Banking Awareness Capsule for SBI PO, Clerk & BOB PO Exam PDF

BANKING AWARENESS CAPSULE FOR SBI PO, CLERK & Exclusively prepared for RACE students PAGE : 48 | | PRICE : NOT FOR...

BANKING AWARENESS CAPSULE FOR SBI PO, CLERK & Exclusively prepared for RACE students PAGE : 48 | | PRICE : NOT FOR SALE BOB PO EXAM TOPIC : BANKING AWARENESS CAPSULE BANK Savings banks interest rates, fixed deposit interest rates, Loan Rates etc Bank is an institution which attracts deposits from the public and are decided by Individual Banks. lends the money to the needy persons at various interest rates. Under The bank which has launched Mobile Bank Accounts in association with Banking Regulation Act 1949, controls Banking Activities in India. Vodafone’s m-paisa- HDFC Bank Largest Public-Sector Bank in India – SBI Largest Private Sector Bank in India – ICICI History of Banking in India Largest Foreign Bank in India – Standard Chartered Bank First bank established in India: Bank of Hindustan in 1770. Frist Indian Bank to open branch outside India (London in 1946) – Bank Second Bank: General Bank of India, 1786 of India The Imperial Bank of India (IBI) was the oldest and the largest First RRB named Prathama Grameen Bank was started by Syndicate commercial bank of the Indian subcontinent. It was created in Jan 1921 by Bank. amalgamation of three presidency banks, those are, Bank of Bengal, Bank First Bank to introduce ATM in India: HSBC in 1987, Mumbai of Bombay, Bank of Madras. Capital Market Regulator is SEBI. After nationalization in 1955, the Imperial Bank of India was named as State Bank of India (SBI). State Bank of India merged with three banks namely Bank of Bengal, Bank of Bombay and Bank of Madras in 1921 to form the Imperial Bank of India which was converted as State Bank of India. Central Bank of India was the first public bank to introduce credit card. Central Bank of India is the first commercial bank which was managed by Indians. ICICI Bank was the first bank to provide Mobile ATM Bank of Baroda has the maximum number of overseas branches. India’s first “Talking” Automated Teller Machine (ATM) launched by Union Bank of India (UBI) for visually impaired, was launched in Ahmedabad (Gujarat). The National Payments Corporation of India (NPCI) launches India’s first rural bank ATM card with a regional rural bank in Varanasi. First Indian bank got ISO: Canara Bank First Indian Bank started solely with Indian capital investment is PNB (Punjab National Bank). Founder of Punjab National Bank is Lala Lajpat Rai. Reserve Bank of India (RBI) was instituted in 1935. First Governor of RBI: Mrs. Osborne Smith First Indian Governor of RBI: Mr. C. D. Deshmukh First Bank to introduce Savings Account in India: Presidency Bank in 1833 First Bank to introduce Cheque System in India: Bengal Bank in 1833 First Bank to introduce Internet Banking: ICICI Bank First Bank to introduce Mutual Fund: State Bank of India Reserve Bank of India (RBI) Largest Commercial Bank in India – State Bank of India The Reserve Bank of India (RBI) is India's central banking institution, First Bank to introduce Credit Card in India: Central Bank of India which controls the monetary policy of the Indian rupee. Credit cards are known as Plastic Money The Reserve Bank of India was established on April 1, 1935 in accordance Open market operations are carried out by RBI with the provisions of the Reserve Bank of India Act, 1934 India’s First Financial Archive has been set up at – Kolkata (recommendations of Hilton Young Commission). CRR, SLR, Repo Rate, Reverse Repo Rate are decided by RBI Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 2 The Central Office of the Reserve Bank was initially established in Calcutta Before DICGC, there were two corporations named Deposit Insurance but was permanently moved to Mumbai in 1937. The Central Office is Corporation (DIC) and Credit Guarantee Corporation of India Ltd. where the Governor sits and where policies are formulated. (CGCI) which were merged to form DICGC with a view to integrate the Though originally privately owned, since nationalisation in 1949, the functions of both DIC and CGCI. Reserve Bank is fully owned by the Government of India. RBI was DICGC insures all bank deposits, such as saving, fixed, current, recurring nationalised on 1 January 1949. deposit for up to the limit of Rs. 100,000 of each deposit in a bank. The RBI has four zonal offices at Chennai, Delhi, Kolkata and Mumbai. However, if there are more accounts in same bank, all of those are treated List of Members: as a single account. The insurance premium is paid by the insured banks The general superintendence and direction of the RBI is entrusted with the itself. 21-member central board of directors: The functions of the DICGC (Deposit Insurance and Credit Guarantee The governor; 4 Deputy Governors; 2 Finance Ministry representatives Corporation) are governed by the provisions of 'The Deposit Insurance (usually the Economic Affairs Secretary and the Financial Services Secretary) and Credit Guarantee Corporation Act, 1961' (DICGC Act) and 'The ; 10 government-nominated directors to represent important elements of Deposit Insurance and Credit Guarantee Corporation General Regulations, India's economy; and 4 directors to represent local boards headquartered at 1961' framed by the Reserve Bank of India in exercise of the powers Mumbai, Kolkata, Chennai and New Delhi. conferred by sub-section (3) of Section 50 of the said Act. Chairman of Each of these local boards consists of 5 members who represent regional DICGC - B.P.Kanungo. Its head office is located in Mumbai, Maharashtra. interests, the interests of co-operative and indigenous banks. Banks covered by Deposit Insurance Scheme (I) All commercial banks including the branches of foreign banks functioning Main Functions of RBI: in India, Local Area Banks and Regional Rural Banks. Monetary Authority: (II) Co-operative Banks - All eligible co-operative banks as defined in Section Formulates, implements and monitors the monetary policy. 2(gg) of the DICGC Act are covered by the Deposit Insurance Scheme Objective: maintaining price stability while keeping in mind the objective of growth. Bharatiya Reserve Bank Note Mudran Private Limited: Regulator and supervisor of the financial system: Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) is a Prescribes broad parameters of banking operations within which the wholly owned subsidiary of Reserve Bank of India which prints bank notes country's banking and financial system functions such as commercial banks, (Indian rupees) for the Reserve Bank of India (RBI). It was established in financial institutions and non-banking finance companies. 1995 to address the demand of bank notes. Its headquarters is located Objective: maintain public confidence in the system, protect depositors' in Bangalore, Karnataka. Chairman of BRBNMPL - B. P. Kanungo. interest and provide cost-effective banking services to the public. BRBNMPL supplies a major portion of bank note requirement in the country Manager of Foreign Exchange: with the remaining requirements met through Security Printing and Manages the Foreign Exchange Management Act, 1999. Minting Corporation of India Limited (SPMCIL), a public sector Objective: to facilitate external trade and payment and promote orderly undertaking wholly owned by Government of India. BRBNMPL has two development and maintenance of foreign exchange market in India. presses in Mysore and Salboni. Issuer of currency: The company made a world record by printing more than 20,000 million Issues and exchanges or destroys currency and coins not fit for circulation. pieces of bank notes in financial year 2016-17. The company has its own Objective: to give the public adequate quantity of supplies of currency design cell. It has the capability to print all the denominations of Indian bank notes and coins and in good quality. Notes. The other two bank note presses of SPMCIL are Currency Note Developmental role: Press (Nashik) and Bank Note Presses (Dewas) which print bank notes Performs a wide range of promotional functions to support national in small quantities. objectives. Under SPMCIL, Security Paper Mill (SPM), Hoshangabad was established Banking Related Functions: in 1968 and notified as non-commercial undertaking under the Banker to the Government: performs merchant banking function for the administrative control of Ministry of Finance, Govt. of India. SPM, a IISO central and the state governments; also acts as their banker. 9001:2000 unit is responsible for manufacturing of different types of Banker to banks: maintains banking accounts of all scheduled banks. Security Papers. The Mints are situated at Mumbai, Hyderabad, Kolkata and Noida have Subsidiaries of RBI rich minting heritage and legacy of producing quality products. These mints Fully owned: Deposit Insurance and Credit Guarantee Corporation of India are carrying out minting of all coins circulated in the country. (DICGC), Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), and National Housing Bank (NHB). National Housing Bank: National Housing Bank (NHB), a wholly owned subsidiary of Reserve Deposit Insurance and Credit Guarantee Corporation of India Bank of India (RBI), was set up on 9 July 1988 under the National (DICGC) Housing Bank Act, 1987. NHB is an apex financial institution for Deposit Insurance and Credit Guarantee Corporation (DICGC) is a housing. NHB has been established with an objective to operate as a subsidiary of Reserve Bank of India. It was established on 15 July 1978 principal agency to promote housing finance institutions both at local under Deposit Insurance and Credit Guarantee Corporation Act, 1961 for and regional levels and to provide financial and other support incidental the purpose of providing insurance of deposits and guaranteeing of to such institutions and for matters connected therewith. credit facilities. Under the Chairmanship of Dr. C. Rangarajan, the then Deputy Governor, RBI to examine the proposal and recommended the setting up of National Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 3 Housing Bank as an autonomous housing finance institution. NHB Credit Management Techniques: RESIDEX was launched first official residential housing price index. Its The basic premise of macro-prudential and micro-prudential policies is early Headquarters is in New Delhi, India. MD & CEO of NHB - Sriram detection of such build-ups and initiation of suitable corrective action. Two Kalyanaraman. types of techniques, i.e., Quantitative (Policy Rates, Reserve Ratios, and Open Market Operation) and Qualitative credit controls (Margin Ways and Means Advances (WMA) Requirements/ LTV, Consumer credit regulation, Selective credit WMA is a mechanism used by Reserve Bank of India (RBI) under its credit control, Moral Suasion) have been used by the central banks world-wide policy by which to provide to States banking with it to help them to tide to achieve their objective of managing flow of credit in the economy. over temporary mismatches in the cash flow of their receipts and payments. This is guided under Section 17(5) of RBI Act, 1934, and are repayable Quantitative Credit Control in each case not later than three months from the date of making that Policy Rates advance'. Repo Rate: There are two types of WMA – Normal and Special. While Normal WMA The (fixed) interest rate at which the Reserve Bank provides overnight are clean advances, Special WMA are secured advances provided against liquidity to banks against the collateral of government and other approved the pledge of government of India–dated securities. securities under the liquidity adjustment facility (LAF). Under Section 17(5) of RBI Act allows RBI to make WMA both to the Repo (Repurchase) rate also known as the benchmark interest rate is the Central and State Govt. Objective: To bridge the interval between rate at which the RBI lends money to the banks for a short-term (max. 90 expenditure and receipts. They are not a sources of finance but are meant days). When the repo rate increases, borrowing from RBI becomes more to provide support, for purely temporary difficulties that arise on account of expensive. mismatch/shortfall in revenue or other receipts for meeting the govt. liabilities. Reverse Repo Rate: Minimum Reserve System The (fixed) interest rate at which the Reserve Bank absorbs liquidity, on For the issue of currencies, the RBI follows Minimum Reserve System at an overnight basis, from banks against the collateral of eligible government present. The Minimum Reserve System (MRS) is followed from 1956 securities under the LAF. It is opposite to that of Repo Rate. onwards. An increase in the reverse repo rate means that the banks will get a higher Under the Minimum Reserve System, the RBI has to keep a minimum rate of interest from RBI. As a result, banks prefer to lend their money to reserve of Rs.200 crore comprising of gold coin and gold bullion and foreign RBI which is always safe instead of lending it to others (people, companies currencies. Out of the total Rs 200 crores, Rs.115 crore should be in the etc.) which is always risky. form of gold coins or gold bullion. The purpose of shifting to MRS was to expand money supply to meet the needs of increasing transactions in the Liquidity Adjustment Facility (LAF) : economy. LAF is a monetary policy which allows banks borrow money through Monetary Policy & Its Framework: repurchase agreements. LAF consists of repo and reverse repo The Reserve Bank of India (RBI) is vested with the responsibility of operations. In LAF, money transaction is done via RTGS (Real time Gross conducting monetary policy. This responsibility is explicitly mandated under settlement). RTGS is an online money transfer method. the Reserve Bank of India Act, 1934. The aim of term repo is to help develop the inter-bank term money market, Monetary policy refers to the use of monetary instruments under the which in turn can set market-based benchmarks for pricing of loans and control of the central bank to regulate magnitudes such as interest deposits, and hence improve transmission of monetary policy. LAF is used rates, money supply and availability of credit with a view to achieving the to aid banks in adjusting the day to day mismatches in liquidity. ultimate objective of economic policy, while keeping in mind the objective of growth specified in the Act. Marginal Standing Facility (MSF) : The framework aims at setting the policy (repo) rate based on an A facility under which scheduled commercial banks can borrow additional assessment of the current and evolving macroeconomic situation; and amount of overnight money from the Reserve Bank by dipping into their modulation of liquidity conditions to anchor money market rates at or around Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of the repo rate. interest. This provides a safety valve against unanticipated liquidity shocks MEMBERS: to the banking system. As per the provisions of the RBI Act, out of the six Members of Monetary All Scheduled Commercial Banks having Current Account and SGL Policy Committee, three Members will be from the RBI and the other three (Subsidiary General Ledger Account) Account with Reserve Bank, Mumbai Members of MPC will be appointed by the Central Government. The will be eligible to participate in the MSF Scheme. Governor of Reserve Bank of India is the chairperson ex officio of the The Facility will be available on all working days in Mumbai, excluding committee. Saturdays between 3.30 P.M. and 4.30 P.M. Requests will be received for The committee was created in 2016 to bring transparency and accountability a minimum amount of Rs. One crore and in multiples of Rs. One crore in fixing India's Monetary Policy. The current mandate of the committee is thereafter. MSF will be undertaken in all SLR-eligible transferable to maintain 4% annual inflation until March 31, 2021 with an upper Government of India (GoI) dated Securities/Treasury Bills and State tolerance of 6% and a lower tolerance of 2%. Development Loans (SDL). Instruments of Monetary Policy Corridor: The MSF rate and reverse repo rate determine the corridor for the There are several direct and indirect instruments that are used for daily movement in the weighted average call money rate. implementing monetary policy. Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 4 Bank Rate: It is determined by a percentage of total demand and time liabilities. It is the rate at which the Reserve Bank is ready to buy or rediscount bills of The SLR is commonly used to control inflation and fuel growth, by increasing exchange or other commercial papers. The Bank Rate is published under or decreasing it respectively. The present SLR is 19.5% (June 2018), but Section 49 of the Reserve Bank of India Act, 1934. This rate has been RBI has the power to increase it up to 40%, if it so deems fit in the aligned to the MSF rate and, therefore, changes automatically as and when interest of the economy. the MSF rate changes alongside policy repo rate changes. Difference between CRR & SLR: Both CRR and SLR are instruments in the hands of RBI to regulate money Note: The Reverse Repo Rate (RRR) will be kept 100 basis points lower than supply in the hands of banks that they can pump in economy the Repo Rate (RR), on the other hand, Marginal Standing Facility (MSF) will CRR is cash reserve ratio that stipulates the percentage of money or cash be kept 100 basis points, higher than the repo rate. that banks are required to keep with RBI SLR is statutory liquidity ratio and specifies the percentage of money a Reserve Ratio bank has to maintain in the form of cash, gold, and other approved securities Cash Reserve Ratio (CRR) : CRR controls liquidity in economy while SLR regulates credit growth in the The average daily balance that a bank is required to maintain with the country Reserve Bank as a share of such per cent of its Net Demand and Time While banks themselves maintain SLR in liquid form, CRR is with RBI Liabilities (NDTL) that the Reserve Bank may notify from time to time in maintained as cash. the Gazette of India. Banks can’t lend the money to corporates or individual borrowers, banks can’t use that money for investment purposes. So, that Open Market Operations (OMOs) : CRR remains in current account and banks don’t earn anything on that. OMOs are the market operations conducted by the RBI by way of sale/ In terms of Section 42(1) of the RBI Act, 1934, all Scheduled Banks are purchase of G-Secs (Govt Securities) to/ from the market with an objective required to maintain with Reserve Bank of India a Cash Reserve Ratio (CRR) to adjust the rupee liquidity conditions in the market on a durable of 4% of Net Demand and Time Liabilities (NDTL). basis. When the RBI feels that there is excess liquidity in the market, it If RBI increases CRR, the available amount with banks comes down, RBI resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, uses it to drain out excessive money from the banks and vice versa. when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market. Demand Liabilities: Demand liabilities are such deposits of the customers which are payable Market Stabilisation Scheme (MSS) : on demand. An example of demand liability is a deposit maintained in a The Reserve Bank under Governor YV Reddy initiated the MSS scheme saving account or current account that is payable on demand through a in 2004. Market Stabilisation Scheme or MSS is a tool used by the withdrawal form such as a cheque. Reserve Bank of India to suck out excess liquidity from the market through Time Liabilities: issue of securities like Treasury Bills, Dated Securities etc. on behalf of the Time liabilities refer to the liabilities which the commercial banks are liable government. to pay to the customers after a certain period mutually agreed upon. The money raised under MSS is kept in a separate account called MSS An example of time liability is a six-month fixed deposit which is not payable Account and not parked in the government account or utilised to fund its on demand but only after six months. expenditures. The Reserve Bank sharply raised the Market Stabilisation Scheme (MSS) ceiling to Rs 6 lakh crore from Rs 30,000 crore. Net Demand and Time Liabilities (NDTL) : The Net Demand and Time Liabilities or NDTL shows the difference Qualitative Credit Controls between the sum of demand and time liabilities (deposits) of a bank (with Marginal requirement: the public or the other bank) and the deposits in the form of assets held by The marginal requirement of a loan is the current value of security the other bank. offered for a loan or the value in totality of the loans granted. The marginal Example: Suppose a bank has deposited 5000 with the other bank and its requirement is increased for those business activities, whose flow of credit total demand and time liabilities (including the other bank deposit) is 10,000. is to be restricted in the economy. The Reserve Bank of India has been using Then the net demand and time liabilities will be 5,000 (10,000-5,000). this method since 1956. If margin percent is more, then fewer loans will be Liabilities of a bank may be in the form of demand or time deposits or given for a certain value of security. If margin percent is less, more loans borrowings or other miscellaneous items of liabilities. As defined will be given. under Section 42 of RBI Act, 1934, liabilities of a bank may be towards Example: A person mortgages his property worth Rs. 5,00,000 against loan. banking system or towards others. "Demand Liabilities" include all The bank will give loan of Rs. 2,50,000 only. The marginal requirement here liabilities which are payable on demand. "Time Liabilities" are those which is 20%. In case the flow of credit has to be increased, the marginal are payable otherwise than on demand. requirement will be lowered. Statutory Liquidity Ratio (SLR) : Rationing of credit: The share of NDTL that a bank is required to maintain in safe and liquid Under this method there is a maximum limit to loans and advances that assets, such as, unencumbered government securities, cash and gold. can be made, which the commercial banks cannot exceed. RBI fixes ceiling Changes in SLR often influence the availability of resources in the banking for specific categories. Such rationing is used for situations when credit flow system for lending to the private sector. Statutory liquidity ratio is is to be checked, particularly for speculative activities. This is all fake determined by Reserve Bank of India maintained by banks in order to control Minimum of "capital: total assets" (ratio between capital and total asset) the expansion of bank credit. can also be prescribed by Reserve Bank of India. Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 5 Direct Action: The Industrial Development Bank (Transfer of Undertaking and Repeal) Under the banking regulation Act, the central bank has the authority to Act, 2003 take strict action against any of the commercial banks that refuses to obey The Industrial Finance Corporation (Transfer of Undertaking and Repeal) the directions given by Reserve Bank of India. There can be a restriction on Act, 1993 advancing of loans imposed by Reserve Bank of India on such banks. e.g. – Some Important Acts under RBI RBI had put up certain restrictions on the working of the Metropolitan co- Reserve Bank of India Act, 1934 operative banks. Reserve Bank of India Act, 1934 is the legislative act under which the Reserve Bank of India was formed. This act along with the Companies Act, Moral Suasion: which was amended in 1936, were meant to provide a framework for the This method is also known as "moral persuasion" as the method that the supervision of banking firms in India. Reserve Bank of India, being the apex bank uses here, is that of persuading The First schedule of the RBI Act 1934 defines the 4 areas under which the commercial banks to follow its directions/orders on the flow of the Indian states should come. The 4 areas are Western Area, Eastern Area, credit. It is part of meetings between RBI and Commercial Banks. RBI Northern Area, and Southern Area. persuade the commercial bank to follow their policies. RBI puts a pressure The Second schedule of the Act lists all the Scheduled Banks in India on the commercial banks to put a ceiling on credit flow during inflation and (Sections 2(e) and 42). be liberal in lending during deflation. Important Section under RBI Act, 1934: RBI (Reserve Bank of India) Section 3: Establishment and incorporation of Reserve Bank. Headquarters: Mumbai, Maharashtra, India Section 4: Capital of the Bank. Governor: Dr. Urjit R. Patel Section 5: Increase and reduction of share capital. Deputy Governors: Shri N. S. Vishwanathan, Dr. Viral V. Acharya, Section 6: Offices, branches and agencies. Shri B.P. Kanungo, Shri M K Jain (June 2018). Section 7: Management. Section 8: Composition of the Central Board, and term of office of Directors Legal Framework of RBI: Section 17: The Act defines manner in which the RBI can conduct business. I. Acts administered by Reserve Bank of India The RBI can accept deposits from the central and state governments without Reserve Bank of India Act, 1934 interest. It can purchase and discount bills of exchange from commercial Public Debt Act, 1944/Government Securities Act, 2006 banks. It can purchase foreign exchange from banks and sell it to them. Government Securities Regulations, 2007 Section 18: Deals with emergency loans to banks. Banking Regulation Act, 1949 Section 20: Obligation of the Bank to transact Government business. Foreign Exchange Management Act, 1999 Section 21: States that RBI must conduct the banking affairs for the central Securitisation and Reconstruction of Financial Assets and Enforcement of government and manage public debt. Security Interest Act, 2002 (Chapter II) Section 22: Says that only RBI has the exclusive rights to issue currency Credit Information Companies (Regulation) Act, 2005 notes in India. Payment and Settlement Systems Act, 2007 Section 24: States that the maximum denomination a note can be Payment and Settlement Systems Regulations, 2008 and Amended up to Rs.10,000 (US$150). 2011 and BPSS Regulations, 2008 Section 26: Describes the legal tender character of Indian bank notes. The Payment and Settlement Systems (Amendment) Act, 2015 - No. 18 of Section 27: Re -issue of notes. 2015 Section 28: Allows the RBI to form rules regarding the exchange of Factoring Regulation Act, 2011 damaged and imperfect notes. Section 31: Says that in India only the RBI or the central government can II. Other relevant Acts issue and accept promissory notes that are payable on demand. However, Negotiable Instruments Act, 1881 cheque, that are payable on demand, can be issued by anyone. Bankers' Books Evidence Act, 1891 Section 42(1) : Says that every scheduled bank must have an average State Bank of India Act, 1955 daily balance with the RBI. The amount of the deposit shall be more that a Companies Act, 1956/ Companies Act, 2013 certain percentage of its net time and demand liabilities in India. Securities Contract (Regulation) Act, 1956 State Bank of India Subsidiary Banks) Act, 1959 Banking Regulation Act, 1949 Deposit Insurance and Credit Guarantee Corporation Act, 1961 The Banking Regulation Act, 1949 is a legislation in India that regulates Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 all banking firms in India. Passed as the Banking Companies Act 1949, it Regional Rural Banks Act, 1976 came into force from 16 March 1949 and changed to Banking Regulation Act Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 1949 from 1st March 1966. Initially, the law was applicable only to banking National Bank for Agriculture and Rural Development Act, 1981 companies. But, 1965 it was amended to make it applicable to cooperative National Housing Bank Act, 1987 banks and to introduce other changes. It is applicable only in Jammu and Recovery of Debts Due to Banks and Financial Institutions Act, 1993 Kashmir in 1956 but now applicable throughout India. Competition Act, 2002 The Act provides a framework using which commercial banking in India Indian Coinage Act, 2011: Governs currency and coins is supervised and regulated. The Act supplements the Companies Act, Banking Secrecy Act 1956. Primary Agricultural Credit Society and cooperative land mortgage banks are excluded from the Act. Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 6 In 1965, the Act was amended to include cooperative banks under its Remittance Facilities under FEMA purview by adding the Section 56. Cooperative banks, which operate Money Changing Activity: only in one state, are formed and run by the state government. But, RBI Authorised Money Changers (AMCs) are entities, authorised by the Reserve controls the licensing and regulates the business operations. Bank under Section 10 of the Foreign Exchange Management Act, Important Section under Banking Regulation Act, 1949: 1999. An AMC is a Full-Fledged Money Changer (FFMC). Section 6: Form and business in which banking companies may engage FFMCs are authorised (a) to purchase foreign exchange from non- Section 7: Use of words “bank”, “banker”, “banking” or “banking company” residents visiting India and residents; and (b) to sell foreign exchange for Section 8: Prohibition of Trading Section certain approved purposes. Section 9: Disposal of non-banking assets Section 11: Requirement as to minimum paid- up capital and reserves Money Transfer Service Scheme (MTSS) Section 12: Regulation of paid-up capital, subscribed capital and authorised Money Transfer Service Scheme (MTSS) is a quick and easy way of capital and voting rights of shareholders transferring personal remittances from abroad to beneficiaries in Section 13: Restriction on commission, brokerage, discount, etc. on sale of India. shares Only inward personal remittances into India such as remittances Section 14: Prohibition of charge on unpaid capital towards family maintenance and remittances favouring foreign tourists Section 17: Reserve Fund visiting India are permissible. Section 18: Cash reserve No outward remittance from India is permissible under MTSS. Section 20: Restrictions on loans and advances The system envisages a tie-up between reputed money transfer companies Section 21: Power of Reserve Bank to control advances by banking abroad known as Overseas Principals and agents in India known as companies Indian Agents who would disburse funds to beneficiaries in India at Section 22: Licensing of banking companies ongoing exchange rates. Section 26: Return of unclaimed deposits The Indian Agent is not allowed to remit any amount to the Overseas Section 26 A: Establishment of Depositor Education and Awareness Fund Principal. Under MTSS the remitters and the beneficiaries are individuals Section 29: Accounts and balance -sheet only. Section 29A: Power in respect of associate enterprises A cap of USD 2,500 has been placed on individual remittances under the Section 30: Audit scheme. In addition, thirty remittances can be received by a single Section 33: Display of audited balance-sheet by companies incorporated individual beneficiary under the scheme during a calendar year. outside India Amounts up to INR 50,000/- may be paid in cash to a beneficiary in Section 35AB: Power of Reserve Bank to issue directions in respect of India. These can also be loaded on to a pre-paid card issued by banks. Any stressed assets amount exceeding this limit shall be paid by means of account payee Section 45 - Power of Reserve Bank to apply to Central Government for cheque/ demand draft/ payment order, etc., or credited directly to the suspension of business by a banking company and to prepare scheme of beneficiary's bank account. However, in exceptional circumstances, reconstitution or amalgamation where the beneficiary is a foreign tourist, higher amounts may be disbursed Section 46 - Penalties in cash. Section 56 - Act to apply to co-operative societies subject to modifications Rupee Drawing Arrangements (RDA) : Under the Rupee Drawing Arrangements (RDAs), cross-border inward Foreign Exchange Management Act, 1999 (FEMA) remittances are received in India through Exchange Houses situated in The main objective of Foreign Exchange Management Act, Gulf countries, Hong Kong, Singapore, Malaysia (for Malaysia only under 1999 (FEMA) is to consolidate and amend the law relating to foreign Speed Remittance Procedure) and all other countries which are FATF exchange with the objective of facilitating external trade and compliant only under Speed Remittance Procedure. payments and for promoting the orderly development and maintenance of No cash disbursement of remittances is allowed under RDA. The foreign exchange market in India. remittances have to be credited to the bank account of the beneficiary. It was passed in the winter session of Parliament in 1999, replacing There is no limit on the remittance amount as well as on the number the Foreign Exchange Regulation Act (FERA) due to Foreign exchange of remittances. However, there is an upper cap of Rs.15.00 lakh for trade reserves were low. related transactions. It also paved the way for the introduction of the Prevention of Money Laundering Act, 2002, which came into effect from 1 July 2005. About FATF: FEMA is applicable to all parts of India. The act is also applicable to all The Financial Action Task Force (FATF) is an intergovernmental branches, offices and agencies outside India owned or controlled by a person organization founded in 1989 on the initiative of the G7 to develop who is a resident of India. policies to combat money laundering. In 2001 its mandate expanded to The FEMA head-office, also known as Enforcement Directorate is situated include terrorism financing. Its headquarters is in Paris, France. in New Delhi and is headed by a Director. The Directorate is further divided First issued in 1990, the FATF Recommendations were revised in 1996, into 5 zonal offices in Delhi, Mumbai, Kolkata, Chennai and Jalandhar and 2001, and 2003 and most recently in 2012 to ensure that they remain up each office is headed by a Deputy Director. to date and relevant, and they are intended to be of universal application. David Lewis joined the FATF as its Executive Secretary in November 2015. Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 7 Liberalised Remittance Scheme: Securitisation and Reconstruction of Financial Assets and The Liberalized Remittance Scheme (LRS) is a facility provided by the RBI Enforcement of Security Interest Act, 2002 (SARFAESI Act) for all resident individuals including minors to freely remit upto a The SARFAESI Act is an Indian law which allows banks and other financial certain amount in terms of US Dollar for current and capital account institution to auction residential or commercial properties to recover loans. purposes or a combination of both. Hence under the LRS, individuals are It gives powers of “Seize and Desist” to banks. allowed to spend money in foreign countries for specific purposes like Banks can give a notice in writing to the defaulting borrower requiring it to education, tourism, asset purchase etc. discharge its liabilities within 60 days. If the borrower fails to comply with The scheme was introduced on February 4, 2004, with a limit of USD the notice, then banks are allowed to take possession of the collateral 25,000. But from April 2018, Resident individuals are permitted to make property and sell it without the permission of a court under this act. remittances up to USD 250,000 per financial year for any permitted This law allowed the creation of Asset Reconstruction Companies (ARC) current or capital account transactions or a combination of both as per the and allowed banks to sell their non-performing assets to ARCs. The first asset regulations prescribed under the Foreign Exchange Management reconstruction company (ARC) of India, ARCIL, was set up under this act. (Current Account Transactions) Rules, 2000, as amended from time to time, and the Foreign Exchange Management Act, 1999 (FEMA) or the Conditions: rules or regulations framed thereunder. SARFAESI is effective only for secured loans where bank can enforce the underlying security eg. Hypothecation, pledge and mortgages. This law does Conditions under LRS: not apply to unsecured loans, loans below Rs.100,000 or where remaining Banks are required to furnish the information on remittances made under debt is below 20% of the original principal. the Liberalised Remittance Scheme (LRS) on a monthly basis, on or The Debt has been classified under Non-Performing Assets by the before the fifth of the following month to which it relates through Online banks. Returns Filing System (ORFS) for which purpose they have been given This act is not applicable to an Agricultural land. user ID and password by the Reserve Bank. Where there is no data to furnish, AD banks are advised to upload ‘nil’ figures in the ORFS system. Hypothecation: Transactions relating to LRS are required to be reported in Foreign It is used for creating charge against the security of movable assets, but Exchange Transactions Electronic Reporting System (FETERS) to here the possession of the security remains with the borrower itself. Thus, Department of Statistics and Information Management (DSIM). in case of default by the borrower, the lender (i.e. to whom the goods / It is mandatory for the resident individual to provide his/her Permanent security has been hypothecated) will have to first take possession of the Account Number (PAN) to make remittance under the Scheme. security and then sell the same. Individuals can avail of foreign exchange facility for the purposes within Example: Car Loans (In this case Car / Vehicle remains with the borrower the limit of USD 2,50,000 only. but the same is hypothecated to the bank / financer. In case the borrower, defaults, banks take possession of the vehicle after giving notice and then Rupee Denominated Bond: sell the same and credit the proceeds to the loan account) A rupee denominated bond is a bond issued by an Indian entity in foreign markets and the interest payments and principal reimbursements are Pledge: denominated (expressed) in rupees. It is used when the lender (pledge) takes actual possession of assets (i.e. The term ‘masala bond’ is also used to describe rupee denominated certificates, goods). Such securities or goods are movable securities. In this ever since the first issuer of rupee-denominated bonds used the name case the pledgee retains the possession of the goods until the pledgor (i.e. masala bonds in its first issue. borrower) repays the entire debt amount. In case there is default by the borrower, the pledgee has a right to sell the goods in his possession and Issued By adjust its proceeds towards the amount due (i.e. principal and interest Any corporate (entity registered as a company under the Companies Act, amount). 1956/ 2013) or body corporate (entity specially created out of a specific act Example: Gold /Jewellery Loans, Advance against goods/stock, Advances of the Parliament) and Indian banks are eligible to issue Rupee denominated against National Saving Certificates etc bonds overseas. The Rupee denominated bonds can only be issued in a country and can Mortgages: only be subscribed by a resident of a country: that is a member of Financial It is used for creating charge against immovable property which includes Action Task Force (FATF) or a member of a FATF-Style Regional body. land, buildings or anything that is attached to the earth or permanently fastened to anything attached to the earth (However, it does not include Maturity: growing crops or grass as they can be easily detached from the earth). It is The minimum maturity period for Masala Bonds raised up to USD 50 million defined in Section 58 of the Transfer of Property Act 1882. equivalent in INR per financial year should be 3 years and for bonds raised Example: When mortgage is created is when someone takes a Housing Loan above USD 50 million equivalent in INR per financial year should be 5 years. / Home Loan. In this case house is mortgaged in favour of the bank / financer In case the subscription to the bonds/ redemption of the bonds is in but remains in possession of the borrower, which he uses for himself or even tranches, minimum average maturity period should be 3/5 years, as may give on rent. mentioned above. Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 8 Difference Between Hypothecation, Pledge, Mortgages: Every Scheduled bank enjoys two types of principal facilities: it becomes Hypothecation Pledge Mortgages eligible for debts/loans at the bank rate from the RBI; and, it automatically Securities are Movable Securities are Movable Securities are acquires the membership of clearing house. Immovable Securities are remains Securities are remains with Securities are Classification: with Borrower Lender remains with The Scheduled banks comprise Scheduled Commercial Banks and Borrower Scheduled Co-operative banks. The further classification is as follows: Ex: Car / Vehicle Ex: Gold Loan, Advance Ex: Housing Scheduled Commercial banks Loans, Adv against against NSCs, Adv against Loans Public Sector Banks stock and debtors goods (also given under State Bank of India and its associates, and hypothecation) Other Nationalised banks Private Sector Indian Banks Payment and Settlement Systems Act, 2007: Private-sector Foreign banks Regional Rural Bank (RRBs) An Act to provide for the regulation and supervision of payment Scheduled Co-operative banks systems in India and to designate the Reserve Bank of India as the Scheduled State Co-operative Banks authority for that purpose and for matters connected therewith or incidental Scheduled Urban Co-operative Banks thereto. The Reserve Bank is authorized under the Act to constitute a Committee of its Central Board known as the Board for Regulation and Supervision of Scheduled Commercial Bank: Payment and Settlement Systems (BPSS), to exercise its powers and The scheduled commercial banks are those banks which are included in perform its functions and discharge its duties under this statute. the second schedule of RBI Act 1934 and which carry out the normal Board for Regulation and Supervision of Payment and Settlement Systems business of banking such as accepting deposits, giving out loans and other Regulations, 2008 and the Payment and Settlement Systems Regulations, banking services. The major difference between Scheduled Commercial 2008. Both these Regulations came into force along with the PSS Act, 2007 Banks and Scheduled Cooperative Banks is their holding pattern, since on 12th August 2008. cooperatives are registered under the Cooperative Societies Act as The PSS Act 2007 does not prohibit foreign entities from operating a cooperative credit institutions. payment system in India and the Act does not discriminate/differentiate Previously, there are 27 Public Sector Banks in India including SBI (plus its between foreign entities and domestic entities. 5 associates) and 19 nationalized banks. Further, there are two banks which have been categorized by RBI as “Other Public-Sector Banks”. IDBI and SCHEDULED BANKS Bhartiya Mahila Bank come under this category. Scheduled Banks in India refer to those banks which have been included But now, there are 21 Public Sector Banks in India, SBI has merged its in the Second Schedule of Reserve Bank of India Act, 1934. RBI in turn Associates Bank & Bhartiya Mahila Bank and 19 Nationalized Banks and one includes only those banks in this Schedule which satisfy the criteria laid down more IDBI has been categorized by RBI as “Other Public-Sector Banks”. vide section 42(6) (a) of the said Act. Banks not under this Schedule are called Non-Scheduled Banks. Public Sectors Banks in India S.no Bank Name Headquarters Chairman MD & CEO Tagline Kolkata, West N. K. Sahoo (Executive 1 Allahabad Bank - A tradition of trust Bengal Director) Hyderabad, 2 Andhra Bank C V R Rajendran Suresh N Patel Where Indian Banks Telangana Ravi Venkatesan (Non- Exceutive 3 Bank of Baroda Vadodara, Gujarat P S Jayakumar India's International Bank Chairman) Mumbai, G. Padmanabhan (Non- Exceutive 4 Bank of India Dinbandhu Mohapatra Relationships beyond banking Maharashtra Chairman) 5 Bank of Maharashtra Pune, Maharashtra Ravindra Prabhakar Marathe (CMD) - One Family One Bank Bangalore, 6 Canara Bank T. N. Manoharan Rakesh Sharma Together We Can Karnataka Mumbai, “CENTRAL” TO YOU SINCE 7 Central Bank of India Rajeev Rishi (CMD) - Maharashtra 2011 Mangalore, 8 Corporation Bank - Jai Kumar Garg A Premier Public-Sector Bank Karnataka Mumbai, 9 Dena Bank Ashwani Kumar (CMD) - Trusted Family Bank Maharashtra Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 9 Mumbai, Aao Sochein Bada / Banking for 10 IDBI Bank Limited - B Sriram Maharashtra all Chennai, Tamil T C Venkat Subramanian (Non- Taking Banking Technology to 11 Indian Bank Kishore Kumar Kharat Nadu Executive Chairman) Common Man Indian Overseas Chennai, Tamil T C A Ranganathan (Non-Executive 12 R. Subramania Kumar Good people to grow with Bank Nadu Chairman) Oriental Bank of Gurugram, Where Every Individual is 13 - Mukesh Kumar Jain Commerce Haryana committed 14 Punjab National Bank New Delhi, India - Sunil Mehta The Name you can BANK upon Punjab and Sind 15 New Delhi, India S. Jatinderbir Singh (CMD) - Where service is a way of life Bank Mumbai, 16 State Bank of India Rajnish Kumar - The Banker to every Indian Maharashtra Faithful and Friendly Financial 17 Syndicate Bank Manipal, Karnataka Ajay Vipin Nanavati Melwyn Oswald Rego Partner Kolkata, West 18 UCO Bank - Ravi Krishan Takkar Honours Your Trust Bengal Mumbai, 19 Union Bank of India - Rajkiran Rai G. Good people to bank with Maharashtra Kolkata, West 20 United Bank of India - Pawan kumar Bajaj The Bank that begins with “U” Bengal Bangalore, R. A. Sankara 21 Vijaya Bank - A Friend you can bank upon Karnataka Narayanan Private Sectors Banks in India S.no Bank Name Headquarters Chairman MD & CEO Tagline 1 Axis Bank Ltd. Mumbai, Maharashtra Sanjiv Misra Shikha Sharma Badhti Ka Naam Zindagi Chandra Shekhar 2 Bandhan Bank Limited Kolkata, West Bengal - Aapka Bhala, Sabki Bhalai Ghosh Trust and Excellence since 3 City Union Bank Ltd. Tanjavur, Tamil Nadu - Dr. N Kamakodi 1904 Vijayawada, Andhra 4 Coastal Local Area Bank Ltd - N Sambasiva Rao Pradesh Development Credit Bank Ltd. 5 Mumbai, Maharashtra Nasser Munjee Murali M Natarajan We Value You (DCB Bank) 6 Dhanlaxmi Bank Ltd. Thrissur, Kerala Jayaram Nayar T Latha Tann. Mann. Dhan Your Perfect Banking 7 The Federal Bank Ltd. Kochi, Kerala K.M Chandrasekhar Shyam Srinivasan Partner 8 HDFC Bank Ltd. Mumbai, Maharashtra Deepak S Parekh Aditya Puri We understand your world 9 IDFC Bank Limited Mumbai, Maharashtra - Sunil Kakar Banking Hatke M. K. Sharma, Girish Chandra 7 ICICI Bank Ltd. Mumbai, Maharashtra Chaturvedi Chanda Kochhar Khayaal Apka (Part time Exceutive Chairman) 8 IndusInd Bank Ltd. Mumbai, Maharashtra R. Seshasayee Romesh Sobti We make you feel richer Parvez Ahmed 9 Jammu and Kashmir Bank Ltd. Srinagar - Serving to Empower (Chairman & CEO) Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 10 Your family bank across 10 Karnataka Bank Ltd. Mangalore, Karnataka - Mahabaleshwara M S India 11 Karur Vysya Bank Ltd. Karur, Tamil Nadu B. Swaminathan P R Seshadri Smart way to bank Uday S Kotak 12 Kotak Mahindra Bank Ltd. Mumbai, Maharashtra - Let’s make money simple (CMD) Parthasarathi The Changing Face of 13 Lakshmi Vilas Bank Ltd. Chennai, Tamil Nadu B K Manjunath Mukherjee Prosperity Banking with Personal 14 Nainital Bank Ltd. Nainital, Uttarakhand - Mukesh Sharma Touch 15 RBL Bank Ltd Mumbai, Maharashtra - Vishwavir Ahuja Apno Ka Bank Experience next generation 16 South Indian Bank Ltd. Thrissur, Kerala Salim Gangadharan V G Mathew banking 17 Tamil Nadu Mercantile Bank Ltd. Tuticorin, Tamil Nadu - K.V. Rama Moorthy Be a step ahead of life 18 The Catholic Syrian Bank Ltd. Thrissur, Kerala T.S. Anantharaman C V R Rajendran Support all the way 19 Yes Bank Ltd. Mumbai, Maharashtra Ashok Chawla Rana Kapoor Experience Our Expertise Foreign Banks in India S.No Bank Name Headquarters MD/CEO/ Chairman Tagline 1 AB Bank Limited Dhaka, Bangladesh Nurul Azim - MA Awal (Chairman) 2 Abu Dhabi Commercial Bank Abu Dhabi, United Arab Darayus Bajan (India) - Emirates 3 American Express New York, United States Manoj Adlakha (India) Do more 4 ANZ Banking Group Melbourne, Australia Sanjeev Bajaj (India) - 5 Bank of America Charlotte, USA Brian Moynihan (USA), Higher Standards, Bank of Kaku Nakhate (India) Opportunity 6 Bank of Bahrain & Kuwait BSC Manama, Bahrain Mallikarjun Kota (India) - 7 Bank of Ceylon Colombo, Sri Lanka Senarath Bandara The Bank you can trust. 8 Barclays Bank Plc London, UK Ramanathan Gopalakrishnan (India) Fluent in Finance 9 BNP PARIBAS Paris, France Jean-Laurent Bonnafé (Paris). Joris The Bank for the changing Dierckx (India) world. 10 Citibank New York, USA Michael Corbat (USA), Pramit Jhaveri The City never sleeps. (India) 11 Cooperative Rabobank Utrecht, Netherlands Todd Charteris (Netherlands), Jaideep A Bank with Ideas Singh (India) 12 DBS Bank Marina Bay, Singapore Piyush Gupta (Singapore), Surojit Living, Breathing Asia Shome (India) 13 Deutsche Bank Frankfurt, Germany John Cryan (Germany), Ravneet sing A Passion to perform. Gill (India) 14 Doha Bank Doha, Qatar Manish Mathur (India) There is so much to look forward too 15 HSBC London, UK John Flint (UK), Jayant Rikhye (India) The world’s local bank. 16 Industrial and Commercial Bank of Beijing, China Yi Huiman (chairman) Integrity leads to prosperity China Ltd. (ICBC) Zheng Bin (India) 17 J P Morgan Chase Bank New York, United States Jamie Dimon (USA), The right relationship is Kalpana Morparia (India) everything Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 11 18 National Australia Bank Melbourne, Australia Rajeev Bhargava (India) - 19 Standard Chartered Bank London, UK Bill Winters (UK), Zarin Daruwala Your Right Partner. (India) 20 The Royal Bank of Scotland Edinburgh, United Ross McEwan (UK), With you all the way Kingdom Brijesh Mehra Scheduled Co-operative Banks: TYPES OF ACCOUNTS IN BANKS It is a retail and commercial banking organized on a cooperative basis. There are mainly three types of deposits accounts in banks. They are Primary Cooperative Credit Society – Association of borrowers and Demand Deposits non-borrowers. Funds of society are derived from members. Time Deposits District Central Cooperative Bank – Functions at District level only. Non- Resident Deposits State Cooperative Bank – Apex Body is the State Govt. Land Development Bank – Long term loans to farmers. No deposits from DEMAND DEPOSITS public. 1. Savings Accounts Urban Cooperative Bank –Banking Activities at State level. A savings account allows you to accumulate interest on funds you’ve saved for future needs. Interest rates can be compounded on a daily basis. Regional Rural Banks (RRBs) Savings accounts vary by monthly service fees, interest rates, method The First Established Regional Rural Bank among all RRBs in India was used to calculate interest, and minimum opening deposit. the Prathama Bank, which was established in 1975. With The authorised In these type of accounts, we have salary or student account etc. capital of Rs. 5 crore. Under the Recommendations of Narshimham Committee RRBs was 2. Current Accounts formed. Initially the authorised capital for RRBs in India was Rs. 100 Current Accounts are basically meant for businessmen and are never used crore ($10 Million) which later augmented to 500 crore ($50 million). for investment or savings. Regional Rural Banks (RRBs) are scheduled commercial banks These deposits are the most liquid deposits and there are no limits for (Government banks) operating at regional level in different States of number of transactions or the amount of transactions in a day. India. They have been created with a view to serve primarily the rural Most of the current account are opened in the names of firm / company areas of India with basic banking and financial services. However, RRBs accounts. may have branches set up for urban operations and their area of No interest paid by banks on these accounts. On the other hand, banks operation may include urban areas too. charges certain service charges, on such accounts. The area of operation of RRBs is limited to the area as notified by In this type of account do not contain any fixed maturity as these are Government of India covering one or more districts in the State. RRBs also on continuous basis accounts. Overdraft facility is available in this account. perform a variety of different functions. The Regional Rural Banks were owned by the Central Government, the 3. No Frill Accounts: State Government and the Sponsor Bank (Any commercial bank can sponsor Banks were advised in November 2005 to make available a basic banking the regional rural banks) who held shares in the ratios as follows Central 'no-frills' account either with 'nil' or very low minimum balance as well as Government – 50%, State Government – 15% and Sponsor Banks – charges that would make such accounts accessible to vast sections of 35%. population. Indian had 57 Regional Rural Banks in which Uttar Pradesh has highest No frill account is a type of bank account, with low / Zero balance number of RRBs. requirement with extra-features removed. RRBs perform various functions: RBI came up with this No-frill concept, because poor people cannot open Providing banking facilities to rural and semi-urban areas. regular bank accounting having requirements like Rs.5000/- minimum Carrying out government operations like disbursement of wages of balance etc. MGNREGA workers, distribution of pensions etc. Providing Para-Banking facilities like locker facilities, debit and credit Basic Savings Bank Deposit Account (BSBDA) : cards. According to the RBI guidelines August 2012, Basic Savings Bank Small financial banks. Deposit (BSBD) account has been created under the Financial Inclusion, which has a zero minimum balance requirement, can be opened List of Regional Rural Banks in Tamil Nadu by people who do not want to be bothered with maintaining any minimum balance. S.No. List of RRBs Head Offices Sponsor bank A BSBD account does not require customers to maintain any monthly average balance. KYC Norms is applicable to these accounts. 1 Pallavan Grama Bank Salem Indian Bank Since BSBD is a type of savings account, the eligibility of a customer to open this account and interest rates offered by it are the same as savings 2 Pandyan Grama Bank Virudhunagar Indian Overseas Bank bank accounts. The customer cannot have any other savings bank account, if he/she has a basic savings bank deposit account in a bank. An individual is eligible to have only one 'Basic Savings Bank Deposit Account' in one bank. Chennai | Puducherry | Madurai | Trichy | Salem | Coimbatore | 7601808080 / 9043303030 www.RACEInstitute.in www.RACEInstitute.in 9043303030 Erode | Namakkal | Tanjore| Tirunelveli | Trivandrum | Ernakulam| Bengaluru | Chandigarh| Vellore  | BANKING AWARENESS CAPSULE FOR - SBI PO, CLERK & BOB PO EXAM | 12 If the customer already has a savings bank account, the same will have to A higher CASA ratio means higher portion of the deposits of the bank be closed within 30 days of opening a Basic Savings Bank Deposit or BSBD has come from current and savings deposit, which is generally a cheaper account. There is no charge on activation of inoperative BSBD accounts and source of fund. Hence, higher the CASA ratio better the net interest margin, no-account closure charges. which means better operating efficiency of the bank. Net interest margin is difference between total interest income and Conditions: expenditure and is shown as a percentage of average earning assets. Total credits in such accounts should not exceed one lakh rupees in a year. TIME DEPOSITS Maximum balance in the account should not exceed fifty thousand 1. Recurring Deposits Account: rupees at any time. These are popularly known as RD accounts and are special kind of Term The total of debits by way of cash withdrawals and transfers will not Deposits and are suitable for people who do not have lump sum amount of exceed ten thousand rupees in a month. savings but are ready to save a small amount every month. Foreign remittances cannot be credited to Small Accounts without Normally, such deposits earn interest on the amount already deposited completing normal KYC formalities. (through monthly installments) at the same rates as are applicable for Fixed Small accounts are valid for a period of 12 months initially which may Deposits / Term Deposits. be extended by another 12 months if the person provides proof of having These are best if you wish to create a fund for your child's education or applied for an Officially Valid Document. marriage of your daughter or buy a car without loans or save for the future. Small Accounts can only be opened at CBS linked branches of banks or The RD interest rates paid by banks in India are usually the same as at such branches where it is possible to manually monitor the fulfilments of payable on Fixed Deposits, except when specific rates on FDs are paid for the conditions particular number of days. Recurring Deposit accounts are normally allowed for maturities ranging 4. Current Account Savings Account (CASA) : from 6 months to 120 months (10 Yrs). CASA deposit is the amount of money that gets deposited in the These accounts can be opened in single or joint names. Nomination facility current and savings accounts of bank customers. It is the cheapest and is also available. major source of funds for banks. The savings accounts portion pays more interest compared to current accounts. 2. Fixed Deposits Accounts: A CASA operates like a normal bank account in which funds may be All Banks in India (including SBI, PNB, ICICI Bank, Yes Bank etc.) offer utilized at any time. Because of this flexibility, a CASA has a lower interest fixed deposits schemes with a wide range of tenures for periods from 7 days rate than a term deposit because the bank does not have a guarantee that to 10 years. all the funds are available to lend for a specific period of time. These are also popularly known as FD accounts. However, in some other These deposits can move out of banks’ books anytime, leading to asset- countries these are known as "Term Deposits" or "Bond". liability mismatches. While in case of term deposits, banks are almost The term "fixed" in Fixed Deposits (FD) denotes the period of maturity or certain that the depositor may not withdraw money before the maturity of tenor. Therefore, the depositors are supposed to continue such Fixed the deposit and may also renew the deposit on maturity. Deposits for the length of time for which the depositor decides to keep the money with the bank. CASA Ratio: In case of urgent need, depositor can close the account prematurely by The CASA ratio shows how much deposit in a bank h