Banking as a Whole
One of the worlds leading
Major provider of financial services
including corporate finance, cash
management, & credit
Commercial
Banking
Comprises of five national business
investment banks
Investment
Bank
segments: Middle Market Banking,
Mid-Corporate Banking, Commercial
Real Estate, Asset Based Lending
and Commercial Leasing
Retail
Financial
Services
Clients
Provides mutual fund, insurance
& home finance and workplace
banking products to consumers
and small businesses
Asset
and
wealth
Management
Provides investment & wealth management
services to institutional investors, high net
worth individuals & retail customers
Provides personalized advice and solutions to
wealthy individuals
corporate strategy and structure,
raising and placing capital, making
markets in financial instruments and
offering sophisticated risk
management services
Treasury and
Securities
Services
Includes Auto Finance,
Consumer Banking, Home
Finance, Insurance and Small
Business Banking
Services provided: Advice on
Global leader in transaction
Card
Services
processing and information
services to wholesale clients
Three Businesses: Institutional
Trust Services, Investor
Services(WSS) and Treasury
Services
Delivers credit card and other related
payment products to cardholders and
merchant outlets
Aims to be the preferred payment card in
existing customers wallets and to increase
access to new customers
Banking and Banking operations
Bank is a commercial institution licensed as a receiver of deposits. Banks are mainly concerned
with making and receiving payments as well as supplying short-term loans to individuals.
Exists to help you make the most of your money
Assist you with your monetary requirements and promote savings
How do they do it ??
By offering different products and Services
Deposits
Banking Services
Loans
Services
Capital Market
E.g.
E.g.
Savings
DP
Current
Short Term
Long Term
Fixed
E.g.
E.g.
Overdraft
Retail
Institutional
Custodian
E.g.
E.g.
Auto Loan
DDs
Home Loan
Lockers
Bank
Guarantee
Merchant
Banking
Bill Pay
Trade
Finance
Debenture
Trustees
Fund based activities, greater market risk
Fee based activities, lesser market risk
Different types of Banks
Types of Banks
Central Bank (RBI)
Non Banking
Finance Companies
(NBFCs)
Commercial Banks
Term Financial
Institutions
Public
Sector
E.g.
Private
Sector
E.g.
Foreign
SBI
HDFC Bank
Citibank
PNB
UTI Bank
ABN Amro
E.g.
BOB
ICICI Bank
HSBC
IFCI
E.g.
Cooperative
Banks
Regional
Rural
Banks
State Finance
Corporations
(SFCs)
Indian Financial
Institutions
NABARD
SIDBI
State/Central
Private
Primary Credit
Societies
Activities of a Bank
Accepting deposits from Public
Lending money to public
Remittances/Collection Business
Keeping valuables in safe custody
Government business
Acting as trustee
Treasury services
Capital Market activity
ECONOMIC SIGNIFICANCE OF BANKING
Facilitates the development of trade and industry
Facilitates the development of agriculture sector
Facilitates the development of service sector
Contributes for the balanced growth
Encouragement of international trade
Implementation of monetary policy
Social service
IB/STO LEARNING AND DEVELOPM
ROLE OF BANKING SYSTEM IN
ECONOMIC DEVELOPMENT
BANKING SYSTEM
&
INDIAN ECONOMY
PRESENTED BY:
PREM
KR.
ECONOMIC SIGNIFICANCE OF BANKING
Facilitates the development of trade and industry
Facilitates the development of agriculture sector
Facilitates the development of service sector
Contributes for the balanced growth
Encouragement of international trade
Implementation of monetary policy
Social service
IB/STO LEARNING AND DEVELOPM
First modern bank-1688, Madras (Agency House) by Britishers
Bank of Hindustan- 1770, calcutta
General bank of india-1786
Three Presidency banks- Bank of Calcutta(1806),Bank of Bombay(1840), Bank of Madras(1843)
Imperial bank of India(1921)- which was nationalised in 1955 and named SBI
Other banks- Allahabad bank(1865), PNB(1894), BOI(1906), Indian Bank(1907), BoB(1909), CBI(1911).
IB/STO LEARNING AND DEVELOPM
Kinds of Bank
CENTRAL BANK
Commercial banks
Co-operative banks
Specialized banks
Rural banks
Housing banks
CENTRAL BANKS
RBI
(established in1935)
A central bank- is usually state owned but it may
also be a private organization.
For instance,
RBI- started as a shareholders organization in
1935, however, it was nationalized in 1949.
(It is free from parliamentary control)
FUNCTIONS OF RBI
TRADITIONAL FUNCTIONS:
To issue currency notes
A banker, Agent & Financial Advisor to the state government
A bankers bank
Control and supervision of banks
Manage and control of foreign exchange
Controlling credit
Lender of the Last Resort
DEVELOPMENT AND PROMOTIONAL FUNCTIONS:
Institutionalised agricultural credit
Establishment of UTI
Setting up of NABARD
Setting up of IDBI (a subsidiary of RBI)
Commercial Banks
(Public, Private & Foreign)
Commercial banks are joint stock companies dealing in money and credit.
prior to July 1969
73 scheduled and 26 non-scheduled banks, except the SBI and its subsidiaries- controlled by
private sector.
On July 19, 1969
14 major commercial banks with deposits of over 50 Corers were nationalized.
In April 1980
Another six commercial banks of high standing undertaken by the
government.
20 nationalized banks + SBI and its 7subsidiaries (public sector banks)
(controls over 90 per cent of the banking business in the country)
FUNCTIONS OF COMM. BANKS
PRIMARY FUNCTION:-
collection of deposits
Loans and advances:
Loans to business and trade
Loans to industry
Loans to agriculture and allied activities
Export and import trade
SECONDARY FUNCTION:Agency services
General utility services
CO-OPERATIVE BANKS
A group of financial institutions organized under the
provisions of the Co-operative societies Act of the
states.
Main objective :
To provide cheap credits to their members.
Principle:
self-reliance and mutual co-operation
Co-operative banking system in India has the shape
of a pyramid a three tier structure, constituted by:
Primary credit societies
[APEX]
Central co-operative
banks
[District level]
State co-operative banks
[Villages, Towns, Cities]
SPECIALIZED BANKS
1. Foreign exchange banks (BoA, BoT, BBME etc.)
2. Development banks
3. Land development banks,
4. Exim bank,
DEVELOPMENT BANKS
(IFCI, IDBI, SFCs, SIDCs IRBI, SIDBI & ICICI)
FUNCTIONS:
Sanction of loan
Guarantee of loan
Underwriting of industrial securities
Investment in shares and debentures
Merchant banking
Development functions
CREDIT CREATION
(POWER OF BANKS)
Liquidity..ProfitabilitySafety
CREDIT MULTIPLIER
=
Reciprocal of CRR
(1/ 1/CRR)
BANKING VISION 2020
to evolve into a strong, sound and globally competitive financial
system
to provide integrated services to customers from all segments
to leverage on technology and human resources, adopting the best
accounting and ethical practices and fulfilling corporate and
social responsibilities towards all stakeholders.
Ranking- 11th
TARGET(2020)
to 4 among 207 countries given in the World
th
Development Report in terms of (GDP).
FDI-to contribute 35% (21% now) in capital formation
International trade-below 1%(present) to 6%
Contribution of GDP- 15% (present) to 35%
Annual growth(GDP)- 8.5% to 9%
Urbanization- 30% to 40%
SME- Major player of the economy
FUTURE
LANDSCAPE
FOUR DYNAMIC TRENDS:1.
Consolidation of major players through merger
& acquisition
2.Globalization of operation
3.Development of new technology
4.Universalization of banking
PUBLIC SECTOR BANKS IN
INDIA
STATE BANK OF INDIA
CENTRAL BANK OF INDIA
DENA BANK
BANK OF INDIA
INDIAN OVERSEAS BANK
ORIENTAL BANK OF COMMERCE
PUNJAB & SIND BANK Etc.
PRIVATE SECTOR BANK OF
INDIA
ICICI BANK
IDBI BANK
AXIS BANK Etc.
HSBC BANK
CITI BANK
STANDARD CHARTED BANK Etc
CO-OPERATIVE BANK OF
INDIA
APEX BANK
IDBI BANK
IFCI ( Industrial Finance Cooperation of
India )
DEVELOPMENT / FINANCIAL
INSTITUTION
FEDERAL BANK
HDFC BANK
HSBC
ICICI
BANK INDIAN OVERSEAS BANK
ING VYSYA BANK
Overview of Indian Banking
Sector
Organization of the financial system
Financial Intermediaries
Banks
NBFC
Financial Assets/Instruments
Financial Markets
Mutual Insurance Money
Funds OrganizationMarket
Leasing Companies
Hire-Purchase/Consumer Finance
Companies
Housing Finance Companies
Venture Capital Funds
Capital/Securities
Market
Primary Market
Primary/Direct
Merchant Banking Organization
Credit Rating Agencies
Equity
Factoring and Forfeiting Org.,
Preference
Stock broking firms
Debentures
Depositories
Innovative debt
instruments
Convertible
Debentures
Non- Convertible
Debentures
Secured Premium
Notes
Secondary
Market
Indirect
Derivatives
Mutual Fundunits
Security Receipts
Pass Through
Certificates
Forward
Futures
Options
What is a Non-Banking Financial Company (NBFC)?
A Non-Banking Financial Company (NBFC) is
a company registered under the Companies
Act, 1956 and is engaged in the business of
loans and advances, acquisition of
shares/stock/bonds/debentures/securities
issued by Government or local authority or
other securities of like marketable nature,
leasing, hire-purchase, insurance business,
chit business but does not include any
institution whose principal business is that of
agriculture activity, industrial activity,
sale/purchase/construction of immovable
property.
In terms of Section 45-IA of the RBI Act, 1934, it
is mandatory that every NBFC should be
registered with RBI to commence or carry on
any business of non-banking financial
institution as defined in clause (a) of Section 45
I of the RBI Act, 1934.
However, to obviate dual regulation, certain category of NBFCs which are regulated by other regulators are exempted
from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking
companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA,
Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b)
of Section 2 of the Chit Funds Act, 1982 or Housing Finance Companies regulated by National Housing Bank.
What are the different types of NBFCs registered with RBI?
The NBFCs that are registered with RBI are:
(i) equipment leasing company;
(ii) hire-purchase company;
(iii) loan company;
(iv) investment company.
With effect from December 6, 2006 the above
NBFCs registered with RBI have been
reclassified as
(i) Asset Finance Company (AFC)
(ii) Investment Company (IC)
(iii) Loan Company (LC)
AFC would be defined as any company which is a financial institution
carrying on as its principal business the financing of physical assets
supporting productive / economic activity, such as automobiles,
tractors, lathe machines, generator sets, earth moving and material
handling equipments, moving on own power and general purpose
industrial machines. Principal business for this purpose is defined as
aggregate of financing real/physical assets supporting economic
activity and income arising there from is not less than 60% of its total
assets and total income respectively.
The above type of companies may be further classified into those
accepting deposits or those not accepting deposits.
Besides the above class of NBFCs the Residuary Non-Banking
Companies are also registered as NBFC with the Bank.
What are the requirements for registration with
RBI?
A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking
financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a minimum net owned fund of
Rs 25 lakh (raised to Rs 200 lakh w.e.f April 21, 1999). The company is required to submit its application for
registration in the prescribed format alongwith necessary documents for Banks consideration. The Bank issues
Certificate of Registration after satisfying itself that the conditions as enumerated in Section 45-IA of the RBI Act,
1934 are satisfied.
Where one can find list of Registered NBFCs and instructions issued to NBFCs?
The list of registered NBFCs is available on the
web site of Reserve Bank of India and can be
viewed at www.rbi.org.in. The instructions
issued to NBFCs from time to time are also
hosted at the above site. Besides, instructions
are also issued through Official Gazette
notifications. Press Release is also issued to
draw attention of the public/NBFCs
Can all NBFCs accept deposits and what are the
requirements for accepting Public Deposits?
All NBFCs are not entitled to accept public
deposits. Only those NBFCs holding a valid
Certificate of Registration with authorisation to
accept Public Deposits can accept/hold public
deposits. The NBFCs accepting public deposits
should have minimum stipulated Net Owned
Fund and comply with the Directions issued by
the Bank.
Is there any ceiling on acceptance of Public Deposits? What is the rate of interest and period of deposit which
NBFCs can accept?
Yes, there is ceiling on acceptance of Public Deposits. A NBFC maintaining required NOF/CRAR and complying with the
prudential norms can accept public deposits as follows:
Category of NBFC
Ceiling on public
deposits
AFCs maintaining CRAR of
15% without credit rating
1.5 times of NOF or Rs
10 crore
whichever is less
AFCs with CRAR of 12% and
having
minimum investment grade
credit rating
LC/IC with CRAR of 15%
and
having minimum investment
grade credit rating
4 times of NOF
1.5 times of NOF
Presently, the maximum rate of interest a NBFC can offer is 11%. The
interest may be paid or compounded at rests not shorter than
monthly rests.
The NBFCs are allowed to accept/renew public deposits for a
minimum period of 12 months and maximum period of 60 months.
They cannot accept deposits repayable on demand.
The RNBCs have different norms for acceptance of deposits which
are explained elsewhere in this booklet.
What are the salient features of NBFCs regulations which the depositor may note at the times of investment?
Some of the important regulations relating to acceptance of deposits by NBFCs are as under:
i) The NBFCs are allowed to accept/renew public deposits for a
minimum period of 12 months and maximum period of 60 months.
They cannot accept deposits repayable on demand.
ii) NBFCs cannot offer interest rates higher than the ceiling rate
prescribed by RBI from time to time. The present ceiling is 11 per
cent per annum. The interest may be paid or compounded at rests
not shorter than monthly rests.
iii) NBFCs cannot offer gifts/incentives or any other additional
benefit to the depositors.
iv) NBFCs (except certain AFCs) should have minimum investment
grade credit rating.
v) The deposits with NBFCs are not insured.
vi) The repayment of deposits by NBFCs is not guaranteed by RBI.
vii) There are certain mandatory disclosures about the company in
the Application Form issued by the company soliciting deposits.
What is deposit and public deposit? Is it defined anywhere?
The term deposit is defined under Section 45 I(bb) of the RBI Act, 1934. Deposit includes and shall be deemed always to
have included any receipt of money by way of deposit or loan or in any other form but does not include:
amount raised by way of share capital, or contributed as capital
by partners of a firm;
amount received from scheduled bank, co-operative bank, a
banking company, State Financial Corporation, IDBI or any other
institution specified by RBI;
amount received by a registered money lender other than a body
corporate;
amount received in ordinary course of business by way of security
deposit, dealership deposit, earnest money, advance against orders for
goods, properties or services;
amount received by way of subscriptions in respect of a Chit.
Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits ( Reserve Bank)
Directions, 1998 defines a public deposit as a deposit as defined under Section 45 I(bb) of the RBI Act, 1934 and
further excludes the following:
amount received from the Central/State Government or any other source
where repayment is guaranteed by Central/State Government or any
amount received from local authority or foreign government or any foreign
citizen/authority/person;
any amount received from financial institutions;
any amount received from other company as inter-corporate deposit;
amount received by way of subscriptions to shares, stock, bonds or
debentures pending allotment or by way of calls in advance if such amount
is not repayable to the members under the articles of association of the
company;
amount received from shareholders by private company;
amount received from directors or relative of the director of a NBFC;
amount raised by issue of bonds or debentures secured by mortgage of
any immovable property or other asset of the company subject to
conditions
the amount brought in by the promoters by way of unsecured loan;
amount received from a mutual fund;
any amount received as hybrid debt or subordinated debt;
any amount received by issuance of Commercial Paper.
Thus, the directions have sought to exclude from the definition of public
deposit amount raised from certain set of informed lenders who can make
independent decision.
Are Secured debentures treated as Public Deposit? If not who
regulates them?
When a companys rating is downgraded, does it have to bring
down its level of public deposits immediately or over a period of
time?
If rating of a NBFC is downgraded to below minimum investment grade rating, it has to stop accepting public
deposit, report the position within fifteen working days to the RBI and reduce within three years from the date
of such downgrading of credit rating, the amount of excess public deposit to nil or to the appropriate extent
permissible under paragraph 4(4) of Non-Banking Financial Companies Acceptance of Public Deposits
( Reserve Bank) Directions, 1998; however such NBFC can renew the matured public deposits subject to
repayment stipulations specified above and compliance with other conditions for acceptance of deposits.
In case a NBFC defaults in repayment of deposit what course of action can be taken by depositors?
If a NBFC defaults in repayment of deposit, the
depositor can approach Company Law Board or
Consumer Forum or file a civil suit to recover
the deposits
What is the role of Company Law Board in protecting the interest of depositors? How one can approach it?
Where a non-banking financial company fails to repay any deposit or
part thereof in accordance with the terms and conditions of such
deposit, the Company Law Board (CLB) either on its own motion or on
an application from the depositor directs, by order, the non-banking
financial company to make repayment of such deposit or part thereof
forthwith or within such time and subject to such conditions as may be
specified in the order. As explained above the depositor can approach
CLB by mailing an application in prescribed form to the appropriate
bench of the Company Law Board according to its territorial jurisdiction
with the prescribed fee
RBI has powers to cause Inspection of the books of any company and call
for any other information about its business activities. For this purpose,
the NBFC is required to furnish the information in respect of any change
in the composition of its Board of Directors, address of the company and
its Directors and the name/s and official designations of its principal
officers and the name and office address of its Auditors. With effect from
April 1, 2007 non-deposit taking NBFCs with assets size of Rs 100 crore
and above have been advised to maintain minimum CRAR of 10% and
shall also be subject to single/group exposure norms.
The NBFCs have been made liable to pay interest on the overdue
matured deposits if the company has not been able to repay the
matured public deposits on receipt of a claim from the depositor.
Please elaborate the provisions.
As per Reserve Banks Directions, overdue interest is payable to the
depositors in case the company has delayed the repayment of
matured deposits, and such interest is payable from the date of
receipt of such claim by the company or the date of maturity of the
deposit whichever is later, till the date of actual payment. If the
depositor has lodged his claim after the date of maturity, the
company would be liable to pay interest for the period from the date
of claim till the date of repayment. For the period between the date of
maturity and the date of claim it is the discretion of the company to
pay interest.
Can a company pre-pay its public deposits?
It is true that there is no ceiling on raising of deposits by RNBCs but
every RNBC has to ensure that the amounts deposited and
investments made by the company are not less that the aggregate
amount of liabilities to the depositors.
To secure the interest of depositor, such companies are required to
invest in a portfolio comprising of highly liquid and secured
instruments viz. Central/State Government securities, fixed deposit
of scheduled commercial banks (SCB), Certificate of deposits of
SCB/FIs, units of Mutual Funds, etc.
Can RNBC forfeit deposit if deposit installments are not paid
regularly or discontinued?
