BANKING AWARENESS

CONTENT PAGE NO.

History Of Banking In India 2
Reserve Bank Of India 5
Nationalization Of Banks In India 15
Indian Banking Structure 17
All India Financial Institutions 22
Security Exchange Board of India & Insurance Regulatory and Development Authority 29
Types Of Account 32
Non Banking Financial Companies (NBFC) 38
Credit Rating Agencies 41
Foreign Exchange Reserve 45
Financial Market 46
Small Finance Bank And Payments Bank 56
Payment And Settlement Systems Act, 2007 58
Financial Inclusion In India 83
Different Codes Used In Banking 86
Inflation 88
Priority Sector Lending 91
Basel Norms 96
Deposit Insurance And Credit Guarantee Corporation 100
Banking Ombudsman In India 101
Know Your Customer 103
Prompt Corrective Action 104
Goods And Services Tax 107
Great SBI Merger 113
Foreign Direct Investment 115
Miscellaneous 120
Bank Headquarters And Tagline 131
Banking Related Acts 139
Committees 143
First Among All Banks 148
Important Banking Abbreviations 150

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 HISTORY OF BANKING IN INDIA

The brief history of Indian banking system given below:

YEAR EVENT

1770 Bank of Hindustan was established by British Government

1806 Presidency Bank of Bengal was established

1840 Presidency Bank of Bombay was established

1843 Presidency Bank of Madras was established

1865 Allahabad Bank was established. It’s Oldest Joint Stock bank in India.

Oudh Commercial Bank was established in 1881 in Faizabad. At the time, it was
1881 the first commercial bank in India having limited liability and an entirely Indian
board of directors. It failed in 1958.
Punjab National Bank (PNB) was established in Lahore by Indian Merchants –
1894
1st Indian effort to continue till present day.

1904 Concept of Co-op Banks introduced by Lord Curzon

Swadeshi Movement (A number of banks established then have survived to the

present such as Catholic Syrian Bank, The South Indian Bank, Bank of India,
1906 - 1911
Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank
of India)
Central Bank of India first Indian commercial bank which was wholly managed
1911
by Indians, was established. It was called first truly Swadeshi Bank.

1913 - 1917 Due to World War 1 and 2 at least 94 Banks in India were failed.

All the three Presidency Banks merged by British Government and named it as
1921
Imperial Bank Of India.

1926 Hilton Young Committee’s Report on Central Bank

Hilton Young Committee’s Report introduced in Legislative Assembly and

1927
rejected.

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1933 Central Banking Investigation Committee’s report passed

Reserve Bank Of India Act, 1934 was introduced on the basis of the 1933’s
1934
report.

1935 RBI established with Headquarter in Calcutta.

1937 HQ of RBI permanently moved to Bombay.

First time demonetisation happened and banknotes of 1000 and 10000 rupee
1946
were withdrawn.
RBI was nationalised on 1st January 1949 (Governor is C.D. Deshmukh)
1949
Also, Banking Regulation Act, 1949 was introduced.
A.D. Gorwala Committee recommends renaming Imperial Bank of India as
1952
State Bank Of India.

1955 Imperial Bank of India was renamed as ‘State Bank of India’ on 1st July, 1955.

1964 IDBI formed as wholly owned subsidiary of RBI by Act of Parliament

14 Banks were nationalised on 19 July, 1969 with authorised capital over Rs 50

1969
crores.

1978 Deposit Insurance and Credit Guarantee Corporation (DICGC) was established.

Regional Rural Banks (RRB) was formed for financial inclusion and
1975
development of rural economy.
Second time Government of India announced demonetisation and banknotes of
1978
1000, 5000 and 10000 rupee were abolished.

1980 6 banks were nationalised with authorised capital more than Rs. 200 crores.

National Bank for Agriculture and Rural Development (NABARD) was

1982
established for credit to agriculture and cooperative sector.

1987 HSBC Bank introduced ATM in Mumbai.

1988 Securities and Exchange Board of India (SEBI) was formed.

1990 Small Industries Development Bank of India (SIDBI) was established.

1992 National Stock Exchange (NSE) of India Limited was established

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 1. New Bank of India and PNB merged on 4 September, 1993. Total of
nationalised banks become 19 excluding SBI and its associates.
1993
2. Banking Regulation Act was amended and gates for new Private Sector
Banks were opened.

1994 ICICI Bank was established

1995 Banking Ombudsman scheme was launched

1994-96 Core Banking System started making its way into banks and branches.

1998-99 Kisan Credit Card introduced by RBI with NABARD.

1. Insurance Regulatory and Development Authority (IRDA) was

1999 established.
2. Basel 1 norm was introduced in Indian Banking System.
TransUnion CIBIL Limited (Credit Information Bureau (India) Limited) is
2000
India’s first Credit Information Company (CIC) founded in August 2000.
SARFAESI Act (Securitisation and Reconstruction of Financial Assets and
2002
Enforcement of Security Interest Act, 2002) was introduced.

2003 Pension Fund Regulatory and Development Authority (PFRDA) was formed

2004 IDBI enters banking sector.

2005 Banking Ombudsman formed.

2006 IDBI merges with IDBI Bank and IDBI acquires United Western Bank.

CTS (Cheque Truncation System) first implemented in NCR, New Delhi –

2007
deadline was 31 December 2013.
1. IDBI Nationalised. Now total nationalised banks is 20 excluding SBI and
its associates.
2. SBI merged with State Bank of Saurashtra (1st associate bank merged
2008
with SBI) on 13 August, 2008.
3. National Payments Corporation of India (NPCI) was formed.

2010 1. ICICI acquires Bank of Rajasthan.

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 2. SBI merged with State Bank of Indore. Its 2nd associate bank merger
happened on 26 August, 2010.

2011 ‘Swabhiman Campaign’ under Financial Inclusion launched.

2012 ‘RuPay’ launched by National Payments Corporation of India.

Bhartiya Mahila Bank formed on 19 November, 2013.

2013
Total nationalised banks is 21 + SBI and its 5 associates = 27.
1. ‘RuPay’ dedicated to India and formally introduced, by President Pranab
Mukherjee. It is India’s 1st indigenous/domestic payment card scheme.
2. ‘Jan Dhan Yojana’ for Financial Inclusion launched.
2014
3. Two new banking license issued by RBI to Bandhan Financial Services
and IDFC.
4. RBI announced recall of pre-2005 currency notes.
1. Small Finance Bank and Payment Banks were introduced
2016 2. Government of India announced the Demonetization of all 500 and 1000
rupee notes and new 500 and 2000 rupee notes were introduced.

2017 SBI merged with its five Associate Banks and Bharatiya Mahila Bank.

2019 Proposed Basel III implementation

RESERVE BANK OF INDIA

The Reserve Bank of India (RBI) was established via RBI Act 1934 on recommendation of the
Hilton-young commission or the Royal commission on India currency and Finance on April 1,
1935 with headquarter in Kolkata. But it was permanently shifted to Mumbai in 1937. The RBI
was nationalized on 1 January, 1949.

Organization and Management:

Organization Structure: Central Board of Directors

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The bank is headed by the Governor and the post is currently held by economist Urjit Patel. There
are 3 Deputy Governors B P Kanungo, N S Vishwanathan and Viral Acharya. Now, One Deputy
governor post is empty.

The Central Board of Directors is the main committee of the Central Bank. The Government of
India appoints the directors for a 4-year term. The Board consists of a Governor, and not more than
4 Deputy Governors, 4 Directors to represent the regional boards, 2 from the Ministry of Finance
and 10 other directors from various fields. RBI wants to create a post of Chief Operating Officer
(COO) and re-allocate work between the five of them(4 Deputy Governor and COO).

Subsidiaries of RBI:

• National Housing Bank (NHB)

• Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
• Deposit Insurance and Credit Guarantee Corporation (DICGC)

Functions of Reserve Bank of India

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The Reserve Bank of India performs various traditional central banking functions as well as
undertakes different promotional and developmental measures to meet the dynamic requirements
of the country.

The broad objectives of the Reserve Bank are:

• Regulating the issue of currency in India;

• Keeping the foreign exchange reserves of the country;
• Establishing the monetary stability in the country; and
• Developing the financial structure of the country on sound lines consistent with the
national socio-economic objectives and policies.

Main functions of the Reserve Bank are described below:

1. Monopoly Power of Note Issue

The Reserve Bank has the monopoly of note issue in the country. It has the sole right to issue
currency notes of all denominations except one-rupee notes. One-rupee notes, coins and small
coins are issued by the Ministry of Finance of the Government of India. At present, notes of
denominations of rupees five, ten, twenty, fifty, one hundred, two hundred, five hundred, and two
thousand are issued by the RBI. It not only issues currency but also exchanges or destroys currency
and coins not fit for circulation.

Prior to 1956, the principle of note issue of the RBI was based on the ‘proportional reserve
system’. This system was replaced by the ‘minimum reserve system’ in 1956 under which the RBI
was required to hold at least Rs. 115 crore worth of gold as backing against the currency issued.
The rest (i.e., Rs. 85 crore) should be in foreign securities, so that— together with gold and foreign
exchange reserve the minimum value of these assets is kept at Rs. 200 crore.

2. Banker to the Government

The RBI acts as the banker to the Government of India and State Governments (except Jammu and
Kashmir). As such, it transacts all merchant banking functions for these Governments.

The RBI accepts and pays money on behalf of the Government and carries out exchange
remittances and other banking operations.

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As the Government’s banker, the RBI provides short-term credit to the Government of India. This
short-term credit is obtainable through the sale of the treasury bills. Not only this, the RBI also
provides ways and means of advances (repayable within 90 days) to State governments. It may be
noted that the Central Government is empowered to borrow any amount from the RBI.

The RBI also acts as the agent of the Government in respect of membership of the IMF and the
World Bank.

Furthermore, the RBI acts as the adviser of the Government not only on banking and financial
matters but also on a wide range of economic issues (like financing patterns, mobilization of
resources, institutional arrangements with regard to banking and credit matters, international
finance), etc.

3. Bankers’ Bank

As a regulator and supervisor of the country’s financial system, the RBI prescribes the broad
parameters of banking operations within the entire banking and financial system operates in the
country. The basic objective of this activity of the RBI is to (i) maintain public confidence in the
country’s banking system, (ii) protect the interests of depositors, and (iii) provide cost- effective
banking services to the public.

As a bankers’ bank, the RBI holds a part of the cash reserves of commercial banks and lends them
funds for short periods. All banks are required to maintain a certain percentage (lying between 3
p.c. and 20 p.c.) of their total liabilities. The main objective of changing this cash reserve ratio by
the RBI is to control credit.

The RBI provides financial assistance to commercial banks and State cooperative banks through
rediscounting of bills of exchange. As the RBI meets the needs of the commercial banks and
cooperative banks, the RBI functions as the ‘lender of the last resort’.

The RBI has been empowered by law to supervise, regulate and control the activities of
commercial and cooperative banks. The RBI periodically inspects banks and asks them for returns
and necessary information.

4. Controller of Credit
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As an apex bank of the country, the RBI has been empowered to formulate, implement and
monitor its monetary policy with the objective of maintaining price stability (both internal and
external) and ensuring adequate flow of credit to the productive sectors.

The RBI controls the total supply of money and bank credit to subserve the country’s interest. The
RBI controls credit to ensure price and exchange rate stability. To achieve this, the RBI uses all
types of credit control instruments quantitative, qualitative, and selective. The most extensively
used credit instrument of the RBI is the bank rate and now repo rate, cash reserve ratio, etc. The
RBI also relies on the selective methods of credit control. But, it has fallen into disuse during the
reform era.

5. Exchange Management and Control

One of the essential central banking functions performed by the RBI is that of maintaining the
external value of rupee. The RBI has the authority to enter into foreign exchange transactions both
on its own account and on behalf of the Government. The official external reserve of the country
consists of monetary gold and foreign assets of the Reserve Bank, besides (Special Drawing Rights
or) SDR holdings.

The Reserve Bank, as the custodian of the country’s foreign exchange reserves, is vested with the
duty of managing the investment and utilization of the reserves in the most advantageous manner.
Being a manager of foreign exchange, it manages the Foreign Exchange Management Act,
(FEMA) 1999. As a manager of foreign exchange, the RBI helps in facilitating trade (external) and
payment and aims at promoting orderly development and maintenance of the foreign exchange
market in India.

6. Miscellaneous Functions:

The RBI collects, collates and publishes all monetary and banking data regularly in its weekly
statements, in the RBI Bulletin (monthly), and in the Report on Currency and Finance (annually).

7. Promotional and Developmental Functions

Apart from these traditional functions, the RBI performs various activities of promotional and
developmental nature. It attempts to mobilize savings for productive purposes. This is done in
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various ways. For instance, the RBI has helped a lot in building the huge financial infrastructure
that we see now.

This consists of such institutions as the Deposit Insurance and Guarantee Corporation (DIGC) (to
safeguard the interests of depositors against bank failure), the Agriculture Refinance and
Development Corporation (to meet the needs of agriculturists), IFCI, SFCs, IDBI, UTI (to meet the
long and medium term needs of industry), etc. As for cooperative credit movement, the RBI’s
performance is really commendable. This has resulted in curbing the activities of moneylenders in
the rural economy.

MONETARY POLICY:

Monetary policy is the process by which monetary authority of a country i.e. RBI controls the
supply of money in the economy by its control over interest rates in order to maintain price
stability and achieve high economic growth. In India, the central monetary authority is the Reserve
Bank of India (RBI). So, it was designed to maintain the price stability in the economy.

The main objectives of Monetary Policy are,

• To maintain price stability.

• To ensure adequate flow of credit to productive sectors so as to assist growth.
• Arrangement of full employment
• Expansion of credit facility
• Equality & Justice Stability in exchange rate
• Promotion of Fixed Deposit
• Equitable distribution of Credit

Instruments of Monetary Policy:

The instruments of credit control or instruments of monetary policy are of two types:

1. Quantitative control: to control amount of credit.

2. Qualitative control: to control the allocation to different sections of economy.

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 MSF

LAF

REVERSE REPO
REPO

Quantitative Tools:

The Quantitative Instruments are also known as the General Tools of monetary policy. These tools
are related to the Quantity or Volume of the money. The Quantitative Tools of credit control are
also called as General Tools for credit control. They are designed to regulate or control the total
volume of bank credit in the economy. These tools are indirect in nature and are employed for
influencing the quantity of credit in the country. The general tool of credit control comprises of
following instruments.

1. Reserve ratio:

Banks have to set aside certain percentage of reserves as cash or RBI approved assets. They are
two types of Reserve Ratios.

Cash Reserve Ratio (CRR):

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Banks in India are required to hold a certain proportion of their deposits in the form of cash.
However Banks don't hold these as cash with themselves, they deposit such cash (aka currency
chests) with Reserve Bank of India , which is considered as equivalent to holding cash with
themselves. This minimum ratio (that is the part of the total deposits to be held as cash) is
stipulated by the RBI and is known as the CRR or Cash Reserve Ratio.

When a bank's deposits increase by Rs100, and if the cash reserve ratio is 9%, the banks will have
to hold Rs. 9 with RBI and the bank will be able to use only Rs 91 for investments and lending,
credit purpose. Therefore, higher the ratio, the lower is the amount that banks will be able to use
for lending and investment. This power of Reserve bank of India to reduce the lendable amount by
increasing the CRR, makes it an instrument in the hands of a central bank through which it can
control the amount that banks lend. Thus, it is a tool used by RBI to control liquidity in the
banking system.

Statutory Liquidity Ratio (SLR):

Every bank is required to maintain at the close of business every day, a minimum proportion of
their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and un-
encumbered approved securities. The ratio of liquid assets to demand and time liabilities is known
as Statutory Liquidity Ratio (SLR). RBI is empowered to increase this ratio up to 40%. An
increase in SLR also restricts the bank's leverage position to pump more money into the economy.

Net Demand Liabilities - Bank accounts from which you can withdraw your money at any time
like your savings accounts and current account.

Time Liabilities - Bank accounts where you cannot immediately withdraw your money but have
to wait for certain period. E.g. Fixed deposit accounts.

2. Open Market Operations:

Open market operation refers to the purchase and sale of Government securities by the Central
bank in open market.

In order to correct the excess demand or inflation, the central bank sells securities to the
commercial banks and general public. When commercial banks buy securities, their cash reserves
are reduced directly. When people buy securities, they make large withdraw of cash from

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commercial banks. Here their cash reserves are diminished indirectly. Consequently, commercial
banks’ capacity to create credit is curtailed. This leads to a reduction in the volume of investment
on the part of businessmen and entrepreneurs and a decline in national income. As a result, the
state of excess demand or inflation is checked.

On the contrary, central bank can correct the state of deficient demand or deflation by purchasing
securities in the open market.

3. Rates:

Bank Rate:

Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges
on its loans and advances to a commercial bank.

The bank rate is the rate of interest at which a bank lends money, especially the minimum rate of
interest that banks are allowed to charge, which is decided by the country's central bank. Bank rate
is not used by RBI for monetary management now. It is now same as the MSF rate. Current bank
rate is 6.25 %.

Liquidity adjustment facility (LAF):

It is a monetary policy tool which allows banks to borrow money through repurchase agreements.
LAF is used to aid banks in adjusting the day to day mismatches in liquidity. LAF consists of repo
and reverse repo operations.

i. Repo rate:

Repo rate, also known as the benchmark interest rate, is the rate at which the RBI lends money to
the banks for a short term. When the repo rate increases, borrowing from RBI becomes more
expensive. If RBI wants to make it more expensive for the banks to borrow money, it increases the
repo rate similarly, if it wants to make it cheaper for banks to borrow money it reduces the repo
rate. Current repo rate is 6 %

ii. Reverse Repo rate:

Reverse Repo is the short term borrowing rate at which RBI borrows money from banks. The
Reserve bank uses this tool when it feels there is too much money floating in the banking system.
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An increase in the reverse repo rate means that the banks will get a higher rate of interest from
RBI. As a result, banks prefer to lend their money to RBI which is always safe instead of lending it
others (people, companies etc) which is always risky. Repo Rate signifies the rate at which
liquidity is injected in the banking system by RBI, whereas Reverse Repo rate signifies the rate at
which the central bank absorbs liquidity from the banks.

Marginal Standing Facility (MSF):

It is a special window for banks to borrow from RBI against approved government securities in an
emergency situation like an acute cash shortage. MSF rate is higher than Repo rate. Current MSF
Rate: 6.25 %.

Qualitative Instruments or Selective Tools:

The Qualitative Instruments are also known as the Selective Tools of monetary policy. These tools
are not directed towards the quality of credit or the use of the credit. They are used for
discriminating between different uses of credit. It can be discrimination favoring export over
import or essential over non-essential credit supply. This method can have influence over the
lender and borrower of the credit. The Selective Tools of credit control comprises of following
instruments.

1. Margin Requirements:

The margin refers to the "proportion of the loan amount which is not financed by the bank". Or in
other words, it is that part of a loan which a borrower has to raise in order to get finance for his
purpose. A change in a margin implies a change in the loan size. This method is used to encourage
credit supply for the needy sector and discourage it for other non-necessary sectors. This can be
done by increasing margin for the non-necessary sectors and by reducing it for other needy sectors.
Example: If the RBI feels that more credit supply should be allocated to agriculture sector, then it
will reduce the margin and even 85-90 percent loan can be given.

2. Selective Credit Controls:

Using this tool RBI may direct banks not to give loan for particular purpose or sector. For
example: RBI may ask bank not to give loans to traders of certain commodities like sugar, oil,

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pulses etc. This prevents hoarding by traders of these commodities. This would help in increasing
supply in market and thus reducing inflation.

3. Moral Suasion:

Moral Suasions are suggestion and guidelines by the RBI to the commercial banks to take so and
so action and measures in so and so trend of the economy. RBI may request commercial banks not
to give loans for unproductive purpose which does not add to economic growth but increases
inflation in the economy.

NATIONALIZATION OF BANKS IN INDIA

The history of nationalization of Indian banks dates back to the year 1955 when the Imperial Bank
of India was nationalized and re-christened as State Bank of India under the SBI Act, 1955. Later
on July 19, 1960, the 7 subsidiaries of SBI were also nationalized with deposits more than 200
crores. Those subsidiaries are

1. State Bank of Hyderabad (SBH)

2. State Bank of Indore
3. State Bank of Saurashtra (SBS)
4. State Bank of Mysore (SBM)
5. State Bank of Bikaner and Jaipur (SBBJ)
6. State Bank of Patiala (SBP)
7. State Bank of Travancore (SBT)

The Government of India issued an ordinance bill “Banking Companies (Acquisition and Transfer
of Undertakings) bill, 1969” and nationalized the 14 largest commercial banks with effect from the
midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the country. All of
these commercial banks have a deposit base over Rs.50 crores. Those 14 banks are

1. Allahabad Bank
2. Bank of Baroda
3. Bank of India
4. Bank of Maharashtra

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 5. Canara Bank
6. Central Bank of India
7. Dena Bank
8. Indian Bank
9. Indian Overseas Bank
10. Punjab National Bank
11. Syndicate Bank
12. UCO Bank
13. Union Bank of India
14. United Bank of India

On 1980, Government of India nationalized another 6 banks; all of these banks have a deposit base
over Rs.200 crores. The stated reason for the nationalization was to give the government more
control of credit delivery. With this nationalization, the Government of India controlled around
91% of the banking business of India. Those 6 nationalized banks are

1. Andhra Bank
2. Corporation Bank
3. New Bank of India
4. Oriental Bank of Commerce
5. Punjab & Sindh Bank
6. Vijaya Bank

Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank.
It was the only merger between nationalized banks and resulted in the reduction of the number of
nationalized banks from 20 to 19.

INDIAN BANKING STRUCTURE

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Scheduled & Non –scheduled Banks:

• A scheduled bank is a bank that is listed under the second schedule of the RBI Act, 1934.
• In order to be included under this schedule of the RBI Act, banks have to fulfill certain
conditions such as having a paid up capital and reserves of at least 5 lakh and satisfying
the Reserve Bank that its affairs are not being conducted in a manner prejudicial to the
interests of its depositors.
• Scheduled banks are further classified into commercial and cooperative banks.
• Non- scheduled banks are those which are not included in the second schedule of the RBI
Act, 1934.

Commercial Banks:

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 • Commercial banks may be defined as, any banking organization that deals with the
deposits and loans of business organizations.
• Commercial banks issue bank cheques and drafts, as well as accept money on term
deposits.
• Commercial banks also act as moneylenders, by way of installment loans and overdrafts.
• It also allow for a variety of deposit accounts, such as checking, savings, and time
deposit.
• These institutions are run to make a profit and owned by a group of individuals.

Scheduled Commercial Banks (SCBs):

• Scheduled commercial banks (SCBs) account for a major proportion of the business of
the scheduled banks.
• SCBs in India are categorized into the five groups based on their ownership and/or their
nature of operations. State Bank of India and its subsidiaries are recognized as a separate
category of SCBs, because of the distinct statutes (SBI Act, 1955 and SBI Subsidiary
Banks Act, 1959) that govern them.
• Nationalized banks and SBI and associates together form the public sector banks group.
• IDBI ltd. has been included in the nationalized banks group since December 2004.
• Private sector banks include the old private sector banks and the new generation private
sector banks which were incorporated according to the revised guidelines issued by the
RBI regarding the entry of private sector banks in 1993.
• Foreign banks are present in the country either through complete branch/subsidiary route
presence or through their representative offices.

Types of Scheduled Commercial Banks:

Nationalized Banks:

Both Public sector banks and SBI are categorized under nationalized banks. In these banks the
majority stake is held by the Government of India. The shares of these banks are listed on stock
exchanges.

Private Sector Banks:

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These are banks majority of share capital of the bank is held by private individuals. These banks
are registered as companies with limited liability. There are two types of Private sector banks

1. Old Private Sector Banks

2. New Private Sector Banks

Old Private Sector Banks:

• The banks, which were not nationalized at the time of bank nationalization that took
place during 1969 and 1980, are known to be the old private-sector banks.
• These were not nationalized, because of their small size and regional focus. Most of the
old private-sector banks are closely held by certain communities their operations are
mostly restricted to the areas in and around their place of origin. Their Board of directors
mainly consists of locally prominent personalities from trade and business circles.
• For example City Union Bank, Karur Vysya Bank, Karnataka Bank, South Indian Bank
etc.

New Private Sector Banks:

• The banks, which came in operation after 1991, with the introduction of economic
reforms and financial sector reforms are called "new private-sector banks".
• Banking regulation act was then amended in 1993, which permitted the entry of new
private-sector banks in the Indian banking s sector.
• Axis Bank, Kotak Mahindra Bank, Yes Bank, ICICI Bank, HDFC Bank are few example
for the Private sector banks.

Foreign Banks:

These banks are registered and have their headquarters in a foreign country but operate their
branches in our country. Examples of foreign banks in India are: HSBC, Citibank, Standard
Chartered Bank, etc.

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Regional Rural Banks:

• Regional Rural Banks were established under the provisions of an Ordinance

promulgated on the 26th September 1975 and the RRB Act, 1976 with an objective to
ensure sufficient institutional credit for agriculture and other rural sectors.
• The area of operation of RRBs is limited to the area as notified by GOI covering one or
more districts in the State.
• RRBs are jointly owned by GOI, the concerned State Government and Sponsor Banks,
the issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and
35% respectively.
• Prathama bank is the first Regional Rural Bank in India located in the city Moradabad in
Uttar Pradesh.

Cooperative Banks:

• A co-operative bank is a financial entity which belongs to its members, who are at the
same time the owners and the customers of their bank.
• Co-operative banks are often created by persons belonging to the same local or
professional community or sharing a common interest.
• It generally provides their members with a wide range of banking and financial services
(loans, deposits, banking accounts, etc).
• They provide limited banking products and are specialists in agriculture-related products.
Cooperative banks are the primary financiers of agricultural activities, some small-scale
industries and self-employed workers.
• It functions on the basis of “no-profit no-loss”.
• Anyonya Co-operative Bank Limited (ACBL) is the first co-operative bank in India
located in the city of Vadodara in Gujarat.

Structure of Cooperative Banking in India:

The structure of cooperative network in India can be divided into 2 broad segments-

1. Urban Cooperative Banks

2. Rural Cooperatives

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Urban Cooperatives:

• Urban Cooperatives can be further divided into scheduled and non-scheduled. Both the
categories are further divided into multi-state and single-state. Majority of these banks
fall in the non-scheduled and single-state category.
• Banking activities of Urban Cooperative Banks are monitored by RBI.
• Registration and Management activities are managed by Registrar of Cooperative
Societies (RCS). These RCS operate in single-state and Central RCS (CRCS) operate in
multiple state.

Rural Cooperatives:

• The rural cooperatives are further divided into short-term and long-term structures.
• The short-term cooperative banks are three tiered operating in different states. Those are,
1. State Cooperative Banks- They operate at the apex level in states
2. District Central Cooperative Banks-They operate at the district levels
3. Primary Agricultural Credit Societies-They operate at the village or grass-root
level.

Likewise, the long-term structures are further divided into –

State Cooperative Agriculture and Rural Development Banks (SCARDS) – They operate at
state-level.

Primary Cooperative Agriculture and Rural Development Banks (PCARDBS) - They operate
at district/block level.

The rural banking cooperatives have a complex monitoring structure as they have a dual control
which has led to many problems. A Forum called State Level Task Force on Cooperative Urban
Banks (TAFCUB) has been set-up to look into issues related to duality in control.

All banking activities are regulated by a shared arrangement between RBI and NABARD. All
management and registration activities are managed by RCS.

ALL INDIA FINANCIAL INSTITUTIONS

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 • All India Financial Institutions (AIFI) is a group composed of Development Finance
Institutions (DFI) and Investment Institutions that play a pivotal role in the financial
markets.
• The financial institutions assist in the proper allocation of resources, sourcing from
businesses that have a surplus and distributing to others who have deficits - this also
assists with ensuring the continued circulation of money in the economy.
• Possibly of greatest significance, the financial institutions act as an intermediary between
borrowers and final lenders, providing safety and liquidity. This process subsequently
ensures earnings on the investments and savings involved.
• The development banks are classified by following way,

Industrial Finance Corporation of India (IFCI):

• The IFCI was the 1st specialized financial institution setup in India to provide term
finance to large industries in India.
• It was established on 1st July, 1948 under The Industrial Finance Corporation Act of
1948.

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 • The Industrial Financial Corporation of India is authorized to grant loans to industrial
companies repayable with twenty five years grants, loans in foreign currency to certain
industries, under write bonds, shares and debentures etc. provided they are disposed of by
the I.F.C.I. within seven years, guarantee deferred payments by importers of capital
goods of foreign manufacturers, accept deposit from the local institution, guarantee loans
from any bank of a foreign country, subscribe shares of industrial companies.
• The corporation’s role now extends to the entire industrial spectrum in the country. The
facilities and services being provided by IFCI can be deemed to fall broadly under
 Project finance
 Financial services
 Promotional services
• The Industrial Finance Corporation has played a vital role in our industrial economy.
Since its inception, the Corporation has provided financial assistance to the
underdeveloped industrial concerns.
• The Corporation has the power to examine the financial aspects of the industrial
companies and give valuable advice to the management for improving their schemes.
• IFCI. has launched promotional schemes like
 Subsidy in interest for women entrepreneurs
 Schemes for modernization of small scale industrial units,
 Consultancy fee subsidy for providing marketing assistance,
 Pollution control schemes etc.
• It is also diversifying its activities in the field of merchant banking to render other
financial services like project counseling, sanction of loans etc. I.F.C.I. is also showing
concern for the development of backward districts of the country.

Industrial Development Bank of India (IDBI):

• Industrial Development Bank of India (IDBI) established under Industrial Development

Bank of India Act, 1964 is the principal financial institution for providing credit and
other facilities for developing industries and assisting development institutions.
• Till 1976, IDBI was a subsidiary bank of RBI.
• A committee formed by RBI with chairman S.H.Khan recommended the transfer of IDBI
from a developmental bank to a commercial bank

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 • In 1976 it was separated from RBI and the ownership was transferred to Government of
India.
• With the Industrial Developmental Bank (Transfer of Undertaking and Repeat) Act 2013
IDBI became IDBI Ltd.
• In September 2004 RBI incorporated IDBI as ‘scheduled bank’ under RBI Act,1934
• IDBI is the tenth largest bank in the world in terms of development.
• Some of the financial institutions built with the support of IDBI are as follows
 Securities and Exchange Board of India (SEBI)
 National Stock Exchange of India (NSE)
 National Securities Depository Limited (NSDL)
 Stock Holding Corporation of India Limited (SHCIL)
 Credit Analysis & Research Ltd.
 Exim Bank
 Small Industries Development Bank of India (SIDBI)
 Entrepreneurship Development Institute of India

Small Industries Development Bank of India (SIDBI):

• SIDBI was set up on April 2, 1990 under an Act of Indian Parliament.

• It has its head office in Lucknow, Uttar Pradesh.
• Mohammad Mustafa is the chairman and managing director of SIDBI.
• It was set up to promote, finance and develop the Micro, Small and Medium Enterprise
(MSME) sector and for coordinating the functions of the institutions engaged in similar
activities.
• “To facilitate and strengthen credit flow to MSMEs and address both financial and
developmental gaps in the MSME eco-system” is the mission of SIDBI.
• The four basic objectives of SIDBI are:
▪ Financing
▪ Promotion
▪ Development
▪ Co-ordination

for orderly growth of industry in the small scale sector.

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Facts about SIDBI:

• The business domain of SIDBI consists of Micro, Small and Medium Enterprises
(MSMEs).
• It was set up as a wholly owned subsidiary of Industrial Development Bank of India, but
now is an independent financial institution.
• Its branches are available in all major clusters of the country.
• SIDBI is in the top 30 Development Banks of the World according to the ranking of The
Banker, London.
• SIDBI also provides financial support to National Small Industrial Corporation (NSIC)
for providing leasing, hire-purchase, and marketing support to the industrial units in the
small-sector.

National Bank for Agriculture And Rural Development (NABARD):

• National Bank for Agriculture and Rural Development (NABARD) is an apex

development bank in India.
• Headquarters – Mumbai.
• It was established by the Committee set up by RBI to Review Arrangements for
Institutional Credit for Agriculture and Rural Development (CRAFICARD) under the
Chairman Shri. B. Sivaraman on 12th July 1982.
• Its main aim is to uplift rural India by increasing the credit flow for evaluation of
agricultural and rural farm sector.
• Chairman – Dr. Harsh Kumar Bhanwala.
• NABARD is active member of Alliance for Financial Inclusion
• NABARD replaced the following organizations
▪ Agricultural Credit Department
▪ Rural Planning and Credit Cell
▪ Agricultural Refinance and Development Corporation
• The initial corpus of NABARD was Rs.100 crores. Consequent to the revision in the
composition of share capital between Government of India and RBI, the paid up capital
as on 31 May 2017, stood at stood at Rs.6,700 crore with Government of India holding
Rs.6,700 crore (100% share). The authorized share capital is Rs.30,000 crore.

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• NABARD takes measures towards institutions which help in improving absorptive
capacity of the credit delivery system including
▪ Monitoring
▪ Formulating rehabilitation schemes
▪ Restructuring of credit institutions
▪ Training of personnel
• It coordinates the rural financing activities of the
▪ Government of India
▪ State Governments
▪ Reserve Bank of India
▪ Other national institutions concerned with policy formulation
• NABARD refinances financial institutions which finance the rural sector. These
refinances are availed by the following organizations
▪ State Co-operative Agriculture and Rural Development Bank (SCARDB)
▪ State Co-operative Banks(SCB)
▪ Regional Rural Banks(RRBs)
▪ Commercial Banks(CB)
▪ Other financial institutions approved by RBI
• It has 336 District offices across the country including 1-sub office at Port Blair and one
special cell at Srinagar.
• It has 6 training establishments.
• NABARD is also known as Self Help Group (SHG) Bank Linkage Programme. About 22
lakh SGHs were credited through this programme.
• NADARD has a portfolio of Natural Resource Management Programmes in the
following fields
▪ Watershed development
▪ Tribal development
▪ Farm innovation
• The RBI and NABARD has laid out guidelines for commercial, Regional Rural and
Cooperative banks to provide data regarding loans given by banks to the microfinance
institutions.

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 • Till 22nd March 2017, Govt of India had 99.6% equity in NABARD and the remaining
0.4% was with RBI. The Union Cabinet on March 22nd March 2017 approved the
transfer of 0.4% equity of RBI in NABARD to the Govt. of India. So now NABARD is
fully owned by Govt. Of India.

Export-Import Bank of India (EXIM Bank):

• Export–Import Bank of India is the premier export finance institution in India,

established in 1982 under Export-Import Bank of India Act 1981.
• EXIM Bank of India has been both a catalyst and a key player in the promotion of cross
border trade and investment.
• The Export-Import Bank of India ranks high among the specialized financial institutions
in India.
• It offers financial assistance to the exporters and importers and also by acting as a link
between the various financial institutions to ensure overall development of the Indian
financial market.
• The bank offers financial assistance to the various sectors like agriculture, export, import,
and film industry.
• For the agricultural sector the bank has arranged for unique financial programs like
posting shipment credit, terming loans etc. The category of term loans are issued for
modernization, purchase of equipments, acquisitions etc.
• For the exporters the bank provides warehousing finance, export lines of credit facilities.
The funded capital scheme of the bank includes long-term working capital, cash flow
financing, and the non funded capital scheme include letter of credit limits, guarantee
limits.
• For the film industry the bank has arranged for cash flow financing for film production,
funds for exhibition in overseas market.
• The bank is engaged in offering specialized services Human Resource Management,
Research and Planning, Internal Audit etc.
• The Export-Import Bank of India has set up offices throughout India and in foreign
countries as well.
• The head office is located at Mumbai and Shri Yaduvendra Mathur is a CEO of the bank.

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National Housing Bank (NHB):

• NHB was set up on July 9, 1988 under the National Housing Bank Act, 1987.
• The Head Office of NHB is at New Delhi.
• NHB is wholly owned by Reserve Bank of India, which contributed the entire paid-up
capital.
• Managing Director & Chief Executive Officer- Shri Sriram Kalyanaraman.

The objectives of NHB:

• To act as an apex institution for housing finance companies (apex means the central
institution like RBI for all the banks and financial institutions).
• To promote a network of dedicated housing finance institutions to adequately serve
various regions and different income groups.
• To provide a cost effective housing finance system to all the sections of society.
• To upgrade housing stock in the country, provide building materials for housing and
supply of buildable land.
• To encourage public companies to provide serviced land for housing.

Micro Units Development and Refinance Agency Ltd (MUDRA) Bank:

• Micro Units Development and Refinance Agency Bank (MUDRA Bank) was set up as a
public sector financial institution on 8 April 2015 under Pradhan Mantri MUDRA Yojana
(PMMY).
• It is set up to provide loans at low rates to Micro-Finance Institutions (MFIs) and Non-
Banking Financial Companies (NBFCs) which then provide credit to MSMEs.
• Established with an initial corpus of Rs. 20,000 crores and a credit guarantee corpus of
Rs 3,000 crores.
• Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY), MUDRA has already
created its initial products / schemes. The financial limit for these schemes are,
 Shishu : covering loans upto 50,000/-
 Kishor :covering loans above 50,000/- and upto 5 lakh
 Tarun :covering loans above 5 lakh to 10 lakh

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 • MUDRA’s delivery channel is conceived to be through the route of refinance primarily to
Banks/NBFCs/MFIs.

Some important facts:

• MUDRA bank is not a physical bank.

• Eligible entities can apply for MUDRA Bank loan under PMMY in NBFCs, MFIs, Rural
Banks, District Banks, Nationalize Banks, Private Banks, Primary Lending Institutions
and other intermediaries.
• Any person who is eligible and having the need of loan of up to Rs 10 lakhs can approach
for loans under PMMY.
• It will not refinance agriculture sector under PMMY but the traders of vegetables & fruits
are covered under MUDRA Bank Schemes.
• The bank is set up as a subsidiary of the Small Industries Development Bank of India
(SIDBI), and later it will be converted to a separate institution.
• The bank was decided to act as regulator of MFIs, but later the decision was withdrawn
and it will be done by RBI.
• There is no fix interest rate in MUDRA loan; it will vary from bank to bank.
• MUDRA will be extending refinance support to RRBs for enhancing their liquidity.

SECURITY EXCHANGE BOARD OF INDIA (SEBI)

SEBI was constituted by Govt. of India during 1988 and accorded statutory powers under SEBI
Act, 1992, with the objectives:

▪ To promote the development of security market

▪ To protect interest of investors
▪ To regulate the security market

The SEBI Act was amended on 25th January, 1995 in Mumbai to give additional powers for
ensuring orderly development of the capital market and to enhance SEBI ability to protect the
interests of the investors. SEBI can file complaints in courts and notify its regulations without the
prior approval of Central Government.

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Management:

SEBI is managed by its Chairman and 5 members and has departments such as –

▪ Issue Management Department

▪ Primary Market Department
▪ Secondary Market Department
▪ Institutional Investment Department
▪ It has 2 advisory committees, one each for primary and secondary market to
provide advisory guidance in framing policies and regulations.

Functions of SEBI:

SEBI Functions are divided into:

▪ Regulatory functions
▪ Developmental functions

Regulatory Function:

• Regulation of stock market and self regulatory organizations

• Registrations & regulation of Self Brokers, sub brokers, merchant bankers
• Registration and Regulation of Investment Schemes, including Mutual Funds
• Regulating acquisition of Shares and takeover of companies
• Prohibition of illegal and unfair trade practices relating to securities market
• Prohibition of insider trading

Developmental function:

• Promotion of fair practices

• Promotion of self regulatory organizations
• Conducting Research and publishing important information to all market participants
• Promoting Investor’s education and training of intermediaries

For the discharge of its functions efficiently, SEBI is vested with the following powers:

• To approve by−laws of stock exchanges.

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 • To require the stock exchange to amend their by−laws.
• Inspect the books of accounts and call for periodical returns from recognized stock
exchanges.
• Inspect the books of accounts of financial intermediaries.
• Compel certain companies to list their shares in one or more stock exchanges.
• Registration brokers.

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA)

• IRDA was set up as autonomous body under the IRDA Act, 1999.
• IRDA Act was passed upon the recommendations of Malhotra Committee report
(7 Jan, 1994), headed by Mr R.N. Malhotra.
• IRDA’s Mission is to protect the interests of policyholders and to regulate and develop
the insurance industry.
• It has its headquarters at Hyderabad, Telangana where it shifted from Delhi in 2001.
• Insurance Regulatory and Development Authority (IRDA) has been renamed as
‘Insurance Regulatory and Development Authority of India’ after the promulgation of
Insurance Laws (Amendment) Ordinance, 2014, by the President of India on December
26, 2014.

Objectives of IRDA:

• To promote the interest and rights of policy holders.

• To promote and ensure the growth of Insurance Industry.
• To ensure speedy settlement of genuine claims and to prevent frauds and malpractices
• To bring transparency and orderly conduct of in financial markets dealing with insurance.

Composition of Authority of IRDA:

The Authority is a ten member team of

• A Chairman and every other whole-time member – 5 years (Maximum age is 60 years).
• Five whole-time members (Maximum age is 62 years).
• Four part-time members (not more than 5 years)
• Subhash Chandra Khuntia is a new chairperson of IRDAI.

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 Functions and Duties of IRDAI:

Section 14 of the IRDA Act, 1999 lays down the following duties, powers and functions of
IRDA.

• Registering and regulating insurance companies

• Protecting policyholders’ interests
• Licensing and establishing norms for insurance intermediaries
• Promoting professional organisations in insurance
• Regulating and overseeing premium rates and terms of non-life insurance covers
• Specifying financial reporting norms of insurance companies
• Regulating investment of policyholders’ funds by insurance companies
• Ensuring the maintenance of solvency margin by insurance companies
• Ensuring insurance coverage in rural areas and of vulnerable sections of society.

TYPES OF ACCOUNT

Traditionally banks in India have four types of deposit accounts, namely

1. Saving Account

2. Current Account

3. Fixed Deposit Account or Time Deposit Accounts

4. Recurring Deposit Account

However, in recent years, due to ever increasing competition, some banks have introduced new products,
such as

1. Demat Account
2. Basic Savings Bank Deposit Account (BSBDA)
3. NRI Accounts

Savings Account:

• Any resident individual- single accounts, two or more individuals in joint accounts, Associations,
clubs etc., are eligible for this account.
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 • Modest credit option available to the depositor.

• Two free cheque books will be issued per year.

• Internet banking facility will be provided without any charge.

• Balance enquiry, NEFT, Bill payment, Mobile recharge etc., are provided through mobile phones.

• Students can open this account with zero balance by providing the required documents.

• In this account interest will be given in daily basis.

• There is no restriction on the number and amount of deposits. But withdrawals are subjected to
certain restrictions.

• Some banks recommend to maintain a minimum amount to keep it functioning.

Current Accounts:

• Current Accounts are basically meant for businessmen and are never used for the purpose of
investment or savings.

• These deposits are the most liquid deposits and there are no limits for number of transactions or
the amount of transactions in a day.

• Most of the current accounts are opened in the names of firm / company accounts.

• Cheque book facility is provided and the account holder can deposit all types of the cheques and
drafts in their name or endorsed in their favor by third parties.

• No interest is paid by banks on these accounts. On the other hand, banks charge certain service
charges, on such accounts.

• The main objective of Current Account holders in opening this account is to enable them (mostly
businessmen) to conduct their business transactions smoothly.

• The current accounts do not have any fixed maturity as these are on continuous basis accounts.

Fixed Deposit Account or Time Deposit Accounts:

• In Fixed Deposit Account (also known as FD Account), a particular sum of money is deposited in
a bank for specific period of time.

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 • Its one time deposit and one time take away (withdraw) account. The money deposited in this
account cannot be withdrawn before the expiry of period.

• However, in case of need, the depositor can ask for closing the fixed deposit prematurely by
paying a penalty. The penalty amount varies with banks.

• A high interest rate is paid on fixed deposits. The rate of interest paid for fixed deposit varies
according to amount, period and also from bank to bank.

Recurring Deposit Account:

• Recurring deposit account or RD account is opened by those who want to save certain amount of
money regularly for a certain period of time and earn a higher interest rate.

• In RD account a fixed amount is deposited every month for a specified period and the total
amount is repaid with interest at the end of the particular fixed period.

• The period of deposit is minimum six months and maximum ten years.

• The interest rates vary for different plans based on the amount one save and the period of time
and also on banks.

• No withdrawals are allowed from the RD account. However, the bank may allow to close the
account before the maturity period.

• These accounts can be opened in single or joint names. Banks are also providing the Nomination
facility to the RD account holders.

Demat Account:

• Demat account is an account in which the shares and securities are held in dematerialized form
i.e. electronically without any physical papers held.

• For getting a Demat account, one needs to go to one of the Depository Participants or DPs. DPs
could be banks, brokers or financial institution that have been allowed to provide this service. The
DPs act as intermediary between central depository and the investor.

• To carry out transactions in the stock market, one should get open a demat account.

• To open a demat account, KYC procedure is also followed.

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 • Multiple demat accounts can be opened.

• Demat accounts are held by a single person i.e. no joint accounts can be operated.

• There is no need of any minimum balance in demat account.

Basic Savings Bank Deposit Account (BSBDA):

• A person having BSBDA in a bank cannot have a Savings Account in the same bank. But he can
have other accounts such as fixed deposit and recurring deposit accounts.

• A person having savings account can open a BSBDA in the same bank. But he will have to close
the savings account within 30 days from the date of opening of BSBDA.

• BSBDAs can be opened in any commercial banks and also in foreign banks.

• This account will be considered as normal banking service.

• For this account, maintenance of minimum balance is not required.

• ATM card/ ATM cum Debit card, Rupay card will be given for the account holders.

• There are going to be no limit on the number of deposits that can be made in a month but, account
holders will be allowed most of 4 withdrawals in a month, which includes ATM withdrawals
also.

• The above facilities will be given without any charge. There will be no charge levied for non-
operation/ activation of in-operative basic saving bank deposit account.

• For this account, overdraft facility will be provided up to Rs. 5000/-.

• Total credits in such accounts should not exceed one lakh rupees in a year.

• Maximum balance in the account should not exceed fifty thousand rupees at any time.

• In a month, the total of cash withdrawals and transfers cannot exceed Rs 10,000.

• Foreign remittances cannot be credited to Small Accounts without completing normal KYC
formalities.

• Small accounts are valid for a period of 12 months initially which may be extended by another 12
months if the person provides proof of having applied for an Officially Valid Document.

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NRI Accounts:

Not only the Indians living in India can have their accounts in the banks of India, but the people who leave
India and reside in some other country or become NRIs (Non-Resident Indian) and PIOs (Person of Indian
Origin) can also maintain their accounts in India enjoying the various benefits of the accounts as applicable.

There are three types of NRI/PIO accounts

1. NRO Account

2. NRE Account

3. FCNR Account

Non Resident Ordinary (NRO) Account:

• NRO account is a Savings Account/ Current Account/ Fixed Deposit Account/ Recurring Deposit
account opened by NRIs and PIOs.

• It is a rupee denominated account i.e. the amount in the account is maintained in Indian Rupees.

• The NRIs and PIOs who transfer from India and have funds gathered in India like rent income,
pension, etc. can enjoy the benefits of NRO account.

• If the residents who leave India have account in India, then that account can be converted to NRO
account with the same account number.

• So the account is efficient for maintaining local rupee earnings in India while living abroad.

• Joint account facility and nomination facility is available with Indian residents.

• Cheque book and ATM card facility is available for joint accountee in India.

• The credit balances in NRO account are subject to respective income tax bracket.

Non Resident External (NRE) Account:

• NRE account is a rupee denominated account which can be Savings Account/ Current Account/
Fixed Deposit Account/ Recurring Deposit account opened by NRIs and PIOs.

• The NRIs and PIOs who want to transfer their foreign earnings to India can enjoy the benefits of
NRE account.

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 • So the account is efficient to use foreign earnings in India while living abroad.

• It is a safe and simple online money transfer service.

• Joint account facility and nomination facility is available with other NRIs or Indian Residents.

• Loan facility is also available against funds in NRE account.

• The principal amount and the interest paid on the amount are not taxable in India.

• The funds in account can be converted to any foreign currency.

Foreign Currency Non Resident (FCNR) Account:

• FCNR account is a term deposit account that can be maintained by NRIs and PIOs in foreign
currency. Authorized dealer banks in India can allow deposits in any of the permitted currency
(currency freely convertible).

• The NRIs and PIOs who want to keep their savings as fixed deposits in Indian banks can apply
for FCNR account. They can gain more rate of interest in India than abroad.

• The maturity period of term deposit ranges from 1 year to 5 years.

• The account is maintained in foreign currency so the money is not converted to Indian Rupees as
in case of NRO account.

• So there is no Foreign Exchange risk, for example: if you deposited $100 in the account with 1%
rate of interest, after 1 year on maturity you will get $ 101 irrespective of what the previous or
current currency rates are.

• Funds in FCNR account can be used for making local payments in India.

• Joint account facility and nomination facility is available with other NRIs or Indian Residents.

• Loan facility is also available against funds in FCNR account.

• The principal amount and the interest paid on the amount are not taxable in India.

• The funds in account can be converted to any foreign currency.

NON BANKING FINANCIAL COMPANIES (NBFC)

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 • Non-banking financial companies (NBFCs) are financial institutions that provide banking
services without meeting the legal definition of a bank, i.e. one that does not hold a
banking license.
• NBFCs are registered under the company act, 1956 of India. NBFCs operations are
regulated by the Reserve Bank of India, within the framework of Reserve Bank of India
Act, 1934.
• NBFCs do offer all sorts of banking services, such as loans and credit facilities,
retirement planning, money markets, underwriting, and merger activities. Examples of
NBFC in India
▪ Fusion Microfinance Pvt Ltd,
▪ Svatantra Micofin Pvt. Ltd.,
▪ S. V. Creditcare Network Pvt. Ltd,
▪ Saija Finance Pvt. Ltd,
▪ LIC,
▪ GIC,
▪ UTI.
• Systematically important NBFCs are Non-banking Financial companies whose asset size
is more than Rs.500 Cr as per their balance sheet.
• The activities carried out by systematically important NBFCs have a direct bearing on the
financial stabilities of the overall economy.
• Types of NBFCs:
▪ Asset Finance Company
▪ Investment Company
▪ Loan Company
▪ Infrastructure Finance Company
▪ Systematically Important Core Investment Company
▪ Infrastructure Debt Fund
▪ Micro-Finance Institution
▪ Factors
▪ Mortgage Guarantee Companies
▪ Non-Operative Financial Holding Company
Difference between banks & NBFCs:

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NBFCs lend and make investments and hence their activities are akin to that of banks; however
there are a few differences as given below:

i. NBFC cannot accept demand deposits;

ii. NBFCs do not form part of the payment and settlement system and cannot issue cheques
drawn on itself;
iii. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not
available to depositors of NBFCs, unlike in case of bank.

Important facts related to NBFC:

• NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months
and maximum period of 60 months.
• They cannot accept demand deposits.
• The interest rates charged to the borrowers by NBFCs are not regulated by RBI. It has
the right to choose its own interest rates but it cannot offer interest rates higher than the
ceiling rate prescribed by RBI from time to time. However, NBFC should provide
complete transparency to its customer about the rate of interest charged in the application
form.
• NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
• NBFCs (except certain AFCs) should have minimum investment grade credit rating.
• The deposits with NBFCs are not insured.
• The repayment of deposits by NBFCs is not guaranteed by RBI.
• Certain mandatory disclosures are to be made about the company in the Application
Form issued by the company soliciting deposits.
• All NBFCs are not entitled to accept public deposits. Only those NBFCs to which the
Bank had given a specific authorization can accept public deposits.
• The RBI does not guarantee repayment of deposits by NBFCs even though they may be
authorized to collect deposits.
• If an NBFC defaults in repayment of deposit, the depositor can approach Company Law
Board or Consumer Forum or file a civil suit in a court of law to recover the deposits.
• There is no Ombudsman for hearing complaints against NBFCs.

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 • However, in respect of credit card operations of an NBFC, which is a subsidiary of a
bank, if a complainant does not get satisfactory response from the NBFC within a
maximum period of 30 days from the date of lodging the complaint, the customer will
have the option to approach the Office of the concerned Banking Ombudsman for
redressal of his grievance/s.

Supervision and Inspection of NBFCS by RBI:

• The RBI conducts on-site inspection and off-site surveillance of NBFCs.

• Off-site surveillance is undertaken by calling for periodical returns. These are generally
fortnightly, monthly or annual returns.
• The on-site inspection is mainly used to ensure that the interest of the depositors is well
protected and these funds are not in danger of vanishing through losses or otherwise.
• The RBI conducts the inspection under the system known as the alphabets of CAMELS.
It stands for,
C = Capital Adequacy requirements
A = Asset quality, like standard etc., assets
M = Management, the level and expertise and appraisal capacity of management.
E = Earning capacity of NBFC
L = Liquidity, the level of liquidity and the components of liquidity are verified.
S = Systems and control exist in the NBFC, its effectiveness etc.

Some important NBFCs operational in India:

• HDFC – established in 1977 provides mortgages, life Insurance, mutual funds and Micro
Finance
• Power Finance Company – established in 1986 provides financial consulting, investment
banking and loan management
• Reliance Capital – established in 1986 – provides asset management, insurance, broking
and distribution, commercial finance and mutual funds
• Infrastructure Development Finance Company – established in 1997 – provides finance
for infrastructure projects, corporate finance, mutual funds and investment banking
• Rural Electricity Corp. – established in 1969 – provides investment and private banking
and asset management
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 • Shree Ram Transport Finance – established in 1974 – provides consumer vehicle finance,
city union finance and micro finance
• Bajaj Holdings – established in 2007 – Asset management, loans and micro finance
• M & M financial – established in 1991 – financial services, micro finance and asset
management.
CREDIT RATING AGENCIES

• A Credit Rating Agency is simply an institution that allocates Credit Ratings to the
borrower’s.
• The basis of these ratings is the debt repayment capacity of the borrower which involves
timely interest payments and the likelihood of default by the customer.
• This credit score reports are considered highly important for getting the loan.
• Credit Rating Agencies in the country are regulated by SEBI (Securities and Exchange
Board of India).
• The SEBI (Credit Rating Agencies) Regulations, 1999 govern the credit rating agencies
and provide for eligibility criteria for registration of credit rating agencies, monitoring
and review of ratings, requirements for a proper rating process, avoidance of conflict of
interest and inspection of rating agencies by SEBI, amongst other things.

Importance of Credit Rating Agencies:

• These agencies determine the risk that is associated by investing in the companies.
• This aids in making Informed Investment Decisions. Credit Ratings give a fair estimate
of the ability of the organizations to fulfill their financial commitment.
• A high credit rating indicates a high possibility of paying back the loan.
• The Credit Rating of organizations also helps the lending institutions in deciding the loan
eligibility of the borrower.
• The increasing levels of default resulting from easy availability of finance, is another
factor that has led to the growing importance of the Credit Rating.
• Credit Rating also plays a vital role in financial markets. They assess the credit risk of the
corporate or government borrowers by analyzing the relevant information available
regarding the borrower and its economic circumstances. This analysis is reflected in

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 Credit Rating. This rating represents an opinion about the likelihood of meeting the
financial obligations by the borrower.
• Credit Rating Agencies rates a wide range of entities, including:
▪ Industrial companies
▪ Banks
▪ Non-banking financial companies (NBFCs)
▪ Infrastructure entities
▪ Microfinance institutions xv. Insurance companies
▪ Mutual funds
▪ State governments
▪ Urban local bodies

Let us have a look at the top most credit agencies in India

CRISIL (Credit Rating Information Services of India Limited):

• CRISIL was established in 1987.

• It is India's first and major Credit Rating Agency.
• CRISIL has its headquarters in Mumbai, Maharashtra.
• It is a subsidiary of Standard & Poor’s.
• Ashu Suyash is the current CEO of the organization.

CARE (Credit Analysis and Research Limited):

• CARE was established in 1993.

• This credit rating agency has its headquarters in Mumbai.
• CARE is promoted by Unit Trust of India or UTI, Canara Bank, IDBI and many other
reputed banks and companies dealing with financial services.
• Ratings conducted by CARE, are authenticated by Government of India.
• The Reserve Bank of India, SEBI, along with other regulatory authorities also recognizes
the ratings of CARE.
• Mr. Rajesh Mokashi is the current MD and CEO of the organization.

ICRA (Investment Information and Credit Rating Agency):

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 • It is an associate of Moody’s Investors Service
• ICRA was founded in 1991.
• Mr. Naresh Takkar is the CEO of this agency.
• It has its headquarters in Gurugram.

ONICRA (Onida Individual Credit Rating Agency):

• ONICRA was founded in 1993

• The organization has its headquarters in Gurugram.
• Mr. Varun Mirchandani serves as the Executive Director of the organization.

Brickwork Ratings India Private Limited:

• Brickwork Ratings India Private Ltd was established in 2007.

• This credit rating agency has its headquarters in Bangalore, Karnataka.
• Mr. Vivek Kulkarni is the chairman of Brickwork India.

SMERA (Small and Medium Enterprises Rating Agency of India Limited):

• This credit rating agency was set up in 2005 exclusively for Micro, small and medium
enterprises.
• It has its headquarters in Mumbai.
• Mr. Sankar Chakraborti is currently the CEO of the organization.

CIBIL:

• TransUnion CIBIL Limited (Formerly: Credit Information Bureau (India) Limited) is

India’s first Credit Information Company (CIC) founded in August 2000.
• CIBIL collects and maintains records of an individual’s payments pertaining to loans and
credit cards. These records are submitted to CIBIL by member banks and credit
institutions, on a monthly basis.
• This information is then used to create Credit Information Reports (CIR) and credit
scores which are provided to credit institutions in order to help evaluate and approve loan
applications.

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 • CIBIL was created to play a critical role in India’s financial system, helping loan
providers manage their business.
• MD and CEO of CIBIL is Satish Pillai, Chairman is M.V.Nair.
• Headquarter of CIBIL is in Mumbai.

Major Credit Rating Agencies of the World

Moody's Investors Service:

• Moody’s is founded by John Moody in 1909 to produce manual published basic statistic
and general information about stocks and bonds.
• It provides international financial research on bonds issued by commercial and
government entities
• It ranks the creditworthiness of borrowers using a standardized rating scale
• According to Moody’s rating system, rates from Aaa to C are assigned. Aaa for highest
quality and C s for lowest quality.
• The organization has its headquarters in New York, USA.
• Mr. Raymond W. McDaniel Jr serves as the CEO of the organization.

Standard & Poor's Financial Services LLC:

• Standard & Poor’s is the world’s leading Index provider and the foremost source of
independent credit ratings. It provides financial market intelligence to decision makers.
• It is founded by Henry Varnum Poor in 1860
• The organization has its headquarters in New York, USA.
• John L. Berisford serves as the acting President of this organization.
• It is a subsidiary of S&P Global.

Fitch Ratings:

• In 1914 Fitch was founded by John Knowles in New York City as Fitch Publishing
Company.
• Later it merged with London based IBCA in 1997
• Fitch Ratings has its headquarters in New York and London.

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 • Paul Taylor is currently the CEO of the organization.
• Fitch Ratings is also the parent company of India Ratings & Research Private Limited
that operates from Mumbai.

FOREIGN EXCHANGE RESERVE

• Foreign exchange reserve can be defined as deposits of a foreign currency held by the
central bank of a country.
• Reserve Bank of India Act, 1934 and the Foreign Exchange Management Act, 1999 set
the legal provisions for governing the foreign exchange reserves.
• RBI is the sole authority to monitor Foreign exchange reserves.
• Reserve bank accumulates foreign currency reserves by purchasing from authorized
dealers in open market operations.
• Foreign exchange reserves of India act as a cushion against rupee volatility once global
interest rates start rising.

Need of Forex Reserve:

• Funding import like trade in different commodities in international market the trader may
not accept the local currency so to settle trade any accepted currency has to be given.
• Debt servicing to facilitate or settle borrowings in acceptable currency
• Stabilizing domestic currency ( it’s known that exchange rate in free market is decide by
foreign currency comparison )
• Confidence building for markets
• Buffer for shocks (for emergency situation)

The Foreign exchange reserves of India consist of below four categories.

1. Foreign Currency Assets

2. Gold
3. SDR
4. Reserve Tranche Position in the IMF
• Foreign currency assets mean total foreign currency available with RBI.
• Gold explains total gold available with RBI.
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 • SDR is a basket of currency in which certain currencies are put in a particular ratio.
Basket comprises of Dollar, Pound, Yen, Euro, Renminbi It is an artificial unit of account
created by IMF in 1969. It is neither a claim nor a currency of IMF.
• Reserve Tranche Position is a particular percentage of SDR that a currency can use for its
settlement.

FINANCIAL MARKET

A financial market is a broad term describing any marketplace where buyers and sellers
participate in the trade of assets such as equities, bonds, currencies and derivatives.

Financial markets are typically defined by having

• Transparent pricing
• Basic regulations on trading, costs and fees
• Market forces determining the prices of securities that trade.

Functions of financial Markets

1. Mobilization of saving & channelize them into more productive uses

2. Facilitate price discovery
3. Provide liquidity to financial assets
4. Reduces the cost of transaction & save time & efforts

A financial market consists of two major segments:

I. Money Market – the money market deals in short-term credit

II. Capital Market – the capital market handles the medium term and long-term credit.

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MONEY MARKET

The money market is that part of a financial market which deals in the borrowing and lending of
short term loans generally for a period of less than or equal to 365 days. It meets the short term
requirements of borrowers and provides liquidity or cash to the lenders.

• It is a place where short term surplus investible funds at the disposal of financial
institutions and individuals are bid by borrowers, again comprising institutions and
individuals and also by the government.
• The Indian money market consists of Reserve Bank of India, Commercial banks, Co-
operative banks, and other specialized financial institutions. The Reserve Bank of India is
the leader of the money market in India.
• Money market does not refer to any specific market place. Rather it refers to the whole
networks of financial institutions dealing in short-term funds, which provides an outlet to
lenders and a source of supply for such funds to borrowers.
• It should be noted that money market does not deal in cash or money but simply provides
a market for credit instruments such as bills of exchange, promissory notes, commercial
paper, treasury bills, etc. These financial instruments are close substitute of money.
• Some Non-Banking Financial Companies (NBFCs) and financial institutions like LIC,
GIC, UTI, etc. also operate in the Indian money market.

Structure of Indian Money Market

Indian money market is characterized by two sectors

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Organized sector: The organized sector is within the direct purview of RBI regulations.

Unorganized sector: The unorganized sector consists of indigenous bankers, money lenders, non-
banking financial institutions, etc.

Major functions of money market:

1. To maintain monetary equilibrium – It means to keep a balance between the demand for
and supply of money for short term monetary transactions.
2. To promote economic growth – Money market can do this by making funds available to
various units in the economy such as agriculture, small scale industries, etc.
3. To provide help to Trade and Industry – Money market provides adequate finance to
trade and industry. Similarly, it also provides facility of discounting bills of exchange for
trade and industry.
4. To help in implementing Monetary Policy – It provides a mechanism for an effective
implementation of the monetary policy.
5. Money market provides non-inflationary sources of finance to government. It is possible
by issuing treasury bills in order to raise short loans.

Money Market Instrument:

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Call Money:

• Call money is mainly used by the banks to meet their temporary requirement of cash. It is
also known as money at call and money at short notice.
• In this, market money is demanded for an extremely short period. The duration of such
transactions is from a few hours to 14 days.
• These transactions help stock brokers and dealers to fulfill their financial requirements.
• The rate at which money is made available is called as call rate.
• Rate is fixed by the market forces such as the demand for and supply of money.

Treasury Bill:

• It is a market for sale and purchase of short-term government securities.

• These securities are called as Treasury Bills, which are promissory notes or financial bills
issued by the RBI on behalf of the Government of India.
• There are two types of treasury bills:
o Ordinary or Regular Treasury Bills
o Ad Hoc Treasury Bills.
• Treasury bills are highly liquid instruments. At any time the holder of treasury bills can
transfer or get it discounted from RBI.
• The maturity period of these securities range from as low as 14 days to as high as 364
days.
• They have become very popular due to high level of safety involved in them.

Cash Management Bills:

• The Government of India, in consultation with the RBI, decided to issue a new short-term
instrument, known as Cash Management Bills (CMBs), to meet the temporary
mismatches in the cash flow of the Government.
• The CMBs have the generic character of T-bills but are issued for maturities less than 91.

Certificate of Deposits (CDs):

• The certificate of deposits is issued by the Commercial Banks

• They are worth the value of Rs. 25 lakh and in multiple of Rs. 25 lakh

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 • The minimum subscription of CDs should be worth Rs. 1 Crore.
• The maturity period of CD is as low as 3 months and as high as 1 year.
• These are the transferable investment instrument in a money market.
• The government initiated a market of CDs in order to widen the range of instruments in
the money market and to provide a higher flexibility to investors for investing their short
term money.

Commercial Papers (CPs):

• Commercial paper (CP) is an investment instrument which can be issued by a listed

company having working capital is not less than Rs. 4 Crore.
• The CPs can be issued in multiples of Rs. 5 Lakhs.
• The maturity period for the CP is a minimum of 7 days and maximum 1 year.
• Commercial paper (CP) is a popular instrument for financing working capital
requirements of companies.
• It can be issued for period ranging from 7 days to one year. Commercial papers are
transferable by endorsement and delivery.

Repurchase Agreements:

• A repurchase agreement, also known as a repo, is the sale of securities together with an
agreement for the seller to buy back the securities at a later date.
• The repurchase price should be greater than the original sale price, the difference
effectively representing interest, sometimes called the repo rate.
• The party that originally buys the securities effectively acts as a lender. The original
seller is effectively acting as a borrower, using their security as collateral for a secured
cash loan at a fixed rate of interest.

CAPITAL MARKET:
• Capital Market is a market dealing in medium and long-term funds. It is an institutional
arrangement for borrowing medium and long-term funds and which provides facilities for
marketing and trading of securities

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 • So it constitutes all long-term borrowings from banks and financial institutions,
borrowings from foreign markets and raising capital by issuing various securities such as
shares, debentures, bonds, etc.
• Both the government and private sector participate in this market for investment
purposes.
• S.E.B.I. regulates the capital market in India.
• Capital market can be classified into
▪ Primary Market
▪ Secondary Market

Primary Market:

• The primary market is a market for new shares.

• The companies have to follow well defined procedures when they are auctioning their
shares for the first time. This is called Initial Public Offer.
• At this stage, the investment banks are involved in setting a price for the shares which the
company is issuing.
• The major players in the primary market are merchant bankers, mutual funds, financial
institutions, and individual investors.

Secondary markets:

• The secondary market is a market for trading of existing securities.

• The secondary market known as stock market or stock exchange plays an equally
important role in mobilizing long-term funds by providing the necessary liquidity to
holdings in shares and debentures.
• It is an organized market where shares and debentures are traded regularly with high
degree of transparency and security.

Functions of the capital market:

1. Mobilization of Savings: Capital market is an important source for mobilizing idle
savings from the economy. It activates the ideal monetary resources and puts them in
proper investments.

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 2. Capital Formation: Capital market helps in capital formation. Capital formation is net
addition to the existing stock of capital in the economy.
3. Speed up Economic Growth and Development: Capital market enhances production
and productivity in the national economy. As it makes funds available for a long period
of time, the financial requirements of business houses are met by the capital market.
4. Proper Regulation of Funds: Capital market also helps in proper allocation of these
resources. It can have regulation over the resources so that it can direct funds in a
qualitative manner.
5. Continuous Availability of Funds: Capital market is place where the investment avenue
is continuously available for long-term investment. This is a liquid market as it makes
funds available on continues basis. Both, buyers and sellers can easily buy and sell
securities.
Capital Market Instruments:

Government Securities (G-secs):

• Tradable instruments issued by the central government or state governments.

• They are both short term (T- bills) and long term (Dated bonds or Government bonds)
• Do not carry any risk of default and are hence called 'risk-free gilt-edged securities'.
• GOI also issues savings instruments (savings bonds, NSCs or special securities (power
bonds, oil bonds) but they are not fully tradable.
• Dated government securities are long-term and carry a fixed or floating coupon rate
which is payable at fixed time periods. The maturity of these securities can be up to 30
years.
• Dated security can be issued to any person, firm, corporate, state governments and trusts.
• Foreign companies owned by NRIs and FIIs registered with SEBI can also invest in
them.
• Floating Rate Bonds carry variable interest rates with fixed percentage pegged to some
benchmark rate.
• Capital Indexed Bonds carry a fixed interest rate over wholesale price index or consumer
price index.
• Inflation Indexed Bonds carry interest rates linked to inflation rates (observed from WPI
earlier, now CPI) so that real return is positive from investments.
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 • Lately, RBI has allowed sovereign wealth funds, endowment funds, insurance and
pension funds & foreign central banks (Federal Reserve etc) to invest in G-secs if they
are registered with SEBI.

Mutual Funds:

• Mutual funds raise money from the public, pool them and invest in stock market.
• They are regulated by SEBI.
• Structure of a mutual fund is as follows:
▪ Sponsor - the person who alone or in association with another organisation establishes
a mutual fund.
▪ Trust - It is registered as a trust according to provisions of Indian Trust Act, 1882 (for
private trusts)
▪ Trustee -a corporate body which safeguards the interests of unit holders
▪ Custodian - A bank or a financial institution registered with SEBI which holds and
safeguards the securities owned within a mutual fund. E.g. SBI is the custodian of
SBI mutual fund.

Hedge Funds:

• A pooled investment which is professionally administered by a firm.

• They invest in diverse markets and use various investment styles.
• They are comparatively more risk prone, aim at faster returns and generally avoid
regulatory oversight.
• Available only to certain investors and can't be sold to general public.
• They are a form of Alternate Investment Funds (AIFs).

Alternative Investment Funds (AIFs):

• Newly created investment vehicle where investments are pooled in from real estate,
hedge funds and private equity. Capital can be pooled from both Indian and foreign
investors.
• Regulated by SEBI.
• It excludes mutual funds, employee stock option and family trusts.

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Venture Capital:

• Money provided by financial institutions for investment in rapidly growing companies.

• They manage the new firms alongside investing, as per terms.
• It's an important source of raising capital for start-up companies.

Angel Investors:

• An individual who provides capital for a business starts up.

• Usually, the investment is in exchange for convertible debt or ownership equity.
• They invest their own money, unlike venture capitalist who invests public money.
• AIs can register themselves as AIFs as per SEBI.
• Minimum investment should be Rs 25 lakh.
• Angel Funds are allowed to invest in overseas venture capital undertakings upto 25% of
their investible corpus in line with other AIFs.
• The lock-in requirements of investment made by Angel Funds in the venture capital
undertaking is one year.
• Angel Funds will be allowed to invest in startups incorporated within five years.

Chit Funds:

• An arrangement that a group of people arrive at to contribute money in a manner at

periodic intervals into a kitty.
• A member can withdraw that money through a lucky draw, auction or other agreed ways.
• Usually popular in Rural India, Tier2 and Tier3 cities due to under penetration of banking
services.
• Chit funds are established under Central Chit Funds Act, 1982.
• An office "Registrar of Chit funds' in every state monitors their operations.

Exchange Traded Funds (ETFs):

• These are index funds listed and traded on stock exchanges.

• They comprise of a basket of stocks that has a composite index and the value of that
depends on underlying stocks.

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 • The major benefit is that you can invest in a diverse portfolio with the simplicity of
trading a single stock.
• ETFs are increasingly becoming a popular investment option throughout the globe.

Difference Between Money and Capital Market:

Money Market Capital Market

Money market is the place where short term Capital Market, where long term securities are
marketable securities are traded. traded is known as Capital Market.

Treasury bills, commercial papers, certificate of

Share, debentures, bonds, retained earnings are
deposits, trade credit are the instrument of money
the instrument of capital market.
market.

The money market instruments are rich in The instruments of the capital market are not that
liquidity. much liquid.

Money Market instruments gives lower returns as Capital market instruments gives higher returns
compared to capital market instruments. as compared to money market instruments.

The instrument traded in money market carry low

The capital market instruments carry high risk.
risk.

Money Market is unsystematic market and so the

trading is done off exchange, i.e. Over The It is broadly divided into two major categories:
Counter (OTC) between two parties by Primary Market and Secondary Market.
usingphones, email, fax, online, etc.

Redemption of money market instruments is Capital market instruments have a life of more
done with in a year. than a year.

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Money Market in India is regulated by Reserve Capital Market in India is regulated by Securities
Bank of India. Exchange Board of India

SMALL FINANCE BANK AND PAYMENTS BANK

Small Finance Bank:

Small Finance banks are physical banks whose aim is to provide basic banking products such as
deposits and supply of credit but in a limited area of operation. Their work is to supply credit to
small farmers, micro and small industries, and other unorganized sector entities through high
technology and also low cost operations.

Important Points about Small Finance Bank:

• Small Finance Banks are a type of niche banks.

• Usha Thorat is the head of Small Finance bank committee.
• NBFC, Micro- Finance Institutions and Local Area Banks who has 10 years of
experience in banking can apply for Small Finance Bank license.
• Small Finance Banks are licensed under section 22 of Banking Regulation Act 1949 and
registered as Public Limited Company under the Companies Act 2013.
• The bank shall primarily undertake basic banking activities of accepting deposits and
lending to small farmers, small businesses, micro and small industries, and unorganized
sector entities
• Their primary targets are Small Business and MSMEs. They are not allowed to lend the
deposited money to big business or industries.

Condition for setting up Small Finance Bank:

• The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore.

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 • Every small finance bank will be required to use the words “Small Finance Bank” in its
name in order to differentiate it from other banks.
• Maximum loan size and investment limit exposure to single person is 10% and for group
would be restricted to 15% of capital funds.
• Annual branch expansion plans should be in compliance with the requirement of opening
at least 25% of its branches in unbanked rural centers.
• 75% of its Adjusted Net Bank Credit (ANBC) should be advanced to the priority sector
as categorized by RBI.
• At least 50% of its loan portfolio should constitute loans and advances of up to Rs.25
lakh to micro finance business.
• For the first three years, 25% of branches should be in unbanked rural areas.
• Minimum paid-up equity capital is 40% and it will be gradually brought down to 26%
within 12 years from date of commencement.
• Small banks can undertake financial services like distribution of Mutual Fund units,
Insurance products, Pension products and so on but not without prior approval from RBI.
• It cannot set up subsidiaries to undertake non-banking financial services activities.

Payment Banks:

Payment Banks are banks which will reach their customers through mobile phones rather than
traditional bank branches. They can be thought of as mobile wallets; however they can also have
physical branches.

The objectives of payments banks will be to further financial inclusion by providing small
savings accounts and payments or remittance services to migrant labor workforce, low income
households, small businesses, other unorganized sector entities and other users.

Important Points about Payments Banks:

• A Payments bank is a type of non-full service niche bank in India.

• RBI formed a Payments Bank Committee on Comprehensive Financial Services for
Small Businesses and Low Income Households under the chairmanship of Nachiket Mor.

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 • Payments Banks are licensed under section 22 of Banking Regulation Act 1949 and
registered as Public Limited Company under the Companies Act 2013.
• Till now, Airtel Payments Bank, Paytm Payments Bank, India Post Payment Bank, Fino
Payment Bank, Aditya Birla Idea Payment Bank and Jio Payment Bank started their
business.

Conditions for setting up Payments Banks:

• The minimum capital requirement to establish a payments bank is Rs. 100 cr

• They can offer only savings and current account in which deposit only up to Rs 1 lakh
per customer is permitted.
• They cannot lend money to people and also cannot issue credit cards. Though ATM or
debit card can be issued.
• A payments bank will need to invest 75% of its funds in government securities or
treasury bills with maturity up to one year.
• It can hold maximum 25% in current and fixed deposits with other scheduled commercial
banks for operations and liquidity management.
• The minimum initial contribution to the paid-up equity capital should be 40% for the first
five years from the commencement of business.
• The Payments Banks would be required to use the word ‘Payments’ in its name to
differentiate it from other banks.
• They cannot accept NRI deposit. The revenue of these banks would come mainly from
the transaction fees.

PAYMENT AND SETTLEMENT SYSTEMS ACT, 2007

The Payment and Settlement Systems Act, 2007 (“PSS Act”) empowers the Reserve Bank of
India to regulate and oversee all payment and settlement systems in the country and also to
provide settlement finality and a sound legal basis for the same.

The Act came into effect on 12th August 2008 vide a notification to that effect.

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The PSS Act specifies that no person, other than the RBI, can operate a payment system except
with due authorization issued by the RBI (unless specifically exempted by the terms of the PSS
Act itself.).

The Act provides for netting and settlement finality and gives formal oversight powers over all
payment and settlement systems with the RBI.

In the brief, the Act:

• Anoints the RBI as the authority that regulates payment and settlement systems;
• Makes it compulsory to obtain RBI authorization to operate a payment system;
• Warrants the RBI to regulate and supervise payment systems by determining standards
and calling for information, regular reports, documents etc;
• Warrants the RBI to audit and conduct on- and off-site inspections of the payment
systems;
• Warrants the RBI to issue directives; and
• Provides for netting and settlement to be final and irrevocable.

Under this act two regulations have been made by RBI, One is, Board for Regulation and
Supervision of Payment and Settlement Systems (BPSS) 2008. This committee is formed by
the central board of directors of RBI. It deals with exercising its powers, the constitution of
subcommittees and advisory committees for payment and settlement related matters.

Another one is Payment and Settlement Systems Regulations, 2008. It deals the issues like the
form of application for authorization for commencing on a payment system and grant of
authorization, payment systems, furnishing of returns, documents, the furnishing of accounts and
balance sheets by systems provider etc.
In India payment system can be classified into three types

I. Paper Based Payment System

II. Electronic Payment System
III. Other Payment System

I. Paper Based Payment System:

Paper Based Payment System comprises of cheque and Demand draft.

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Cheque:

A Cheque is a document that orders a bank to pay a specific amount of money to the person in
whose name the cheque has been issued. Cheque is used to make safe and convenient payment.
Cheque is a financial instrument which can be transferred to another party by simply endorsing
it.

After opening an account in a bank, with cheque book facility, the bank you will provide you
with a cheque book. However, there are various kinds of cheque book you receive and it would
depend on the type of account you have. The number of cheques in a cheque book also differs
depending on the account. Charges also vary depending on the type of account, like current
account, where more cheque leaves are provided as compared to individual savings account.

Parts of a Cheque:

Drawer: Maker or writer of a bill of exchange (cheque)

Drawee: The party that has been directed by the depositor to pay certain sum of money to the
person

Payee: A person to whom money is paid or is to be paid

History of Cheques in India:

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 • The Cheque was introduced in India by the Bank of Hindustan. In 1881, the Negotiable
Instruments Act was enacted in India.
• The NI Act provided a legal framework for non-cash paper payment instruments in India.
• In 1938, the Calcutta Clearing Banks’ Association, which was the largest bankers’
association at that time, adopted clearing house.
• Until 1 April 2012, cheques in India were valid for a period of six months from the date
of their issue, before the Reserve Bank of India issued a notification reducing their
validity to three months from the date of issue.

Different Types of Cheque:

1) Open Cheque Or Bearer Cheque:

• When the words "or bearer" printed on the cheque is not cancelled, the cheque is called a
bearer cheque.
• A bearer cheque is made payable to the bearer i.e. it is payable to the person who presents
it to the bank for encashment.
• However, such cheques are risky, this is because if such cheques are lost, the finder of the
cheque can collect payment from the bank.
• Bearer cheque can be transferred by mere delivery; they need no endorsement. In simple
words a cheque which is payable to any person who presents it for payment at the bank
counter is called ‘Bearer cheque’.

2) Order Cheque:

• When the word "or bearer" printed on the cheque is cancelled and the word ‘order’ may
be written on the cheque, the cheque is called an order cheque.
• An order cheque is one which is payable to a particular person.
• The payee can transfer an order cheque to someone else by signing his or her name on the
back of it.

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3) Crossed Cheque:

• Crossed cheque means drawing two parallel lines on the left corner of the cheque with or
without additional words like “A/c Payee only” or “&co” or “Not Negotiable”.
• A crossed cheque cannot be encashed at the cash counter of a bank but it can only b
credited to the payee’s account.
• This is a safer way of transferring money then an Uncrossed or open cheque because we
can find to which account the money has been transferred.

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4) Post Dated Cheque (PDCs):

• Post Dated Cheque’s are cheques issued with future date on it.
• The cheque issued today will be vailed for three months from the date of issue.
• It is used for business purposes or making of payment in future date.
• For example; on 11/6/2017 you are issuing it dated 15/9/2017 than it will called post
dated cheque and will be vailed for three months from 15/9/2017.

5) Anti Dated Cheque:

• If a cheque bears a date earlier than the date on which it is presented to the bank, it is
called as “anti-dated cheque”.
• Such a cheque is valid upto three months from the date of the cheque.
• For example on 11/6/2017 you are issuing a cheque dated 1/6/2017 than it will called anti
dated cheque and will be vailed for three months form 1/1/2015.

6) Stale Cheque:

If a cheque is presented for payment after three months from the date of the cheque, it is called
stale cheque. A stale cheque is not honoured by the bank.

7) Gift Cheque:

• Gift cheque, it is a cheque forirted in decorative form issued for a small extra charge by
the banks for use by customers who wish to give presents of money on special occasions.
• Gift cheques may be purchased in unlimited numbers from every branch of the ‘X’ Bank.

8) Traveller’s Cheque:

• It is an instrument issued by a bank for remittance of money from one place to another.

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 • Travelers Cheques are accepted almost everywhere and are available in many
denominations. There is no-expiration in this type.
• Generally used by people on vacation in foreign countries instead of cash, as many
businesses used to accept traveler’s cheques as currency.

9) Multilated Cheque:

• If a cheque is torn into two or more pieces such cheque is Mutilated Cheque.
• If it presented for payment, such a cheque the bank will not make payment against such a
cheque without getting confirmation of the drawer.
• In case, if a cheque is torn at the corners and no material fact is erased or cancelled, the
bank may make payment against such a cheque.

10) Blank Cheque:

• A cheque on which the drawer puts his signature and leaves all other columns blank is
called a blank cheque.
• A check that is signed by the payer but with no specific amount indicated, leaving this
determination up to the drawee.
• More generally, a term used for any situation in which an usually high level of trust is
afforded by one party to another.

11) Self Cheque:

• Self cheque means the cheque payable to the drawer himself.

• Normally, when the drawer is willing to get cash from the bank, they used to write the
cheque favoring “Self” and after tendering the cheque to the teller they will get payment
for the cheque.
• Suppose you are having two different accounts in the same branch, you can issue a
cheque from one account favoring “Self” and deposit the cheque in another account in
your name and it is transfer of funds from one account to another account by means of
cheque.
• Suppose you are having one account with ABC bank and another account with XYZ
bank, you can issue a cheque drawn on ABC bank favoring “Self”(means your name) and
can deposit the cheque in the account with XYZ bank.

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 • Normally, bearer cheques will not create any issue; however, in the case of order
cheques, you have to establish your identity to XYZ bank.
• For example,

Demand Draft (DD):

• It is kind of a pre-paid negotiable instrument that is used to direct payments from one
bank to another bank or one of its own branches to pay a certain sum to the specified
party.
• Demand drafts can only be made payable to a specified party, also known as pay to order.
• When a bank gets request for the issue of a DD by any individual or party, it either
deducts the money from the bank account (if the individual/party has bank account in that
bank) or individual/party has to give the amount in cash not exceeding Rs 50,000. In case
of amount exceeding Rs 50,000, the payment is to be made by cheque along with giving
the PAN No.
• Like a cheque, DD also contains DD number and MICR No. at the bottom. DDs can also
be used for making payments abroad by issuing a draft in foreign currency.

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II. Electronic Payment System:

In 1990 RBI took initiative for the electronic clearing service in order to enhance better payment
and settlement system in India.

Electronic Payment System in India can be classified into two types such as Gross Settlement
System and Net Settlement System.

RTGS (Real Time Gross Settlement System):

• Reserve Bank of India introduced the RTGS System in March 2004 with four bank
branches on a pilot basis, only for inter-bank transactions.
• RTGS is a real time and gross settlement system. Real Time means settlement of the
transaction is start at the time it received.
• Gross Settlement means transactions are individually processed. No other transaction can
bunch with other.
• The transaction is recorded in the books of RBI so it is final and irrevocable transaction.
• In RTGS, there is minimum limit for the transfer of money is Rs 2,00,000 (Rs 2 lakh) and
there is no maximum limit for the transfer of money.
• Customers can avail facility of RTGS between 9:00 am to 4:30 pm on weekdays and on
Saturdays from 9:00 am to 2:00 pm
• In order to enter into RTGS transactions the bank must have CBS (Core Banking
Solution) which is assigned to enable bank and branches.
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NEFT (National Electronic Fund Transfer):

• NEFT is introduced by RBI in 2005, it enables individuals, firms and corporate to

transfer funds from any bank branch to any individual, firm or corporate.
• In NEFT, transfer is done on the half - hourly basis. There are twenty three settlements
from 8 am to 7 pm on weekdays and the 1st, 3rd and 5th Saturday of the calendar month.
• There is no maximum and minimum limit in NEFT for the transfer of funds in India.
• In order to enter into the RTGS the bank must be enable for NEFT.

National Payments Corporation Of India:

• National Payments Corporation of India has the important role to improve electronic
payment system in India. It introduced lot of products to develop digital payment in
India.
• NPCI was founded in 2008 under section 8 of Companies Act 2013.
• NPCI is a not-for-profit organization owned by a consortium of major banks and has been
promoted by the country’s central bank, the Reserve Bank of India.
• NPCI is a kind of platform that facilitates all electronic retail transactions involving
money in India (currently) and provides solutions to the economic and monetary
problems through Direct Cash Transfer, Financial Inclusion, Subsidy Allocation, One
Access Point Mechanism etc.
• Just to take an example of Visa. Now it works as the most popular way to carry and
transfer money around the globe, which can be trusted by nearly all financial institutes.
• Or take for instance payment linking mechanisms of the world like- China Union Pay in
China, Vocalink in Uk, Bankserv in South Africa. NPCI seeks to operate as a service that
can provide similar benefits to Indian people.

The products of National Payments Corporation of India are,

1. National Financial Switch (NFS) - network of shared automated teller machines in India.
2. Immediate Payment Service (IMPS) - Real time payment with mobile number.
3. Unified Payment Interface (UPI) - Single mobile application for accessing different bank
accounts
4. BHIM App - Smartphone app built using UPI interface.

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 5. *99# - mobile banking using USSD
6. National Automated Clearing House (NACH)- a web based solution to facilitate
interbank, high volume, electronic transactions.
7. Cheque Truncation System - online image-based cheque clearing system
8. Aadhaar Payments Bridge System (APBS) - Aadhar based payment solution
9. RuPay - card scheme
10. Bharat Bill Payment System (BBPS) - integrated bill payment system.

1. National Financial Switch (NFS):

• National Financial Switch was initiated by Institute of Development and Research in

Banking Technology and handed over to NPCI in 2009.
• NFS consists of a national switch to facilitate connectivity between bank’s switches and
their ATMs, and inter-bank payment gateway for authentication and routing the payment
details of various e-commerce transactions.
• NFS is India’s largest ATM connecting network.
• Any bank having a core banking solution system can be a part of NFS.
• Customers of member banks can withdraw money from any of these banks without
incurring any extra cost.
• Main purpose of NFS initially was to include rural and cooperative banks under its
umbrella, but now any bank can join this network for maximizing its reach.

2. Immediate Payment Service (IMPS):

IMPS is a tool through which one can transfer money instantly within banks across India through
mobile, internet and ATMs which is not only safe but also economical both in financial and non-
financial perspectives.

This facility is available 24x7x365 and it is launched by National Payments Corporation of India
on 22nd November 2010.

Before IMPS system, the transactions could be done either by NEFT or by RTGS. But it creates
lot of inconvenience to the customer because of its working hours.

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So NPCI along with some banks like SBI, BOI, UBI and ICICI in 2010 launched IMPS in
Mumbai.

The participants for IMPS are:

▪ Remitter (Sender)
▪ Beneficiary (Receiver)
▪ Banks
▪ National Financial Switch by NPCI

Objectives of IMPS

• It is customer friendly so that customers do not have to wait for tomorrow to make
remittances.
• Can make the payment simpler just with the use of mobile number.
• Can achieve digitization in doing retail payments.
• Can build the foundation for a full range of mobile based Banking services.

Some important facts:

• The bank should have an approval from RBI for Mobile Banking Service to be eligible to
participate in IMPS.
• Customer should do Mobile Banking Registration if he wants to transact through mobile.
• The customer gets a unique Mobile Money Identifier (MMID) which is one of the inputs
to start the transaction. It is a 7 digit number issued by banks.
• Every mobile phone be it a basic phone or Smartphone is eligible for IMPS.
• There is no need of bank account to avail IMPS.
• More than one account can be linked to single mobile number.
• The recipient is not required to register for IMPS.
• Individual banks can also charge money for IMPS as per bank policy.

3. Unified Payment Interface (UPI):

Unified Payments Interface (UPI) is a payment system launched by National Payments

Corporation of India and regulated by the Reserve Bank of India which facilitates the instant
fund transfer between two bank accounts on the mobile platform.

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UPI is built over Immediate Payment Service (IMPS) for transferring funds using

1. Virtual Payment Address (a unique ID provided by the bank),

2. Account Number with IFS Code,
3. Mobile Number with MMID (Mobile Money Identifier- 7 digits),
4. Aadhaar Number, or a one-time use Virtual ID.

An MPIN (Mobile banking Personal Identification number) is required to confirm each payment
which will be a standardized 4- or 6-digit number similar to an ATM PIN.

Some important facts about UPI:

• UPI works on single click 2 factor authentication.

• Two-factor authentication is a security mechanism that requires two types of credentials
for authentication and is designed to provide an additional layer of validation, minimizing
security breaches. Two-factor authentication is also known as strong authentication.
• Before UPI launched, the customer who has more than on account need to download
several banking apps. For example if he has account in Indian, Axis and ICICI bank he
need to download three different app for his purpose.
• But in UPI interface the customer needs to download UPI app alone and its network
connect all the banks together and make it possible for the customer to make his/her
transactions using a single app. So, through the use of one app, one can perform all
payment transactions.
• The limit on transaction through UPI system is Rs 1 lakh.
• Charges can be applied depending on the amount of money transferred.
• The service is available 24×7×365.
• Merchant will not be able to track even the account number.
• UPI system will not at all include the wallets.

4. BHIM App:

• BHIM (Bharat Interface for Money) is a Mobile App developed by National Payments
Corporation of India (NPCI).
• It was launched by Narendra Modi, the Prime Minister of India, at a Digi Dhan mela at
Talkatora Stadium in New Delhi on 30 December 2016.

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• It has been named after Dr. Bhimrao R. Ambedkar.
• The app is built over the Immediate Payment Service infrastructure and allows the user to
instantly transfer money between the bank accounts of any two parties.
• It can be used on all mobile devices.
• The app is based on the Unified Payments Interface (UPI).
• It is an open platform and not a mobile wallet. It means unlike mobile wallets (Paytm,
MobiKwik, mPesa, Airtel Money etc) which hold money, the BHIM app is only a
transfer mechanism, which transfers money between different bank accounts.
• We can send or receive money to different bank accounts with ZERO Transaction
charges by using
a) UPI payment addresses by dialing *99#
b) Account number with IFSC (Indian Financial System Code) code or MMID
(Mobile Money Identifier) Code
c) QR (Quick Response) code for a fixed amount of money
d) ‘Pay to Aadhaar Number’ – can transfer money to the Aadhaar number linked
with beneficiaries’ bank account.
• BHIM allow users to send or receive money to or from UPI payment addresses, or to
non-UPI based accounts (by scanning a QR code with account number and IFSC code or
MMID Code)
• Transactions on BHIM are nearly instantaneous and can be done 24/7 including
weekends and bank holidays.
• BHIM also allows users to check the current balance in their bank accounts and to choose
which account to use for conducting transactions, although only one can be active at any
time.
• Users can create their own QR code for a fixed amount of money, which is helpful in
merchant — seller — buyer transactions. Users can also have more than one payment
address.
• If the 12-digit Aadhaar number is listed as a payment ID, the BHIM app will not require
any biometric authentication or prior registration with the bank or Unified Payment
Interface (UPI).
• Transaction limit per transaction would not exceed Rs.10,000 and per day limit is Rs.
20,000.
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5. *99#:

One of the innovative payment service launched by NPCI includes *99# service, which works on
Unstructured Supplementary Service Data (USSD) channel.

This service was launched envisioning the potential of Mobile Banking and the need for
immediate low value remittances which will help in financial deepening and inclusion of under
banked society in the mainstream banking services.

*99# service was dedicated to the nation by the Honorable Prime Minister of India Shri Narendra
Modi on 28th August 2014 as part of Pradhan Mantri Jan Dhan Yojana (PMJDY).

Features of *99# Service:

▪ Works without Internet

▪ Round the clock availability (works even on holidays)
▪ Accessible through a common code *99# across all TSPs
▪ Works across all GSM service providers and mobile handsets
▪ Additional channel for banking and key catalyst for financial inclusion
▪ Service also offered through BC Micro ATMs to serve the rural populace

6. National Automated Clearing House (NACH):

Started by the National Payments Corporation of India (NPCI), NACH aims to create a better
option for facilitating clearing services than the existing Electronic Clearing Service (ECS)
system.

NACH is a centralized, web-based clearing service that can ease the work of banks, financial
institutions, the government and the corporates by consolidating all regional ECS systems into
one national payment system, thereby removing any geographical barriers in efficient banking.

The service is now active in all Indian banks with core banking facility. It comes in two variants

i. ECS Credit - which involves distribution of salary, pensions, dividends,

interest, etc to the relevant stakeholders at set frequency and periods
ii. ECS Debit – which makes regular fixed payments towards insurance
premiums, loan repayments, recurring deposits, etc.

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The process of activation of ECS mandates had a longer turnaround time (30 days) than what it
is expected to be in NACH (10 days). Also, the Aadhar-based benefit transfers have been
simplified.

There are three types of electronic clearing services:

▪ Local ECS
▪ Regional ECS
▪ ECS

Some facts about NACH:

• From 1st May, 2016 NACH replaced ECS.

• Those who are using ECS already can use ECS till their validity expires. After this, one
will have to fill NACH forms instead of ECS forms.
• NACH forms can be availed from AMC (Asset Management Company) offices or their
websites.
• The structure of NACH allows member banks to design their own products to ensure the
needs of their retain customers, corporate clients and Government.

Some of the benefits of NACH scheme:

• NACH Credit and Debit schemes can be initiated by institutions/individuals who apply
for it.
• There is no need to go to bank branches/ collection centers after all formalities are
completed while applying.
• Freedom from paper handling such as cheques as all credits and debits are done
electronically.
• So it avoids the loss and fraudulent of papers in transit.
• NACH is very cost effective.
• This system eliminates the local barriers and facilitates same day transactions anywhere
in India.
• Customers need not keep track of due date for payments.

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7. Cheque Truncation System (CTS):

Cheque truncation is a system between clearing and settlement of cheques based on electronic
images. This form of clearing does not involve any physical exchange of cheques.

In order to ensure speedy clearance of cheques “Cheque Truncation System” was introduced in
the year 2008 and it is defined under the section 6 of the Negotiable Instruments Act 1881.

Though MICR technology helped improve efficiency in cheque handling, clearing is not very
speedy as cheques have to be physically transported from the collecting branch of a bank to the
drawee bank branch.

Under CTS, instead of physical movement of the cheque, an electronic image of the cheque is
transmitted to the drawee branch / bank. Along with the electronic image, certain key relevant
information is also transmitted, such as date of presentation, presenting bank details, data on the
MICR band.

Features of cheques issued under CTS:

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 (a) Details of the bank and its logo: The bank details and its logo are printed on the face of
the cheque. However, it is printed in invisible ink.
(b) VOID pantograph: This is a wavelike design, which is visible to the naked eye and seen
below the area where the account number is printed.
(c) Cheque printer details: This is printed on the extreme left hand side of the cheque. The
printer details along with the words ‘CTS-2010’ is mentioned along the area where you
tear off the leaf from the cheque book.
(d) Rupee symbol: The new symbol of the Indian rupee is printed beside the area where the
amount in figures needs to be written.
(e) Signature space indicator: The words ‘please sign above’ are mentioned indicating the
space where you will need to sign the cheque.

Benefits of Cheque Truncation System:

• The CTS is more advanced and more secure.

• It provides faster clearance of cheques as local cheques are cleared on the same day
as the cheque is presented to the clearing house, while intercity cheques is cleared the
next day.
• It reduces reconciliation and clearing frauds.
• It provides no geographical restrictions.
• It reduces operational risk and risks associated with paper clearing.
• There are no extra charges levied for collection of cheques drawn on a bank located
within the grid.

8. AEPS (Adhaar Enabled Payment System):

The Adhaar-enabled payment systems (AEPS) developed by NPCL is a bank-led model that
facilitates financial inclusion by allowing transactions at Point of Sale or PoS (the micro ATM)
through the business correspondent (BC) using the Aadhaar authentication number.

The four Aadhaar-enabled basic types of banking transactions are

• balance enquiry
• cash withdrawal
• cash deposit

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 • Aadhaar to Aadhaar funds transfer

Now all that a customer needs for availing of the AEPS services are an individual identification
number (identifying the bank to which the customer is associated), an Aadhaar number and
fingerprints captured during his/her enrolment.

The objective of AEPS is,

• To empower a bank customer to use Aadhaar to access his/her Aadhaar-enabled bank

account and perform basic banking transactions that are intra-bank or interbank in
nature through a business correspondent.
• It serves another important goal of RBI in electronification of retail payments.
• It would enable banks to route the Aadhaar-initiated interbank transactions through a
central switching and clearing agency.
• It would facilitate disbursements of government entitlements like NREGA, social
security pension, handicapped old age pension, etc, of any central or state government
bodies, using Aadhaar and authentication thereof as supported by UIDAI.
• Another important goal AEPS serves is to facilitate inter-operability across banks in a
safe and secured manner.

9. RuPay Cards:

RuPay is the Indian domestic card payment network being set up by National Payments
Corporation of India (NPCI) at the behest of banks in India.

This project had been conceived by Indian Banks Association and has the approval of Reserve
Bank of India. The objectives to be fulfilled are:

• Reduce overall transaction cost for the banks in India by introducing competition to
international card schemes.
• Develop products appropriate for the country particularly for financial inclusion.
• Provide card payment service option to many banks that are currently not eligible for card
issuance under the eligibility criteria of international card schemes.
• Build environment whereby payment information of the country remains within the
country

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 • Shift Personal Consumption Expenditure (PCE) from cash to electronic payments in a
growing economy with a population of 1.2 billion

The need for a domestic payment card the “RuPay” card is on account of two factors:

(a) The high cost borne by the Indian banks for affiliation with international card
associations in the absence of a domestic price setter and

(b) The connection with international card associations resulting in the need for routing
even domestic transactions, which account for more than 90% of the total, through a
switch located outside the country.

NPCI has since been granted approval to launch the “RuPay” affiliated cards for use at ATMs
and Micro ATMs.

NPCI has been advised to ensure that the use of these cards under the Aadhaar Enabled Payment
System (AEPS) is in strict compliance with the DBOD (Department of Banking Operations &
Development) guidelines on business correspondents (BCs).

RuPay will compete with Visa and MasterCard in terms of cost and quality of service, and it is
only natural to expect the incumbents also to reduce their rates.

It is imperative for India to create a low-cost electronic payment system if the ongoing
Endeavour to overhaul the existing system of welfare payments and subsidies is to succeed.

The unique identity project will deliver a unique numerical tag for every Indian resident, which
can then be used to create unique electronic bank accounts.

Transferring welfare and other payments from government treasuries directly to beneficiary
accounts would be possible. Thereafter, if the beneficiary can use electronic cards to spend the
money in his account, it would remove one more layer of administrative mediation with its
potential for corruption and leakage.

10. Bharat Bill Payment System (BBPS):

Bharat Bill Payment System is an integrated bill payment system in India offering interoperable
and accessible bill payment service to customers through a network of agents, enabling multiple
payment modes, and providing instant confirmation of payment.

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Bharat Bill Payment System (BBPS) was proposed by G. Padmanabhan committee in 2013.

National Payment Corporation of India (NPCI) had been identified to act as Bharat Bill Payment
Central Unit (BBPCU) which will be a single authorized entity for operating the BBPS.

The BBPCU will set necessary operational, technical and business standards for the entire
system and its participants, and also undertake clearing and settlement activities. It will work
only as a medium to connect multiple billers and agents through various Operating Units.

Banks and non-bank entities presently engaged in any of the bill payment activities falling under
the scope of BBPS can apply for approval from RBI under the Payment and Settlement Systems
(PSS) Act 2007.

Some important facts about BBPS:

• The biggest advantage is that the bill can be paid anywhere and anytime.
• The system will provide multiple payment modes and instant confirmation of payment.
• Payments may be made through the BBPS using cash, transfer cheques, and electronic
modes.
• Retail points will be set up for bill payments across the country who would be able to
accept all kinds of bills payments made through credit cards, debit cards, mobile wallets,
net banking (IMPS, NEFT).
• The BBPS outlets would include banks, ATMs, business correspondents, kiosks etc.
• Payments would be made securely through the NPCI network with instant receipts
getting generated.
• PayU India is the first non-bank entity which got RBI approval to set up and operate
Bharat Bill Payment System (BBPS).

Iii. Other Payment Systems:

Automated Teller Machine – ATM:

An electronic banking outlet, which allows customers to complete basic transactions, withdrawal
of money, depositing money and checking of one’s own balances etc. without the aid of a branch
representative or teller.

There are two primary types of ATMs

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 1. The basic units allow the customer to only withdraw cash and receive a report of the
account's balance.

2. The more complex machines will accept deposits, facilitate credit card payments and
report account information.

ATM does most of the functions of cashier in the bank. ATM is operated by plastic card issued
by the bank which is called as ATM Card, with its special features.

Advantages of ATM:

1. Round the Clock Services: ATM provides banking services to its customers round the clock,
24 hours a day, 7 days a week and 365 days a year.

2. Access to bank from any part of the world: Essential banking services like deposits,
withdrawals transfer of funds, etc can be accessed by customers from any part of the world.

3. Expansion of Services to any corner of the world: Of the Banks can expand their services to
any corner of the world by providing electronic access to its customers.

4. Reduction in cost of operation: This reduces human intervention and thereby reduces the cost
of operations and increases profitability of banks.

5. For shopping Purpose: Now days almost every shopping mall, restaurant and other
organizations are accepting credit card payments.

Types of ATM:

White Label ATM:

White Label ATMs are those ATMs which set up, owned and operated by non-bank entities. To
aid financial inclusion and drive ATM penetration in the country the Reserve Bank of India has
permitted the launch of White Labeled ATMs (WLAs) i.e. private non-bank companies to set up,
own and operate its own brand of ATMs in the country. These white label ATMs will not display
logo of any particular bank. TATA launched the first white label ATM in India under the brand
name of Indicash.

Brown Label ATM:

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These ATMs are owned and maintained by service provider whereas a sponsor bank whose
brand is used on ATM takes care of cash management and network connectivity.

Onsite ATM:

These are ATM machines that are set up in the premises where there is a bank branch so that
both the physical branch and the ATM can be used. This is known as being on site and this can
be used for several purposes. Many people can use this to avoid the lines that are present in the
branch and hence save on the time required to complete their transactions.

Offsite ATMs:

These are the machines that are set up on a standalone basis. This means that the bank has a
place where there is only an ATM machine then this becomes an offsite ATM. This is done to
ensure that the bank reaches out to more geographical areas and that people are able to use its
services even when there is no bank branch in the area.

Cash Dispenser:

Allows only cash withdrawals, balance enquiry and mini statement requests, cash dispenser
(CD).

Worksite ATM: It is located within the premises of an organization and is generally meant only
for the employees of the organization.

Mobile ATM: It refers to an ATM that moves in various areas for the customers. Few priavte
banks have introduced ATM on wheels.

Green Label ATM: Provided for Agricultural Transaction.

Orange Label ATM: Provided for Share Transactions.

Yellow Label ATM: Provided for E-commerce.

Pink label ATM: Women banking.

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Point of Sale Terminal:

A point of sale terminal (POS terminal) is an electronic device used to process card payments at
retail locations. A POS terminal generally does the following:

• Reads the information off a customer’s credit or debit card

• Checks whether the funds in a customer’s bank account are sufficient
• Transfers the funds from the customer’s account to the seller’s account (or at least,
accounts for the transfer with the credit card network)
• Records the transaction and prints a receipt

Mobile Wallet:

• It’s a mobile-based virtual wallet, where you preload a certain amount in your account
created with the mobile wallet service provider, and spend it at online and offline
merchants listed with the mobile wallet service provider.
• For example, if you go to a coffee shop A, which is listed with XYZ mobile wallet, you
can pay for your coffee through the phone. Depending on the service provider, you can
also pay through app, text message, social media account or website.
• There are four types of mobile wallets in India
▪ open
▪ semi-open
▪ closed
▪ semi-closed
• Open wallets are the ones that allow you to buy goods and services, withdraw cash at
ATMs or banks and transfer funds. These kinds of wallets only issued by banks. M-Pesa

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 by Vodafone is one such example. Apart from the usual merchant payments, it also
allows you to send money to any mobile number bank account.
• Airtel Money is a semi-open wallet, which allows you to transact with merchants that
have a contract with Airtel. You can't withdraw cash or get it back. You'll have to spend
what you load.
• Closed wallets are issued by a company to a consumer for buying goods and services
exclusively from that company, which are quite popular with e-commerce companies.
• Lastly, semi-closed wallets like Paytm, which do not permit cash withdrawal or
redemption, but allow you to buy goods and services at listed merchants and perform
financial services at listed locations.

FINANCIAL INCLUSION IN INDIA

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Financial inclusion is the initiative of the government of India, RBI and banks to provide basic
banking services to all section of society in urban areas or rural areas at affordable cost. The
Government of India and the Reserve Bank of India have been making concerted efforts to
promote financial inclusion as one of the important national objectives of the country.

The GOI and RBI with the help of banks has initiated financial inclusion program to provide
banking services to deprived and low income groups of our society at affordable cost.

Steps taken by RBI to support financial inclusion:

Opening of No-Frills Accounts:

Basic banking no-frills account is with nil or very low minimum balance as well as charges that
make such accounts accessible to vast sections of the population. Banks have been advised to
provide small overdrafts in such accounts.

Relaxation on Know-Your’s-Customer (KYC) Norms:

• KYC requirements for opening bank accounts were relaxed for small accounts in August
2005; thereby simplifying procedures by stipulating that introduction by an account
holder who has been subjected to the full KYC drill would suffice for opening such
accounts.
• The banks were also permitted to take any evidence as to the identity and address of the
customer to their satisfaction.
• It has now been further relaxed to include the letters issued by the Unique Identification
Authority of India containing details of name, address and Aadhaar number.
• The Reserve Bank of India has updated its master direction on KYC - Know Your
Customer - norms, making Aadhaar key for the due diligence process at banks and
financial institutions. The norms state that customers already having account-based
relationships with a bank must submit the Aadhaar number before the date notified by the
government. If they fail to do so, the account shall cease to be operational.

Engaging Business Correspondents (BCs):

• In January 2006, RBI permitted banks to engage business facilitators (BFs) and BCs as
intermediaries for providing financial and banking services.

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 • The BC model allows banks to provide doorstep delivery of services, especially cash in-
cash out transactions, thus addressing the last-mile problem.

Use of Technology:

Recognizing that technology has the potential to address the issues of outreach and credit
delivery in rural and remote areas in a viable manner, banks have been advised to make effective
use of information and communications technology (ICT), to provide doorstep banking services
through the BC model where the accounts can be operated by even illiterate customers by using
biometrics, thus ensuring the security of transactions and enhancing confidence in the banking
system

Adoption of EBT:

Banks have been advised to implement EBT by leveraging ICT-based banking through BCs to
transfer social benefits electronically to the bank account of the beneficiary and deliver
government benefits to the doorstep of the beneficiary, thus reducing dependence on cash and
lowering transaction costs.

General Credit Card (GCC):

With a view to helping the poor and the disadvantaged with access to easy credit, banks have
been asked to consider introduction of a general purpose credit card facility up to 25,000 at their
rural and semi-urban branches.

The objective of the scheme is to provide hassle-free credit to banks’ customers based on the
assessment of cash flow without insistence on security, purpose or end use of the credit. This is
in the nature of revolving credit entitling the holder to withdraw up to the limit sanctioned.

Simplified Branch Authorization:

To address the issue of uneven spread of bank branches, in December 2009, domestic scheduled
commercial banks were permitted to freely open branches in tier III to tier VI centers with a
population of less than 50,000 under general permission, subject to reporting.

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In the north-eastern states and Sikkim, domestic scheduled commercial banks can now open
branches in rural, semi-urban and urban centers without the need to take permission from RBI in
each case, subject to reporting.

Opening of Branches in Unbanked Rural Centers:

To further step up the opening of branches in rural areas so as to improve banking penetration
and financial inclusion rapidly, the need for the opening of more bricks and mortar branches,
besides the use of BCs, was felt. Accordingly, banks have been mandated in the April monetary
policy statement to allocate at least 25% of the total number of branches to be opened during a
year to unbanked rural centers.

Swabhimaan:

Swabhimaan is financial inclusion scheme launched by GOI to provide banking facilities in

habitation with a population in excess of 2000 by March 2012. This nationwide programme on
financial inclusion was launched in February, 2011 with its focus on bringing the deprived
sections of the society in the banking network.

Pradhan Mantri Jan Dhan Yojana (PMJDY):

• Pradhan Mantri Jan Dhan Yojana (PMJDY) is a national mission to bring comprehensive
financial inclusion of all the households in the country.
• Under the PMJDY, any individual above the age of 10 years and does not have a bank
account can open a bank account without depositing any money.
• The scheme was to ensure the access to financial services such as banking / savings &
deposit Accounts, remittance, credit, debit cards, insurance and pension in affordable
manner.
• The scheme was mostly targeted to the people belonging to the Below Poverty Line but is
beneficial to everyone who does not have a bank account.
• Jan Dhan Yojana has seen a great success, about 21 Crore accounts have been opened in
just about one and half year under the scheme. Out of the total 12.87 crore in rural area
and 8.13 Crore accounts have been opened in urban areas.
• Despite of zero minimum balance, there is 33074.89 crore rupees balance in these
accounts with 28.88% accounts opened with zero balance.
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 DIFFERENT CODES USED IN BANKING

IFSC Code:

• IFSC Code stands for Indian Financial System Code.

• This code is an alpha-numeric code that is used to uniquely identify a bank branch
participating in the electronic payment systems in India like Real Time Gross Settlement
(RTGS) and the National Electronic Fund Transfer (NEFT).
• It is an 11 digit code.
• The components of IFSC code are:
▪ First 4 letters represent bank code.
▪ The 5th letter is a ‘0’ (Zero).
▪ Last six letters represent bank branch.

For example: IFS Code of a branch of Punjab National Bank in Delhi is PUNB0614800.

MICR:

• MICR stands for Magnetic Ink Character Recognition.

• The magnetic ink character recognition line is printed using special ink, which is
sensitive to magnetic fields that allow computers to read the printed information.
• This code is present at the bottom of cheques and other vouchers.
• MICR code is 9 digits numeric code used to identify a bank participating in electronic
clearing scheme.
• The components of MICR code are:
▪ First 3 digits represents city code
▪ The second 3 digits represents Bank code
▪ The last 3 digits denotes bank branch.

For example: MICR-no of one of the Punjab National Bank in Delhi is 110024490.

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SWIFT/BIC Code:

• SWIFT stands for Society for Worldwide Interbank Financial Telecommunication.

• It is a unique identification code for both financial and non-financial institutions
approved by the International Organization for Standardization (ISO).
• SWIFT codes are used mainly for international money transfer between banks.
• It is a standard format of Bank identifier Codes (BIC)
• It is an 8 or 11 digit code.
• The components of SWIFT code are:
▪ First 4 characters represent bank code.
▪ Next 2 characters represent ISO 3166-1 alpha-2 country code.
▪ Next 2 characters represent location code.
▪ The last 3 characters represent branch code.

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For example: The SWIFT code of one of the branches of Indian Bank in Chennai is
IDIBINBBASA.

BSR (Basic Statistical Returns) Code:

• BSR code is used by the Income Tax department in order to identify a bank branch for
submission of returns to the RBI.
• It is allotted to banks by Reserve Bank of India. While filling TDS/TCS (tax deducted at
source/ tax collected at source) returns, BSR code is used in details related to challan and
deductee.
• It is a 7-digit code.

Example: BSR Code of a branch of Punjab National Bank in Delhi is 305066.

INFLATION

• Inflation is nothing but the more prices we pay for goods. It is the persistent rise of all
goods and services over a period of time. There are several factors that influence inflation
in India.

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 • The major factors to be taken into account are the population, unbalanced economic
growth, demand for more money and increased taxes. On the flip side it has adverse
effects on consumers.
• The day to day goods are sold considerably at a higher rate which makes difficult for the
consumers to afford their basic needs. Hence the need for money increases which is one
of the major cause.
• There is huge money gap which could be the potential factor for increased price and
inflation in India. Increase in enormous expenditure can cause inflammatory gap at
current prices.
• The rate of inflation is measured on the basis of price indices which are of two kinds
 Wholesale Price Index (WPI)
 Consumer Price Index (CPI)

Types of Inflation:

Demand – Pull Inflation:

When there is a mis-match between demand and supply, it will eventually pull up the prices.
Here we have two cases.

In first case, the demand increases over the same level of supply. In second case, the supply
decreases with the same level of demand. In both cases the situation of Demand-pull inflation
arises.

Cost – Push Inflation:

An increase in factor input costs pushes up prices. In general the factors that could contribute to
Cost-Push inflation are increases in corporate taxes, rising wages, and rising raw materials cost.

Low Inflation:

Low inflation takes place in a longer period and the range of increase is usually in ‘single digit’.
Such inflation has also been called as ‘creeping inflation’.

Deflation:

• Deflation is the exact opposite of inflation.

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 • The persistent fall in the prices of all goods and services over a period of time is called
deflation.
• When deflation occurs it is possible to buy more amounts of goods with the same amount
of money.
• Deflation has often had the side effect of increasing unemployment in an economy, since
the process often leads to a lower level of demand in the economy.

Stagflation:

Stagflation is a situation in an economy where inflation and unemployment both are at higher
levels. Stagflation occurs when the economy isn’t growing but prices are going up. Stagflation is
basically a combination of high inflation and low growth.

Galloping Inflation:

This is a “very high inflation” running in the range of double-digit or triple digit (i.e. 20%, 100%
or 200% a year). The Russian economy showed such inflation after the disintegration of the ex-
USSR in the late 1980s.

Hyperinflation:

This form of inflation is ‘large and accelerating’ which might have the annual rates in million or
even trillion. In such inflation not only range of increase is very large but the increase takes place
in a very short span of time, prices shoot up overnight. This hasn’t happened in the U.S. since the
Civil War, occurred in Germany before World War II, and in Zimbabwe in the 2000s. Such
inflation quickly leads to a complete loss of confidence in the domestic currency and people start
opting for other forms of money.

Skewflation:

It is an un-usual inflation, where there is inflation in one particular sector for a particular period
of time, while the other sector is experiencing no changes at all or facing deflation.

Impacts of Inflation:

• It slows down the economic growth rate.

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 • Inflation redistributes wealth from creditors to debtors i.e. lenders suffer and borrowers
benefit out of inflation.
• Prices goes up, that mean you pay more money for the same product which you got it
lesser earlier.
• With the rise in inflation, lending institutions feel the pressure of higher lending.
• Investment in the economy is boosted by the inflation (in the short-run).
• The standard of living declines.
• The export segment of the economy benefits due to inflation.
• Inflation gives an economy the advantage of lower imports and import-substitution as
foreign goods become costlier.

PRIORITY SECTOR LENDING

Priority Sector refers to those sectors of the economy which may not get timely and
adequate credit in the absence of this special dispensation.

The overall objective of priority sector lending is to ensure that adequate institutional
credit flows into some of the vulnerable sectors of the economy, which may not be attractive for
the banks from the point of view of profitability.

Priority sector came into much attention in 1972, following the National Credit Council’s
plea that more emphasis should be given by commercial banks to the priority sector. Therefore,
initially, in 1974, the commercial banks were given a target of 33.33 % of their total credit
should go to the priority sector.

Following the recommendations of Dr. K S Krishanaswamy Committee, this target was

revised to 40% of the total credit given by the banks.

The latest revision in PSL targets has been made by the M.V. Nair Committee in 2012.
The categories under priority sector lending are as follows

• Agriculture (Direct and Indirect finance)

• Micro and Small Enterprises
• Education

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 • Housing
• Export Credit
• Social Infrastructure
• Renewable Energy
• Others

The targets and sub-targets under priority sector lending are linked to Adjusted Net Bank
Credit (ANBC).

Under PSL the domestic and foreign banks operating in India are furnished below:

Categories Domestic Scheduled Commercial Foreign banks with less than

Banks and Foreign banks with 20 20 branches
branches and above (It can be either
ANBC or Credit Equivalent Amount of
Off-Balance Sheet Exposure,
whichever is higher.)

Total Priority 34% for 2016-17 and 36% for

Sector 40%
2017-18

Agriculture 18% Not applicable

Micro
7.5% Not Applicable
Enterprises

Advances to
Weaker 10% Not Applicable
Sections

Agriculture:

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 Direct Agricultural advances denote advances given by banks directly to farmers for
agricultural purposes. Direct finance to agriculture shall include short, medium and long-term
loans given for agriculture and allied activities directly to individual farmer, Self-Help Groups
(SHGs) or Joint Liability Groups (JLGs) of individual farmers.

It also includes loans to small and marginal farmers for purchase of land for agricultural
purposes, Purchase of agricultural implements and machinery, Development of irrigation
potential, Reclamation and Land Development Schemes, Construction of farm buildings and
structures, etc.

Indirect finance may include loan for construction and running of storage facilities to
store agricultural products. Indirect finance denotes to finance provided by banks to farmers
indirectly, i.e., through other agencies. Priority sector lending by commercial banks is monitored
by Reserve Bank of India through periodical Returns received from them.

Micro Small and Medium Enterprises:

The limits for investments as notified by Ministry of Micro Small and Medium Enterprise are:

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Further, the following loans are also counted as priority sector loans under MSME:

• Loans to Khadi and Village Industries Sector (KVI)

• Loans to entities which provide inputs to artisans / village / cottage industries and their
cooperatives
• Loans to Micro-finance Institutions, which in turn use this loan to disburse to MSME
• Loans under various schemes related to MSME scheme
• Overdraft under Pradhan Mantri Jan-dhan Yojana up to Rs. 5000.
• Outstanding deposits with SIDBI and MUDRA Ltd. on account of priority sector
shortfall.

Education:

Education loans include loans and advances granted to only individuals for educational
purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad, and do not
include those granted to institutions.

Housing:

• For housing loans to individuals, limit to be counted as priority sector loans is Rs. 28
Lakh in Metros and Rs. 20 Lakh in other cities, towns and villages.

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 • For repairing of house, limit is Rs. 5 Lakh in metros and Rs. 2 lakh in others.
• Loans to any government agency for construction of houses subject to ceiling of Rs. 10
Lakh per house / dwelling unit for weaker sections or slum clearing.

Export Credit:

Incremental export credit up to 2% for domestic banks and foreign banks with 20
branches and above.

Social Infrastructure:

• This includes loans up to Rs 5 crore per borrower for building social infrastructure for
activities viz. schools, health care facilities, drinking water facilities and sanitation
facilities including construction/ refurbishment of household toilets and household level
water improvements in Tier II to Tier VI centers.
• It also includes loan to Micro-finance Institutions (MFIs) for on-lending to SHGs and
JLGs for water and sanitation facilities.

Renewable Energy:

• This includes loan up to Rs. 15 crore to borrowers for purposes like solar based power
generators, biomass based power generators, wind mills, micro-hydel plants and for non-
conventional energy based public utilities Viz. Street lighting systems, and remote village
electrification.
• For individual households, the loan limit will be Rs 10 lakh per borrower.

Others:

• Loans not exceeding Rs 50,000/- per borrower provided directly by banks to individuals
and their SHG/JLG, provided the individual borrower’s household annual income in rural
areas does not exceed Rs 100,000/- and for non-rural areas it does not exceed Rs
1,60,000/-.
• Loans to distressed persons not exceeding Rs 100,000/- per borrower to prepay their debt
to non-institutional lenders.

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 • Overdrafts extended by banks upto Rs 5,000/- under Pradhan Mantri Jan-DhanYojana
(PMJDY) accounts provided the borrowers household annual income does not exceed Rs
100,000/- for rural areas and Rs 1,60,000/- for non-rural areas.
• Loans sanctioned to State Sponsored Organizations for Scheduled Castes/ Scheduled
Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of
the outputs of the beneficiaries of these organizations.

Bank credit to Micro Finance Institutions (MFIs) treated as priority sector lending:

• Bank credit to MFIs- Micro Finance Institutions (NBFC-MFIs, societies, trusts, etc)
extended for on-lending to individuals and also to members of SHGs/JLGs is eligible for
categorisation as priority sector advance under respective categories viz., Agriculture,
Micro, Small and Medium Enterprises, Social Infrastructure and Others.

BASEL NORMS

• Basel is a city in Switzerland which is also the headquarters of Bureau of International

Settlement (BIS).
• Basel is a set of international banking regulations put forth by the Basel Committee on
Bank Supervision (BCBS) that sets out the minimum capital requirements of financial
institutions with the goal of minimizing credit risk.
• The set of agreement by the BCBS, which mainly focuses on risks to banks and the
financial system are called Basel accord. The purpose of the accord is to ensure that
financial institutions have enough capital on account to meet obligations and absorb
unexpected losses.

The following terms are necessary to understand Basel accord,

CAR - Capital Adequacy Ratio

CRAR - Capital to Risk Weighted Asset Ratio

IRB – Internal Ratings Based

RWA- Risk Weighted Assets

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⇒ Formulae for CAR = Total Capital / RWA*100

⇒ Total Capital= Tier1 capital + Tier2 capital

Tier 1 - The Tier- I Capital is the core capital

Paid up Capital, Statutory Reserves, Other disclosed free reserves, Capital Reserves which
represent surplus arising out of the sale proceeds of the assets, other intangible assets belong
from the category of Tier1 capital.

Tier 2 - Tier-II capital can be said to be subordinate capitals

Undisclosed reserves, Revaluation Reserves, General Provisions and loss reserves, Hybrid
debt capital instruments such as bonds, Long term unsecured loans and Debt Capital
Instruments etc belong from the category of Tier 2 capital.

Risk Weighted Assets

RWA means assets with different risk profiles; it means that we all know that is much larger
risk in personal loans in comparison to the housing loan, so with different types of loans the
risk percentage on these loans also varies.

BASEL 1:

• The BCBS was founded in 1974 as an international forum where members could
cooperate on banking supervision matters.
• The BCBS aims to enhance "financial stability by improving supervisory know-how
and the quality of banking supervision worldwide."
• In 1988, BCBS introduced capital measurement system called Basel capital accord,
also called as Basel 1.
• It focused almost entirely on credit risk. It defined capital and structure of risk
weights for banks.
• The Basel I classification system groups a bank's assets into five risk categories,
classified as percentages: 0%, 10%, 20%, 50% and 100%. A bank's assets are placed
into a category based on the nature of the debtor.
• The minimum capital requirement was fixed at 8% of risk weighted assets (RWA).
RWA means assets with different risk profiles.
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 • India adopted Basel 1 guidelines in 1999.

BASEL 2:

• In 2004, Basel II guidelines were published by BCBS, which were considered to be

the refined and reformed versions of Basel I accord.
• The second Basel Accord, called Revised Capital Framework but better known as
Basel II.
• It focuses on three main areas, those are called three pillars of Basel 2 accord
1. Minimum capital requirements
2. Supervisory review of an institution's capital adequacy
3. Internal assessment process and effective use of disclosure as a lever to strengthen
market discipline and encourage sound banking practices including supervisory
review.

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BASEL 3:

• In the wake of the Lehman Brothers collapse of 2008 and the ensuing financial crisis, the
BCBS decided to update and strengthen the Accords.
• In 2010, Basel III guidelines were released. Basel 3 accord is an enhancement of Basel 2
accord.

• Basel 3 measures aim to:

 Improve the banking sector's ability to absorb shocks arising from
financial and economic stress, whatever the source.
 Improve risk management and governance.
 Strengthen banks transparency and disclosures.
• Basel -3 recommended that the Capital Adequacy Ratio (CAR) be increased to 8%
internationally, while in India it is 9%.
• Out of the 9% capital adequacy requirement, 7 % has to be met by Tier 1 capital while
the remaining 2% by Tier 2 capital.
• Presently Indian banking system follows Basel II norms.
• The Reserve Bank of India has extended the timeline for full implementation of the Basel
III capital regulations by a year to March 31, 2019.
• Nearly 2.4 lakh crore rupees are required to implement Basel 3 in India.

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 DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION
(DICGC)

• DICGC is one of the wholly owned subsidiaries of the Reserve bank of India (RBI).
• It was established on 15 July 1978 under Deposit Insurance and Credit Guarantee
Corporation Act, 1961 for the purpose of providing insurance of deposits and
guaranteeing of credit facilities to the customers of banks.
• This means that the money of customers who deposit money in the banks is insured by
DICGC. And the customers who take loans from banks are guaranteed of money by
DICGC.
• Deposit Insurance Corporation (DIC) and Credit Guarantee Corporation of India Ltd.
(CGCI) which were merged to form DICGC with a view to integrate the functions of
both DIC and CGCI.

Bank covered Insurance under DICGC:

• All scheduled commercial Banks & Cooperative Banks

• It also include foreign banks which is running in India also be covered under DICGC.
• It also include Indian Banks which is functioning outside India will also be covered under
this Act.
• All Regional Rural Bank which is functioning in India also be covered under DICGC.
• There is a few exceptions which is listed below –
▪ Primary Agricultural Credit Society.
▪ Cooperative banks from Meghalaya, Chandigarh, Lakshadweep & Dadra &
Nagar Haveli.

Types of Deposit covered under DICGC:

DICGC insures all bank deposits, such as saving, fixed, current, and recurring, etc. except the
following types of deposits.

• Deposits of foreign Governments;

• Deposits of Central/State Governments;
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 • Inter-bank deposits;
• Deposits of the State Land Development Banks with the State co-operative banks;
• Any amount due on account of and deposit received outside India;
• Any amount which has been specifically exempted by the corporation with the previous
approval of the RBI.

Features of DICGC:

• A maximum of Rs 1,00,000 is insured for each user for both principal and interest
amount.
• If the customer has accounts in different banks, they all account are insured to a
maximum of Rs 1,00,000. However, if there are more accounts in same bank, they all are
treated as a single account.
• The insurance premium is paid by the insured banks itself. This means that the benefit of
deposit insurance protection is made available to the depositors or customers of banks
free of cost.
• The Corporation has the power to cancel the registration of an insured bank if it fails to
pay the premium for three consecutive half-year periods.
• The Corporation may restore the registration of the bank, which has been de-registered
for non-payment of premium, if the concerned bank makes a request in this behalf and
pays all the amounts due by way of premium from the date of default together with
interest.

BANKING OMBUDSMAN IN INDIA

The Banking Ombudsman Scheme was first introduced in India in 1995, and was revised in
2002. The current scheme became operative from 1 January 2006, and replaced and superseded
the banking Ombudsman Scheme 2002. From 2002 until 2006, around 36,000 complaints have
been dealt by the Banking Ombudsmen.

Banking Ombudsman is a quasi judicial authority functioning under the Banking Ombudsman
Scheme, 2006. The authority was created to enable resolution of complaints of customers of
banks relating to services rendered by the lenders.

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Banking Ombudsman Scheme is a mechanism created by the RBI to address the complaints
raised by bank customers. It is run by the RBI directly to ensure customer protection in the
banking industry. According to the RBI, “The Scheme enables an expeditious and inexpensive
forum to bank customers for resolution of complaints relating to certain services rendered by
banks.”

The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking
Regulation Act, 1949 by RBI with effect from 1995. The present Ombudsman scheme was
introduced in 2006.

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India. He has the
responsibility to redress customer complaints against deficiency in certain banking services. At
present twenty Ombudsmen were appointed by the RBI to settle complaints and they are
appointed in state capitals.

All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative
Banks are covered under the Scheme.

The Banking Ombudsman can receive and consider any complaint relating to a number of
deficiencies related to banking operations including internet banking. RBI has mentioned a large
number of service deficiencies by banks to customers where the customers can approach the
Ombudsman through a complaint.

Following are some of the instances:

• Non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.
• Non-acceptance, without sufficient cause, of small denomination notes tendered for any
purpose, and for charging of commission in respect thereof
• Non-acceptance, without sufficient cause, of coins tendered and for charging of
commission in respect thereof
• Non-payment or delay in payment of inward remittances
• Failure to issue or delay in issue of drafts, pay orders or bankers’ cheques
• Non-adherence to prescribed working hours

A customer can file a complaint before the Banking Ombudsman if the bank doesn’t gives a
reply to the customer within a period of one month or the bank rejects the complaint, or if the
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complainant is not satisfied with the reply by the bank.

KNOW YOUR CUSTOMER

• Know Your Customer is a process by which banks obtain information about the identity
and address of the customers. This process helps to ensure that banks’ services are not
misused.
• The KYC procedure is to be completed by the banks while opening accounts and also
periodically update the same.
• KYC guidelines were introduced in year 2002 by RBI and all banks were asked to make
all accounts KYC compliant by 31 December 2005.
• These guidelines are issued under Section 35 A of the Banking Regulation Act, 1949.
• KYC guidelines have been revisited time to time in the context of the Recommendations
made by the Financial Action Task Force (FATF) on Anti Money Laundering (AML)
standards and on Combating Financing of Terrorism (CFT).
• In January 2012, the Capital markets regulator SEBI’s Chairman, Mr. U.K. Sinha,
launched India’s first Know Your Customer Registration Agency – KRA at Bombay
Stock Exchange. The system avoids duplication of customer details and is interoperable,
which means that other market participants can share the data and bring in more
uniformity.

‘Officially Valid Documents’ (OVDs):

• Banks need two types of document one for identity another for address along with a
recent photograph.
• The Government of India has notified six documents as ‘Officially Valid Documents’
(OVDs) for the purpose of producing proof of identity. These are
1. Passport,
2. Driving License,
3. Voters Identity Card,
4. PAN Card,
5. Aadhaar Card
6. NREGA (National Rural Employment Guarantee Act) Job Card.
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 • If the document submitted by you for proof of identity does not contain address details,
then you will have to submit another officially valid document which contains address
details.
E-KYC:

• e-KYC refers to electronic KYC.

• e-KYC is possible only for those who have Aadhaar numbers.
• While using e-KYC service, you have to authorize the Unique Identification Authority of
India (UIDAI), by explicit consent, to release your identity/address through biometric
authentication to the bank branches/business correspondent (BC).
• The UIDAI then transfers your data comprising your name, age, gender, and photograph
electronically to the bank.
• Information thus provided through e-KYC process is permitted to be treated as an
‘Officially Valid Document’ under PML (Prevention of Money Laundering) Rules and is
a valid process for KYC verification.

PROMPT CORRECTIVE ACTION

• RBI introduces Prompt Corrective Action when the Bank’s financial conditions worsen
below certain limits (trigger points).
• The limit set is in the form of three conventional financial indicators which are called
trigger points– CRAR, Net NPA and Return on Assets.
• Trigger points implies the RBI imposes corrective action in accordance with the level of
trigger points.

Prompt Corrective Action Framework:

• RBI has issued a policy action guideline (first in May 2014 and revised effective from
April 1, 2017) in the form of Prompt Corrective Action (PCA) Framework if a
commercial bank’s financial condition worsens below a mark.
• The PCA framework is applicable only to commercial banks and not extended to co-
operative banks, non-banking financial companies (NBFCs) and FMIs.

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 • The PCA framework specifies the trigger points or the level in which the RBI will
intervene with corrective action. This trigger points are expressed in terms of parameters
for the banks.
• The triggering of PCA means there will be several restrictions imposed on the banks from
lending to the distribution of dividends etc.

The parameters that invite corrective action from the central bank are:

1. Capital to Risk weighted Asset Ratio (CRAR)

2. Net Non-Performing Assets (NPA) and
3. Return on Assets (RoA)
4. Leverage ratio

When these parameters reach the set trigger points for a bank, the RBI will initiate certain
structured and discretionary actions for the bank.

As per the revised framework by the RBI, in April 2017, capital, asset quality and profitability
continue to be the key areas for monitoring. Along with this, leverage of banks also will be
monitored.

The trigger points along with structured and discretionary actions that could be taken by the
Reserve Bank are described below:

1. CRAR

(i) CRAR less than 9%, but equal or more than 6% -

• Bank need to submit capital restoration plan

• Restrictions on RWA expansion, entering into new lines of business, accessing/renewing
costly deposits and CDs, and making dividend payments
• Order recapitalization
• Restrictions on borrowing from inter-bank market,
• Reduction of stake in subsidiaries,
• Reducing its exposure to sensitive sectors like capital market, real estate or investment in
non-SLR securities.

(ii) CRAR less than 6%, but equal or more than 3%:
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 • In addition to actions in hitting the first trigger point, RBI could take steps to bring in
new Management/ Board, appoint consultants for business/ organizational restructuring,
take steps to change ownership, and also take steps to merge the bank if it fails to submit
recapitalization plan.

(iii) CRAR less than 3% :

• In addition to actions in hitting the first and second trigger points, more close monitoring;
steps to merge/amalgamate/liquidate the bank or impose moratorium on the bank if its
CRAR does not improve beyond 3% within one year or within such extended period as
agreed to.

2. Net NPAs

(i) Net NPAs over 10% but less than 15% -

• Special drive to reduce NPAs and contain generation of fresh NPAs

• Review loan policy and take steps to strengthen credit appraisal skills, follow-up of
advances and suit-filed/decreed debts, put in place proper credit-risk management
policies
• Reduce loan concentration
• Restrictions in entering new lines of business, making dividend payments and increasing
its stake in subsidiaries.

(ii) Net NPAs 15% and above:

• In addition to actions on hitting the above trigger point, bank’s Board is called for
discussion on corrective plan of action.

3. ROA less than 0.25%:

• Restrictions on accessing/renewing costly deposits and CDs, entering into new lines of
business, bank’s borrowings from inter-bank market, making dividend payments and
expanding its staff
• Special drive to reduce NPAs and contain generation of fresh NPAs

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 • Restrictions on incurring any capital expenditure other than for technological
upgradation and for some emergency situations.

Corrective action that can be imposed on banks includes special audit, restructuring operations
and activation of recovery plan.

Promoters of banks can be asked to bring in new management, or even can supersede the bank’s
board, as a part of corrective action.

GOODS AND SERVICES TAX

Goods and Services Tax (GST) is a comprehensive indirect tax on manufacture, sale, and
consumption of goods and services throughout India. GST would replace respective taxes levied
by the central and state governments.

What is GST?

• GST is a destination-based taxation system.

• It has been established by the 101st Constitutional Amendment Act and of 122
Amendment Bill.
• It is an indirect tax for the whole country on the lines of “One Nation One Tax” to make
India a unified market.
• It is a single tax on supply of Goods and Services in its entire product cycle or life cycle
i.e. from manufacturer to the consumer.
• It is calculated only in the “Value addition” at any stage of a goods or services.
• The final consumer will pay only his part of the tax and not the entire supply chain which
was the case earlier.
• There is a provision of GST Council to decide upon any matter related to GST whose
chairman in the finance minister of India.

What taxes at center and state level are incorporated into the GST?

At the State Level

• State Value Added Tax/Sales Tax

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 • Entertainment Tax (Other than the tax levied by the local bodies)
• Octroi and Entry Tax
• Purchase Tax
• Luxury Tax
• Taxes on lottery, betting, and gambling

At the Central level

• Central Excise Duty

• Additional Excise Duty
• Service Tax
• Additional Customs Duty (Countervailing Duty)
• Special Additional Duty of Customs

Benefits of GST:

For Central and State Governments:

Simple and Easy to administer: Because multiple indirect taxes at the central and state levels are
being replaced by a single tax “GST”. Moreover, backed with a robust end to end IT system, it
would be easier to administer.

Better control on leakage: Because of better tax compliance, reduction of rent seeking,
transparency in taxation due to IT use, an inbuilt mechanism in the design of GST that would
incentivize tax compliance by traders.

Higher revenue efficiency: Since the cost of collection will decrease along with an increase in
the ease of compliance, it will lead to higher tax revenue.

For the Consumer:

• The single and transparent tax will provide a lowering of inflation.

• Relief in overall tax burden.
• Tax democracy that is luxury items will be taxed more and basic goods will be tax-free.

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For the Business Class:

• Ease of doing business will increase due to easy tax compliance.

• Uniformity of tax rate and structure, therefore, better future business decision making and
investments by the corporates.
• Removal of cascading effects of taxes.
• Reduction in transactional cost will lead to improved competitiveness.
• Gain to the manufacturer and exporters.
• It is expected to raise the country GDP by 2% points.

Regulatory Framework of GST

A new set up by Government of India named as ‘GST Council’.

• The GST Council consists of

a) The Union Finance Minister (as Chairman),
b) The Union Minister of State in charge of Revenue or Finance, and
c) The Minister in charge of Finance or Taxation or any other Minister, nominated
by each state government.
• It is the 1st Federal Institution of India, as per the Finance minister.
• It will approve all decision related to taxation in the country.
• It consists of Centre, 29 states, Delhi and Puducherry.
• Centre has 1/3rd voting rights and states have 2/3rd voting rights.
• Decisions are taken after a majority in the council.

Supporting Laws to implement GST:

For the implementation of GST, apart from the Constitution Amendment Act, some other
statutes are also necessary. Recently 5 supporting laws to the GST were recommended by the
council. 4 for the bills should be passed by the parliament, while the 5th one should be passed by
respective state legislatures. The details are given below.

• The Central Goods and Services Tax Bill 2017 (The CGST Bill).
• The Integrated Goods and Services Tax Bill 2017 (The IGST Bill).
• The Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill).

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 • The Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation
Bill).

And a state GST will be passed by the respective state legislative assemblies.

Tax slabs are decided as 0%, 5%, 12%, 18%, 28% along with categories of exempted and zero
rated goods for different types of goods and services.

Further, a cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala
and tobacco products, over and above the rate of 28% for payment of compensation to the States.
Highest tax slab is pegged at 40%.

The Principle of GST:

• The Centre will levy and collect the Central GST.

• States will levy and collect the State GST on the supply of goods and services within a
state.
• The Centre will levy the Integrated GST (IGST) on the interstate supply of goods and
services, and apportion the state’s share of tax to the state where the good or service is
consumed.

The 2016 Act requires Parliament to compensate states for any revenue loss owing to the
implementation of GST.

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Goods and Service Tax Network (GSTN):

• GSTN is registered as a not-for-profit company under the companies Act.

• It has been formed to set up and operate the information technology backbone of the
GST.
• While the Central (24.5%) and the state (24.5%) governments hold a combined stake of
49%, the remaining 51% stake is divided among five financial institutions—LIC Housing
Finance with 11% stake and ICICI Bank, HDFC, HDFC Bank and NSE Strategic
Investment Corporation Ltd with 10% stake each.
• GSTN had awarded Infosys Ltd the contract to develop the hardware and software for
GST.
• The idea behind GSTN was to set up an entity that is equidistant from both the Central
government and the state governments, as it will advise both the Centre and the states on
the information technology network.

The rates will be applicable at under mentioned levels-

• Nil
• 5%
• 12%
• 18%
• 28%

Nil (No tax Slab):

No tax will be imposed on items like jute, fresh meat, fish chicken, eggs, milk, butter milk,
curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, bindi.
Sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, Bones and
horn cores, bone grist, bone meal, etc.; hoof meal, horn meal, Cereal grains hulled, Palmyra
jaggery, Salt - all types, Kajal, Children's' picture, drawing or colouring books, Human hair,
Khadi purchased from Khadi and Village Industries stores, Clay idols, brooms, Cotton seed
oil cake,Charkha, Guar meal, hop cone, certain dried vegetables, unworked coconut shell and
fish, and bangles of lac/shellac.

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5% Slab:

This tax slab would involve articles like, frozen fish, fish fillets, Ultra high temperature milk,
Milk cream, Cream yogurt, Whey, Ivory, Herb , bark, dry plant, frozen or preserved fruits
and vegetables, Peel of citrus fruits and melons, Coffee, tea, natural gums, resins, Vegetable
fats and oils, beet, sugar, cane sugar, cocoa beans, Mixes and doughs for the preparation of
bread, Tobacco leaves, Unroasted iron pyrites, sulphur, All ores and concentrates, Kerosene,
Sulphonated castor oil, fish oil, Handmade safety matches, Building bricks, Kerosene,
Lifeboats etc.

On January 18, these items were moved to 5% GST Slab

LPG supply to household domestic consumers by private LPG distributors

Tailoring service, Tamarind Kernel Powder, Mehendi paste in cones, Scientific and technical
instruments, Basketware and wickerwork, Velvet fabric, Cigarette filter rods

Services

All restaurants, restaurants of hotels with room tariff of less than Rs 7,500, Food parcels,
Textile job work, Transport services (Railways, air transport); Supply of e-waste.

12% Slab:

This includes items such as, Frozen meat, Butter and other fats, Cheese, Dry fruits, starches,
Animal fats and oils, Sausages and similar products, of meat, meat offal or blood, Fruit and
vegetable juices, Roasted chicory, Soya milk drinks, Beverages containing milk, Marble,
Granite blocks, Bio-gas, Medicinal grade Hydrogen peroxide, Fertilizers, Fountain/ Ball pen
ink, Tooth powder, Agarbatti, Candles, Photographic plates and films, Children’s picture/
drawing/ colouring books, Umbrellas, Sand lime bricks, Sewing Machines, Cell Phones etc.

On January 18, these items were moved to 12% GST slab

Sugar boiled confectionery, Drinking water packed in 20 litre bottles, Drip Irrigation system,
Fertilizer grade Phosphoric acid, Bio-diesel, Bio-pesticides, Bamboo wood building joinery,
Mechanical Sprayer

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Services

State-run lotteries, Non-AC hotels, business class air ticket, fertilisers, and Work contracts

18% Slab:

Items included in this tax slab are, Condensed Milk, Malt, Vegetable saps and extracts,
Indian katha, Glycerol, Vegetable waxes, Refined sugar, Pasta, Cornflakes, Waffles, Pastries
and Cakes, Jams, Jellies, Marmalades, Sauces, Soups, Ice cream, Food mixes, Diabetic
foods, Petroleum jelly, Paraffin wax, Fluorine, Chlorine, Bromine, Iodine, Colouring matter,
Printing ink, Essential Oils, Artificial waxes, Safety fuses, Insecticides, Wood tar,
Kitchenware, Tableware, Safety Headgears (Helmets), Refractory bricks, Camera, Speakers
and Monitors etc.

On January 18, these items were moved under 18% slab

Second-hand medium and large cars and SUVs, Bio-fuels powered buses, The admission to
theme parks, water parks, Cigarette filter rods etc.

28% Slab:

Following are the products included in this tax slab - Chewing gum, Cocoa butter, Extracts,
essences and concentrates of coffee, Non-alcoholic beverages, Aerated Water, Portland
cement, Paints and Varnishes, Artist/ Student or signboard painter’s colours, Perfumes,
Toothpaste, Fireworks, Sinks, Wash basins, Wall paper/ coverings, Lamps, Lighting fittings,
Pianos, Revolvers, Washing machines, Vacuum cleaners, Motorcycles, Aircrafts for personal
use, Yachts etc.

Important Points for Exams:

• Amendment Bill- 122

• Amendment Act – 101
• GST council formation based on Article – 279A
• GST Council Headquarters – New Delhi
• Chairman – Arun Jaitley
• GST Finance Ministers Panel Chairman – Amit Mishra (West Bengal Finance
Minister)
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• 1st State to ratify GST Bill – Assam
• 1st State passed GST bill – Telangana
• GST threshold limit for normal states – 20 lakh
• GST threshold limit for north eastern states – 10 lakh
• The GST council on April 2018 announced major cuts in taxes of 27 items along with
a slew of relief measures to support exporters and small businesses.
• In New GST Changes, 28% Tax Only For 50 Items Now: Daily use items like
shampoo, deodorant, toothpaste, shaving-cream, aftershave lotion, shoe polish,
chocolate, chewing gums and nutritious drinks would become cheaper. Lowering tax
rates on food served in air-conditioned restaurants to 12 per cent, down from 18 per
cent.
• Service providers with turnover up to Rs.20 lakh need not register even if making
interstate supplies.
• More time for filling returns for those under composition scheme.
• Refunds to be released every month
• E-wallet facility by APR
• No Tax on duty free scrips
• Merchant exporters need to pay 0.1% tax on domestic goods procurement.
• E-way bill to be rolled out from 1 April, 2018
• A committee to review the levy on restaurants.

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 GREAT SBI MERGER

State Bank of India (SBI), India’s largest bank, became even larger with the merger of its five
commercial banking subsidiaries and Bharatiya Mahila Bank on April 1, 2017.

The five associated banks are:

1. State Bank of Bikaner & Jaipur (SBBJ),

2. State Bank of Mysore (SBM),
3. State Bank of Travancore (SBT),
4. State Bank of Patiala (SBP) and
5. State Bank of Hyderabad (SBH)

Bharatiya Mahila Bank Ltd is the first of its kind in the Banking Industry in India formed with a
vision of economic empowerment for women. Ex Indian Prime Minister Manmohan Singh
inaugurated the system in 2013.

India is the 3rd country in the world to have a bank especially for women, after Pakistan and
Tanzania.

Major reason for merger:

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 • Before merger SBI was the biggest bank of India in terms of assets. But still it was
nowhere in top 50 banks of world. After the merger of the banks SBI’s balance sheet
rouses to the size of 41 trillion rupees. Because of it, SBI placed into the top 50 banks of
the world list. The ICICI bank, the 2nd rank holder, is having balance sheet of 4 trillion
rupees only.
• NPA (Non Performing Assets) is one of the biggest problems faced by banking sector.
High NPA, in simple terms means the repayment of loans back to banks is poor. The
solution to NPA is capital infusion. But in present scenario the capital is scattered into
many regional banks. The merger of banks will cause a large bank with large capital.
This will solve the NPA problem.
• Better reach and network.
• India is a developing country and it is growing at high speed. The fast growing economy
involves many high budget projects. High budget project means huge amount of loans
from bank. So we need a bank which is capable of financing high budget project. But in
present scenario, our banking system is scattered into many small regional banks. So the
consolidation of banks will solve this problem and will help India to be in race of
economic development.
• India is home to many international MNCs. Consolidation of banks will solve the
financing issues of these large MNCs. This will also attract other MNCs to open offices
in India, which is good for a developing country.
• International experience is also favorable towards banks consolidation. Banks in Japan
between 1990 and 2004 gained a lot as a result of large scale merger and acquisition
process.
• Larger bank may be less risky than a smaller one as the former will have a more
diversified portfolio, resulting in less vacillation in its earnings and consequently, higher
credit ratings.

Highlights of Merger:

• SBI has rebranded its corporate website as “bank.sbi” from the earlier sbi.co.in.
• The background to the SBI signboard has been changed from white to “inky blue” and
SBI will be written in a new font called Effra.

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 • The designing and rebranding of SBI logo has been done by a company called Design
Stack.
• The SBI logo symbolizes its role of a custodian that will keep customers’ money safe.
• After the merger the tagline of SBI has remained same i.e. “Banker to every Indian”.
• With the merger, State Bank of India has entered the league of ‘Top 50 Global Banks’.
SBI is placed at 44th position making it in the top 50 leading banks globally.
• With the merger, SBI now has a balance sheet size of Rs 41 lakh crore, 2.77 lakh
employees, 50 crore customers, more than 25000 branches and nearly 59,000 ATMs.
• The market share of SBI has increased to nearly 22 per cent from 17 percent.
• Customers can access SBI across the globe at over 190 foreign offices in 36 countries.

FOREIGN DIRECT INVESTMENT (FDI)

India has already marked its presence as one of the fastest growing economies of the
world. It has been ranked among the top 10 attractive destinations for inbound investments.
Since 1991, the regulatory environment in terms of foreign investment has been consistently
eased to make it investor-friendly.

The measures taken by the Government are directed to open new sectors for foreign
direct investment, increase the sectoral limit of existing sectors and simplifying other conditions
of the FDI policy. FDI policy reforms are meant to provide ease of doing business and accelerate
the pace of foreign investment in the country.

Automatic Route:

Under this route no Central Government permission is required.

Government Route:

Prior approval by government is needed via this route.

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 Sector Limit Entry Route

Banking- Public Sector 20% Government

Print Media
[Publishing of newspaper and periodicals
dealing with news and current
26% Government
affairs ][Publication of Indian editions of
foreign magazines dealing with news and
current affairs ]
Petroleum & Natural Gas
(Petroleum refining by the Public Sector 49% Automatic
Undertakings (PSU))

Broadcasting Content Services 49% Government

Infrastructure Company in the Securities

49%
Market[in compliance with SEBI Automatic
Regulations ]

Insurance 49% Automatic

Pension Sector 49% Automatic

Power Exchanges 49% Automatic

Multi Brand Retail Trading 51% Government

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Private Security Agencies 74% Automatic

Automatic up to 49%
Government route
74%
Banking- Private Sector beyond 49% and up to
74%.

Agriculture & Animal Husbandry 100% Automatic

Plantation Sector
(Tea,Coffee,Rubber,Cardamom,Palm oil, 100% Automatic
Olive oil)

Mining 100% Automatic

Petroleum & Natural Gas(All other

100% Automatic
activity)

Automatic upto 49%

Above 49% under
Defense 100%
Government route on
case to case basis

Automatic upto 49%

Broadcasting Carriage Services 100% Government route
beyond 49%

Print Media
[Publishing/printing of scientific and
technical magazines/specialty journals/
100% Government
periodical ]

[Publication of facsimile edition of foreign

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newspapers ]

Civil Aviation 100% Automatic

Airports[Greenfield projects ] 100% Automatic

Automatic up to 74%
Government route
Airports[Existing projects ] 100%
beyond 74%

Construction Development 100% Automatic

Industrial Parks 100% Automatic

Satellites- establishment and operation 100% Automatic

Automatic up to 49%
Government route
Telecom Services 100%
beyond 49%

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Trading
[Cash & Carry Wholesale
100% Automatic
Trading/Wholesale Trading (including
sourcing from MSEs) ]

E-commerce activities 100% Automatic

Automatic up to 49%

Single Brand product retail trading 100% Government route

beyond 49%

Processed Food Products 100% Automatic

Duty Free Shops 100% Automatic

Railway Infrastructure 100% Automatic

Asset Reconstruction Companies 100% Automatic

Credit Information Companies (CIC) 100% Automatic

White Label ATM Operations 100% Automatic

Non-Banking Finance Companies (NBFC) 100% Automatic

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Pharmaceuticals[Greenfield] 100% Automatic

Pharmaceuticals[Brownfield]
100% Government

Railway Infrastructure 100% Automatic

In February 2018, Ikea announced its plans to invest up to Rs 4,000 crore (US$ 612 million) in
the state of Maharashtra to set up multi-format stores and experience centres.

MISCELLANEOUS

Non Performing Assets (NPA):

NPA means an asset or account of borrower, which has been classified by a bank or financial
institution as sub standard, doubtful or loss asset in accordance with the guidelines of RBI.
Simply, NPA is a loan not recovered. If a loan has been overdue for more than 90 days from its
due date of payment, it will be considered as NPA of the bank.

ATM (Automatic Teller Machines):

They are machines that dispense cash, receive cash, accept cheques, and give balance details and
mini statements to the customers through Computer network.

Bancassurance:

Bancassurance as the term suggests is Bank + Insurance. Bancassurance means selling insurance
product through banks. It is one of the para banking activity which the RBI has allowed the
banks to take up. For selling the insurance product, bank and insurance company come up in a
partnership where the bank sells the insurance company’s insurance products to its clients.

Bouncing of a Cheque:

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When an account has insufficient funds the cheque is not payable and is returned by the bank
with a reason “Exceeds arrangement” or “funds insufficient”.

Bank Rate:

It is the rate of interest charged by a central bank to commercial banks on the advances and the
loans it extends.

Basis Point:

One-hundredth of 1% point normally used for indicating cost of finance

Bullion Market:

A market where the trading of precious metals held like: Gold, Silver, Diamond, Platinum and
Crystal.

Bull:

Bull is an investor who thinks the market a specific security or an industry will raise. Bulls are
the optimistic investors presently predicting good things of the market and bullish is a habit to
purchase that share which is in profit they are responsible to Rose in stock exchanges.

Bear:

It is an investor who believes that a particular security or market is headed downward. Bears
attempt to profit from a decline in prices. A Bear is generally pessimistic about the state of the
given market.

Bridge Loan:

It is also known as swing loan, which is basically a real estate loan or a home loan, where the
current residence/real estate is pledged by the borrower as collateral in order to purchase a new
residence.

Call Money:

It is a loan that is made for a very short period of a few days only with a low rate of interest.

Clearing House:

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A clearing house is a place for exchange of cheques by banks; it facilitates transfer of funds from
one bank to another, which represents the proceeds of cheques. It is as a central meeting place
for bankers to exchange the cheques drawn on one another and claim funds for the same. Such
operations are called as clearing operations.

Core Banking:

It is a general term used to describe the services provided by a group of networked bank
branches.

Core Banking Solutions (CBS):

In this all the branches of the bank are connected together and the customer can access his/her
funds or transactions from any other branch.

CRR (Cash Reverse Ratio):

The amount of funds that a bank keep with the RBI. If the percentage of CRR increases then the
amount with the bank comes down.

Currency chest:

• To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has
authorised select branches of scheduled banks to establish Currency Chests.
• These are actually storehouses where banknotes and rupee coins are stocked on behalf of
the Reserve Bank. As on June 30, 2006, there were 4428 Currency Chests and 4102
Small Coin Depots.
• The currency chest branches are expected to distribute banknotes and rupee coins to other
bank branches in their area of operation.

Currency swap:

It is a foreign-exchange agreement between two parties to exchange aspects (namely the

principal and/or interest payments) of a loan in one currency for equivalent aspects of an equal in
net present value loan in another currency. Currency swap is an instrument to manage cash flows
in different currency.

Debit Card:
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It is a card issued by the bank so the customers can withdraw their money from their account
electronically.

Demat Account:

The way in which a bank keeps money in a deposit account in the same way the Depository
Company converts share certificates into electronic form and keep them in a Demat account.

Deflation:

Deflation is the general decline in the prices of goods or assets. In deflation, there is a
tremendous lack of liquidity in the market and the purchasing power of consumers is reduced.

Dishonour of Cheque:

Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-
payment.

Disinvestment:

The Selling of the government stake in public sector undertakings.

E-Banking:

It is a type of banking in which we can conduct financial transactions electronically. RTGS,

Credit cards, Debit cards etc come under this category.

EFT – (Electronic Fund Transfer):

In this we use Automatic teller machine, wire transfer and computers to move funds between
different accounts in different or same bank.

Exchange Rate:

Rate at which the domestic currency can be converted into foreign currency and vice versa.

Fiscal Deficit:

It is the amount of Funds borrowed by the government to meet the expenditures.

Fiat Money:

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Fiat money is a legal tender for settling debts. It is a paper money that is not convertible and is
declared by government to be legal tender for the settlement of all debts.

Floating Rate:

An interest rate that is referenced to a market rate and is revised as per the change in the interest
rates in the economy. When interest rates in the economy rise, floating rates rise and vice versa.

Foreign Institutional Investors (FII):

They invest in the Indian capital market. These flows are large in magnitude and have a great
impact on capital market and exchange rate. FIIs are also permitted to use their investment in
corporate bonds and government securities as collateral to meet their margin requirements.

GDP:

The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a
country over a specific period; classically a year.

GNP:

Gross National Product is measured as GDP plus income of residents from investments made
abroad minus income earned by foreigners in domestic market.

Grace Period:

It is an interest free period that is to be given by a creditor to a debtor after the period of the loan
gets over, before initiating the process of loss recovery. The grace period depends on the amount
of the loan and also the credit score of the borrower.

Hot money:

Money that is held in one currency but is liable to switch to another currency at a moment’s
notice in search of highest available returns.

Junk Bonds:

Junk bonds are issued generally by smaller or relatively less well- known firms to finance their
operations, or by large and well-known firms to fund leveraged buyouts. These bonds are

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126
frequently unsecured or partially secured, and they pay higher interest rates: 3 to 4 percentage
points higher than the interest rate on blue chip corporate bonds of comparable maturity period.

Inflation:

Inflation is defined as a sustained increase in the general level of prices for goods and services. It
is measured as an annual percentage increase. As inflation rises, every rupee you own buys a
smaller percentage of a good or service. Consequently, Inflation affects as a reduction in the
purchasing power per unit of money- a loss of real value in the medium of exchange and unit of
account within the economy.

Initial Public Offering (IPO):

IPO is Initial Public Offering. This is the first offering of shares to the general public from a
company wishes to list on the stock exchanges.

Islamic Banking:

Islamic banking refers to a system of banking or banking activity that is consistent with Islamic
law (SHARIA) principles and guided by Islamic economics. Particular Islamic law Prohibits
usury, the Collection and payment of interest, also commonly called RIBA in Islamic discourse
in addition, Islamic law prohibits investing in businesses’ that are considered unlawful, or
HARAAM (such as Businesses that sell alcohol or pork, or businesses that produce media such
as gossip columns or pornography, which are contrary to Islamic values). In the late 20th
century, a number of Islamic Banks were created, to cater to this particular banking market.

Kiosk Banking:

Doing banking from a cubicle from which food, newspapers, tickets, etc are also sold.

Leverage Ratio:

It is a financial ratio which gives us an idea or a measure of a company’s ability to meet its
financial losses.

Liquidity:

It is the ability of converting an investment quickly into cash with no loss in value.

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127
Liquidity adjustments facility (LAF):

It consist of daily infusion or absorption of liquidity on a repurchase basis, through repo

(liquidity injection) and reserve repo (liquidity absorption) auction operations, using
governments securities as collateral.

LIBOR:

London Inter Bank Offered Rate. An interest rate at which banks can borrow funds, in
marketable size, from other banks in the London interbank market.

Market Capitalization:

The product of the share price and number of the company’s outstanding ordinary shares.

Market Stabilization scheme (MSS):

This Instrument for monetary management was introduced in 2004. Liquidity of a more enduring
nature arising from large capital flows is absorbed through sale of short –dated government
securities and treasury bills.

Mortgage:

A Mortgage is a method of using property as a security for the performance of an obligation,

usually the payment of a debt. The term Mortgage refers to a legal device used for this purpose
and it is also commonly used to refer to a debt secure by the Mortgage.

Money Laundering:

Money laundering is the practice in a specific financial transaction to conceal the identity, source
and destination of money and is the main operation of underground economy. India has
prevention of money laundering act 2002 which was at latest amended in 2009.

Mutual Fund:

These are investment schemes. It pools money from various investors in order to purchase
securities.

Monetary Policy:

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It refers to the Central Government policy with respect to the quantity of money in the economy,
the rate of interest and the exchange rate.

National Income:

National Income is the money value of all goods and services produced in a Country during the
year.

Nostro Account:

It is the overseas account which is held by the domestic bank in the foreign bank or with the own
foreign branch of the bank. For example the account held by state bank of India with bank of
America in New York is a Nostro account of the state bank of India.

Open Market Operations (OMO):

Outright sales/purchases of government securities, in addition to LAF, as a tool to determine the

level of liquidity over the medium term.

Participatory notes or P-Notes:

These are financial instruments used by the investors or hedge funds that are not registered with
the SEBI to invest in Indian securities.

Permanent Account Number (PAN):

PAN is a number issued by the Income Tax Department to their tax payers.

Plastic Money:

Plastic money is a name given to Credit cards, Debit cards, ATM cards and International Cards
issued by banks.

Point of Sale (PoS):

PoS refers to a location at which a payment of a card transaction occurs

Prime Lending Rate (PLR):

Rate of interest at which a bank gives loan to its most reliable customer i.e., customer with ‘zero
risk’
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129
Pass Book:

It is a book where all the bank transactions are recorded. They are mainly issued to Current or
Savings Bank account holders.

Repo Rate:

Commercial banks borrow funds by the RBI if there is any shortage in the form of rupees. If this
rate increases it becomes expensive to borrow money from RBI and vice versa.

Reverse Repo Rate:

It is the exact opposite of repo rate. It is the rate at which RBI borrows money from banks when
it feels there is too much money floating in the banking system.

Revenue deficit:

It defines that, where the net amount received (by taxes & other forms) fails to meet the
predicted net amount to be received by the government.

SARFAESI Act, 2002:

The full form of SARFAESI Act as we know is Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002. Banks utilize this act as an effective tool
for bad loans (NPA) recovery. It is possible where non-performing assets are backed by
securities charged to the Bank by way of hypothecation or mortgage or assignment.

• Upon loan default, banks can seize the securities (except agricultural land) without
intervention of the court.
• SARFAESI is effective only for secured loans where bank can enforce the underlying
security e.g. hypothecation, pledge and mortgages. In such cases, court intervention is not
necessary, unless the security is invalid or fraudulent. However, if the asset in question is
an unsecured asset, the bank would have to move the court to file civil case against the
defaulters.

Self Help Group:

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130
Self help group is a small volunteer association of poor people preferably from the same socio
Economic background. They come together for the purpose of solving their common problems
through self help and mutual help. The self help group promotes small saving among the
members. The savings are kept with the Bank. This common fund is in the name of SHG.
Usually the number of members in one SHG doesn’t exceed 20. The NABARD and NGOs the
promoters of this group.

SLR (Statutory Liquidity Ratio):

It is amount that a commercial bank should have before giving credits to its customers which
should be either in the form of gold, money or bonds.

Special Economic Zone:

SEZ implies Special Economic Zone is one of the pieces of government’s strategies in India. An
extraordinary Economic Zone is a land districts that financial law which is more liberal than the
typical monetary laws in the nation.

The essential aphorism behind this is to increment the investment from foreign, improvement of
a foundation, openings for work and increment the income level of the general population.

Special Drawing Rights (SDR):

It is a reserve asset (Paper Gold) created within the framework of the International Monetary
Fund in an attempt to increase international liquidity

Stock Market:

A stock market is a private or public market for trading of company, stock and derivatives of
company stock at an agreed price. Both of these are securities listed on stock exchange as well as
those only traded privately.

Stag:

A Stag is an investor or speculator who subscribes to a new issue with the intention of selling
them soon after allotment to realize for quick profit.

Teller:

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131
He/she is a staff member of the bank who cashes cheques, accepts deposits and perform different
banking services for the general mass.

Teaser Loan:

If a bank offers a slightly lower rate in the initial years and higher rate in later years, it is called a
teaser loan.

Universal Banking:

When financial institutions and banks undertake activities related to banking like investment,
issue of debit and credit card etc then it is known as universal banking.

Virtual Banking:

Internet banking is sometimes known as virtual banking. It is called so because it has no bricks
and boundaries. It is controlled by the World Wide Web.

Vostro Account :

It is the account which is held by a foreign bank with a local bank, so if bank of America
maintains an account with state bank of India it will be a vostro account for state bank of India.

Wholesale Banking:

It is similar to retail banking with a slight difference that it mainly focuses on the financial needs
of the institutional clients and the industry.

Zero Coupon Bond:

It is a bond that is sold at good discount as it has no coupon.

BANK HEADQUARTERS AND TAGLINE

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132
Headquarters of Public Sector Banks:

Head
No Bank Name Chairman Tagline
Quarters

1 Allahabad Bank Kolkata Mr. Rakesh Sethi A tradition of trust

2 Andhra Bank Hyderabad Mr. Suresh N Patel Where India Banks

India’s International
3 Bank of Baroda Vadodara Mr. P. S. Jayakumar
Bank

Relationships
4 Bank of India Mumbai Mr. Melwyn O Rego
beyond Banking

Mr. Ravindra One Family One

5 Bank of Maharashtra Pune
Prabhakar Marathe Bank

Together we Can,
It’s easy to change
6 Canara Bank Bangalore Mr. Rakesh Sharma
for those who you
love

Central to you since

1911, Build A
7 Central Bank of India Mumbai Mr. Rajeev Rishi
Better Life Around
Us

A Premier Public
8 Corporation Bank Mangalore Mr. Jai Kumar Garg Sector Bank,
Prosperity for all

Trusted Family
9 Dena Bank Mumbai Mr. Ashwani Kumar
Bank

Your Tech-friendly
10 Indian Bank Chennai Mr. Kishor Kharat
bank

Mr. Good people to

11 Indian Overseas Bank Chennai
R.Subramaniakumar grow with

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133
 Where every
Oriental Bank of Mr. Animesh
12 Gurugram individual is
Commerce Chauhan
committed

The Name you can

13 Punjab National Bank New Delhi Sunil Mehta
Bank Upon

Mr. Jatinder Bir Where series is a

14 Punjab & Sind Bank New Delhi
Singh way of life

Mr. Arun
15 Syndicate Bank Manipal Faithful. Friendly
Shrivastava

Mr. Ravi Krishan

16 UCO Bank Kolkata Honors Your Trust
Takkar

Good people to
17 Union Bank of India Mumbai Mr. Arun Tiwari
bank with

Mr. Pawan Kumar The Bank that

18 United Bank of India Kolkata
Bajaj begins with “U”

Mr. Kishore Kumar A friend You can

19 Vijaya Bank Bangalore
Sansi Bank Upon

Banking For All,

Mr. Mahesh Kumar
20 IDBI Bank Ltd Mumbai “Aao Sochein
Jain
Bada”

Headquarters of Private Sector Banks:

No Bank Name Chairman Head Quarter Tagline

Everything is the same

1 AXIS Bank Shika Sharma Mumbai
except the name

Trust and Excellene since

2 Citi Union Bank Dr. N. Kamakodi Tamilnadu
1904

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134
 3 Dhanlaxmi Bank G. Sreeram Tamilnadu Tann. Mann. Dhan

Hum Hain na!!, Khayaal

4 ICICI Bank Ltd Chanda Kochhar Mumbai
Apka

5 IndusInd Bank Romesh Sobti Mumbai We make money simple

Your family bank across

6 Karnataka Bank P Jayaram Bhat Mangalore
India

Kotak Mahindra
7 Uday Kotak Mumbai Let’s make money simple
Bank

Catholic Syrian Anand

8 Thrissur Support all the way.
Bank Krishnamurthy

Your perfect banking

9 Federal Bank Shyam Srinivasan Kerala
partner

10 HDFC Bank Aditya puri Mumbai We understand your world.

Karur Vysya
11 K. Venkataraman Tamilnadu Smart way to bank
Bank

Lakshmi Vilas Parthasarathi The Changing Face of

12 Tamilnadu
Bank Mukherjee prosperity

13 Yes Bank Rana Kapoor Mumbai Experience our expertise

South Indian Experience next generation

14 V.G Mathew Thrissur
Bank banking

Tamilnadu H. S.
15 Tuticorin Be a step ahead of life
Mercantile Bank UpendraKamath

State Bank Group:

1 Mumbai The Nation

State Bank of Mrs. Arundhati
banks on us;
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135
 India Bhattacharya Pure Banking
Nothing Else;
With you all the
way

State Bank of
Mrs. Arundhati The Bank with a
2 Bikaner & Rajasthan
Bhattacharya vision.
Jaipur

State Bank of Mrs. Arundhati You can always

3 Hyderabad
Hyderabad Bhattacharya bank on us

State Bank of Mrs. Arundhati Working for a

4 Bangalore
Mysore Bhattacharya better tomorrow

Blending
State Bank of Mrs. Arundhati
5 Punjab Modernity with
Patiala Bhattacharya
Tradition

State Bank of Mrs. Arundhati A Long Tradition

6 Thiruvananthapuram
Travancore Bhattacharya of Trus

Foreign Banks in India:

No Bank Country Tagline

1 AB Bank Ltd. Bangladesh

2 ABN AMRO Bank Netherland Making More Possible

Abu Dhabi Commercial

3 UAE Long Life Ambition
Bank

American Express
4 USA Do more
Banking Corporation

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136
 Australia and New
Australia
5 Zealand Banking Group We Live in Your World
Ltd.

6 Bank of America USA Bank of Opportunity

Bank of Bahrain &

7 Bahrain
Kuwait BSC

8 Bank of Ceylon Sri Lanka The Bank you can trust

9 Bank of Nova Scotia Canada

Bank International
10 Indonesia
Indonesia

11 Berclays Bank UK Fluent In Finance

The Bank For A Changing

12 BNP Paribas Bank France
World

China Trust Commercial

13 Taiwan We are Family
Bank

14 Citi Bank USA The Citi never sleeps.

Commonwealth Bank of
15 Australia
Australia

Credit Agricole
16 Corporate & Investment France Common Sense has a future
Bank

It’s Time for an Expert;

17 Credit Suisse A.G Switzerland Whatever makes you happy;
Credit Suisse 360 Finance

18 CTBC Bank Co. Ltd. Taiwan

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19 DBS Bank Singapore Living, Breathing Asia

20 Deustsche Bank Germany A Passion to Perform

21 Doha Bank Qatar

22 FirstRand Bank Ltd South Africa

23 HSBC Ltd Hong Kong The World's Local Bank

Industrial &
24 Commercial Bank of China Moving Forward
China Ltd.

25 Industrial Bank of Korea South Korea

J.P. Morgan Chase Bank The Right Relationship is

26 USA
N.A Everything

27 JSC VTB Bank Russia World Without Barriers

28 KBC Bank NV Belgium

29 Korea Exchange Bank South Korea

Krung Thai Bank Public

30 Thailand
Co. Ltd.

We Do Banking Services with

31 Mashreq Bank PSC UAE
High Focus on Innovation

32 Mizuho Bank Ltd. Japan Channel to Discovery

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138
 A Little Word for a big life;
33 National Australia Bank Australia
More give, less take

National Bank of Abu

34 UAE
Dhabi PJSC

35 Rabobank International Netherlands A Bank with Ideas

36 Royal Bank of Scotland UK Make It Happen

37 Sberbank Russia By Your Side; Always Nearby

38 Scotia Bank Canada You’re Richer Than You Think

39 Shinhan Bank South Korea The Bank Of Bride

40 Societe Gednerale France Building Team Sprit Together

Your Trusted Partner in

41 Sonali Bank Ltd. Bangladesh
Innovative Banking

Standard Chartered
42 UK Your Right Partner
Bank

43 State Bank of Mauritius Mauritius

Sumitomo Mitsui
44 Japan One Bank, One SMBC
Banking Corporation

The Bank of Tokyo-

45 Japan
Mitsubishi UFJ, Ltd

The Royal Bank of

46 Netherlands
Scotland N.V.

47 UBS AG Switzerland We Will Not Rest

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139
 United Overseas Bank
48 Singapore United for Growth
Ltd

Westpac Banking
49 Australia Help is What we do
Corporation

50 Woori Bank South Korea Home to the Intelligent Investors

Small Finance Bank Headquarters:

No Bank Headquarters

1 AU Small Finance Bank Jaipur

2 Capital Local Area Bank Jalandhar

3 Fincare Small Finance Bank Ahmadabad

4 Equitas Small Finance Bank Chennai

5 ESAF Small Finance Bank Thrissur

6 Jana Small Finance Bank Bangalore

7 North East Small Finance Bank Guwahati

8 Suryoday Small Finance Bank Navi Mumbai

9 Ujjivan Small Finance Bank Bangalore

10 Utkarsh Small Finance Bank Varanasi

Payments Bank Headquarters:

Bank
No Head Quarters

1 Airtel Payments Bank Rajasthan

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140
2 Paytm Payments Bank Noida

3 India Post Payments Bank New Delhi

BANKING RELATED ACTS

1. Negotiable Instrument Act–1881

2. The Bankers Books Evidence Act–1891
3. The Reserve Bank of India Act–1934
4. The Industrial Finance Corporation of India Act–1948
5. The Banking Companies (Legal Practitioner Clients’ Accounts) Act–1949
6. The Industrial Disputes (Banking and Insurance Companies) Act–1949
7. The Banking Regulation(Companies) Rules–1949
8. The Banking Regulation Act–1949
9. The State Financial Corporations Act–1951
10. The Reserve Bank of India (Amendment and Misc. Provisions) Act–1953
11. The Industrial Disputes (Banking Companies) Decision Act–1955
12. The State Bank of India Act–1955
13. The State Bank of India (Subsidiary Banks) Act-1959
14. The Subsidiary Banks General Regulation–1959
15. The Deposit Insurance and Credit Guarantee Corporation Act–1961(DICGC)
16. The Banking Companies (Acquisition and Transfer of Undertakings) Act–1970
17. The Regional Rural Banks Act–1976
18. The Banking Companies (Acquisition and Transfer of Undertakings) Act–1980
19. The Export-Import Bank of India Act–1981
20. The National Bank for Agriculture and Rural Development Act–1981
21. Chit Fund Act–1982
22. Sick Industrial Companies (Special Provisions)Act–1985
23. The National Housing Bank Act–1987
24. SIDBI Act–1989
25. The Special Court (trial of Offences relating to Transactions in Securities) Act–1992
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141
26. The Industrial Finance Corporation (Transfer of Undertakings and Repeal) Act–1993
27. Industrial Reconstruction Bank (Transfer of Undertaking & Appeal) Act–1997
28. The Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest Act–(SARFASI-2002)
29. Industrial Development Bank (Transfer of Undertaking & Repeal) Act–2003
30. Credit Information Companies (Rules & Regulation) Act–2005
31. The Industrial Finance Corporation of India Act–1948
32. The Banking Companies (Legal Practitioner Clients’ Accounts) Act–1949
33. The Industrial Disputes (Banking and Insurance Companies) Act–1949
34. The State Financial Corporations Act–1951
35. The Reserve Bank of India (Amendment and Misc. Provisions) Act–1953
36. The Industrial Disputes (Banking Companies) Decision Act–1955
37. The State Bank of India Act–1955
38. The State Bank of India (Subsidiary Banks) Act-1959
39. The Subsidiary Banks General Regulation–1959
40. The Deposit Insurance and Credit Guarantee Corporation Act–1961
41. The National Bank for Agriculture and Rural Development Act–1981
42. Chit Fund Act–1982
43. Shipping Development Fund Committee (Abolition)Act–1985
44. Sick Industrial Companies (Special Provisions)Act–1985
45. The National Housing Bank Act–1987
46. The Special Court (trial of Offences relating to Transactions in Securities) Act–1992
47. The Industrial Finance Corporation (Transfer of Undertakings and Repeal) Act–1993
48. Industrial Reconstruction Bank (Transfer of Undertaking & Appeal) Act–1997
49. SIDBI General Regulations, 1990
50. Banking Regulation (Companies) Rules 1949
51. The Nationalized Banks (Management and Misc. Provisions)Scheme,1970
52. NABARD General Regulations 1982
53. Banking Companies (Period of Preservation of Records) Rules, 1985
54. Banking Companies (Regulation)Rules,1985
55. NABARD Bonds Regulations — 1988
56. The Banking Ombudsman Scheme, 2006

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142
57. Factoring Act Rules, 2011
58. SARFAESI (Central registry) Rules,2011
59. Banker’s Books Evidence Act, 1891
60. Banking Regulation Act, 1949
61. Banking Companies (Legal Practitioners’ Clients’ Account) Act, 1949
62. Banking Regulation (Companies) Rules, 1949
63. Banking Companies (Acquisition and Transfer of Undertaking) Act, 1969
64. Debts Recovery Appellate Tribunal (Procedure) Rules,1994
65. Foreign Contribution (Regulation) Act, 1976
66. Foreign Exchange Management Act, 1999
67. Indian Partnership Act, 1932
68. Indian Stamp Act, 1899
69. Indian Trusts Act, 1882
70. Limitation Act, 1963
71. Recovery of Debts due to Banks and Financial Institutions Act,1993
72. Reserve Bank of India Act — 1934
73. Negotiable Instruments Act, 1881
• Section 4 – Promissory note
• Section 5 – Bill of exchange
• Section 6 – Cheque
• Section 13 – Negotiable Instruments
• Section 123 – Cheque Crossed Generally
• Section 124, 126 – Cheque crossed specially
• Section 130 – Cheque bearing Not Negotiable
• Section 118 – Presumptions as to Negotiable Instruments
74. Reserve Bank of India Act, 1934
• Section 17 – Defines Business of RBI
• Section 18 – Deals with Emergency loans to Banks
• Section 22 – only RBI has the exclusive rights to issue currency notes in
India.
• Section 24 – maximum denomination a note can be Rs. 10,000.
• Section 26 – Describes the legal tender character of Indian bank notes.
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143
 • Section 28 – Allows the RBI to form rules regarding the exchange of damaged
and imperfect notes.
• Section 31 – In India only the RBI or the central government can issue and
accept promissory notes that are payable on demand.
• Section 42(1) – Every scheduled bank must have an average daily balance
with the RBI.

COMMITTEES

No Committee Name Focus Area

1 A. C. Shah Committee NBFC

2 Abid Hussain Committee Development of Capital markets

3 A Ghosh Committee Final Accounts

Modalities Of Implementation Of New 20 Point
4 A Ghosh Committee
Programme
5 A Ghosh Committee: Frauds & Malpractices In Banks
Coordination Between Term Lending Institutions
6 AK Bhuchar Committee
And Commercial Banks
7 Adhyarjuna Committee Changes in NI Act and Stamp Act

8 B. Eradi Committee Insolvency and Wind up laws

Institutional Credit For Agricultural & Rural
9 B Sivaraman Committee
Development
10 B. Venkatappaiah Committee All India Rural Credit Review

11 B.D. Shah Committee Stock Lending Scheme

12 BD Thakar Committee Job Criteria in bank loans (Approach)

13 Bhagwati Committee Unemployment

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144
14 Bhagwati Committee Public Welfare

15 Bhave Committee Share Transfer Reforms

Coordination between Commercial Banks and
16 Bhide Committee
SFC’s
17 Bhootlingam Committee Wage, Income and Prices

18 C. Rao Committee Agricultural Policy

19 C.E. Kamath Committee Multi Agency approach in Agricultural Finance

20 Chatalier Committee Finance to Small Scale Industry

21 Chesi Committee Direct Taxes

22 Cook Committee Capital Adequacy of Banks

Review Progress And Recommend Improvement
23 D R Mehta Committee
Measures Of IRDP
24 Damle Committee MICR

25 Dandekar Committee Regional Imbalances

26 Dantwala Committee Estimation of Employments

27 Dave Committee Mutual Funds (Functioning)

28 Dharia Committee Public Distribution System

29 D.R. Gadgil Committee Agricultural Finance

30 Dutta Committee Industrial Licensing

31 G. Sundaram Committee Export Credit

32 Gadgil Committee (1969) Lead Banking System

33 Godwala Committee Rural Finance

34 Goiporia Committee Customer Service in Banks

35 G.S. Dahotre Committee Credit Requirements of Leasing Industry

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145
36 G.S. Patel Committee Carry Forward System on Stock Exchange

37 Hathi Committee Soiled Banknotes

38 Hazari Committee (1967) Industrial Policy

39 I.T. Vaz Committee Working Capital Finance in Banks

40 J. Reddy Committee Reforms in Insurance Sector

41 James Raj Committee Functioning of Public Sector Banks

Securities Transactions Of Banks & Financial
42 Jankiramanan Committee
Institutions
43 J.V. Shetty Committee Consortium Advances

44 K. Madhav Das Committee Urban Cooperative Banks

45 Kalyansundaram Committee Introduction of Factoring Services in India

46 Kamath Committee Education Loan Scheme

47 Karve Committee Small Scale Industry

48 K.B. Chore Committee To review the Symbol of Cash Credit Q

Role Of Banks In Priority Sector And 20 Point
49 KS Krishnaswamy Committee
Economic Programme
50 Khanna Committee Non Performing Assets

51 Khusrau Committee Agricultural Credit

52 L.K. Jha Committee Indirect Taxes

53 L.C. Gupta Committee Financial Derivatives

54 Mahadevan Committee Single Window System

55 Mahalanobis Committee Income Distribution

56 Marathe Committee Licensing of New Banks

57 M.L. Dantwala Committee Regional Rural Banks

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146
58 Mrs. K,S, Shere Committee Electronic Fund Transfer

59 Nariman Committee Branch Expansion Programme

Improved Procedures For Transactions In PSU
60 Nadkarni Committee
Bonds And Units
Committee on comprehensive financial services for
61 Nachiket Mor
small businesses and low-income households
62 Narsimhan Committee Financial System

63 Omkar Goswami Committee Industrial Sickness and Corporate Restructuring

64 P.R. Nayak Committee Institutional Credit to SSI Sector

65 P. Selvam Committee Non Performing Assets of Banks

Productivity, Operational Efficiency and
66 P.C. Luther Committee
Profitability of Banks
67 P.D. Ojha Committee Service Area Approach

68 Pillai Committee Pay Scales of Bank Officers

69 P.L. Tandon Committee Export Strategy

Develop appropriate Supervisory Framework for
70 P.R. Khanna Committee
NBFC
71 Purshottam Das Committee Agricultural Finance and Cooperative Societies

72 R. Jilani Banks Inspection System of Banks

73 R.S. Saria Committee Agricultural Finance and Cooperative Societies

74 Raghavan Committee Competition Law

75 Raja Chelliah Committee Tax Reforms

76 Rajamannar Committee Centre-State Fiscal Relationships

Changes in Banking Laws, Bouncing of Cheques
77 Rajamannar Committee
etc.
78 Rakesh Mohan Committee Petro Chemical Sector
Ram Niwas Mirdha Committee
79 Securities Scam
(JPC)

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147
80 Rangrajan Committee Computerization of Banking Industry

81 Rangrajan Committee Public Sector Disinvestment

82 Rashid Jilani Committee Cash Credit System

83 Ray Committee Industrial Sickness

84 R.G. Saraiya Committee (1972) Banking Commission

85 R.H. Khan Committee Harmonization of Banks and Ssis

86 R.K. Hajara Committee Differential Interest Rates Scheme

Enactment Having A Bearing On Agro Landings By
87 R.K. Talwar Committee
Commercial Banks
88 R.K. Talwar Committee Customer Service

89 R.N. Malhotra Committee Reforms in Insurance Sector

90 R.N. Mirdha Committee Cooperative Societies

91 R.V. Gupta Committee Agricultural Credit Delivery

92 S. Padmanabhan Committee Onsite supervision Function of Banks

93 S. Padmanabhan Committee Inspection of Banks (By RBI)

94 Samal Committee Rural Credit

95 S.C. Choksi Committee Direct Tax Law

96 Shankar Lal Gauri Committee Agricultural Marketing

97 S.K. Kalia Committee Role of NGO and SHG in Credit

98 S.L. Kapoor Committee Institutional Credit to SSI

Foreign Exchange Markets in NRI investment in
99 Sodhani Committee
India
100 S.S. Nadkarni Committee Trading in Public Sector Banks

101 SS Kohli Committee Willful Defaulters

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102 SS Kohli Committee Rehabilitation Of Sick Industrial Units

103 SS Kohli Committee Rationalization Of Staff Strength In Banks

104 S.S. Tarapore Committee Capital Account Convertibility

Sukhmoy Chakravarty
105 To review the working of Monetary System
Committee
106 Tambe Committee Term Loans to SSI

107 Tandon Committee Follow up of Bank Credit

108 Tandon Committee Industrial Sickness

109 Thakkar Committee Credit Schemes to Self employed

110 Thingalaya Committee Restructuring of RRB

111 Tiwari Committee Rehabilitation of sick Industrial undertakings

112 U.K. Sharma Committee Lead Bank Scheme (Review)

113 Usha Thorat Panel Financial Inclusion

114 Vaghul Committee Mutul Fund Scheme

115 Varshney Committee Revised methods for Loans (> 2 lakhs)

116 Venketaiya Committee Review of Rural Financing System

117 Vipin Malik Committee Consolidated Accounting by Banks

118 Vyas Committee Rural Credit

119 Wanchoo Committee Direct Taxes

120 W.S. Saraf Committee Technology Issues in Banking Industry

121 Y.H. Malegam Committee Disclosure norms for Public Issues

122 Y.V. Reddy Committee Reforms in Small Savings

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 FIRST AMONG ALL BANKS

NO IMPORTANT FACTS BANK

1 First bank established in India Bank of Hindustan

2 First bank to introduce savings account in India Presidency Bank

3 First bank to introduce cheque system in India Bengal Bank

4 First bank to introduce internet banking ICICI Bank

5 First bank to introduce mutual fund State Bank of India

6 First bank to introduce credit card in India Central Bank of India

7 First bank to introduce ATM in India HSBC

8 First bank to provide Mobile ATM ICICI Bank

9 First bank to open branch outside India: Bank of India

10 Largest commercial bank in India State Bank of India

11 India’s first financial Archive set up at Kolkata

12 Largest public sector bank in India SBI

13 Largest private sector bank in India ICICI Bank

14 Largest foreign bank in India Standard Chartered Bank

15 Bank having maximum overseas branches Bank of Baroda

16 First Governor of RBI Sir Osborne Smith

17 First Indian Governor of RBI C.D Deshmukh

18 First Joint Bank of India Allahabad Bank

First Indian Bank Started with Indian capital
19 Punjab National Bank
indigenous Bank
20 First Regional Rural Bank Prathama Grameen Bank

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21 First Universal Bank in India ICICI Bank
First Bank to India listed in New York Stock
22 ICICI Bank
Exchange
23 First Bank in India launch talking ATM Union Bank of India
First Bank in India to launch its own Payment
24 State Bank of India
Aggregators
25 India’s first all woman Bank Bhartiya Mahila Bank
First private bank to open dedicated branch for
26 RBL
startups
27 First Aadhaar based ATM launched by DCB Bank

28 First Bank to sell Indian gold coins Indian Overseas Bank

29 First Payment Bank Rajasthan m commerce

30 First Small Finance Bank Capital Small Finance Bank Limited

Contactless credit cards for small and midsized
31 ICICI
enterprises
First certified Green Bond at London Stock
32 Axis Bank
Exchange
33 First small and medium enterprises Bank HDFC

34 First Transaction on Block chain is executed by ICICI

35 First Issuer of Masala Bonds HDFC

IMPORTANT BANKING ABBREVIATIONS

NO ACRONYMS ABBREVIATIONS

1 ADB Asian Development Bank

2 ADF Automated Data Flow

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3 ADR American Depository Receipt

4 AEPS Aadhaar Enabled Payment System

5 AIF Alternative Investment Fund

6 AIFI All India Financial Institutions

7 AIIB Asian Infrastructure Investment Bank

8 ALCO Asset/ Liability Committee

9 ALM Asset Liability Management

10 AMFI Association of Mutual Funds in India

11 AML Anti-Money Laundering

12 ANBC Adjusted Net Bank Credit

13 APBS Aadhaar Payment Bridge System

14 ARC Asset Reconstruction Companies

15 ARCIL Asset Reconstruction Companies India Limited

16 ARM Adjustable-Rate Mortgage

17 ASBA Applications Supported by Blocked Amount

18 ASSOCHAM Associated Chambers of Commerce and Industry of India

19 ATM Automated Teller Machine

20 BBB Bank Board Bureau

21 BBPS Bharat Bill Payment System

22 BCBS Basel Committee on Banking Supervision

23 BCSBI Banking Codes and Standards Board of India

24 BHIM App Bharat Interface for Money Application

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25 BIRD Bankers Institute of Rural Development

26 BIS Bank for International Settlements

27 BOP Balance of Payments

28 BPLR Benchmark Prime Lending Rate

29 BRBNMPL Bharatiya Reserve Bank Note Mudran Private Limited

30 BSBDA Basic Savings Bank Deposit Account

31 BSE Bombay Stock Exchange

32 BSR Basic Statistical Returns

33 CAG Controller and Auditor General

34 CAR Capital Adequacy Ratio

35 CARE Credit Analysis and Research Limited

36 CASA Current and Savings Accounts

37 CBDT Central Board of Direct Taxes

38 CBLO Collateralized Borrowing and Lending Obligation

39 CBS CORE Banking Solution

40 CCEA Cabinet Committee on Economic Affairs

41 CCIL Clearing Corporation of India Limited

42 CD Certificate of Deposit

43 CDR Corporate Debt Restructuring

44 CDS Credit Default Swap

45 CECA Comprehensive Economic Cooperation Agreement

46 CEPA Comprehensive Economic Partnership Agreement

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47 CIBIL Credit Information Bureau of India Limited

48 CII Confederation of Indian Industry

49 CMS Cash Management Services

50 CORE Centralized Online Real-time Exchange

51 CP Commercial Paper

52 CPFF Commercial Paper Funding Facility

53 CPI Consumer Price Index

54 CRAR Capital To Risk Weighted Asset Ratio

55 CRISIL Credit Rating Information Services Of India

56 CRM Customer Relationship Management

57 CRR Cash Reserve Ratio

58 CSP Customer Service Point

59 CSR corporate social responsibility

60 CTS Cheque Truncation System

61 CUB City Union Bank

62 CVA Credit valuation adjustment

63 DICGC Deposit Insurance and Credit Guarantee Corporation

64 DIPP Department of Industrial Policy and Promotion

65 DPG Deferred Payment Guarantee

66 DPN Demand Promissory Note

67 DRAT Debt Recovery Appellate Tribunal

68 DRI Differential Rate Of Interest

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69 DRT Debts Recovery Tribunal

70 DSCR Debt Service Coverage Ratio

71 D-SIBs Domestic Systemically Important Banks

72 DTAA Double Taxation Avoidance Agreement

73 ECB External Commercial Borrowings

74 ECGC Export Credit Guarantee Corporation of India

75 ECS Electronic Clearing System

76 EDF Export Development Fund

77 EDI Electronic Data Interchange

78 EEFC Exchange Earners Foreign Currency Account

79 EFSF European Financial Stability Facility

80 EFTPOS Electronic Funds Transfer At Point Of Sale

81 EIB European Investment Bank

82 ELSS Equity Linked Saving Scheme

83 EMI Equated Monthly Installment

84 EPFO Employees’ Provident Fund Organisation

85 EPOS Electronic Point Of Sale

86 ETF Exchange-traded fund

87 EXIM Export Import Bank of India

88 FATF Financial Action Task Force

89 FCA Financial Conduct Authority

90 FCCB Foreign Currency Convertible Bond

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91 FCNR Foreign Currency Non-Repatriable account deposits

92 FDI Foreign Direct Investment

93 FEDAI Foreign Exchange Dealers Association Of India

94 FERA Foreign Exchange Regulation Act

95 FICCI Federation of Indian Chambers of Commerce and Industry

96 FII Foreign Institutional Investor

97 FIMMDA Fixed Income Money Markets and Derivatives Association of India

98 FINO Financial Inclusion Network Operations

99 FIPB Foreign Investment Promotion Board

100 FPI Foreign Portfolio Investment

101 FPO follow-on public offer

102 FRBMA Fiscal Responsibility and Budget Management Act

103 FSLRC Financial Sector Legislative Reforms Commission

104 FSRASC Financial Sector Regulatory Appointment Search Committee

105 FTA Free Trade Agreement

106 GAAR General Anti Avoidance Rule

107 GDP Gross Domestic Product

108 GDR Global Depository Receipt

109 GIRO Goverment Internal Revenue Order

110 GMS Gold Monetisation Scheme

111 G-SIBs Global Systemically Important Banks

112 GST Goods and Services Tax

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113 GSTN Goods and Services Network

114 GVA Gross value added

115 HDFC Housing Development Finance Corporation

116 HNI High net worth individual

117 HUF Hindu Undivided Family

118 IADB Inter-American Development Bank

119 IAF India Aspiration Fund

120 IBA Indian Banks' Association

121 IBBI Insolvency and Bankruptcy Board of India

122 IBPS Institute of Banking Personnel Selection

123 IBRD International Bank for Reconstruction and Development

124 IBU IFSC Banking Unit

125 ICICI Industrial Credit and Investment Corporation of India

126 ICRA Investment Information and Credit Rating Agency of India Limited

127 IDB Islamic Development Bank

128 IDBI Industrial Development Bank of India

129 IDF Infrastructure Development Fund

130 IDR Indian Depository Receipts

131 IDRBT Institute for Development & Research in Banking Technology

132 IDS Income Declaration Scheme

133 IEPF Investors Education and Protection Fund

134 IFC International Finance Corporation

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135 IGIDR Indira Gandhi Institute of Development Research

136 IGST Integrated Goods and Services Tax

137 IIB International Investment Bank

138 IIBF Indian Institute of Banking and Finance

139 IIBI Industrial Investment Bank of India

140 IMF International Monetary Fund

141 IMPS Immediate Payment Service

142 IMT Instant Money Transfer

143 INFINET Indian Financial Network

144 InvITs Infrastructure Investment Trusts

145 IPO Initial Public Offering

146 IPPB India Post Payments Bank

147 IRDA Insurance Regulatory and Development Authority of India

148 IRR Internal Rate Of Return

149 ISA Individual Savings Account

150 ITF in trust for

151 JLF Joint Lenders' Forum

152 KCC Kisan Credit Card

153 KGC Kisan Gold Card

154 KMB Kotak Mahindra Bank

155 KVB Karur Vysya Bank

156 KVIC Khadi and Village Industries Commission

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158
157 KVP Kisan Vikas Patra

158 KYC Know Your Customer

159 LAB Local Area Bank

160 LAF Liquidity Adjustment Facility

161 LDB Land Development Bank

162 LERMS Liberalized Exchange Rate Management System

163 LIBOR London Inter-Bank Offered Rate

164 LIC Life Insurance Corporation Of India

165 MCLR Marginal Cost of Funds based Lending Rate

166 MDB Multilateral Development Banks

167 MDR Merchant Discount Rate

168 MFDF Micro Finance Development Fund

169 MFI Micro Finance Institutions

170 MIBID Mumbai Interbank Bid Rate

171 MIBOR Mumbai Inter Bank Offered Rate

172 MICR Magnetic Ink Character Recognition

173 MIS Management Information System

174 MMID Mobile Money Identifier

175 MMTC Metals and Minerals Trading Corporation of India

176 MOD Multi Option Deposit Account

177 MPC Monetary Policy Committee

178 MSF Marginal Standing Facility

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179 MSMED Micro, Small and Medium Enterprises Development

180 MSS Market Stabilisation Scheme

181 MTN Medium Term Note

182 MUDRA Micro Units Development And Refinance Agency

183 NABARD National Bank For Agricultural And Rural Development

184 NACH National Automated Clearing House

185 NASDAQ National Association for Securities Dealers Automated Quotations

186 NAV Net Asset Value

187 NBFC Non-Banking Financial Company

188 NDS Negotiated Dealing System

189 NDTL Net Demand and Time Liabilities

190 NECS National Electronic Clearing Service

191 NEFT National Electronic Funds Transfer

192 NFC Near-field communication

193 NFS National Financial Switch

194 NHB National Housing Bank

195 NIBM National Institute of Bank Management

196 NPA Non-Performing Assets

197 NPCI National Payments Corporation Of India

198 NPS National Pension System

199 NPV Net Present Value

200 NRE Non Resident External Account

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201 NRI Non Resident Indian

202 NRO Non-Resident Ordinary savings account

203 NSE National Stock Exchange

204 NSFDC National Scheduled Castes Finance And Development Corporation

205 NUUP National Unified USSD Platform

206 OECD Organisation For Economic Cooperation And Development

207 OLTAS Online Tax Accounting System

208 OMO Open Market Operations

209 ORM Operational Risk management

210 OTCEI Over the Counter Exchange Of India

211 OTP One-Time Password

212 OVD Officially Valid Documents

213 PACS Primary Agricultural Credit Society

214 PAN Permanent Account Number

215 PDO Public Debt Office

216 PFRDA Pension Fund Regulatory and Development Authority

217 PIN Personal Identification Number

218 PIS Portfolio Investment Scheme

219 P-Notes Participatory Notes

220 POA Power of Attorney

221 PoS Point of Sale

222 PPF Public Provident Fund

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223 PPI Payment protection insurance

224 PPP Public Private Partnership/ Purchasing Power Parity

225 PRSF Partial Risk Sharing Facility

226 PSBs Public Sector Banks

227 PSL Priority Sector Lending

228 PSS Act Payment and Settlement Systems Act

229 QFI Qualified Foriegn Investors

230 QIB Qualified Institutional Buyer

231 QIP Qualified Institutional Placement

232 RBI Reserve Bank of India

233 RBS Royal Bank of Scotland

234 RDBMS Relational Database Management System

235 RDDBFI Recovery of Debts Due to Banks and Financial Institutions

236 REC Rural Electrification Corporation

237 REITs Real Estate Investment Trusts

238 RFC Resident Foreign Currency

239 RFID Radio-Frequency Identification

240 RIDF Rural Infrastructure Development Fund

241 RoA Return On Assets

242 RoE Return On Equity

243 RRB Regional Rural Bank

244 RTGS Real Time Gross Settlement

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245 RWA Risk Weighted Assets

246 S4A Scheme for Sustainable Structuring of Stressed Assets

Securitization and Reconstruction of Financial Assets and

247 SARFAESI
Enforcement of Security Interest

248 SBI State Bank of India

249 SBNs Specified Bank Notes

250 SCB Scheduled Commercial Bank

251 SCC Selective Credit Control

252 SDR Special Drawing Rights

253 SEBI Securities and Exchange Board of India

254 SENSEX Sensitive Index

255 SEPA Single Euro Payments Area

256 SEZ Special Economic Zone

257 SFMS Structured Financial Messaging System

258 SGB Sovereign Gold Bond

259 SHG Self Help Group

260 SIDBI Small Industries Development Bank Of India

261 SIFI Systematically Important Financial Institution

262 SIP Systematic Investment Plan

263 SIPS Systemically Important Payment Systems

264 SLR Statutory Reserve Ratio

265 SMERA SME Rating Agency of India Limited

266 SMILE SIDBI Make in India Loan for Enterprises

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267 SPMCIL Security Printing and Minting Corporation of India Limited

268 SPNS Shared Payment Network System

269 SSSBE Small-scale Service and Business Enterprises

270 STP Straight-through Processing

271 SWIFT Society For World Wide Inter Bank Financial Telecommunication

272 TARC Tax Administration Reform Commission

273 TCS Tax Collected at Source

274 TDR Term Deposit Receipt

275 TDS Tax Deducted at Source

276 TIEA Tax Information Exchange Agreement

277 TIN Taxpayer Identification Number

278 UEBA Universal Electronic Bank Account

279 UIDAI Unique Identification Authority of India

280 UPI Unified Payment Interface

281 USB Ultra Small Branch

282 USSD Unstructured Supplementary Service Data

283 UTI Unit Trust of India

284 VDBS Vertically Differentiated Banking System

285 VPA Virtual Payment Address

286 WBCIS Weather Based Crop Insurance Scheme

287 WCTL Working Capital Term Loan

288 WLAs White Label ATMs

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289 WMA Ways and Means Advances

290 WPI Wholesale Price Index

291 YTM Yield to Maturity

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