Commercial Bank in India

PUBLIC SECTOR State Bank of India Allahabad Bank Punjab National Bank Bank of Baroda Dena Bank PRIVATE SECTOR HDFC Bank ICICI Bank ING Vysya Bank Axis Bank Induslnd Bank Karur Vysya Bank FOREIGN SECTOR

ABN AMRO Deutsche Bank HSBC Bank Citibank JP Morgan Chase Bank Standard Chartered Bank

LIABILITIES OF BANK
DEPOSITS

DEMAND DEPOSIT

TERM DEPOSIT/FIXED DEPOSIT

CURRENT DEPOSIT

SAVING

CALL DEPOSIT

OTHER LIABILITIES
Borrowings from RBI
Borrowings from other banks Other non deposits resources such as

borrowings from IDBI, NABARD , EXIM BANK and bills rediscounted with financial institutions.

BANKING ASSET

ASSET

CASH IN HAND & BALANCES WITH RBI

ASSET WITH BANKING SYSTEM

INVESTMENT IN GOVT. & APPROVED SECURITIES

BANK CREDIT

INVESTMENT

SLR SECURITIES

GOVT OF INDIA SECURITIES

NON SLR SECURITIES

NONAPPROVED SECURITIES

OTHER APPROVED SECURITIES

BANK CREDIT
LOANS

DEMAND LOANS

CASH CREDIT

CREDIT
INSTALLMENT OR HIRE PURCHASE CREDIT PURCHASE & DISCOUNTING OF COMMERCIAL BANKS OVERDRAFT

INVESTMENT POLICIES
Each bank is responsible for framing its own Internal Investment

Policy Guidelines (or, simply, Investment policy). The Asset Liability Committee (ALCO) of a bank, comprising senior bank officials and headed in most cases by the CEO, plays a key role in drafting the investment policy of the bank. The investment policy and the changes made therein from time to time have to obtain the bank Board's approval for it. The aim of an Investment Policy of a bank is to create a broad framework within which investment decisions of the Bank could be taken. The actual decisions regarding investment are to be taken by the Investment Committee set up by the Board. The Investment Policy outlines general instructions and safeguards necessary to ensure that operations in securities are conducted in accordance with sound and acceptable business practices.

 The parameters on which the policy is based are return (target return

as determined in individual cases), duration (target duration of the portfolio), liquidity consideration and risk. Thus, while the Policy remains within the framework of the RBI guidelines with respect to bank investment, it also takes into consideration certain bank-specific factors, viz., the bank's liquidity condition and its ability to take credit risk, interest rate risk and market risk. The policy is determined for SLR and non-SLR securities, separately. The Investment Policy provides guidelines with respect to investment instruments, maturity mix of investment portfolio, exposure ceilings, minimum rating of bonds/ debentures, trading policy, accounting standards, valuation of securities and income recognition norms, audit review and reporting and provisions for Non-Performing Investments (NPI). It also outlines functions of front office/ back office/ mid office, delegation of financial powers as a part of expeditious decision-making process in treasury operations, handling of asset liability management (ALM)issues, etc.

 Several banks follow the practice of a strategy paper. Based on the

market environment envisaged by Asset Liability Committee (ALCO) in the Asset Liability Management (ALM) Policy, a Strategy Paper on investments and expected yield is usually prepared which is placed before the CEO of the Bank. A review of the Strategy Paper may be done at, say half yearly basis and put up to the CEO.

EVOLVING TRENDS
TECHNOLOGY

FINANCIAL INCLUSION

OUTSOURCING OF SERVICES

TECHNOLOGY
TECHNOLOGY OUTSOURCING OF SERVICES FINANCIAL INCLUSION

INTERNET BANKING

OUTSOURCING OF NON CORE ACTIVITIES

NO FRILL ACCOUNT

MOBILE BANKING TRANSACTIONS

USE OF BUSINESS FACILITATOR & CORRESPONDENTS

INFORMATION AND COMMUNICATION TECHNOLOGY

MICRO CREDIT

SELF HELP GROUP

Conclusion
Banks have played a critical role in the economic development of some developed countries such as Japan and Germany and most of the emerging economies including India. Banks today are important not just from the point of view of economic growth, but also financial stability. In emerging economies, banks are special for three important reasons. First, they take a leading role in developing other financial intermediaries and markets. Second, due to the absence of well-developed equity and bond markets, the corporate sector depends heavily on banks to meet its financing needs. Finally, in emerging markets such as India, banks cater to the needs of a vast number of savers from the household sector, who prefer assured income and liquidity and safety of funds, because of their inadequate capacity to manage financial risks.