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Culture Documents
BACHELOR OF COMMERCE
BANKING & INSURANCE
SEMESTER V
Submitted
In Partial Fulfillment of the requirements
For the Award of the Degree of
Bachelor of Commerce Banking & Insurance
By
C E R T I F I C A T E
This
is
to
certify
that
Shri
Miss
project
on
Course Coordinator
Principal
External Examiner
DECLARATION
that
have
completed
this
project
on
______________________________
The information submitted is true & original to the best of my
knowledge.
Students Signature
ACKNOWLEDGEMENT
EXECUTIVE SUMMARY
b.
c.
a.
Power to license.
b.
c.
d.
e.
f.
g.
h.
i.
Reserve Bank has the power to order their winding up. The
circumstances in which Reserve Bank may require winding up are
mentioned in Section 13D of the Act.
Commercial banks play an important role in directing the
affairs of the economy.
Commercial bank regulation involves three federal agencies
and fifty state agencies. Currently in most jurisdiction commercial
banks are regulated by Government entities and require a special
bank license to operate. Scheduled Commercial Banks are
required to maintain with RBI an average cash balance and
required to submit a provisional return in Form A.
INDEX
7
SR.NO
PARTICULARS
PAGE NO
1.
CENTRAL BANKING
2.
15
3.
TYPES OF BANKS
25
4.
COMMERCIAL BANKS
26
5.
CO-OPERATIVE BANKS
31
6.
38
43
8.
46
9.
BANKS
BANKING REGULATIONS FOR CO-OPERATIVE
55
10.
BANKS
CONCLUSION
65
10
11
MONETARY POLICY
12
Currency Issuance
13
Many central banks are "banks" in the sense that they hold
assets (foreign exchange, gold, and other financial assets) and
liabilities. A central bank's primary liabilities are the currency
outstanding, and these liabilities are backed by the assets the
bank owns.
Central banks generally earn money by issuing currency
notes and "selling" them to the public for interest-bearing assets,
such as government bonds. Since currency usually pays no
interest, the difference in interest generates income. In most
central banking systems, this income is remitted to the
government. The European Central Bank remits its interest income
to its owners, the central banks of the member countries of the
European Union.
Although central banks generally hold government debt, in
some countries the outstanding amount of government debt is
smaller than the amount the central bank may wish to hold. In
many countries, central banks may hold significant amounts of
foreign currency assets, rather than assets in their own national
currency, particularly when the national currency is fixed to other
currencies.
14
Both the Federal Reserve and the ECB are composed of one
or more central bodies that are responsible for the main decisions
about interest rates and the size and type of open market
15
Policy Instruments
Interest Rates
16
These rates directly affect the rates in the money market, the
market for short-term loans.
18
collateral securities
Capital Requirements
19
Reserve Requirements
20
Exchange Requirements
21
these
23
24
Establishment
The Reserve Bank of India was established on April 1, 1935
in accordance with the provisions of the Reserve Bank of India Act,
1934.
The Central Office of the Reserve Bank was initially
established in Calcutta but was permanently moved to Mumbai in
1937. The Central Office is where the Governor sits and where
policies are formulated.
Though originally privately owned, since nationalization in
1949, the Reserve Bank is fully owned by the Government of India.
25
Preamble
The Preamble of the Reserve Bank of India describes the
basic functions of the Reserve Bank as:
"...to regulate the issue of Bank Notes and keeping of reserves
with a view to securing monetary stability in India and generally to
operate the currency and credit system of the country to its
advantage."
Central Board
The Reserve Bank's affairs are governed by a central board of
directors. The board is appointed by the Government of India in
keeping with the Reserve Bank of India Act.
Constitution.
Financial Supervision
The Reserve Bank of India performs this function under the
guidance of the Board for Financial Supervision (BFS). The Board
was constituted in November 1994 as a committee of the Central
Board of Directors of the Reserve Bank of India.
26
Objective
Primary objective of BFS is to undertake consolidated
supervision of the financial sector comprising commercial banks,
financial institutions and non-banking finance companies.
Constitution
The Board is constituted by co-opting four Directors from the
Central Board as members for a term of two years and is chaired
by the Governor. The Deputy Governors of the Reserve Bank are
ex-officio members. One Deputy Governor, usually, the Deputy
Governor in charge of banking regulation and supervision, is
nominated as the Vice-Chairman of the Board.
Current Focus
Consolidated accounting
27
Main Functions
Monetary Authority:
Issuer Of Currency:
Functions of Reserve Bank:The Reserve Bank of India Act of 1934 entrust all the
28
BANK OF ISSUE
Under Section 22 of the Reserve Bank of India Act, the Bank
has the sole right to issue bank notes of all denominations. The
distribution of one rupee notes and coins and small coins all over
the country is undertaken by the Reserve Bank as agent of the
Government. The Reserve Bank has a separate Issue Department
which is entrusted with the issue of currency notes. The assets and
liabilities of the Issue Department are kept separate from those of
the Banking Department. Originally, the assets of the Issue
Department were to consist of not less than two-fifths of gold coin,
gold bullion or sterling securities provided the amount of gold was
not less than Rs. 40 crores in value. The remaining three-fifths of
the assets might be held in rupee coins, Government of India
rupee securities, eligible bills of exchange and promissory notes
payable in India. Due to the exigencies of the Second World War
and the post-war period, these provisions were considerably
modified. Since 1957, the Reserve Bank of India is required to
maintain gold and foreign exchange reserves of Ra. 200 crores, of
which at least Rs. 115 crores should be in gold. The system as it
exists today is known as the minimum reserve system.
Banker to Government:-
29
out
their
exchange
remittances
and
other
banking
operations. The Reserve Bank of India helps the Government both the Union and the States to float new loans and to manage
public debt. The Bank makes ways and means advances to the
Governments for 90 days. It makes loans and advances to the
States and local authorities. It acts as adviser to the Government
on all monetary and banking matters.
Bankers' Bank and Lender of the Last Resort:The Reserve Bank of India acts as the bankers' bank.
According to the provisions of the Banking Companies Act of 1949,
every scheduled bank was required to maintain with the Reserve
Bank a cash balance equivalent to 5% of its demand liabilites and
2 per cent of its time liabilities in India. By an amendment of 1962,
the distinction between demand and time liabilities was abolished
and banks have been asked to keep cash reserves equal to 3 per
cent of their aggregate deposit liabilities. The minimum cash
requirements can be changed by the Reserve Bank of India.
30
The scheduled banks can borrow from the Reserve Bank of India
on the basis of eligible securities or get financial accommodation in
times of need or stringency by rediscounting bills of exchange.
Since commercial banks can always expect the Reserve Bank of
India to come to their help in times of banking crisis the Reserve
Bank becomes not only the banker's bank but also the lender of
the last resort.
Controller of Credit:The Reserve Bank of India is the controller of credit i.e. it has
the power to influence the volume of credit created by banks in
India. It can do so through changing the Bank rate or through open
market operations. According to the Banking Regulation Act of
1949, the Reserve Bank of India can ask any particular bank or the
whole banking system not to lend to particular groups or persons
on the basis of certain types of securities. Since 1956, selective
controls of credit are increasingly being used by the Reserve Bank.
The Reserve Bank of India is armed with many more
powers to control the Indian money market. Every bank has to get
a licence from the Reserve Bank of India to do banking business
within India, the licence can be cancelled by the Reserve Bank of
certain stipulated conditions are not fulfilled. Every bank will have
to get the permission of the Reserve Bank before it can open a
new branch. Each scheduled bank must send a weekly return to
the Reserve Bank showing, in detail, its assets and liabilities. This
power of the Bank to call for information is also intended to give it
effective control of the credit system. The Reserve Bank has also
31
Custodian of Foreign Reserves:The Reserve Bank of India has the responsibility to maintain
the official rate of exchange. According to the Reserve Bank of
India Act of 1934, the Bank was required to buy and sell at fixed
rates any amount of sterling in lots of not less than Rs. 10,000. The
rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank
was able to maintain the exchange rate fixed at lsh.6d. Though
there were periods of extreme pressure in favour of or against
The rupee. After India became a member of the International
Monetary Fund in 1946, the Reserve Bank has the responsibility of
32
administering
the
exchange
controls
of
the
country.
and
methods
of
working,
amalgamation,
the
methods
of
33
their
operation.
Classification of RBIs functions:The monetary functions also known as the central banking
functions of the RBI are related to control and regulation of money
and credit, i.e., issue of currency, control of bank credit, control of
foreign exchange operations, banker to the Government and to the
money market. Monetary functions of the RBI are significant as
they control and regulate the volume of money and credit in the
country.
Equally important, however, are the non-monetary functions
of the RBI in the context of India's economic backwardness. The
supervisory function of the RBI may be regarded as a nonmonetary function (though many consider this a monetary
function). The promotion of sound banking in India is an important
goal of the RBI, the RBI has been given wide and drastic powers,
under the Banking Regulation Act of 1949 - these powers relate to
licencing of banks, branch expansion, liquidity of their assets,
management and methods of working, inspection, amalgamation,
reconstruction and liquidation. Under the RBI's supervision and
inspection,
Commercial
the
working
banks
have
of
banks
developed
has
into
greatly
improved.
financially
and
Since
independence,
particularly
after
its
National
Bank
for Agriculture
and Rural
35
TYPES OF BANKS
36
R
R
E
S
E
B
O
E
V
A
N
K
I
D
COMMERCIAL BANKS
37
Introduction
38
39
application
and
regional
spread
of
scheduled
42
CO-OPERATIVE BANK
INTRODUCTION
43
According to NAFCUB the total deposits & lendings of Cooperative Banks in much ore than Old Private Sector Banks & also
the New Private Sector Banks. This exponential growth of Cooperative Banks is attributed mainly to their much better local
reach, personal interaction with customers, and their ability to
catch the nerve of the local clientele.
45
46
U
C
BB OO
R N
B
O
V O
R O
AA PP
A
EE
PK
I E N
R S
T
A T
T U
I T
V
O E
N
B
A
N
K
47
(SCARDBs)
and
Primary
Co-operative
Regulatory Environment
49
co-operative banks
52
4)
56
ORIGIN OF BANKING
Since the banking activities were started in different
periods in different countries there is no unanimous view regarding
the origin of the word bank. The word Bank is said to have
derived from the French word banco or bancus or banc or banque
which means a bench. In fact the early jews in Lombardly
transacted their banking business by sitting on benches. When
their business failed, the benches were broken and hence the
word bankrupt came into vogue.
Another common held view is that the word bank might be
original from the German word back which means a joint stock
fund. Of course a bank essentially deals with funds .In due course
it was Italiansied into banco Franchised into bank and finally
Angliesed into bank. This view is most prevalent even today.
A Banker who is doing the banking business is called a
banker. But it is not at all easy to define the term banker precisely
because a banker performs multifarious functions.
57
dishonest
management,
speculative
investment,
DEFINATION ON BANKING:-.
58
61
Restrictions on loans and advances:No banking company shall grant any loans or advances on
the security of its own shares, or enter into any commitment for
granting any loan or advance to or on behalf of
63
Lending Limits
Lending limit regulations restrict the total amount of loans
and credits that a bank may extend to a single borrower. This
restriction is usually stated as a percentage of the bank's capital or
64
assets. For example, a national bank generally must limit its total
outstanding loans and credits to any single borrower to no more
than 15% of the bank's total capital and surplus. Some state
banking regulations also contain similar lending limits applicable to
state-chartered banks. Both federal and state laws generally allow
for a higher lending limit, up to 25% of capital and surplus for
national banks, when the portion of the credit that exceed the initial
lending limit is fully secured.
Accounts and balance-sheet:At the expiration of each calendar year or at the expiration of
a period of twelve months ending with such date, as the Central
Government may, by notification in the Official Gazette, specify
that every banking company incorporated in India, in respect of all
business
transacted
by
it,
and
every
banking
company
66
Power of the Reserve Bank to give directions:Where the Reserve Bank is satisfied that
(a) In the public interest or in the interest of banking policy.
67
69
Banking Regulations for Co-operative Banks:Act to override bye-laws, etc:The provisions of this Act shall have effect, notwithstanding
anything to the contrary contained in the bye-laws of a cooperative society, or in any agreement executed by it, or in any
resolution passed by it in general meeting, or by its Board of
70
Use of words "bank", "banker" or "banking" :No co-operative society other than a co-operative bank shall
use as part of its name or in connection with its business any of
the words "bank", "banker" or "banking", and no co-operative
society shall carry on the business of banking in India unless it
uses as part of its name at least of such words.
Nothing in this section apply to:(a) A primary credit society, or
(b) A co-operative society formed for the protection of the mutual
interest of co-operative banks or co-operative land mortgage
banks, or
71
Restrictions on loans and advances:No co-operative bank shall:(a) Make any loans or advances on the security of its own shares.
(b) Grant unsecured loans or advances
(i) To any of its directors.
(ii) To firms or private companies in which any of its directors is
interested as partner of managing agent or guarantor or to
individuals in cases where any of its directors is a guarantor; or
(iii) To any company in which the chairman of the Board of
directors of the co-operative bank (where the appointment of a
chairman is for a fixed term) is interested as its managing agent, or
where there is no managing agent, as its chairman or managing
director.
74
Accounts and Balance Sheet:At the expiration of each year ending with the 30th days of
June, or at the expiration of a period of twelve months ending with
such date as the Central Government may, by notification in the
Official Gazette, specify in this behalf every co-operative bank, in
respect of all business transacted by it, shall prepare with
reference to that year or the period a balance sheet and profit and
loss account as on the last working day of the year or the period in
the Forms set out in the Third Schedule as near there to as
circumstances admit:
Bank,
which
was
subsisting
on
the
date
of
CONCLUSION
The reserve bank of India is Indias central bank. Reserve bank is
a regulation of banks but is also the dominant owner of the largest
commercial banks. With globalization and impact of technology,
several new challenges are likely to emerge for the fraternity of
central banks. The RBI has blamed the commercial banks,
78
RECOMMENDATIONS / SUGGESTIONS
The role of the bank as regulator of banking sector is mainly
by virtue of the provisions of the Banking Regulation Act, 1949.
As provided in Section 6 of the banking regulation act, banks
may undertake certain non banking business in addition to the
80
to
bye-laws,
change
81
of
liability,
division,
by
their
bye-laws
and
decided
by
their
own
82
banks,
implementation
of
this
policy
remains
83
BIBLOGRAPHY
BOOKS
CO-OPERATIVE BANKING
84
-R. NARAYAN
-A. T. VAZE
CENTRAL BANKING IN INDIA
-K. GOVINDA BHAT
COMMERCIAL BANKS IN INDIA
-KUNJUKUNJ
SEARCH ENGINE
www.google.com
www.yahoo.com
www.rbi.org.in
www.wikipedia.com
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