Repo rate is the rate :at which banks borrow from RBI during shortage of funds. This is a short term loan provided for upto 90 days by selling securities to RBI and receiving money in lieu of it.
Reverse repo rate :is the rate at which banks deposit their excess liquidity with the RBI. In other words, the rate at which RBI borrows from banks by selling securities in order to control excess liquidity in the market is reverse repo rate.
It refers to the ATMs where investment, installation and maintenance is by a private operator but the license and branding is by a commercial bank.
The banking ombudsman scheme is a scheme to listen to customer’s grievances and complaints regarding certain services provided by the bank. It was introduced under the Section 35 A of banking regulation act, 1949 by RBI with effect from 1995 which was later amended and became the banking ombudsman scheme, 2006.
Customer can appeal against the decision of ombudsman to deputy governor of RBI. He is the highest authority of appeal. All banks in India are covered under the scheme.
BSBDA stands for Basic Savings Bank deposit account. BSBDA is the new name for “no-frill accounts” under which anyone can open a bank account with even zero balance in it or “zero balance account”. This BSBDA is aimed at providing banking facilities to weaker section of the society and improve financial inclusion.
Banks which are owned and run by individuals are called private banks.
Example: karnataka bank, karur vysya bank, lakshmi vilas bank etc.
Para Banking includes all the services provided by banks apart from day to day banking.
For example: Debit cards, Credit cards, Life Insurance products, Cash Management services etc.
Banking sector has successfully been adding new products and innovative services to its basket of products being offered to retail customer and institutional customers. I think the banking sector will keep its goal to accelerate the growth. Secondly each bank would like to optimize its costs of marketing and distribution so as to keep its overheads low without affecting its reach or quality of services.
With regards to changes, I feel that there would be marketing strategy which would be “socially engaging”. The leading banks would adopt “Intelligent Multichannel” approach over their brick and mortar branch banking
It is same as repo rate but here the time period is for more than 90 days.
Equity financing is less risky (you won’t have to pay it back). You’ll have more cash on hand. You won’t have to channel profits into loan repayment. Your equity investors will have a longer term view. Your company will have more credibility. And you might get to tap your investors’ network to help you develop the business.
We are living in a digital age, where everyday technological innovations our style of living, doing the business and even the way we do a commercial traction. The banks will have to catch up and offer (a) Multi Channel Optimization (b) Digital Distribution and most importantly (c) Effective Sales Efforts.
The main purpose of industrial banks is to provide big lo to large scale industries.
Examples: IDBI bank, Industrial bank of India etc.
A NPA is an obligation payable to the bank which has not been made or the interest and principal amount has not been paid on the due time. NPA is the loan or credit provided by the bank to its customers which could not be recovered in due time. NPA is also known as “bad debts”.
SLR is the amount of NDTL which a bank needs to maintain in the form of cash, gold or govt. securities before providing credit to its customers. Through SLR, RBI makes sure that bank always have a reserve amount out of their deposits to meet any future contingencies
Micro credit is giving a small amount of loan to the customers whereas MicroFinance is a wide term. It includes small loan + training on financial matters. In other words, Microfinance= Microcredit + Financial Literacy.
It refers to ATMs owned by corporate or private operators seeking to earn a commission by banks for tractions performed by their customers.
For ex:- INDICASH by TATA group.
Banks which are owned and run by government of India are called as nationalized banks.
Example: Canara bank, syndicate bank, Vijaya bank, etc..,
There are total 20 nationalized banks.
State bank of India has got 7 subsidiaries they are State bank of Hyderabad, State bank of Mysore, State bank of Travancore, State bank of Indore, State bank of Saurashtra, State bank of Bikaner, state bank of Jaipur.
Banks which are foreign originated [based] are called foreign banks
Example: Citi bank, YES bank etc.
RBI established in 1935, its head office in Mumbai. Present Governor of RBI “ D. SubbaRao”.
Its functions:
RBI is also called as “bankers bank”, because all banks will have a/c’s with RBI. It provides funds to all banks hence it is called as BANKERS BANK.
CRR is the part of Net Demand and Time Liabilities (NDTL) or cash of the bank deposited with the RBI. A higher CRR makes lo expensive as liquidity is controlled by RBI. NDTL is the deposits of the customers with the bank.
Bank is financial institution which accepts deposits from the public for the purpose of lending.
The components of monetary policy include CRR, Repo rate, reverse repo rate, SLR, MSF and Bank Rate.
The main purpose of cooperative banks is to co-operate small scale industries, and to provide small lo.
Example: karimnagar dist co-op bank etc.
CRISIL has made an index to calculate financial inclusion named as “CRISIL INCLUSIX” and in June 2013, there was 40% financial inclusion as per the index.
Saving bank account [SB a/c]: The main purpose of SB a/c is to encourage small savings from the public. Interest paid on SB a/c is 3 percent. Any individual can open SB a/c. An Indian residing at abroad can open a NRI a/c. NRI represents non-resident Indi.
Current account: It’s a running and active account. No interest is paid on current a/c.
Current accounts can be opened on firm names. Even individuals can also open current a/cs. But on firm names you cannot open SB a/c.
Fixed Deposit account: Amount is kept for a fixed period. Higher rate of interest will be paid on this a/c.
Recurring deposit [RD a/c]: A fixed amount can be deposited in monthly installments.
Interest rate is same as fixed deposits.
All Indian banks and foreign banks (which have more than 20 branches in India) are required give 40% of their credit to priority sector out of which 18% is for agriculture. In case of Regional Rural Banks, 60% credit is to be given to priority sector.
FDI or foreign direct investment is an investment that a parent company makes in a foreign country. FII or Foreign Institutional Investor is an investment made by an investor in the markets of a foreign nation. FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily as FDI only targets a specific sector.
CAR is the proportion of capital to the banks’ risk. DEMAT accounts are those in which shares, securities and insurance policies are kept in electronic form.
A nationalized bank is owned by the govt. of that country and is also known as Public Sector Bank whereas a private sector bank is owned by an independent individual or company.
In 1969 : 14 banks were nationalized.
In 1980: 6 banks were nationalized.
In MSF, banks borrow money from RBI for upto 24 hours. MSF is always 1% above the repo rate and banks can draw only upto 25 of their NDTL from RBI.
RTGS: Real Time Gross Settlement.
NEFT: National Electronic Fund Trfer.
These two are the two methods through which funds can be trferred from one bank to another bank.
CAPM is the capital asset pricing model, and it is a model designed to find the expected return on an investment and therefore the appropriate discount rate for a company’s cash flows. It provides the required rate of return given the riskiness of the asset.
Cheque is a negotiable instrument which is paid to the bearer but a demand draft is a negotiable instrument always payable on order.
Inflation: is the increase in the price of goods and services due to more demand and less supply. In inflation, there is more liquidity in market which has to be controlled to reduce the purchasing power of customers.
Deflation: is the decrease in prices of goods and services due to more supply and very less demand. In deflation, there is lack of liquidity in market which results in very weak purchasing power of people.
CAD or current account deficit is the difference between the imports and exports of a nation in one financial year whereas fiscal deficit is the difference between total revenue and expenditure of a nation.
A NBFC is a company registered under the companies act, 1956 which is involved in the business of lo, shares/stocks, etc. Non-banking financial companies are financial institutions that provide banking services, but do not hold a banking license.
These institutions are not allowed to take deposits from the public. NBFCs do offer all sorts of banking services, such as lo and credit facilities, retirement planning, money markets, underwriting, and merger activities.
The key levers are:
a lower purchase price, a higher exit price (when the company is sold on), increased leverage. improving the way the company operations, or getting cheap financing.
Accretion is asset growth through addition or expion. Accretion can occur through a company’s internal development or by way of mergers and acquisitions. Dilution is a reduction in earnings per share of stock that occurs when additional shares are issued or the stock changes into convertible securities.
There are mainly three types of risks faced by banks:-
Credit Risk: loan or NPA.
Market Risk: Money invested in the market.
Operational risk: Day-to-Day working risks.
Financial inclusion is the availability of banking services at a affordable cost in order to include the weaker section of the society in the banking system.
CBS stands for CORE banking solutions under which the branches of the banks are interconnected with each other through intranet with a central database server. The CORE word in CBS stands for Centralized Online Realtime Exchange.
NABARD was established by an act of Parliament on 12 July 1976 as National Bank for Agricultural and Rural Development. It is the apex bank to provide rural credit and monitor the RRBs.
The main functions of NABARD are:-
Food Security bill, MNREGA, Sarva Shiksha Abhiyan, Antyodaya Yojana, JNNURM, Swavalamban Yojana, Nirmal Gram Yojana, Rajiv Awas Yojana, Indira Gandhi Pension plan etc.
Under term repo, RBI lends to banks through auction of funds. The minimum interest charged has to be above the repo rate and there is no limit for maximum interest rate because auction is made on the rate of interest.