Para banking activities

Presented by:-
RISHI CHAUHAN-127
BHISHAM MUDGAL-14
NISHANT SHEKHAR-32
BHAVDEEP CHHABRA-13
Para banking

The activities which are done by a Bank

apart from its normal day to day
transactions ( like deposit , withdrawal etc..)
are called Para-Banking Activities /
Operations. 
Para banking
 .Subsidiary Companies
 Investment ceiling in financial services companies etc
 Equipment Leasing, Hire purchase business and factoring
services
 Equipment leasing, Hire purchase and factoring services as
departmental activities
 Guidelines for banks undertaking PD Business
 Mutual Fund business
 Relationship with subsidiaries
 Smart/Debit Card Business
 .Money Market Mutual Funds (MMMFs)
 . Cheque Writing Facility for investors of Money Market Mutual
Funds (MMMFs)
 Entry of banks into Insurance business
 Pension Fund Management by banks
 Underwriting of Corporate Shares and Debentures
 Underwriting of bonds of Public Sector Undertakings

 
 Banks source of Income

 Interest income
 Non-interest income
 Interest income
Interest income is generated from what is known as “the
spread.” The spread is the difference between the interest a
bank earns on loans extended to customers, corporate etc
and the interest paid to depositors for the use of their money. It
is also earned from any securities that the banks own, such as
treasury bills or bonds.
Non interest income
Any income that banks earn from activities other than
their core intermediation business (taking deposits
and making loans) or from their investments is
classified as noninterest income. This type of income
is often referred to as "fee income" since fees
constitute the majority of noninterest income. Banks
report this income to regulators in five broadly
defined categories summarized in the accompanying
table.
 Diversification of Indian banking sector
During the second half of the 1990s many Indian
banks have indeed adopted universal banking
structures as a strategic response to increased
competition in both domestic as well as global
market.
The Indian banking industry too has been seen
steadily shifting away from traditional sources of
revenue like loan-making and towards nontraditional
activities that generate fee income, service charges,
trading revenue, and other types of noninterest
income.
Diversification helps a bank in eliminating the
unevenness of geographical reach, product-process
innovation, exploit economies of scale and scope,
reap benefit of advanced technology, diversify risk
along with mobilization of additional capital.
Diversification has opened the door for commercial
banks to earn fee income from investment banking,
merchant banking, insurance agency, securities
brokerage, and other nontraditional financial
services
 Universal banking
Universal Banking is a superstore for
financial products under one roof.
Corporate can get loans and avail of other
handy services, while can deposit and
borrow. It includes not only services related
to savings and loans but also investments.
 Source of non-interest income

Income from Fiduciary Activities

Trading Revenue

Service Charges on Deposit Accounts

Fee Income

Other Non-fee Income

 Income from Fiduciary Activities

Income from trust department transactions

and services
 Banks park funds with mutual funds
again
RBI indicate that total outstanding funds parked
with mutual funds amounted to Rs 35,779 crore as
on July 30 against Rs 19,106 crore as on July 2.

Banks essentially park funds in liquid MF schemes

as the return is a shade better than the return
earned by deploying funds in the overnight call
money market . 
Income from trading
Income from exposure to financial
instruments relating to commodities,
foreign exchange, interest rates, and
equity securities and indices
Income from Service Charges on
deposit accounts

Charges for account maintenance,

failure to maintain minimum balances
and processing of "insufficient funds"
checks
 Income from fee

Fees from credit cards, securitizing loans,

mortgage refinancing and servicing, sales of
mutual funds and annuities, and ATM
surcharges
Income from Other Non-fee
Income
Income received from data
processing services, sales of
miscellaneous assets and other
income not included above
Growth rate of interest and non interest
income
Non- interest
income

Interest
Total income
income
Net profitability of bank groups in India
 ICICI bank operating result data
Rs. In billions
2008-09 2009-10 %change
Interest income Rs.310.93 Rs.257.07 (17.3)
Interest expense 227.26 175.93 (22.6)
Net interest margin 83.67 81.14 (3.0)
Non-interest 76.03 74.78 (1.6)
income
- Fee income 65.24 56.50 (13.4)
- Treasury income 4.43 11.81 166.6
- Lease income 2.33 1.57 (32.6)
- Others 4.03 4.90 21.6
 Unique characteristics of non-interest
income
Banks also seek to increase noninterest income
because it is considered to have traits that make it
different from interest income and thus desirable.

In particular, noninterest income could lead a bank

to be less risky if it leads to greater diversification.

In addition, noninterest income is typically

described as more steady or stable than interest
income
Increase Non-interest Income and Improve
Relationship Value by Optimizing Your Debit Card
Portfolio

The new Regulation have created a much higher focus on individual

account revenue. That means now is the time to re-evaluate whether
your debit card strategy is optimized.

According to the 2009 Debit Issuer Study commissioned by Pulse, the

average consumer debit card penetration rate in 2008 was 73 percent.
Among these cardholders, 56 percent were active — that is, they used
their cards to conduct a signature transaction in the past 30 days. In
addition,
while the penetration rate and active rate for businesses were lower (59
percent and 39 percent, respectively), the revenue potential was
greater due to a higher average transaction size and significantly higher
interchange income.
 Solutions to take Advantage of the Debit
Card Opportunity
Instant issuance at the branch level
Targeted activation and utilization campaigns
Promoting debit cards as a bill payment option
Marketing the use of debit cards for internet purchases 
Revisiting rewards programs
Increased emphasis on business debit 
Enhanced metrics
Innovation
Role of RBI ON PARA BANKING
And master circular on para banking by RBI
NON-INTEREST COMPARISION OF SBI AND ICICI

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Total income distribution of banks

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Role of RBI ON PARA BANKING
And master circular on para banking by RBI
NON-INTEREST COMPARISION OF SBI AND ICICI

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