BANKING INDUSTRY

The Banking Industry was once a simple and reliable business that took deposits from investors at a lower interest rate and loaned it out to borrowers at a higher rate. However deregulation and technology led to a revolution in the Banking Industry that saw it transformed. Through technology development, banking services have become available 24 hours a day, 365 days a week, through ATMs, at online bankings, and in electronically enabled exchanges where everything from stocks to currency futures contracts can be traded. The Banking Industry at its core provides access to credit. In the lenders case, this includes access to their own savings and investments, and interest payments on those amounts. In the case of borrowers, it includes access to loans for the creditworthy, at a competitive interest rate. Banking services include transactional services, such as verification of account details, account balance details and the transfer of funds, as well as advisory services that help individuals and institutions to properly plan and manage their finances. Online banking channels have become key in the last 10 years. The collapse of the Banking Industry in the Financial Crisis, however, means that some of the more extreme risk-taking and complex securitisation activities that banks increasingly engaged in since 2000 will be limited and carefully watched, to ensure that there is not another banking system meltdown in the future.

BANKING

Whether commercial or public, government or private there are numerous types of banks, each serving its own specific role. There are several types of banks in the world, and each has a specific role and function as well as a domain in which they operate. In broad strokes, banks may be divided into several groups on the basis of their activities and these include investment banks, retail, private, business, and also corporate banks. Many of the larger banks have multiple divisions covering some or all of these categories. Retail banks deal directly with consumers and small business owners. They focus on mass market products such as current and savings accounts, mortgages and other loans, and credit cards. By contrast, private banks normally provide wealth management services to high net worth families and individuals. Business banks provide services to businesses and other organizations that are medium sized, whereas the clients of corporate banks are usually major business entities. Lastly, investment banks provide services related to financial markets, such as mergers and acquisitions. Another way in which banks may be categorised is on the basis of their ownership. They might either be privately held or publicly owned banks. Privately owned banks are motivated by profit in their business operations. Publicly owned banks are held by the state governments of the individual countries and they serve as a nations centralized bank, as well as an economic backbone for that particular country. They are also known as central banks. Publicly owned banks, which

are controlled by the government, have numerous responsibilities pertaining to the banking sector of the country, such as administering various activities for the commercial banks of that country. They also determine the rates of interest offered by banks doing business in that country, as well as playing a major role in maintaining liquidity in the banking sector. There are several types of notable retail banks. These include the offshore, community and savings banks, as well as the community development banks, building societies, postal savings banks, ethical banks and Islamic banks. Offshore banks operate in areas of reduced taxes, as compared to the country in which the investor lives in. This is why most offshore banks are private banks. Community banks are monetary organizations operated on a local basis, while community development banks cater to the populations or markets that have typically not been served properly. Postal savings banks are basically savings banks that operate in conjunction with the national postal systems of that country. Building societies where traditionally mutually owned by their customers. They provide a full range of retail banking services, but with a particular focus on mortgages. Ethical banks do their business based on their own code of conduct. They only accept investments that they perceive to be useful from a social and environmental point of view. The Islamic Banks perform their business operations as per the Sharia law, the Islamic code of law. In particular, this means that they operate sans interest. There are two types of investment banks - the investment banks that perform underwriting

activities, and the merchant banks, a traditional form of banking that performs tradefinancing activities.

GENERAL HISTORY OF BANKING

A simple form of banking was practiced by the ancient temples of EGYPT,
BABYLONIA ,

and GREECE, which loaned at high rate of interest the gold and silver

deposited for safe keeping. Private banking existed by 600 B.C. and was considerably developed by the Greeks, Romans, and Byzantines. Medieval banking was dominated by Jews Levantines because of the Christian church against interest and because many other occupations were largely closed to Jews. The forerunners of modern banks were frequently chartered for a specific purpose, e.g., the Bank of Venice (1171) and the Bank of England (1694), in connection with loans to the government; the Bank of Amsterdam(1609), to receive deposits of gold and silver. Banking developed rapidly throughout the 18th and 19th cent., accompanying the expansion of industry and trade, with each nation evolving the distinctive forms peculiar to its economic and social life.

FUNCTIONS OF BANKING
ACCEPTING DEPOSITS

Banks are the custodians of public money. Basically, the money is accepted as deposit for safe keeping. But since the Banks use this money to earn interest from people who need money, Banks share a part of this interest with the depositors. Accepting deposits and keeping track of the money involves a lot of book-keeping and other operations. To provide this service the bank must maintain: 1. An effective branch network to reach the targetted customer base

2. A system of Intra branch accounting with separate account(s) for each customer 3. A system of reconciliation at the end of the day 4. Availability of adequate funds at each branch 5. Trained staff for effective customer service 6. Infrastructural inputs like space, stationery, comfortable environment etc.

LENDING MONEY TO THE PUBLIC

Lending money is one of the two major activities of any Bank. The Bank acts as an intermediary between the people who have the money to lend and those who have the need for money to carry out business transactions. This activity places its own requirements on the resources of the Bank. For effective functioning of this, a bank must possess: Sufficient deposits. Skills to appraise the potential borrowers and the activity. Legal skills for documentation.

 Legal skills for recovery of its dues through the courts. Skills to follow up and monitor the end-use of money An effective credit delivery system. Review of credit portfolio. lent by it.

TRUSTEE BUSINESS
Banks also act as trustees for various purposes. For example, whenever a company wishes to issue secured debentures, it has to appoint a financial intermediary as trustee who takes charge of the security for the debenture and looks after the interests of the debenture holders. Such entity necessarily has to have expertise in financial matters and also be of sufficient standing in the market/society to generate confidence in the minds of potential subscribers to the debenture. While Banks are the natural choice for the customers, Banks must possess the following to be effective and retain that: A track record of sufficient length. Facilities for safe keeping. Legal skills to take necessary steps for the trusteeship

TRANSFER OF MONEY

Apart from accepting deposits and lending money, Banks also carry out, on behalf of their customers the act of transfer of money - both domestic and foreign.- from one place to another. This activity is known as "remittance business. Banks issue Demand Drafts, Banker's Cheques, and Money Orders etc. for transferring the money. Banks also have the facility of quick transfer of money also know as Telegraphic Transfer or Tele Cash Orders. To deliver this service, a Bank must have: An effective branch network or correspondent relationships. A system of Inter branch reconciliation A system of reconciliation with the correspondents Availability of funds at all the centers

SAFE CUSTODY
Bankers are in the business of providing security to the money and valuables of the general public. While security of money is taken care of through offering various type of deposit schemes, security of valuables is provided through making secured space available to general public for keeping these valuables. These spaces are available in the shape of LOCKERS. The latter are small compartments with dual locking facility built into strong cupboards. These are stored in the Bank's Strong Room and are fully secure. Lockers can neither be opened by the hirer or the Bank individually. Both must come

together and use their respective keys to open the locker. To make this facility available to its customers, the Bank must provide: Physical structures to house the lockers Locker cabinets