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Principles and

Practices of

Banking
For JAIIB Exam
Siva Rama Prasad Sir Notes
EX-GM, SBI PO
36+ Years of Experience

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Principles And Practices Of Banking Study Notes For JAIIB Free e-book

Principles and Practices of Banking Study Notes

for JAIIB
Check out this eBook on the Principles and Practices of Banking for JAIIB Exam 2022 and get
to know about the syllabus in detail and the short notes for IIBF JAIIB principles and practices
of banking.

Principles and Practices of Banking - Exam Pattern

Each paper will comprise approximately 120 objective type multiple-choice questions (MCQs)
for 100 marks, including questions based on case studies. There are no penalties for incorrect
answers. The Institute, on the other hand, has the authority to change the number of questions
that they will ask for each subject.

Passing Criteria for JAIIB

A pass is defined as a score of at least 150 in total and at least 45 in each topic in a single try
(which does not have to be the first attempt). Otherwise, 50 marks for each topic. From the first
attempt, a passed subject is carried on to four additional attempts (whether you take the exam
or not). If you do not pass after four attempts, you must retake all three papers.
First Class
60 per cent or above on a scale of one to ten, with a pass in all subjects in the FIRST PHYSICAL
ATTEMPT.
First Class with Distinction
In the FIRST PHYSICAL ATTEMPT, 70 per cent or more marks in aggregate and 60 per cent or
more in each subject. Only "Pass Class" will be offered to candidates who have been granted
exemption in the subject(s).
Principles And Practices Of Banking Study Notes For JAIIB Free e-book

Principles and Practices of Banking | JAIIB

Unit 1: Indian Financial System
Indian Financial System – An Overview
Here is a quick overview to the Indian Financial System.

1. NBFCs are permitted to raise funds from the general public and lend money through
various mechanisms such as ex-lease, hire purchase, and bill discounting.
2. Main dealers deal in both primary and secondary markets for government securities.
3. Financial institutions (FIs) are financial institutions that provide long-term funding to
industry and agriculture.
4. Cooperative banks are permitted to take deposits and make advances from and to the
general public.
5. The state government and the Reserve Bank of India have control over urban
cooperative banks.
6. The state government and NABARD influence other cooperative banks.
7. CRR is a proportion of a bank's demand and time obligations, which are its deposits.
8. SLR is a percentage of a bank's demand and time liabilities held in specified government
securities.
9. Banks can utilize corporate securities such as bonds and debentures to raise funds.
10. Securities include debts, equities, and derivatives, to name a few.
11. The capital market regulator is SEBI.
12. SEBI licenses merchant bankers, often known as investment bankers, who issue stocks,
raise funds, and manage them.
13. SEBI has granted FII permission to invest in the Indian equities and debt markets via
stock exchanges.
14. Securities were held in Demat form by depositories (not physical).
15. A mutual fund invests in stocks, bonds, and other securities by pooling money from
investors.
16. The three regulatory authorities are the Reserve Bank of India (RBI), the Securities and
Exchange Board of India (SEBI), and the Insurance Regulatory and Development
Authority (IRDA).

Unit 2: Banking Regulation

We have listed the Banking regulations laid by RBI in the country.

1. The RBI was established under the RBI Act of 1934.

2. The Reserve Bank of India (RBI) began operations on April 1, 1935.
3. The RBI (Transfer of Public Ownership) Act of 1948 makes the RBI a state-owned
corporation.
4. The Union government has nominated four Deputy Governors and fifteen Directors to
the RBI.
5. The Government of India issues all coins and the Re 1 note, but the Reserve Bank of India
distributes them.
6. The Reserve Bank of India (RBI) controls the exchange rate between the Indian Rupee
and foreign currencies by selling and buying foreign exchange to and from Authorised
Dealers (RBI branches and other dealers).
7. Important macroeconomic policies include:
a. Monetary and credit policies are issued by the Reserve Bank of India (RBI)
Principles And Practices Of Banking Study Notes For JAIIB Free e-book

annually;
b. Fiscal policy is made by the Ministry of Finance. b. Ministry of Commerce's EXIM
policy
8. Demand obligations include savings and current accounts.
9. Lowering the CRR limits the amount of money that can be borrowed from banks.
10. The RBI can set the SLR anywhere between 0% and 40% of the bank's DTL.
11. Increasing the SLR diminishes loanable bank funds.
12. The rate at which the RBI is willing to buy or rediscount bills of exchange or other
qualifying commercial paper from banks is the bank rate.
13. No bank might hold shares in a company as a pledge or mortgagee over 30 percent of
that company's paid-up capital or 30 percent of the bank's paid-up capital and reserves,
whichever was less.
14. The selling or acquisition of government securities in the open market by the RBI is
referred to as open market operations.
15. Another weapon used by the RBI for monetary control is selective credit restriction. It
inhibits the stockpiling of vital commodities and the consequent price rise. SCC
currently covers buffer sugar stocks, unreleased sugar stocks with sugar mills, and levy
sugar.

Unit 3: Retail Banking, ADR, GDR and PNS

1. Retail banking is the exchange of assets and liabilities between commercial banks and
private consumers. SB, RD, CA, TDR, STDR, No Frill A/C, Home loan, auto loan, personal
loan, education loan, crop loan, credit card, debit card, lockers, bank assurance, and so
on are some of the products available.
2. Wholesale banking, also known as corporate banking or commercial banking, is the
practice of banking with industrial and business entities, primarily corporations and
trading houses, such as multinational corporations, domestic corporations, and
government-owned enterprises. LC, BG, bill and document collection, FX desk, tax
collection, RTGS, term lending, and other services are available.
3. Dealing in cross-border transactions is referred to as international banking.
4. Under one roof, Universal Banking offers all types of financial products such as mutual
funds, capital market-related products such as share broking, commodity broking, and
so on, as well as the sale of gold/bullion, government/corporate bonds, merchant
banking, general banking, and insurance (both life and non-life).
5. A depository receipt (DR) is a negotiable (transferable) financial instrument traded on a
country's local stock exchange but represents a security, typically in the form of equity,
issued by a publicly-traded foreign corporation.
6. Contract notes are similar to participatory notes. FII issues them to entities that want to
invest in the Indian stock market but don't want to register with the SEBI.
7. FIIs are not permitted to issue Participatory notes to Indian nationals or foreign
corporations (due to the bulk of their ownership and control being held by NRIs).

Unit 4: Role of Fixed Income Markets, Money Markets, Forex Markets,

and FEMA
1. Money markets play an important role in bank liquidity management and monetary policy
transmission.
2. Money markets are among the most liquid in the financial industry in normal times.
3. By offering the required instruments and liquidity trading partners, the money market
supports the mitigation of your company's liquidity risk.
4. Only the banking system and the money market are capable of implementing monetary
Principles And Practices Of Banking Study Notes For JAIIB Free e-book

policy.
5. Money market development facilitates financial intermediation and boosts lending to the
economy, enhancing the country's economic and social well-being.
6. As a result, the money market's expansion helps all stakeholders: the central bank, the
banking industry, and the overall economy.
7. Instruments with a maturity of less than one year. The "Money Market" is the market for
short-term funding requirements and deployment. Money market instruments are the
following instruments that are often referred to as such: CP: Commercial Paper, CD:
Certificate of Deposit, Notice/ Call/ Term Money, Inter Bank term Money, Inter Bank
Participation Certificates, Bill Rediscounting, Treasury Bills.
8. Features of Government Securities: There is a lot of liquidity because the investor can sell
the security on the secondary market, there is no risk of default because the government
backs the securities, and is given at face v. Interestrest is paid on a half-yearly basis on the
face value of the loan, it's possible to keep it in Demat form, No VAT is deducted at the
point of sale.
9. GOI uses these funds to meet its expenditure commitments. These securities are
generally fixed maturity and fixed coupon securities carrying semi-annual coupons. Since
the date of maturity is specified in the securities, these are known as dated Government
Securities.
10. Government Securities are mostly interest-bearing dated securities issued by RBI on
behalf of the Government of India.
11. The government provides securities to raise funds for a public loan or otherwise
announced in the official gazette.
12. They Consist of Government Promissory Notes, Bearer Bonds, Stocks, or Bond held in
Bond Ledger Account.
13. They may be in the form of or Dated Government Securities.
14. Corporate bonds are debt instruments issued by both private and public companies.
15. IRS is a liquid financial derivative in which two parties agree to swap interest rate cash
flows based on a set notional amount from a fixed rate to a floating rate or from one
floating rate to another.
16. While a corporate bond gives an IOU from the company, it does not have an ownership
interest in the issuing company, unlike when one purchases its equity stock.
17. An interest rate future is a financial derivative in which the underlying asset is an interest-
bearing instrument. This is a specific form of interest rate swap.
18. The Foreign Exchange Management Act (FEMA) of 1999 applies to the entire country of
India; Any branch, office, or agency located outside of India that is owned or controlled by
an Indian citizen.
19. A short-term loan benchmark rate, i.e., BBA LIBOR, that some of the world's top banks
charge one another.
20. IBA administers LIBOR based on five currencies: USD, EUR, GBP, JPY, and CHF.
21. It is available in seven distinct maturities: overnight, 1 week, 1, 2, 3, 6, and 12 months.
22. The Indian interbank market is the interest rate at which banks can borrow funds in
marketable size from other banks.

Conclusion
This brings us to the conclusion of this Principles and Practices of Banking ebook. We hope this
short note has provided you with useful information on the study notes for Principles and
Practices of Banking. Please get in touch with us at Oliveboard if you have any questions.
Principles And Practices Of Banking Study Notes For JAIIB Free e-book

FREQUENTLY ASKED QUESTIONS

Question 1: How many questions will each paper contain?
Ans. Each paper will consist of 120 objective-type multiple-choice questions (MCQs).
Question 2: Can the Institute change the number of questions that can be asked for each
subject?
Ans. The Institute has the authority to change the number of questions that will be asked for
each subject. There are no penalties for incorrect answers.
Question 3: How many marks are required to pass the exam?
 More
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