Assignment of banking management:-

Q1. Explain in detail the function of a central bank?

Answer:-01
Functions of the Central Bank
Central bank is regarded as an apex financial institution in the banking
system. It is considered as an integral part of the economic and
financial system of a nation. The central bank functions as an
independent authority and is responsible for controlling, regulating and
stabilising the monetary and banking structure of the country.

In India, the Reserve Bank of India is regarded as the central bank. It was set up in 1935.
Central banks are responsible for maintaining the financial stability and economic
sovereignty of the country.
function as the controller of credit in the economy. It happens that commercial banks create
a lot of credit in the economy that increases the inflation.

The central bank controls the way credit creation by commercial banks is done by engaging
in open market operations or bringing about a change in the CRR to control the process of
credit creation by commercial banks.
Protecting depositors interests: The Central bank also needs to keep an eye on the
functioning of the commercial banks in order to protect the interests of depositors.

Q2. Describe in detail, the different types of banks.

Answer:- O2
Functions of Banks
The major functions of banks are almost the same but the set of people each sector or type
deals with may differ. Given below the functions of the banks in India:

Acceptance of deposits from the public

Provide demand withdrawal facility
Lending facility
Transfer of funds
Issue of drafts
Provide customers with locker facilities
Dealing with foreign exchange
Apart from the above-mentioned list, various utility functions also need to be performed by
the various banks.

Aspirants can read about different bank exams in the linked article.

Central Bank
The Reserve Bank of India is the central bank of our country. Each country has a central
bank that regulates all the other banks in that particular country.

The main function of the central bank is to act as the Government’s Bank and guide and
regulate the other banking institutions in the country. Given below are the functions of the
central bank of a country:

Guiding other banks

Issuing currency
Implementing the monetary policies
Supervisor of the financial system
In other words, the central bank of the country may also be known as the banker’s bank as it
provides assistance to the other banks of the country and manages the financial system of
the country, under the supervision of the Government.

Cooperative Banks
These banks are organised under the state government’s act. They give short-term loans to
the agriculture sector and other allied activities.

The main goal of Cooperative Banks is to promote social welfare by providing concessional
loans

They are organised in the 3-tier structure

Tier 1 (State Level) – State Cooperative Banks (regulated by RBI, State Govt, NABARD)
Funded by RBI, the government and NABARD. Money is then distributed to the public
Concessional CRR and SLR apply to these banks. (CRR- 3%, SLR- 25%)
Owned by the state government and top management is elected by members
Tier 2 (District Level) – Central/District Cooperative Banks
Tier 3 (Village Level) – Primary Agriculture Cooperative Banks
Commercial Banks
Organised under the Banking Companies Act, 1956
They operate on a commercial basis and its main objective is profit.
They have a unified structure and are owned by the government, state, or any private entity.
They tend to all sectors ranging from rural to urban
These banks do not charge concessional interest rates unless instructed by the RBI
Public deposits are the main source of funds for these banks
The commercial banks can be further divided into three categories:

Public sector Banks – A bank where the majority stakes are owned by the Government or the
central bank of the country.
Private sector Banks – A bank where the majority stakes are owned by a private organization
or an individual or a group of people
Foreign Banks – The banks with their headquarters in foreign countries and branches in our
country, fall under this type of bank
Regional Rural Banks (RRB)
These are special types of commercial Banks that provide concessional credit to agriculture
and rural sectors.
RRBs were established in 1975 and are registered under the Regional Rural Bank Act, 1976.
RRBs are joint ventures between the Central government (50%), State government (15%),
and a Commercial Bank (35%).
196 RRBs have been established from 1987 to 2005.
From 2005 onwards government started the merger of RRBs thus reducing the number of
RRBs to 82
One RRB cannot open its branches in more than 3 geographically connected districts.
Local Area Banks (LAB)
Introduced in India in the year 1996
These are organized by the private sector
Earning profit is the main objective of Local Area Banks
Local Area Banks are registered under Companies Act, 1956
At present, there are only 4 Local Area Banks all of which are located in South India
Specialized Banks
Certain banks are introduced for specific purposes only. Such banks are called specialized
banks. These include:

Small Industries Development Bank of India (SIDBI) – Loans for a small-scale industry or
business can be taken from SIDBI. Financing small industries with modern technology and
equipment is done with the help of this bank
EXIM Bank – EXIM Bank stands for Export and Import Bank. To get loans or other financial
assistance with exporting or importing goods by foreign countries can be done through this
type of bank
National Bank for Agricultural & Rural Development (NABARD) – To get any kind of financial
assistance for rural, handicraft, village, and agricultural development, people can turn to
NABARD.
There are various other specialized banks and each possesses a different role in helping
develop the country financially.

Small Finance Banks

As the name suggests, this type of bank looks after the micro industries, small farmers, and
the unorganized sector of society by providing them with loans and financial assistance.
These banks are governed by the central bank of the country.
Payments Banks
A newly introduced form of banking, the payments bank has been conceptualized by the
Reserve Bank of India. People with an account in the payments bank can only deposit an
amount of up to Rs.1,00,000/- and cannot apply for loans or credit cards under this account.

Options for online banking, mobile banking, the issue of ATMs, and debit cards can be done
through payments banks. Given below is a list of the few payments banks in our country:

Airtel Payments Bank

India Post Payments Bank
Fino Payments Bank,
Jio Payments Bank,
Paytm Payments Bank,
NSDL Payments Bank.
Q3. Explain in detail, the evolution of banks.
Answer :- 03
The Indian banking system consists of commercial banks, which may be public scheduled
or non-scheduled, private, regional, rural and cooperative banks. The banking system in
India defines banking through the Banking Companies Act of 1949.

In this post, we take a look at the evolution of banking in India, the different categories and
the impact of nationalised banks.

Phase 1: The Pre-Independence Phase

There were almost 600 banks present in India before independence. The first bank to be
established the Bank of Hindustan was founded in 1770 in Calcutta. It closed down in 1832.
The Oudh Commercial Bank was India’s first commercial bank in the history of the evolution
of banking in India.

A few other banks that were established in the 19th century, such as Allahabad Bank (Est.
1865) and Punjab National Bank (Est. 1894), have survived the test of time and exist even
today.

Some other banks like the Bank of Bengal, Bank of Madras, and Bank of Bombay –
established in the early to mid-1800s – were merged as one to become the Imperial Bank,
which later became the State Bank of India.
Phase 2: The Post-Independence Phase

After independence, the evolution of the banking system in India continued pretty much the
same as before. In 1969, the Government of India decided to nationalise the banks under the
Banking Regulation Act of 1949. A total of 14 banks were nationalised, including the
Reserve Bank of India (RBI).

In 1975, the Government of India recognised that several groups were financially excluded.
Between 1982 and 1990, it created banking institutions with specialised functions in line
with the evolution of financial services in India.

NABARD (1982) – to support agricultural activities

EXIM (1982) – to promote export and import
National Housing Board – to finance housing projects
SIDBI – to fund small-scale industries.
Phase 3: The LPG Era (1991 Till Date)

From 1991 onwards, there was a sea change in the Indian economy. The government invited
private investors to invest in India. Ten private banks were approved by the RBI. A few
prominent names which exist even today from this liberalisation are HDFC, Axis Bank,
ICICI, DCB and IndusInd Bank.

In the early to mid-2000s, two other banks, Kotak Mahindra Bank (2001) and Yes Bank
(2004), received their licenses. IDFC and Bandhan banks were also given licenses in
2013-14.

Q4.Explain in detail, the meaning, characteristics, type of cheque?

A cheque is an instrument with an unconditional order in writing, addressed to the bank to
pay a specific sum of money to the bearer or to the person or entity named as the payee. A
cheque can be issued for a current account or a savings account and can be used to deposit
or pay money to other people through the bank account.
Features of Cheque
Here are the detailed characteristics of a cheque:
What Is Cheque and Different Types Of Cheque
In the digital age, where electronic transactions and online banking dominate, the humble
cheque might seem like a relic from the past. However, cheques still play a significant role in
financial transactions, providing a tangible and secure way to transfer money. Let's delve into
the world of cheques, exploring what they are and the various types that exist.
Types of Cheques in a Bank:-
1. Bearer Cheque:
The meaning of a bearer cheque is quite simple. In a bearer cheque, the payment is made to
the person who holds the cheque, i.e., the bearer. These cheques are negotiable
instruments, and anyone who possesses the cheque can cash it. However, this type of
cheque poses a higher risk as it's similar to carrying cash. If lost or stolen, anyone can use it.
2. Order Cheque:
If you are wondering about an order cheque meaning, it’s a cheque that is payable to a
specific person or entity mentioned on the cheque. It includes phrases like "Pay to the order
of" or "Pay to," followed by the payee's name. Only the specified person or their authorized
representative can encash an order cheque.
3. Crossed Cheque:
Crossing a cheque involves drawing two parallel lines across the face of the cheque. This
signifies that the cheque cannot be encashed at the counter but must be deposited into a
bank account. Crossing enhances the security of the transaction by ensuring the money
goes directly into the payee's account.
4. Open Cheque:
An open cheque is not crossed, meaning it can be encashed at the counter of the drawee
bank. While convenient, it lacks the security features of a crossed cheque and is akin to
carrying cash. Therefore, it's advisable to be cautious when dealing with open cheques.
5. Post-dated Cheque:
A post-dated cheque carries a future date. The drawer issues it with the understanding that
the payee will not cash it until the specified date arrives. This is often used as a form of
security or to delay payment until a certain time.
6. Anti-dated Cheque:
In contrast to a post-dated cheque, an anti-dated cheque bears a date earlier than the day it
is issued. While not as common, it may be used to fulfill an obligation or settle a debt with
an earlier due date.
7. Stale Cheque:
A stale cheque is one that is not cashed or deposited within a specified period, usually six
months. Banks may refuse to honour stale cheques due to the risk of insufficient funds or
other complications.
8. Traveller's Cheque:
A Traveller's Cheque is a fixed-denomination cheque designed for secure travel
transactions. Featuring pre-printed denominations, it offers the convenience of
predetermined values and includes security measures like watermarks and dual signatures
to minimize the risk of theft. In case of loss or theft, these cheques can often be replaced,
making them a reliable option for travellers. Their global acceptance makes them a widely
used form of currency exchange worldwide.
9. Self-Cheque:
A Self-Cheque is a cheque written by the account holder to themselves, serving the purpose
of cash withdrawal or fund transfer. In this type of cheque, the issuer and recipient are the
same individual. It can be used for withdrawing cash at the bank counter or transferring
funds between the account holder's own accounts. However, caution is advised as there is a
security risk if the self-cheque is lost or stolen, potentially allowing anyone in possession to
misuse it., you may ask right? Well, a Banker's Cheque, also referred to as a demand draft, is
issued by a bank on its own funds, providing a secure and guaranteed form of payment.
Unlike traditional cheques tied to an individual's account, a banker's cheque is drawn on the
bank's funds. This ensures security as the bank guarantees the specified amount on the
cheque, making it similar to a guaranteed form of payment. The banker’s cheque’s validity
lasts for 3 months from the issued date. When the period of validity ends for a cheque, it
becomes stale or invalid and cannot be submitted for any payment to the bank. Often used
for secure transactions, banker's cheques are payable to a third party, offering reliability and
eliminating the risk of bouncing due to insufficient funds in the drawer's account.