SESSION 3 01 SEP 2021

MSc FE
COMMERCIAL BANKING

SESSION 3 : 01 SEPTEMBER 2021

GUEST FACULTY : SHRIDHAR S

OVERVIEW OF COMMERCIAL BANKS

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

SESSION 3 PLAN

Types of Banking - Retail Banking, Corporate Banking (Wholesale Banking), SME

Banking, International banking, Narrow banking, Universal banking, Private
banking

Products and services offered by Banks- Fund based and Non-Fund based
Activities, Deposit, Advances, Ancillary and Technology oriented services:,
Wealth Management, Treasury management, Cash management services,
Merchant banking.

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SESSION 3 01 SEP 2021

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

• Retail Banking – Banking Business with Natural Persons

• Corporate Banking – Banking Business with Incorporated entities – Companies,

Trusts, Statutory Corporations

• Residual - Banking Business with Unincorporated Non - Natural Persons – e.g.

Partnerships, Association of Persons, LLP, LL Proprietorship, Government (?), etc.

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

SME BANKING – Banking business with Small and Medium Enterprises

What is MSME ?

As per the ‘Micro, Small and Medium Enterprises Development Act, 2006’
Revised Classification applicable i.e. 1st July 2020
Composite Criteria: Investment in Plant & Machinery/equipment (IPME) and Annual Turnover (AT)
Classification Micro Small Medium
Manufacturing IPME : ≤ Rs.1 Cr. IPME : ≤ Rs.10 Cr. IPME : ≤ Rs.50 Cr.
Enterprises and
Enterprises AT: ≤ Rs. 5 Cr. AT: ≤ Rs. 50 Cr. AT: ≤ Rs. 250 Cr.
rendering
Services
≤ = “Not More Than”
THE DEFINITION IS VERY IMPORTANT, AS A NUMBER OF INCENTIVE SCHEMES / CONCESSIONS / DIRECTED CREDIT
AND RELAXATIONS ARE AVAIABLE TO MSMEs.

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SESSION 3 01 SEP 2021

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

• International banking –

BIS Definition – “Internationally active banks are banks that have substantial
international business, meaning business with non-residents or business in
foreign currencies”

International Banking is extending banking business to residents of foreign

countries, or dealing in foreign currencies

Significance – Capital adequacy requirements, other regulatory requirements

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

• Narrow banking – Restricted banking – usually activities permitted under BR Act

Section 5 plus one or two of the activities permitted under Section 6 (a) to (o),
geographical restrictions

- e.g. Payments Banks, Regional Rural Banks, Local Area banks, Small Finance Banks

• Universal banking – Rendering almost the full range of services permitted under
BR Act, directly, and / or through subsidiaries.

Debate: Which model is superior for overall development of the country and stable
financial system?

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SESSION 3 01 SEP 2021

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

Private banking
Investopedia – “Private banking consists of personalized financial services and products
offered to the high-net-worth individual (HNWI) clients of a retail bank or other financial
institution.”
Services provided (by a Private Bank) may include
• Investment Advisory and / or Portfolio management
• Wealth management
• Tax advisory and services
• Insurance advisory and services
• Trust and estate planning, and services
HNWI (HNI) - Usually, an Individual with liquid assets of USD 1 Million or more –
Definition varies from institution to institution.

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

• Development Banking – Banking Business designed to promote National

Economic Development

- Bank Nationalisation
- Branch Authorisation
- Priority Sector Lending
- Lead Bank Scheme
- Financial Inclusion

- Financial Literacy

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SESSION 3 01 SEP 2021

COMMERCIAL BANKING : BASIC BUSINESS MODEL DIAGRAM : RECAP

PROVIDERS CUSTOMERS
OF GOODS FOR GOODS
& SERVICES & SERVICES

G&S INCOMES
EXPENSES G&S RECEIVED
PAID RECD.
GIVEN

DEPOSITS CASH + BALANCES WITH

CAPITAL CASH
CAPITAL OTHER SCHEDULED BANKS
CAPITAL
PROFITS
LOANS
DEPOSITS : DEPOSITS BANK LOANS
DEMAND AND INTT. RECD.
TIME LIABILITIES INTT. PAID EMPLOYEES

BORROWINGS: FIXED INVESTMENTS

BORROWINGS ASSETS INVESTMENTS
DEMAND AND INV. INCOME
INTT. PAID
TIME LIABILITIES
BANK’S PROFIT =
(NET INTEREST INCOME + OTHER INCOME) - (EXPENSES + PROVISION FOR NPA & OTHERS)

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

PRODUCTS AND SERVICES OFFERED BY BANKS

FUND BASED AND NON - FUND BASED PRODUCTS

• FUND BASED PRODUCTS ARE FINANCIAL PRODUCTS THAT INVOLVE

- BORROWING OR LENDING OF FUNDS – FORM PART OF LIABILITIES OR ASSETS OF BANK

- PAYMENT OR RECEIPT OF INTEREST.

- FINANCIAL INTERMEDIATION

- PERMITTED UNDER SECTION 5 OF BR ACT 1949

• NON FUND BASED PRODUCTS ARE FINANCIAL PRODUCTS / SERVICES THAT

- DO NOT INVOLVE BORROWING OR LENDING OF FUNDS.

- INCOME IS BY WAY OF COMMISSION, EXCHANGE, FEES, SERVICE CHARGES, ETC.

- PERMITTED UNDER SECTION 6 (a) TO (o) OF BR ACT 1949

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SESSION 3 01 SEP 2021

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

LIABILITY PRODUCTS : DEPOSITS

➢“REPAYABLE ON DEMAND”– CURRENT AND SAVINGS BANK ACCOUNTS, DEMAND / CALL /

NOTICE DEPOSITS

➢ “FIXED” OR “TERM” DEPOSITS – ORDINARY TERM DEPOSITS, CUMULATIVE TERM DEPOSITS,

RECURRING DEPOSITS, PYGMY DEPOSITS, ANNUITY DEPOSITS

• LIABILITY PRODUCTS : BORROWINGS

➢CERTIFICATES OF DEPOSITS

➢CALL AND NOTICE MONEY BORROWINGS

➢REPURCHASE AGREEMENTS (REPOS)

➢TERM BORROWINGS

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

PRODUCTS AND SERVICES OFFERED BY BANKS

ASSET PRODUCTS: LOANS : AS PER REPAYMENT TYPE

• “REPAYABLE ON DEMAND” LOANS – OVERDRAFTS AND CASH CREDITS, DEMAND LOANS
• “TERM LOANS” – BULLET LOANS, INSTALMENT LOANS, EMI LOANS
ASSET PRODUCTS : LOANS : AS PER PURPOSE
• BUSINESS LOANS – Working Capital Loans, Equipment Finance, Project Finance
• PERSONAL LOANS – Consumption Loans, Housing Loans, Vehicle Loans, Education Loans
ASSET PRODUCTS: INVESTMENTS
• REVERSE REPOS
• TIER-II BONDS, PERPETUAL BONDS
• EQUITY SHARES AND PERPETUAL NON-CUMULATIVE PREFERENCE SHARES

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SESSION 3 01 SEP 2021

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

PRODUCTS AND SERVICES OFFERED BY BANKS

Ancillary and Technology oriented services

• Remittances – Bankers, Cheques / Pay Orders, Drafts, EFT (NEFT, IMPS, RTGS, SWIFT)

• Credit, Debit and Pre-paid Cards, Virtual Cards

• Foreign Exchange – Sale and Purchase

• Trade Finance – Letters of Credit, Bank Guarantees, Solvency Certificates

• Sale / Distribution of Third party products – Insurance, Mutual Funds etc.

• Derivatives – Forward Exchange Contracts, Interest Rate Derivatives, Structured products

• Correspondent Banking

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

PRODUCTS AND SERVICES OFFERED BY BANKS
• Wealth Management – Private Banking, Advisory/Execution, PMS,

• Executor & Trustee services

• Escrow Account services

• Treasury management – Trading and Hedging, Cash / Liquidity Mgt., ALM, Inv. Mgt.

• Cash and Currency management services – Collection of Cash, Issue and Collection of cheques,
Collection of Bills / Receivables, Funds Pooling,, Cash / Cheque / documents pick-up and delivery,
Bulk Remittances and disbursements, Standing Instructions

• Merchant Banking – Arranging Funds, Managing issues, Loan Syndication

• Safe Custody / Safe Deposit Lockers / Custodial Services

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SESSION 3 01 SEP 2021

MSc FE: COMMERCIAL BANKING – OVERVIEW OF COMMERCIAL BANKS

DELIVERY CHANNELS
PHYSICAL OR “BRICKS AND MORTAR”
- Branches / CPCs, Relationship Banking, Door-step banking
- ATMs / CDMs / PBPs / e-Corners / Kiosk Banking
AGENCY CHANNELS
- DSAs
- Business Correspondents
- Correspondent banks
DIGITAL CHANNELS
- Internet Banking (Web based and App based)
- Mobile Banking / Telephone Banking (including Call centre) / Video banking
PLEASE DO NOT CONFUSE A DELIVERY CHANNEL WITH A PRODUCT/SERVICE

COMMERCIAL BANKING SESSION 3 : Q AND A & CONTACT

ANY QUESTIONS ?

PLEASE CONTACT ME:

E-mail: shridhar58@gmail.com

WhatsApp: 9818547778

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