First among the banks:

 First Bank in India – Bank of Hindustan

 First Governor of RBI – Osborne Smith
 First Indian governor of RBI – C D Deshmuk
 First Bank to Introduce ATM in India – HSBC
 First Bank to introduce Saving Bank Account in India –
Presidency bank in 1830
 First Bank to Introduce Cheque system in India – Bengal
Bank 1784
 First Bank to introduce Internet Banking – ICICI BANK
 First Bank to introduce Mutual Fund – State Bank of India
 First Bank to introduce Credit Card in India – Central Bank of
India
  First Foreign Bank in India – Comptoire d’Escompte de
Paris of France in 1860
 First Joint Stock Bank of India – Allahabad Bank
 First Indian bank to open branch outside India in London in
1946 – Bank of India
 First Indian Bank started with Indian capital –
Punjab National Bank
 First Regional Rural Bank name Prathama Grameen Bank was
started by – Syndicate Bank
 First Universal Bank in India – ICICI Bank
 First bank in India listed in New York Stock Exchange (NYSE) –
ICICI Bank
 First Bank in India to launch Talking ATMs for differently -
able person – Union Bank of India
 First Bank in India to launch its own Payment Aggregators –
State Bank of India. (SBIePay)
 Country‟s first all woman bank – Bhartiya Mahila Bank
 First India bank Got ISO – Canara Bank

Important Banking Terminologies :

 ATM (Automatic Teller Machines):

 Machines that dispense cash and give balance details and mini
statements to the customers through Computer network

 Bancassurance:
 Distribution of insurance products and policies of insurance
companies by banks as agents through their branches.

 Bouncing of a cheque:

 When an account has insufficient funds, cheque is not payable

and is thus returned by the bank with a reason “funds
insufficient”.

 Bank Rate:

 Rate of interest charged by the central bank to the commercial

banks on the advances and the loans they extend.

 Call Money:

 Loan made for a very short period of only a few days.

 Cheque:

 Written by an individual to withdraw or transfer amount between

two accounts of the same or different bank and the money is
withdrawn from the account.

 Core Banking Solutions (CBS):

 All the branches of the bank are connected together so that the
customer can access his/her funds or transactions from any
branch.
 CRR (Cash Reserve Ratio):

 The amount of funds that a bank keeps with RBI. If the

percentage of CRR increases then the amount with the bank
comes down.

 Current Account:

 Account opened generally for business purposes with no

restrictions on withdrawals and no interest paid

 Debit Card:

 Card issued by the bank so the customers can withdraw their

money from their account electronically.

 E-Banking:

 Banking in which we can conduct financial transactions

electronically. NEFT, RTGS, Online Banking etc come under this
category.

 Fiscal Deficit:

 Amount of Funds borrowed by the government to meet the

expenditures.

 Inflation:
 Increase in the quantity of money in circulation without any
corresponding increase in goods thus leading to an abnormal rise
in the price level

 Liquidity:

 Ability of converting an investment quickly into cash with no loss

in value.

 Market Capitalization:

 The product of the share price and number of the company‟s

outstanding ordinary shares.

 Mortgage:

 Security which one offers for taking an advance or loan from

someone.

 Mutual Fund:

 Investment scheme that pools money from various investors in

order to purchase securities.

 Monetary Policy:
 Central Government policy with respect to the quantity of money
in the economy, the rate of interest and the exchange rate

 Non-performing Assets (NPAs):

 NPA or non-performing loans are loans given by a bank on which

repayments or interest payments are not being made on time

 Permanent Account Number (PAN):

 PAN is a number issued by the Income Tax Department to their

tax payers.

 Plastic Money:

 Name given to Credit cards, Debit cards, and Other Such Cards
issued by banks

 Point of Sale (PoS):

 PoS refers to a location at which a payment of a card transaction

occurs.

 Prime Lending Rate (PLR):

 Rate of interest at which a bank gives loan to its most reliable

customer (customer with „zero risk‟ )
 Pass Book:

 Book given to customers, where all the bank transactions are

recorded.

 Repo Rate:

 Commercial banks borrow funds by the RBI if there is any

shortage in the form of rupees. If this rate increases it becomes
expensive to borrow money from RBI and vice versa.

 Reverse Repo Rate:

 Exact opposite of repo rate. It is the rate at which RBI borrows

money from banks when it feels there is too much money
floating in the banking system

 SLR (Statutory Liquidity Ratio):

 Amount that a commercial bank should have before giving credits

to its customers which should be either in the form of gold,
money or bonds.

 Teller:
  Staff member of the bank who cashes cheques, accepts deposits
and perform different banking services for the customers.

 Virtual Banking:

 Internet banking is sometimes known as virtual banking (as it

has no bricks and boundaries )

 White labeled ATM:

 An ATM or cash machine that does not prominently display a

bank‟s name or logo. A fee will be charged for cash withdrawals
in these ATMs and they don‟t accept deposits

 Wholesale Banking:

 Banking that mainly focuses on the financial needs of the

institutional clients and the industry.

 Zero Coupon Bond:

 Bond that is sold at good discount as it has no coupon.

Banking Regulation Act,1949

 As per Section 5(b) Banking is defined.

 As per Section 8, Trading of goods by a Banking Company is
restricted.
  As per Section 17 every banking company incorporated in
India is required to transfer each year to Reserve Fund a sum
equivalent to not less than 20% of profit before declaration of
dividend
 As per Section 24, SLR is to be maintained.
 As per Section 45(Z) Nomination facility has been granted for
bank deposits.
 As per Section 35A ,RBI has prohibited stapling of currency
notes.

Reserve Bank of India Act,1934 Scheduled Bank-

 As per Section 2(e) a Scheduled Bank is one whose name is

included in the Second Schedule to RBI Act, 1934.
 Section 17(4) enables RBI to grant loans and advances to
Scheduled Banks
 Section 20 empowers RBI to act as Banker to the Govt.
 Section 22 gives right to issue Bank Notes.
 As per Section 29, Bank note shall be exempted from stamp
duty under Indian Stamp Act.
 Section 31 prohibits issue of notes payable to bearer by any
person in India other than RBI.
 As per Section 38 RBI is the sole authority to issue currency in
the country except for one rupee note or coins( which is issued
by Central Govt.)
 As per Section 42(1) all scheduled banks are required to
maintain CRR in the form of cash.
  As per Section 45B RBI collects credit information from all
banking companies and furnish consolidated credit information
to any banking company.

National Bank for Agriculture and Rural Development

Act,1981

 As per Section 3 NABARD was established.

 As per Section 4, capital shall be Rs.100 crore which may be
increased to Rs.5000 crore by Central Govt. in consultation
with RBI.
 Provides refinance facilities for credit to agriculture, small and
village and cottage industries and Co-operative Banks.

Banking Ombudsman Scheme,2006

 As per Section 4, RBI appoints one or more of its officers in

the rank of Chief General Manager or General Manager to be
known as Banking Ombudsman.
 If a complaint on deficiencies in banking services is not
responded by the concerned Bank within one month or the
reply has not satisfied the complainant, the Banking
Ombudsman whose jurisdiction covers the Bank Branch may
be approached.
 The complaint should be made before expiry of one year after
the cause of action has arisen. Complaint can be filed simply
by writing on a plain paper.
 Complaint can be filed by authorized representative (other
than an advocate) of the complainant.
  No fees are charged for resolving a complaint.
 Complaint may be settled by agreement within a period of one
month.
 In case it is not settled by agreement, Banking Ombudsman
may pass an award by giving reasonable opportunity to both
sides.
 The award is on compensation, not more than actual loss
suffered on account of the act of omission or commission by
the bank or Rs.10 lac whichever is lower.
 In case Award is not acceptable, the party not accepting the
award may approach the appellate authority i.e. Deputy
Governor of RBI within 30 days from the date of receipt of the
award. The complainant has also the recourse before Court.

Prevention of Money Laundering Act, 2002

 Records of cash transactions above Rs.10 lac or its equivalent

in foreign currency have to be maintained. Records of series of
cash transactions connected to each other of below Rs 10 lac
or its equivalent in foreign currency within a month and the
aggregate value of such transactions exceeds Rs.10 lac have
to be maintained.
 Records of Cash transactions in forged or counterfeit currency
notes or bank notes and where forgery of any valuable
security has taken place have to be maintained.
 Records of Suspicious transactions in cash or otherwise have
to be maintained. Records of transactions, both domestic and
international, between the bank and the client need be
 preserved for at least 10 years from the date of cessation of
transaction.
 Cash Transactions Report (CTR) for transactions of above
Rs.10 lac in a month have to be submitted to Financial
Intelligence Unit-India (FIU-IND) within 15 days of close of the
month.
 Suspicious Transactions Report(STR) of a transaction ,in cash
or non-cash, or a series of transactions integrally connected
have to be reported within 7 days of arriving at the conclusion.

Indian Stamp Act,1989

 As per section 17 of Indian Stamp Act,1989 all

instruments/documents chargeable with duty and executed by
any person in India shall be stamped before or at the time of
execution.
 The Stamp Act extends to whole of India except J&K. Stamp
duty on Demand Promissory Note, Bill of Exchange payable
otherwise than on demand, money receipts, proxies and
transfer of shares comes under Central List.
 Powers to reduce or remit the duty on these instruments are
vested with the Central Govt. For other instruments stamp
duty rates are prescribed by the respective State Govts.
 In case of Usance Bills, arising out of bonafide commercial or
trade transaction, of not more than 3months usance after date
or sight drawn on or made by or in favour of a Commercial
Bank/Co-operative Bank stamp duty is remitted.
 Documents under Central list are not admissible in evidence if
unstamped or understamped and are nullified.
Stamps are of three types:

 Postage stamps- These are covered under India Post Office

Act for postal charges.
 Judicial stamps- These are used in connection with filing
suit, court fees and other judicial matters as per provisions of
Court Fees Act.
 Non-judicial stamps- These are used as per provisions of
Stamp Act for commercial transactions.

Non-judicial stamps are of three kinds:

 Adhesive stamps- Adhesive stamps are those which are

affixed by adhesive. There are many varieties of adhesive
stamps such as revenue stamp, foreign bill stamp, share
transfer stamp, insurance stamp, notary stamp, attorney
stamp, consular stamp. These stamps are used for
transaction.
 Embossed or Impressed stamps- Impressed stamps are
Hundi papers( on which Hundis are to be drawn) or Non-
judicial stamp papers( on which stamps are already printed).
These are mostly used for execution of agreement such as
hypothecation, pledge & lien agreements, letter of continuity,
letter of guarantees, mortgage deed etc.
 Special adhesive stamps- These stamps are substitutes for
non-judicial stamp papers. It is convenient to use them in
printed agreements. Special adhesive stamps are to be affixed
and cancelled by proper officer notified under the stamp rules.
The Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002
(SARFAESI)

In the event of default by a borrower, the bank have the powers to

1. Take possession, sell or lease the secured assets

2. Take over the management of the business of the borrower
3. Appoint a Manager( not below Scale-IV Officers)
4. Recover money from the debtor of the borrower Loans
outstanding of Rs.1 lac & above are covered by the Act. Agri.
Loans and where 80% recovery has been done are exempted.

 U/s. 13(2) of the Act, secured creditor has to serve 60 days‟

notice before taking any of the measures under Section 13(4)
of the Act.
 After service of notice if the borrower makes a representation
or raises any objection, the secured creditor shall consider
such representation or objection and if the same is acceptable
or tenable, the reasons of non-acceptance have to be
communicated within one week of receipt.

Central Registry under SARFAESI Act,2002 ( CERSAI)

 Central Registry of Securitization, Asset Reconstruction and

Security Interest of India(CERSAI in short), a Government
Company, licensed under Section 25 of the Companies Act,
1956 has been incorporated CERSAI has become operational
from 31.3.2011.
Section 20 of the SARFAESI Act,2002provides for setting up of a
Central Registry for the purpose of registration of transactions of
securitisation, asset reconstruction and security interest under the
SARFAESI Act.

It contains the following Four Forms:

 FORM-I – To be used for filing Particulars of Creation or

Modification of Security Interest in favour of Secured Creditors
Fee:For a loan upto Rs.5 lac : Rs. 250/- for both creation and
modification of security interest For a loan above Rs. 5.00
lakh: Rs. 500/- for creation and for any subsequent
modification of security interest in favour of a secured
creditor.
 FORM-II – To be used for filing Satisfaction of any existing
Security Interest Fee – Rs. 250/-
 FORM-III – To be used for filing Particulars of Securitisation
or Reconstruction of Financial Assets Fee – Rs. 1000/- FORM-
IV – To be used for filing Particulars of Satisfaction of
Securitisation or Reconstruction transactions Fee – Rs. 250/-
The particulars of every transaction referred to above shall
have to be filed with Central Registrar within a period of thirty
days from the date of such transaction. In case of delay in
filing, the Central Registrar may on an application being made
stating the reasons for delay not exceeding thirty days, allow
filing of particulars on payment of additional fees, as specified
in the SARFAESI (Central Registry) Rules.-.
Basal Committee:

 The Basel Committee on Banking Supervision provides a forum

for regular cooperation on banking supervisory matters.
 Its objective is to enhance understanding of key supervisory
issues and improve the quality of banking supervision
worldwide.
 It seeks to do so by exchanging information on national
supervisory issues, approaches and techniques, with a view to
promoting common understanding.
 The Committee‟s Secretariat is located at the Bank for
International Settlements (BIS) in Basel, Switzerland.

NEED FOR BASEL NORMS

 The first accord by the name Basel Accord I was established

in 1988 and was implemented by 1992.
 It was the very first attempt to introduce the concept of
minimum standards of capital adequacy.
 Then the second accord by the name Basel Accord II was
established in 1999 with a final directive in 2003 for
implementation by 2006 as Basel II Norms.
 Unfortunately, India could not fully implement this but, is now
gearing up under the guidance from the Reserve Bank of India
to implement it from 1 April, 2009.
 Basel II Norms have been introduced to overcome the
drawbacks of Basel I Accord.
 For Indian Banks, its the need of the hour to buckle-up and
practice banking business at par with global standards and
 make the banking system in India more reliable, transparent
and safe.
 These Norms are necessary since India is and will witness
increased capital flows from foreign countries and there is
increasing cross-border economic & financial transactions.

FEATURES OF BASEL II NORMS

 Basel II Norms are considered as the reformed & refined form

of Basel I Accord. The Basel II Norms primarily stress on 3
factors, viz. Capital Adequacy, Supervisory Review and Market
discipline.
 The Basel Committee calls these factors as the Three Pillars to
manage risks.

Pillar I: Capital Adequacy Requirements

 Under the Basel II Norms, banks should maintain a minimum

capital adequacy requirement of 8% of risk assets.
 For India, the Reserve Bank of India has mandated
maintaining of 9% minimum capital
adequacy requirement. This requirement is popularly called as
Capital Adequacy Ratio (CAR) or Capital to Risk Weighted
Assets Ratio (CRAR).

Pillar II: Supervisory Review

 Banks majorly encounter with 3 Risks, viz. Credit, Operational

& Market Risks.
  Basel II Norms under this Pillar wants to ensure that not only
banks have adequate capital to support all the risks, but
also to encourage them to develop and use better risk
management techniques in monitoring and managing their
risks.

The process has four key principles:

1. Banks should have a process for assessing their overall capital

adequacy in relation to their risk profile and a strategy for
monitoring their capital levels.
2. Supervisors should review and evaluate bank‟s internal capital
adequacy assessment and
strategies, as well as their ability to monitor and ensure their
compliance with regulatory capital ratios.
3. Supervisors should expect banks to operate above the
minimum regulatory capital ratios and should have the ability
to require banks to hold capital in excess of the minimum.
4. Supervisors should seek to intervene at an early stage to
prevent capital from falling below minimum level and should
require rapid remedial action if capital is not mentioned or
restored.

Pillar III: Market Discipline

 Market discipline imposes banks to conduct their banking

business in a safe, sound and effective manner.
 Mandatory disclosure requirements on capital, risk exposure
(semiannually or more
 frequently, if appropriate) are required to be made so that
market participants can assess a bank‟s capital adequacy.
 Qualitative disclosures such as risk management objectives
and policies, definitions etc. may be also published.

BASEL III

 The Reserve Bank released, guidelines outlining proposed

implementation of Basel III capital regulation in India.
 These guidelines are in response to the comprehensive reform
package entitled “Basel III: A global regulatory framework for
more resilient banks and banking systems” of the
Basel Committee on Banking Supervision (BCBS) issued in
December 2010.

The major highlights of the draft guidelines are:

Minimum Capital Requirements:

 Common Equity Tier 1 (CET1) capital must be at least 5.5% of

risk-weighted assets (RWAs).
 Tier 1 capital must be at least 7% of RWAs.
 Total capital must be at least 9% of RWAs.

Capital Conservation Buffer:

 The capital conservation buffer in the form of Common Equity

of 2.5% of RWAs. A such minimum
  Capital Adequacy ratio for banks will be 11.5% after full
application of the capital conservation buffer by 31 March
2018.
 Capital conservation buffer requirement is proposed to be
implemented between March 31, 2014 and March 31, 2018.

Transitional Arrangements:

 It is proposed that the implementation period of minimum

capital requirements and deductions from Common Equity will
begin from January 1, 2013 and be fully implemented as on
March 31, 2018.
 The implementation schedule indicated above will be finalized
taking into account the feedback received on these guidelines.
 Instruments which no longer qualify as regulatory capital
instruments will be phased-out during the period beginning
from January 1, 2013 to March 31, 2022.

Enhancing Risk Coverage

 For OTC derivatives, in addition to the capital charge for

counterparty default risk under Current Exposure Method,
banks will be required to compute an additional credit value
adjustments (CVA) risk capital charge.

Leverage Ratio:

 The parallel run for the leverage ratio will be from January 1,
2013 to January 1, 2018, during which banks would be
 expected to strive to operate at a minimum Tier 1 leverage
ratio of 5%.
 The leverage ratio requirement will be finalized taking into
account the final proposal of the Basel Committee.