Indian Economics At A Glance

Bank Rate -
Repo Rate -
Reverse Repo Rate
CRR -
Slr -
Plr -
Saving Bank Rate
Deposit Rate

BANKING SYSTEM :
Money market - It refers to borrowing and lending.

Organized and unorganized sector

Organized sector are State Bank, 7 associated banks, 19 Nationalised banks, RRB, Co-operative Banks, Non
Governmental sector and other Banks.
Unorganized includes the moneylenders and indigenous bankers.

Functions Of RBI:
Issue of Notes: followed Minimum Reserve System(MRS) 200 Crore(115Crore gold+85Crore foreign
exchange etc.)
Bankers Bank : Banking Regulation Act 1949 - Lender to the last resort.(loan to Commerlised Bank)
Controller of Credit & money supply
Quantitative: Bank Rate, open Market operation, statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR
(ii)Qualitative (or) Selective: since 1956
Rationing of Credit
Regulation of Consumer credit
Variation in margin requirements.
Fixation of maximum limit of Credit given for a Special purpose.
Discriminatory interest rates on some special types of advances
Custodian of Foreign Reserves: RBI buys & sells the foreign currencies
Collecting and publishing the economic data.
Buying and selling of Govt. securities and trade bills
Representing the Govt in IMF.
Giving loans to the Govt to buying and selling of valuable commodities etc.
Techniques in credit control:
(a) Quantitative and Qualitative Credit Control Bank rate - SLR, CRR, open marker operations etc., and
variation in margin requirements publicity etc.,
(a) Houses for slum, credit to formers for purchase, ordinary retailers etc., shall be given priority at least
40% to them

(b) Differential rate of interest less interest 4% rate for weaker sections. It is for those whose income not more than
per annum 6400/7200 in Rural and Urban areas- for lands less than 2.5-acres/1 acre non irrigated and irrigated
land respectively. (c) New strategy for rural lending 1987 service area approach.

List Of Nationalised Banks In India :

Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce (OBC)
Punjab and Sind Bank
Punjab National Bank (PNB)
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India (UBI)
Vijaya Bank

Scheduled Banks - Paid up capital not less than 5 lakhs and activity will not affect interest of depositors.(ii)It has
following facilities:-1.Eligible to get loan from RBI 2.Membership of clearing house 3. get rediscount in exchange bills

Non Scheduled banks - included in scheduled but to follow CRR conditions but no deposit with RBI and not eligible
for loan from RBI.

Indian Banks Abroad:- Bank of Baroda has the highest with 38 branches and SBI with 22 branches and Bank of
India have 18 branches. In U.K. 19 branches and Fiji 9 branches.

New Banks in Private Sector:Created from 2000 based on Narasimham Committee important are UTI, IIBL, ICIC,
HDFC and IDBI. Amas Bank is the first private bank established Europe by Indian National in 1994 and Hinduja
Group has established it at Geneva Local Area Banks in private sector allowed by RBI in A.P, Maharashtra and
Karnataka.
Co-operative Banks: It has 3 tier - state and district primary.

Regional Rural Banks (RRB)1975 established under RRB Act 1976

Capital Source: Central Govt. 50% , State Govt. 15%, Sponsered Public Sector Commercial Bank 35%
Objectives: Rural Development especially in Remote Rural Areas
loan to weaker section (concessional rate of interest)
mobilise rural savings
83% of branches in Rural Areas (except Sikkim)
since 1987, no new RRB has been opened (Kelkar committee) increased capital Rs.25 lakh to 1 Crore
1994-95 M.C.Bhandari Committee: to invest NON SLR surplus fund in profitable areas
1995-96 K.Basu Committee: Re-organisation of selected RRBs
Narasimham committee recommended to give more freedom to RRB

Committees:

a.Narasimham committee 1991 financial reforms.

b.Goiporria Committee 1990 improvement of consumer service in banking
c.Janakiraman Committee 1992 high-level enquiry on irregularities in securities.
d.J.P.C. Shares scam in 1992. (e) Chandrashekar Committee: 1997 transfer of shares.
(f) Pherwani Committee: 1991 established National Stock Exchange.
.Banking Ombudsman RBI introduced 1995 11 already appointed all except RRB included. Time limit one month.
Some important banking Institutions:
a) IDBI- 1964-To provide financial assistance to industrial enterprises and to promote institutions engaged in industrial
development.
b) IFCI: 1948 Act -To arrange medium and long term credit for varuois industrial enterprises- 1993 corpn was
converted into a company
c) ICICI: 1955-Developing medium and small industries 2002 merged with ICICI Bank
d) UTI: 1964- Biggest mutual fund- peoples savings and reinvestment. It started UTI bank in 1994 at Ahenmedabad.
Various Funds of UTI: 1) India Fund-1986 (ii) India Growth Fund 1988 (iii) India Access Fund 1997 (iv) India Debt
Fund 1997 (v)Master Value- Index Fund 2 in 1998.
e) EXIM bank: 1982- For financing, facilitating and promoting foreign trade in India.
f) NHB: 1988-wholly owned by RBI.Apex institution for housing finance,
 BANKING TERMS

Annuity: A life insurance contract sold by insurance companies, brokers, and other financial institutions. It is usually
sold as a retirement investment. An annuity is a long-term investment and can have steep surrender charges and
penalties for withdrawal before the annuity's maturity date. (Annuities are not FDIC insured.)

Appraisal: The act of evaluating and setting the value of a specific piece of personal or real property.

Automated teller machine (ATM): A machine, activated by a magnetically encoded card or other medium, that can
process a variety of banking transactions. These include accepting deposits and loan payments, providing
withdrawals, and transferring funds between accounts.

Bankrupt: A bankrupt person, firm, or corporation has insufficient assets to cover their debts. The debtor seeks relief
through a court proceeding to work out a payment schedule or erase debts. In some cases, the debtor must
surrender control of all assets to a court-appointed trustee.

was not authorized by the cardholder or the cardholders' designee,

is not properly identified, and
was not accepted by the cardholder or the cardholder's designee.

Bear Market When Stock market is falling it is termed a bear market .

Bounced Cheque - when the bank has not enough funds in the relevant account or the account holder requests that

the cheque is bounced (under exceptional circumstances) then the bank will return the cheque to the account holder.

This normally incurs a fee from the bank.

Bond: Publicly traded long-term debt securities, issued by corporations and governments, whereby the issuer agrees

to pay a fixed amount of interest over a specified period of time and to repay a fixed amount of principal at maturity.

Bull Market - When Stock market is rising it is termed a bear market .

Capital Markets: The market in which long-term securities such as stocks and bonds are bought and sold.

Collateral: Assets that are offered to secure a loan or other credit. For example, if you get a real estate mortgage, the
bank's collateral is typically your house. Collateral becomes subject to seizure on default.

Compound Interest: Interest paid not only on the initial deposit but also on any interest accumulated from one period
to the next.

Cheque : A written order instructing a financial institution to pay immediately on demand a specified amount of
money from the check writer's account to the person named on the check or, if a specific person is not named, to
whoever bears the check to the institution for payment.
Cheque Clearing - This is the process of getting the money from the cheque-writer's account into the cheque

receiver's account.

Clearing Bank - This is a bank that can clear funds between banks. For general purposes, this is any institution

which we know of as a bank or as a provider of banking services.

Credit-Worthiness - This is the judgement of an organization which is assessing whether or not to take a particular
individual on as a customer. An individual might be considered credit-worthy by one organisation but not by another.
Much depends on whether an organization is involved with high risk customers or not.

Debit: A debit may be an account entry representing money you owe a lender or money that has been taken from
your deposit account.

Debit card: A debit card allows the account owner to access their funds electronically. Debit cards may be used to
obtain cash from automated teller machines or purchase goods or services using point-of-sale systems. The use of a
debit card involves

Delinquency: A debt that was not paid when due.

Draft: A signed, written order by which one party (the drawer) instructs another party (the drawee) to pay a specified
sum to a third party (the payee), at sight or at a specific date. Typical bank drafts are negotiable instruments and are
similar in many ways to checks.

Electronic banking: A service that allows an account holder to obtain account information and manage certain
banking transactions through a personal computer via the financial institution's Web site on the Internet. (This is also
known as Internet or online banking.)

Equity: Ownership of the company in the form of shares of common stock.

Hire Purchase - When an item of large capital value is bought over time by paying a deposit and fixing a period over

which the loan will run (usually between 12 and 60 months) and then paying fixed and equal repayments over this

period.

Interest - The amount paid or charged on money over time. If you borrow money interest will be charged on the loan.
It you invest money, interest will be paid (where appropriate to the investment). Interest rates usually bear a close
relationship to the Bank of England's base rate. It is expressed in percent.

Liquidity: The ability to convert an investment into cash quickly and with little or no loss in value.

Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in
consideration of a payment (e.g., rent).

Money Laundering - This is when money gained from crime is put into a bank so that it can be accessed safely by

the criminals and terrorists. It makes the proceeds of illegal activities easier to get to.

Money Transfer - This is the movement of money from one account to another.

Mutual Fund: A company that invests in and professionally manages a diversified portfolio of securities and sells
shares of the portfolio to investors.
Mortgage: A debt instrument used in a real estate transaction where the property is the collateral for the loan. A
mortgage gives the lender a right to take possession of the property if the borrower fails to pay off the loan.

Mutual Fund: A fund operated by an investment company that raises money from shareholders and invests it in
stocks, bonds, options, commodities, or money market securities. These funds offer investors the advantages of
diversification and professional management. To participate, the investor may pay fees and expenses. (Mutual funds
are not covered by FDIC insurance.)

Passbook: A book in ledger form in which are recorded all deposits, withdrawals, and earnings of a customer's

savings account.

Overdraft - This is when a person has a minus figure in their account. It can be authorized (agreed to in advance or

retrospect) or unauthorized (where the bank has not agreed to the overdraft either because the account holder

represents too great a risk to lend to in this way or because the account holder has not asked for an overdraft facility).

Payee - The person who receives a payment. This often applies to cheques. If you receive a cheque you are the

payee and the person or company who wrote the cheque is the payer.

Net Asset Value: The underlying value of a share of stock in a particular mutual fund; also used with preferred stock.

Rate of Return: A percentage showing the amount of investment gain or loss against the initial investment.

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