MANAGEMENT OF BANKS……

PART……1….
MATS….2009-2011 BATCH…3RD TRIMESTER…………….

1. INTRODUCTION.

⇒ A financial Institution.
⇒ A service provider.
⇒ Back bone of Financial system.
⇒ Varied identified services.
⇒ Everybody needs this Institution.
⇒ 200 years old history.
⇒ Constitution is same but different category.
⇒ One regulatory authority.
⇒ Objective…GROWTH WITH PROFIT.
⇒ All monetary transactions done through these Institutions are
accepted as genuine.

2. HISTORY OF BANKING.

 Early 19th century saw need of a Commercial bank.

 1806 saw the establishment of first Commercial bank at Kolkatta
by East India company.
 This was Bank of Bengal. Also known as Presidency bank.
 Similar banks were opened as Bank of Bombay and Bank Of
Madras.
 1906-1913..saw many new Banks commencing business.
 Lack of regulations ..many of them were liquidated.
 1921…..saw the Presidency Banks became IMPERIAL BANK
OF INDIA..
 This was partly functioning as Central bank and Commercial
bank.
 1935..ESTABLISHMENT OF RESERVE BANK OF INDIA…AS
A REGULATORY AUTHORITY FOR BANKING .
 IBI handed over three important functions of Central bank to
RBI
 1955…I.B.I AFTER NATIONALISATION BECAME SBI.
 1948…saw the First DFI promoted by Government by an act of
parliament ie I F C I…
 1959…some Banks in the princely states were nationalized and
brought under SBI management
 1961….RBI formed a subsidiary …DICGC …to protect the
deposits of the depositors to bring in confidence to build up the
business and also encourage banks to extend small loans which
was being insured.
 1961………ICICI WAS FORMED BY AN ACT AS A DFI.
 1964………IDBI WAS FORMED BY AN ACT..AS A DFI
 These were formed for Industrial financing …as a Long term
lending institutions. Survey...study was done on various industries
to understand the proper ways and means of development.
 BY THE PARTICIPATION OF STATE GOVERNMENT
S.F.C.`S WERE FORMED AT STATE LEVEL.
 BOTH THESE WERE DIRECT LENDING AND
REFINANCING INSTITUTIONS.
 Commercial banks then were known as Short term funding
institutions .
 Agriculture was second biggest after the industry and was back
bone of our country ..as we were agro based economy.
 1969…Government came up with a scheme known as Lead bank
scheme
 1969…Government with an intention of making Banking as Mass
banking …nationalized 14 banks with rs 50.00 crs deposits.
 1980… 6 BANKS WERE NATIONALISED with rs 200.00c rs
deposits.
 1975…LEAD BANK SCHEME …FOR RURAL
DEVELOPMENT.. was implemented by asking State bank group
and Nationalised banks to sponsor a bank in an underdeveloped
District all over India. 336 such districts were identified .
 1978 such banks were formed and commenced functioning in
remote places.
 1984 saw the first set back for the Banks due to political
intervention.
 1984-1987 saw the worst performances by the banks and were in
loss.
 GOVERNMENT ESTABLSIHED SOME MORE APEX LEVEL
INSTITUTIONS…NABARD….EXIM BANK…NHB…SIDBI…
 1987…GOVERNMENT APPOINTED A COMMITTEE
HEADED BY R.B.I. DY .GOVERNOR TO BRING IN
REFORMS IN THE BANKING INDUSTRY TO MAKE THE
SYS TEM PAR WITH INTERNATIONAL LEVEL.
 1989 …THE COMMITTEE RECOMMENDATIONS WERE
IMPLEMENTED.

 BANKS WERE PERMITTED TO DIVERSIFY …

ESTABLISHING VARIOUS FINANCIAL SERVICES
ORGANISATIONS.

 Liberalisation. Made banks to enter, MF, Insurance, factoring ,

Rating agencies, CIBIL, ARC`s .Custodial service, PD`s,
Merchant banking , brokerage, areas.

 BANKS STARTED LOOKING AT FUNDING PROJECTS

INCLUDING LONG TERM EXPOSURES.
 1995 …BANKS WERE PERMITTED TO ENTER CAPITAL
MARKET .
 1995..NEW SECTOR PRIVATE BANKS WERE
ESTABLISHED.
 1995..FOREIGN BANKS WERE GIVEN LICENSE TO OPEN
BRANCHES
 PRIME LENDING RATE ..FREE TO FINALISE..
 AROUND 1997 …98 …TECHNOLOGY WERE INTRODUCED
FOR OPERATIONS.
 ACCESS TO INTERNATIONAL CAPITAL MARKET
 COMPUTERISATION…..A T M….ONLINE BANKING ….
 CORE BANKING .
 M&A ACTIVITIES IN BANKING .
 SARFAESI ACT WAS PASSED IN 2002.
  Basel II was introduced in 2008.
 SBI took over SBS.and the process of consolidation is under way.
 BANKS HAVE MAJOR ROLE TO PLAY IN FINANCIAL
SYSTEM…ie MARKETS, OPERATIONS ,

3. PRESENT STATUS.

We have today…………

a. Development financial institutions

b. State level DFI`s
c. State bank group.
d. Old generation private sector banks
e. Co operative banks .
f. Regional rural banks.
g. New generation Private sector banks
h. Foreign banks .

4. OTHER FINANCIAL INSTITUTIONS.

All the following Institutions are related to Banking operations.

a. DICGC
b. ECGC
c. CIBIL
d. CCIL
e. ARC`S
f. NABARD
g. EXIM BANK
h. NHB.
i. NBFC`S
 5. RESERVE BANK OF INDIA.

AS A REGULATORY AUTHORITY

Has 26 departments…only four related to Banking is discussed.

⇒ Established under RBI act 1934 and commenced functioning from

1.4.1935.

⇒ Central bank of country…

regulating….guiding…..monitoring and promoting Indian financial

system…

PREAMBLE OF THE ACT……..

“Where as it is expedient to constitute a Reserve Bank for India to

regulate the issue of bank notes and keeping the reserves operate the
currency and credit system with a view of securing monetary stability in
India and generally to of the country to its advantage .”

FUNCTIONS OF CENTRAL BANK……

The structure of Central bank may vary from country to country

the basic functions are……..

⇒ Issuance of notes and regulation of volume of currency.

⇒ Act as a Banker to the Government.
⇒ Acts as a Banker to Banks.
⇒ Custodian of Country`s reserves.
⇒ Lender of last resort.
⇒ Controller of credit.
⇒ Supervises Bank`s activities.
⇒ Ensure economic development of the country.
FUNCTIONS CAN BE CLASSIFIED…..

 Traditional.
 Promotional.
 Supervisory.

RESPONSIBILITY……

 Ensure Monetary stability.

 Ensure stable payment system
 Ensure development of Financial infrastructure of markets and
systems.
 Ensure Credit allocation according to national economic priorities
and social concerns.

IMPORTANT DEPARTMENTS…..

DEPARTMENT OF CURRENCY MANAGEMENT.

Discharge of Currency issue function is done by this department by

taking the assistance of Commercial Banks through their net work of
branches. All the Commercial banks act as an agent for this purpose.
RBI has structured the reporting system.

This ensures the stable payment system and support clearing

settlements.

MONETARY POLICY DEPARTMENT.

Monetary policy is a tool used by the Central bank to manage money

supply in the economy in order to achieve a desirable growth.
The Central bank controls the money supply by increasing and
decreasing the cost of money and the rate of interest.

Expansionary policy is to increase money supply by lowering interest

rates.
Contractionary policy is to decrease money supply and make money
dearer.

Fiscal policy of the government is used to monitor the economy by

looking at Revenue collection and spending.

RBI Governor announces the Monetary and credit policy every year
after the Union budget is presented.

The policy outlines the plan of action for the markets, institutions and
guidelines for functioning of our financial system for economic
development.

The guidelines covers the Economic scenario, domestic scenario,

international economic situation and guides the market and institutions
with new policy , product, reforms to be implemented during the
financial year.

From 2005 RBI will review the policy guidelines quarterly .

MONETARY POLCY OF R B I …FOR THE YEAR 2009-2010….

Highlights of RBI's Annual Policy Statement for
2009-10 (Apr-Mar) :
(THIS HAS ALREADY BEEN REVIEWED IN JULY09, OCT09, )
DUE FOR REVIEW IN JAN 2010…..

AS PER R.B.I. ..QUARTERLY REVIEW WILL BE DONE …SOME

OF THE POLICY DECISION MAY UNDERGO CHANGE
KEY MEASURES
* Repo Rate cut 25bps to 4.75%, effective immediately.
* Reverse Repo Rate cut 25bps to 3.25% immediate effect.
* CRR kept unchanged at 5.0%.
* Accounting method of savings bank interest rate to be changed from
Apr 2010.
* Interest payment on savings bk accounts to be calculated daily
product basis.
* Working group to suggest changes for BPLR system.
* Working group on BPLR system to submit report end-Aug.
* To launch exchange traded rate futures contract soon
* Extends special refinance facility to banks till March 2010.
* Extends special 14-day repo facility to banks till March 2010.
* To conduct special 14-day term repo weekly basis.
* RBI to announce first quarter review of monetary policy on Jul 28.

STANCE
* FY10 GDP growth projected at 6.0%.
* FY10 inflation projected at 4.0% by end March.
* FY10 credit growth projected at 20.0%.
* FY10 deposit growth projected at 18.0%.
* Banks with strong deposit base should aim loan growth over 20%.
* FY10 money supply growth projected at 17.0%.
* Deposit, loan rate higher vs 2004-07 but policy rates lower.
* Ensuring conducive rate condition key policy challenge.
* To ensure policy regime conducive to credit growth, quality.
* To maintain rate regime conducive to financial, price stability.
* Will continue to maintain vigil on global, local development.
* Steps taken since Sep aimed to mitigate global crisis impact.
* Stance conditioned to halt growth fall, keep financial stability.
* Will maintain conditions conducive for financial stability.
* Policy thrust to maintain adequate rupee, dollar liquidity.
* Policy thrust to also maintain market conducive to loan growth.
* External finance conditions to remain tight.
* Committed to provide ample liquidity on continuous basis.
* Global econ outlook remains uncertain and unsettled.
* Need to address several immediate challenges facing economy.
* Meeting industry credit needs second policy challenge.
* Loan growth fall reflects demand fall, inventory drawdown.

INFLATION
* Inflation risks have "clearly abated".
* WPI inflation seen negative for short period.
* Will see all inflation indices to anchor expectations.
* Endeavour to anchor inflation, inflation expectation.

GOVERNMENT BORROWING
* Have managed government market borrowing FY09 in orderly manner.
* To manage govt market borrow in non-disruptive way is a major
challenge.
* Large govt borrow "militates" against low rate environment.
* Will use policy plus debt management tools to manage govt borrowing.
* H1 OMO buy, MSS unwind equals 3 percentage points CRR cut.
* Planned OMO buy, MSS unwind H1 FY10 to add 1.20 trln rupees liquidity.
* Challenge to unwind fiscal stimulus, return to consolidation

LIQUIDITY
* Need to withdraw liquidity once economy regains momentum.
* Fall in rates across tenures and markets are not uniform.
* Steps since Sep boosted liquidity to 4.22 trln rupees.
* Liquidity situation improved "significantly".
* Overnight rates have softened "considerably".
* MFs' liquidity problems have eased considerably.
* Multiple policy, prudential tools aided liquidity mgmt

GROWTH
* Upturn in growth momentum FY10 unlikely as global demand down.
* India growth prospects remain favourable vs other economies.
* Supporting drivers of demand major policy challenge.

MARKET DEVELOPMENT
* Exchange traded rate futures contract to be based on 10-yr g-sec.
* Structure for pricing floating rate bonds revised.
* CONTEXT: Earlier FRB pricing linked to 364-day T-bill cut-off yields.
* FRB auction to be conducted on price-based method vs spread-based
earlier.
* FRB base yield to be linked to 182-day T-bill cut-offs at auctions.
* Revised issuance structure built into NDS-OM auction format.
* New FRB issuance will be in terms of revised issuance structure.
* CCIL developing the revised issuance structure of FRBs.
* RBI panel for no bidding in physical form in G-sec auction
* One consolidated bid by PDs/banks in gilt auction in non-competitive
bidding.
* Consolidated non-competitive bid to be implemented post notification
change.
* Central govt WMA limit 200 bln rupees in first half 2009-10.
* Central govt WMA limit 100 bln rupees in second half 2009-10.
* State WMA limit at 99.25 bln rupees FY10.
* To launch STRIPS in FY10.
* To place draft norms on STRIPS process by end-May.
* To issue revised norms on repo accounting on basis of RBI draft norms.
* Revised repo accounting norms to be implemented from April 2010.
* Multi nodal settlement system facility extended to insurance, pension
funds.
* CONTEXT: Multi nodal system was for MFs to participate in gilt
tenders.
* 13 members participating in non-guaranteed OTC trades in rate
derivatives.
* To OK clearing houses to have transitory pooling acct with RBI in
corp bonds.
* Transitory pooling acct with RBI to help real time settlement of corp
bonds.
* Extends ECB relaxation for all-in-cost limit to December.
* Relaxes FCCB buyback policy for cos
* Cos can buy back out of internal accruals $100 mln of redemption vs
$50 mln

BANKING
* BPLR lost relevance as most loans below BPLR.
* Sub-BPLR loan system makes loan pricing "non-transparent"
* To identify with SEBI macro-prudential concerns of MFs
* To review export credit refinance limit in Mar 2010
* Hikes limit on loans to NRI against deposits to 10 mln rupees vs 0.2
mln.
* Banks should not be "overly apprehensive" over small savings.
* Banks deposits, small savings are no prefect substitute.
* To ask MSE advisory panel to review Credit Guarantee Scheme.
* Allows banks to set up offsite ATMs without prior nod.
* To form group for better branch authorisation policy
* Uncertainties about fincl strength exits among global banks.
* Current norm of foreign banks presence in India stay
* Foreign banks presence in India norm to be reviewed later.
* To issue norms on banks' floating provisions later.
* Banks need to integrate FX assets, liabilities in branches.
* RBI to form draft norm on integrating liquidity risk mgmt of banks.
* Draft norm on integrating liquidity risk mgmt by Jun 15.
* Banks have been slow in rate cuts as deposit cost high.
* There is room for more deposit rate cuts.
* Changes risk exposure to counterparty contracts.
* Defers 12% CAR implementation of some NBFCs to Mar 31, 2010.
* Defers 15% CAR implementation of some NBFCs to Mar 31, 2011.
* Issue paper on bks floating, managing pvt capital pool by Sep.

FOREIGN EXCHANGE DEPARTMENT .

Formerly known as Exchange control department changed its name to

FED from 2004 .

The area of operations of the department..……

• Maintenance of External value of the Rupee

• Administration Foreign Exchange control.
• Choose and fix exchange rate system.
• Custody and Management of Foreign exchange reserves.
( utilization and investment )
• Interact with international monetary organizations ..

.
FEX dealings are managed through Commercial banks ….licensed as
Authorised dealers.

Earlier FERA1973 …AND NOW FEMA 2000 for FEX transactions…

Exchange control manual published and updated regularly by RBI as a
hand book for doing FEX transactions by the Public.
BANKERS TO THE GOVERNMENT..

⇒ On behalf of Central government , State government and State

PSU`s …assists in mobilizing funds from market.
⇒ Manages the Government accounts.
⇒ Manages the Public debt.

BANKER`S BANK.

CONTROL OVER
COMMERCIAL BANKS,
CO-OPERATIVE BANKS,
NBFC`S,
DFI`S..
AS A REGULATORY AUTHORITY
ISSUE LICENSE TO OPEN A BANK…BRANCH….

⇒ PRESCRIBE CRR, SLR, FOR CB`S. FOR STATUTORY

RESERVES REQUIREMENTS
⇒ INSPECT BANK`S WORKING.
⇒ APPOINTMENT OF CEO`S….TERMINATION…MERGERS,
AMALGAMATIONS OF BANKS..
⇒ DEFINING THE LENDING NORMS.
⇒ REDISCOUNTING THE COMMERCIAL BILLS OF THE
BANKS.

PROMOTER OF FINANCIAL SYSTEM………..

 ⇒ Development of financial sector.
⇒ Strengthen the financial system.
⇒ Achieve the objective of economic development.
⇒ Creation of institutions in respective field.

CREDIT DELIVERY…..

R B I ensures that the funds mobilized by Banks and DFI are deployed
properly…..

⇒ According to the need of the customers.

⇒ As per the industry norms.
⇒ Norms for Credit appraisal.
⇒ Inspection and Follow up norms.
⇒ Ensure end use of credit.

R B I on a regular basis has brought many reforms in functioning of

Money market, Commercial banks, DFI`s, NBFC`s and Co opertive
banks.

Prudential norms for functioning of institutions and adoption of

technology in the financial system.

R B I`s GOAL………

Banks should be a strong healthy institution that offer loans to worthy

borrowers who in turn repay loan with interest so that Bank can build
up Capital base and reasonable return to Share holders.

Banks should use internal credit risk ratings to calculate minimum

regulatory capital need to set aside for credit risk.

⇒ Bench mark and rating system……

⇒ Risk of borrower default

⇒ Account transactions specific factors.

 ⇒ Clarity and consistency in implementation of the rating system.

⇒ Human judgement is the important factor for rating assignment

6. GENERAL BANKING

ORGANISATION STRUCTURE…………

HEAD OFFICE……

 POLICY MAKING….
 DECISION MAKING…
 OVER ALL CONTROL….

DIFFERENT DEPARTMENTS………

PLANNING…..OPERATIONS

 GENERAL BANKING….
 CREDIT DEPARTMENT ….
 INTERNATIONAL BANKING….
 PERSONNEL…HRD…..TRAINING….
 PUBLIC RELATION….
 LEGAL…VIGILENCE….DISCIPLINARY
 ECONOMIC RESEARCH AND SURVEY
 TREASURY… INVESTMENTS
 INTER OFFICE… … AUDIT AND INSPECTION…

ZONAL OFFICE…..REGIONAL OFFICE

CONTROLS BRANCHES IN DIFFERENT ZONES…..

AREA WISE…..

 SIMILAR DEPARTMENTS OF HEAD .OFFICE WILL BE IN

Z.O..

 HEAD OFFICE FRAMES THE BUSINESS POLICY…..

  CONVEYED TO BRANCHES THROUGH ZONAL OFFICES…
CIRCULARS

 BUSINESS HAPPENS AT BRANCHES……

 BRANCHES REPORTS TO CONTROLLING

AUTHORITIES…..

 BY REPORTS…WHICH ARE NORAMLLY CALLED AS ……

RETURNS…..

 BRANCH REPORTS MAY BE OF DIFFERENT TIME

FRAME……

PURPOSE OF REPORTS…….

 STATISTICAL

 STATUTORY…….

⇒ OVERALL PERFORMANCE WILL BE REPORTED BY

HEAD OFFICE TO R .B. I .

 HEAD OF BRANCHES…..ARE DELEGATED WITH

SANCTIONING POWERS ACCORDING TO THEIR GRADE
AND BUSINESS POTENTIAL……
( SOME BANKS HAVE CENTRALISED SANCTIONING AND
APPRAISAL SYSTEM AND HAVE MADE BRANCHES AS
MARKETING ARM)

 REVIEW OF PERFORMANCE AT EACH LEVEL WILL BE

DONE REGULARLY .

 BANK AS A WHOLE REVIEW THE PERFORMANCE

AFTER ASCERTAINING THE DIFFERENT SEGMENT
REPORTS.
  THIS REVIEW WILL HELP THE BANK MANAGEMENT TO
TAKE APPROPRIATE STEPS TO PLAN AND IMPROVE
THE PERFORMANCE.

BRANCHES…….

CLASSIFIED LOCATION WISE……

⇒ METRO…….
⇒ URBAN……
⇒ SEMI URBAN….
⇒ RURAL……..

Banks have now classified their branches according to the business

potential.

BUSINESS CLASSIFICATION…

MARKET SEGMENT………

 INDUSTRY……

⇒ SMALL SCALE…
⇒ SMALL BUSINESS……
⇒ SME…..
⇒ CORPORATES

 TRADING…..COMMERCIAL….

 INSTITUTIONAL….

 PERSONAL OR RETAIL BANKING…..

 SELF EMPLOYED AND PROFESSIONAL…..

  TRANSPORT OPERATORS….

 AGRICULTURE. AND ALLIED ACTIVITIES…SERVICES….

.ACTIVITIES OF BANKS………..

⇒ MOBILISATION OF FUNDS……………

Various sources…………….

⇒ Mobilisation of Deposits…..Demand and Time deposits.

BANKS PROVIDE SERVICE TO THE PEOPLE AT LARGE OF ALL

CONSTITUTION…TO OPEN ACCOUNTS DEPEND UPON THEIR
REQUIREMENTS..

1. Savings bank account

2..Current account………….

Popularly known to bank as demand deposits…….

BOTH ARE OPERATIONAL…………

3. Term deposits
4. Recurring deposits …

Popularly known as Time deposits.

BOTH ARE LIABILITY TO THE BANK…..

BANK CALLS BOTH AS DEMAND AND TIME

LIABILITIES……………
 ⇒ Short term funds from Money market.
⇒ Long term from Capital market
⇒ International Capital market.
⇒ Joint ventures….FDI….
⇒ Borrowings from RBI.AND OTHER BANKS.

Cash reserve ratio……….(CRR)

Maintenance of CRR….RBI act of 1934 clearly says that all scheduled
commercial banks have to maintain average cash balance notified time
to time by RBI on a fortnightly basis on the NET DEMAND AND
TIME LIABILITIE of the bank

DEMAND DEPOSITS.
⇒ Current deposits
⇒ Demand liabilities portion of savings bank account.
⇒ Margins held for LC and BG.
⇒ Balances in overdue fixed deposits.
⇒ Outstanding drafts issued.
⇒ Unclaimed deposits
⇒ Money at call and notice from outside Banking system .
TIME LIABILITIES…………

⇒ FIXED DEPOSITS.
⇒ RECURRING AND CUMULATIVE DEPOSITS.
⇒ TIME LIABILITIES PORTION OF SAVINGS BANK
ACCOUNTS.
⇒ DEPOSITS HELD AS SECURITY FOR ADVANCES…..

Other liabilities that must be included as others are ……………

⇒ Interest accrued on deposits.

⇒ Bills payable.
⇒ Unpaid dividends
COMPUTATION…………….

Not to be considered……..
 ⇒ Amount received from …DICGC….ECGC…Court receiver…
Insurance company for adhoc settlement

ZERO RESERVE……………

⇒ NRE
⇒ NRNR
⇒ FCNR
⇒ EEFC
⇒ PCFC
⇒ FOREIGN CURRENCY A/C BY INDIAN EXPORTERS.

THIS CHANGES AS PER R.B.I GUIDELINES …MAY BE

ANNOUNCED IN MONETORY POLICY OR ANY TIME WHERE
R.B.I FEELS IT IS REQUIRED TO MAKE A CHANGE
CONSIDERING THE ECONOMIC SITUATION. This has an impact
on the money supply.

Statutory Liquidity ratio…( SLR)

Under sec 18 of the BR act…in addition to the maintenance of daily

cash balance …all scheduled banks have to maintain……..

⇒ In cash
⇒ Gold valued at market price.
⇒ Unencumbered approved securities.

Maintenance of certain percentage of NDTL. This also changes as per

RBI guidelines.

Banks should report to RBI ON 20th of every month.. on maintenance of

CRR AND SLR

Banks fails to maintain shall be penalized by RBI RELATED TO

BANK RATE .
GENERAL BANKING OPERATIONS…………

Any person who would like to avail the banking services has to build up
a relation………..

Basic relationship starts with opening of Accounts….

Mainly deposits accounts…………

Earlier the approach of banks were simple and due to the increase in
volume of business and the OPERATIONAL RISK Banks introduced
certain guidelines…

K.Y.C. …KNOW YOUR CUSTOMER……..

Guidelines are the key principle for identification of an Individual

/other constitutions including Corporates.
1. to ensure appropriate customer identification.
2. To Monitor transactions of any suspicious nature.
3. IBA has prepared Anti money laundering guidelines.
4. Ceilings of cash transactions.
5. Staff should be trained in this matter.

Must be aware of documents to be verified ……

What type of account the customer would like to open.
Nominatiuon facility…..Benefit of joint account.

Banker must be well versed with the operations of………..

⇒ Single account
⇒ Joint account.
⇒ Non operative account
⇒ Minor`s account
⇒ Illiterates account
⇒ Dormant account
⇒ Deceased account
⇒ Legal aspects of operations.
 *************************

 TREASURY OPERATIONS

Investment activities……..Manage surplus ….maintain SLR

requirements.
Investment in Securities……

BANKS CREATES ASSETS IN THE FORM OF SECURITIES..

BANKS MOBILISES FUNDS FROM VARIUOS SOURCES

….LENDING IS THE PRIMARY ACTIVITY…

THE ALLOCATED FUNDS CANNOT BE DISBURSED

IMMEDIATELY…DUE TO PROCEDURAL ASPECT.LIKE
APPRAISAL…OTHER FORMALITIES….

The funds also cannot be kept idle. Banks invest these funds in the
various securities in the market..

⇒ To maintain SLR requirements.

⇒ To earn profit from investments
⇒ Area of investments will be Government securities , T bills,
Commercial paper, Joint ventures, Capital market instruments,
International market, Creation of subsidiaries.
⇒ Bank consider these income as Non interest income.

Banks activity of investing in securities are popularly known as

Treasury operations.

As per RBI guidelines they have the securities…………..

⇒ Hold till maturity.

 ⇒ Identified for Sale
⇒ Identified for Trading.

Only Gsecs, T bills and other approved securities are taken to work out
the statutory SLR status.

Banks get regular income from investments…by sale of investments …

profit
Interest , dividend

 FEE BASED ACTIVITIES…….

ANCILLARY SERVICES

1. ISSUE OF DRAFTS
2. TRANSFER OF FUNDS
3. SAFE DEPOSIT LOCKERS
4. SAFE CUSTODY
5. ISSUE AND ENCASHMENT OF F T C .
6. ISSUE AND ENCASHMENT OF FOREIGN CURRENCY
7. COLLECTION OF REVENUE OF GOVERNMENT
8. COLLECTION SUBSCRIPTION FOR CORPORATES(BANKERS TO
ISSUE)
9. REFUND BANKERS…
10. PAYMENT OF INTERST AND DIVIDEND WARRANTS ON BEHALF OF
CORPORATES
11. ACTING A S ADEBENTURE TRUSTEES.
12. SELLING OF M.F. AND INSURANCE PRODUCTS.
13. EXECUTOR AND TRUSTEES WORK.
14. ISSUE OF CREDIT CARDS
15. A T M SERVICES
16. UNDERWRITING

The above services when availed by the customer, bank will collect
certain service charges for the service provided.

Source of income….
This income is also known as Non interest income.

OTHER ACTIVITES TAKEN UP BY BANKING

INSTITUTIONS………..AS A SEPARATE ORGANISATION
 ⇒ MERCHANT BANKING
⇒ HOUSING FINANCE
⇒ MUTUAL FUNDS
⇒ INSURANCE
⇒ FACTORING
⇒ CUSTODIAL SERVICES
⇒ PRIMARY DEALERSHIP
⇒ VENTURE CAPITAL
⇒ARC
⇒ CIBIL

**********************

END OF PART….1…….