics. That could then send a signal to an ATM to pre-stage a cash withdrawal based on the customer’s preferences. As soon as the customer inputs their PIN number, the money would be dispensed. Such a frictionless transaction could give customers a “wow” factor and make them think highly of IoT. ATM manufacturers are embedding these capabilities.

84. According to NASSCOM, things will continue to look up with Indian fintech market potentially touching 2.4 billion dollars by 2020. Paytm, MobiKwik, Policy Bazaar, PhonePe, PayU, Kissht, Shubh Loans, Lending Kart and Faircent.

85. FINANCIAL INCLUSION Definitions : It is the process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair & transparent manner by mainstream institutional players. (RBI 2014) Committee on Financial Inclusion defined financial inclusion as “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost” (Rangarajan 2008).

86. FINANCIAL INCLUSION List of the financial inclusion schemes in the country: Pradhan Mantri Jan Dhan Yojana (PMJDY) Atal Pension Yojana (APY) Pradhan Mantri Vaya Vandana Yojana Stand Up India Scheme Pradhan Mantri Mudra Yojana Pradhan Mantri Suraksha Bima Yojana (PMSBY) Sukanya Samriddhi Yojana Jeevan Suraksha Bandhan Yojana Credit Enhancement Guarantee Scheme (CEGS) for Scheduled Castes (SCs) Venture Capital Fund for Scheduled Castes under the Social Sector Initiatives Varishtha Pension Bima Yojana (VPBY)

87. OBJECTIVES OF FINANCIAL INCLUSION To help people secure financial services and products at economical prices such as deposits, fund transfer services, loans, insurance, payment services, etc. It aims to establish proper financial institutions to cater to the needs of the poor people. To increase awareness about the benefits of financial services among the economically underprivileged sections of the society. To improve financial literacy and financial awareness in the nation. It aims to provide tailor-made and custom-made financial solutions to poor people as per their individual financial conditions, household needs, preferences, and income levels.

88. BRANCHLESS BANKING Branchless Banking (BB) is one of the marvels of innovation in the fields of Information Communication Technology (ICT)and BPR (Business Process Re-engineering). It is the mode of rendering financial services through distribution network without having conventional branch brick and mortar set up. Instead of setting up formal bank branches, these systems use a network of human agents to facilitate banking transactions, thereby reducing the cost of banking for people with small cash holdings.

89. ADVANTAGES OF BRANCHLESS BANKING Customer Perspective: From the customer perspective, it is a convenience all the way. Banking Correspondents have come as a boon to these folks by helping them enjoy the banking services without going through the hassle of travelling. Business Perspective: From the perspective of banks, it is less costly. There are an approximately 50% savings in cost when a bank moves to branchless channels instead of opening traditional bank branches. The saved cost can be utilized for various functions like launching newer products or reaching out to newer geographies.

90. UNIVERSAL BANKING Universal banking is a system in which banks provide a wide variety of financial services, including commercial and investment services It is a combination of Commercial banking, Investment banking, Development banking, Insurance and many other financial activities. It is a place where all financial products are available under one roof. “ A universal bank is a financial service conglomerate combining retail, wholesale and investment banking services under one roof and reaping synergies between them

91. BNP Paribas, Deutsche Bank, Morgan Stanley, and JP Morgan Chase, Citigroup, Bank of America, UBS, Credit Suisse, HSBC, and Barclays are also universal banks. In fact, the twenty largest banks in the world are all universal banks.

92. ADVANTAGES OF UNIVERSAL BANKING Investors' Trust Economics of Scale Resource Utilisation Profitable Diversification Easy Marketing One-stop Shopping

93. DISADVANTAGES OF UNIVERSAL BANKING Different Rules and Regulations  Effect of failure on Banking System Monopoly Conflict of Interest 

94. E -WALLET E-wallet is a type of electronic card which is used for transactions made online through a computer or a smartphone. Its utility is same as a credit or debit card. An E-wallet needs to be linked with the individual’s bank account to make payments. E-wallet has mainly two components, software and information. The software component stores personal information and provides security and encryption of the data.  

95. ADVANTAGES Easy accessibility Simple to load money Range of uses (DTH, postpaid, data card and broadband to buying air, bus or train tickets) Split bill facility Ensures timely payments Incentives and Promotions Quick transfer of funds

96. DISADVANTAGES Investment Support Technology System Outages Security

97. REFERENCES https://www.rbi.org.in https://indianmoney.com/articles/banking-system-in-india https://www.yourarticlelibrary.com/economics/7-major-functions-of-the-reserve-bank-of-india/2764 https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RWF15012018_FCD40172EE58946BAA647A765DC942BD5.PDF https://www.toppr.com/guides/general-awareness/banking/nationalization-of-banks/