Roles of Banks
A bank is usually thought of as a reliable agency with which money is deposited. The idea is wanting in precision. Banks do receive valuables for safe custody and undertake to return them, but that is only a subsidiary function. Usually it is jewellery, deeds, securities and similar articles, which are given to the bank as safe custody deposits, but the services rendered by a bank either as depository or as trustee are only a few of the many services some of them of a more important nature, a modern commercial bank renders. In very general terms, the roles of a commercial bank can be classified under the following main heads:
Receiving of money on deposit:
This is, perhaps, the most important role of almost all modern banks, as it is largely by means of deposits that bank prepares the basis for several other activities. The money power of a bank, by which it helps largely the business community, depends considerably upon the amounts it can borrow by way of deposits, which may be in the form of fixed, savings or current deposits. All these go towards augmenting its resources. The money received on fixed deposits can be used without any risk of withdrawal before the due date, and, in the case of savings deposits, a bank can use a very large part of them, as generally the demands of customers having such deposits are comparatively small, on account of restrictions placed as to the amount to be withdrawn and the number of withdrawals to be made within a week. By the opening of current accounts, a bank not only obtains funds, but also provides its clients with deposit currency, which is both more convenient and more economical than other forms of currency. Buy taking money on deposit, a bank strong room. It is replaced by a debt due from a banker, who ordinarily pays interest so long as the money is retained by him as a deposit. The principal together with interest is returned on its being claimed in accordance with the terms of the contract.
The Term Paper on Comparative Study of Mutual Funds and Bank Deposits
Comparison between mutual funds and fixed deposits is a long debate, especially when it comes to a comparison between fixed deposits and debt mutual funds. Even a few years ago, any conservative and risk averse investor would think investing in bank fixed deposits is better than mutual funds (debt or otherwise). Nevertheless, the market scenario has changed a lot in the recent years, and many a ...
Issuing of notes:
This role, which was once considered to be the most paying part of a baker’/s business, is in modern times performed generally by central banking institutions, ion most of the leading countries of the world. Its importance to banks in general has dwindled in some of the important countries, instance, in England and the United States of America, the part which is played very popular in certain European countries such as France and Germany, where serious efforts are being made to popularize the use of cheques as a means of payment.
Lending of money:
This function is not only very important, but is also the main source of profit to most of the banks. When a bank agrees to discount a bill, or gives funds in exchange for a promissory not, the transaction is know as either a discount or a loan. In either case, the bank agrees to place funds at the disposal of the borrower, in exchange for a promise of payment at a future date. This enables those persons and corporation, who find their own capital insufficient for carrying on business on a large scale, to do so with the help of the funds borrowed from a bank, and thus use their capital more profitably than they could otherwise do. A bank, therefore, is able to help not only merchants but also others who, in turn, may use funds not only to their advantage, buy also the advantage of the community.
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... supports governments as they eliminate wasteful public enterprises and central government controls on business, and as ... the rest will go to Asian countries such as India, Vietnam, Bangladesh and China and to ... packages, coordinating financing from foreign and local banks and companies and export credit agencies.IFC charges ... IDA simply takes its money out of a different 'drawer.' A country must be a ...
Transferring money from place to place:
Modern banks are, generally, in a position to remit money, from one place or country to another, by means of drafts drawn upon their branches or agents. They can, also, by purchasing bills of exchange, enable merchants and others to receive money from their debtors, in other cities or countries. These facilities have helped not only the internal trade of different countries, but also the international commerce. It will be evident that the great strides, which have been made by trade and commerce, development of different parts of the world, would have been an impossibility but for the facilities of exchange provided by banks.
Nationalized Banks..
A Nationalized Bank is a bank whose majority ownership vests with the Government of India.
Central Bank | Commercial Bank |
1. Central bank functions as the apex bank of the country. 2. The Central Bank designs and controls all instruments of monetary policy of the country.3. Central Bank is the sole authority of note issuing.4. Central bank does not deal directly with the public. It does not accept deposits or advance loans. | 1. Commercial banks function according to the rules and regulations stipulated by the Central bank.2. Commercial banks only execute the monetary policy as directed by the Central bank.3. Commercial banks contribute to the flow of money only by way of credit creation.4. Commercial banks deal directly with the public by accepting deposit and advancing loans. |
Nationalization of Banks
After independence, India adoped a socialist pattern of society as its goal. This means, in no-technical language, a society with wealth distributed as equitable as possible without making the country a totalitarian State. The goal is purported to be achieved through democratic processes. With this aim in view, a mixed pattern of panning is evolved. The two sectors, private and public, are allowed in function independently of each other. The public sector is wholly owned and controlled by the government. The private sector is regulated through a system of regulation, licenses, controls and legislative acts, the latest of which is the Monopolies and Restrictive Trade Practices Act, 1969. The public sector is made to grow by nationalization of industries and institution.
The Report on India Is a Rich Country with Poor People
well our govt needs to support farmers Indian lands are so fertile ,that we can grow any crop ,i think farmers are getting exploited by middle men,they buy food and crop from them for low rates and then sell them at high prices in markets reliance fresh is the prime example ,they buy it for low prices and sell it at high prices to the customers in their supermarket just go to a super market and ...
The banking institutions are the custodians of private savings and powerful instrument to provide credit. They mobilize the resources of the country by accepting deposits and channellize them for industrial and national development by granting advances. In 1955, the Imperial bank of India was nationalized and its undertaking was taken over by the State Bank India.
On 19 July, 1969 fourteen major banks were nationalized. They are:
1. Central bank of India
2. The bank of India
3. Punjab National Bank
4. Bank of Baroda
5. United Commercial Bank
6. Canara Bank
7. United Bank of India
8. Allahabad Bank
9. Indian Bank
10. Bank of Maharashtra
11. Indian Overseas Bank
Each had the deposits of more than Rs. 50 crores and having between themselves aggregate deposits of Rs. 2632 crores with 4,130 branches were nationalized and taken over.
Nationalization of 6 more banks on 15th April, 1980 which had demand and time liabilities of not less than Rs. 200 crores each were nationalized, extending further the area of public control over the country’s banking system. These banks were:
1. Andhra Bank
2. Corporation Bank
3. New Bank India
4. Oriental Bank of Commerce
5. Punjab and Sind Bank
6. Vijaya Bank
Statutory Liquidity Ratio (SLR)
SLR is the statutory reserve that is set aside by banks for investment in cash, gold or unencumbered approved securities valued at a price not exceeding the current market price. SLR should not be less than 25% and not exceeding 40% of NDTL as per Section 24 of the Banking Companies Regulation Act. (however SLR 20% during the fiscal year 2008-2009 to pump into much more liquidity in the market to combat ‘Recession’).
The effective SLR level that a bank has to maintain keeps changing depending on the announcement by the RBI in its credit policies The objectives of SLR are 1) to restrict the expansion of bank credit 2) to augment the investment of the banks in Government securities and 3) to ensure solvency of banks.
The Term Paper on Indian Bank Banks Banking India
... 45 was inserted in Banking Companies Act in September 1960.According to Section 45, the Reserve Bank of India can submit a ... 196116. Rayalaseema Bank Ltd.Indian Bank 01-09-196117. Cuttack Bank Ltd. United Bank of India 04-09-196118. Pie Money Bank Pvt. Ltd.Syndicate Bank 04- ... the deposits were eroded. Under the circumstances in order to safeguard the depositors' interest and image of banking, .RBI ...
Scheduled Banks
Scheduled banks are those, which are included in the Second schedule of Banking Regulation Act, 1965. To be included in the Second Schedule, a bank 1) must have paid-up capital and reserves of not less than Rs. 5 lakhs 2) must also satisfy the RBI that its affairs are not conducted in a manner detrimental to the interests of its depositors. Scheduled banks are required to maintain a certain amount of reserves with the RBI. They, in return, enjoy the facility of financial accommodation and remittance facilities at concessional rates from the RBI.
Private Banks
Private Bank is a bank registered as public limited company under the Companies Act, 1956. The RBI may on merit grant a license under the Banking Regulation Act, 1949 for such a bank. HDFC Bank, ICICI Bank are the new generation private sector banks.
Promissory Note
According to the Negotiable Instruments Act, a Promissory Note is an instrument in writing (not being a bank note or a currency note) containing an unconditional promise, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. Maker is the person who makes the promissory note and promises to pay, and the person to whom the payment is made is the payee.
Monetary Policy
Implemented by the Reserve Bank of India, it is policy using money supply and control of credit in the Indian economy to control the general direction of interest rates and maintain the integrity of the Indian Rupee.
Tightening monetary policy is indicative of rising rates usually near the end of a phase of economic expansion. Conversely, loosening monetary policy is accompanied by decreasing rates that usually precedes economic expansion.
Face Value
Face value is the amount that is to be paid to an investor at the maturity date of the security. Debt securities can be issued at varying face values. The face value is also known as the repayment amount or par.
Cash Reserve Ratio (CRR)
CRR is the statutory reserve that has to be maintained by banks either in cash or as balance with the Reserve Bank of India. CRR is intended to be a reserve by which the RBI assures itself that the bank is safe and has the liquidity for servicing its depositors. As per Section 42 of the RBI Act, RBI is allowed to announce any level of CRR depending on the market conditions within a certain band, the minimum being 3% and the maximum 15% of NDTL.
The Essay on Money And Banking Bank Deposits Banks
In earlier times people only accepted bank notes as money because they were convertible into gold. Nowadays everything have changed, money has become a commodity and its always accepted as that if it possesses some properties such as durability, portability, divisibility and if it is limited in supply. Money Supply consists on bank deposits, bank notes and coins. Bank deposits can be converted ...
Bank Rate
The minimum rate at which the Reserve Bank of India will make short-term advances (usually for overnight) to the banks.
Early history of Banking:
As early as 2000 BC, Babylonians had developed a banking system. There is evidence to show that the temples of Babylon were used as bank, and such temples as those of Ephesus and Delphi were the most powerful of the Greek banking institutions.
India was too not a stranger to the conception of banking. ‘Loans and usury were well understood in those days, and Rishis occasionally lament their state of indebtedness with simplicity of primitive times. The transition from money-lending to money lending to banking must have occurred before Manu, who has devoted a special section to the subject of deposits and pledges, where he says, ‘A sensible man should deposit his money with a person of good family, of good conduct, well-acquainted with the law, veracious, having many relatives wealthy and honorable.
The Hundi
The word ‘Hundi’ is said to be derived from the Sanskrit root ‘hund’ meaning to collect.
Hundis were quite in vogue during the Middle Ages. According to another tradition, Bastupal Tejpal drew a Hundi for rupees ten crores on Nagar Seth of Ahmedabad and the temples of Dilwara were build with that money.
Even in modern times, bills of exchange are generally used for the collection of debts. For instance, when a merchant in Bombay sells goods to a merchant in Delhi, the former draws a bill of exchange on the latter, so as to collect the price of those goods.
Roles of Banks
A bank is usually thought of as a reliable agency with which money is deposited. The idea is wanting in precision. Banks do receive valuables for safe custody and undertake to return them, but that is only a subsidiary function. Usually it is jewellery, deeds, securities and similar articles, which are given to the bank as safe custody deposits, but the services rendered by a bank either as depository or as trustee are only a few of the many services some of them of a more important nature, a modern commercial bank renders. In very general terms, the roles of a commercial bank can be classified under the following main heads:
The Essay on Bank Deposit Schemes
These accounts are opened for saving purpose only. Some fixed amount is deposited at monthly intervals for a pre-fixed term. These accounts generally earn higher interest than Savings Bank Accounts. View salient features of Recurring Deposit accounts in banks. * Fixed Deposit or Term Deposit Accounts: These accounts are opened for investing funds for fixed terms to earn higher interests. Usually ...
Receiving of money on deposit:
This is, perhaps, the most important role of almost all modern banks, as it is largely by means of deposits that bank prepares the basis for several other activities. The money power of a bank, by which it helps largely the business community, depends considerably upon the amounts it can borrow by way of deposits, which may be in the form of fixed, savings or current deposits. All these go towards augmenting its resources. The money received on fixed deposits can be used without any risk of withdrawal before the due date, and, in the case of savings deposits, a bank can use a very large part of them, as generally the demands of customers having such deposits are comparatively small, on account of restrictions placed as to the amount to be withdrawn and the number of withdrawals to be made within a week. By the opening of current accounts, a bank not only obtains funds, but also provides its clients with deposit currency, which is both more convenient and more economical than other forms of currency. Buy taking money on deposit, a bank strong room. It is replaced by a debt due from a banker, who ordinarily pays interest so long as the money is retained by him as a deposit. The principal together with interest is returned on its being claimed in accordance with the terms of the contract.
Issuing of notes:
This role, which was once considered to be the most paying part of a baker’/s business, is in modern times performed generally by central banking institutions, ion most of the leading countries of the world. Its importance to banks in general has dwindled in some of the important countries, instance, in England and the United States of America, the part which is played very popular in certain European countries such as France and Germany, where serious efforts are being made to popularize the use of cheques as a means of payment.
Lending of money
