1. Banking operations : Balance sheet &
Customer Relationships
Compiled by :-
Garima verma
Salaka singh
Swadha mishra

2. Banking operations
Banking operations relate to the raising
of Banking fund from different sources,
making investments and giving Loans .

3. Sources of Banking Funds
1. Share capital
2. Deposits
3. Loans
4. Credit creations
5. Reserve fund

4. Investment policy of Bank
The Bank obtain its fund from several sources. But
these funds are not allowed to lie idle in the Bank. The
bank invest the funds with a view to earning profit for
itself.
The investment policy of banks is different in different
countries. The reason is that the economic condition of
the market differ from country to country . Hence, The
bank in every country have formulate their investment
policy account to the economic condition prevailing
there in . These principles are given ahead :-

5. 1. Principle of safety
2. Principle of liquidity
3. Principle of productivity of Investments
4. Principle of Diversity
5. Principles of salability of securities
6. Principle of stability in the value of Investments
7. Principles of Tax-Exemptions of Investment

6. Bank Investments
Generally, the Investments of a bank
are of two types :-
1. Non-profitable Investments
2. Profitable Investments

7. Non-Profitable Investments
It has mainly two heads :-
(I) Cash reserves
(ii) Dead stocks

8. Profitable Investments
1. Call money or short-period Loans –
2. Discounting of Exchange and treasury
Bills –
3. Investments in Securities –
4. Loans and Advances

9. Securities regarding loans
As is well Known, a bank generally insists
upon securities before advancing loans to
the borrowers.
The securities are mainly of Two types :-
(i) Personal Security
(ii) Collateral Security

10. Personal Security
A bank may sometimes grant a loan to its customer
against personal securities, In other words it may
not insist upon the security of certain stocks or
property before giving loan to the customer, such
types of loans are also known as Uncovered
loans.
The bank extend this type of loan to those of its
respectable costumer with whom it is well
acquainted or in whose integrity it has full faith.

11. The loan given against Personal
security in India are generally two types:-
1. One party pronote :- The loan here is granted
to the party against a pronote executed by it.
2. Two party pronote:- This type of loan is given
when borrower and the surety jointly execute
the note.

12. Collateral security
This refer to those substantial securities which the
borrower pledge with the bank for securing loan from
it .
The bank may accept raw materials or finished goods
or other material assets as collateral securities.

13. The Collateral Securities are accepted by the
Bank in three forms:-
1. Lien – Under this the debtor keeps some goods or
some property with the bank by way of cover against
the loan secured by him .
2. Pledge - Under this also the debtor keeps some goods
or some property with the bank by way of cover
against the loan secured by him . But if loan is not
repaid in time the bank can auction the securities.

14. Mortgage – Under this, the debtors
obtain the loans by mortgaging his
property with the bank . If the debtors
does not repay the loan in time , the
ownership of the mortgaged property
automatically gets transferred to the
bank.

15. Balance sheet
A financial statement that summarizes a company’s
assets , liabilities and shareholders equity at a specific
point of time .
Balance sheet also known as Financial statement .
Financial position reveals a company’s assets
, liabilities and owner’s equity .

16. Every Bank has to publish its Balance sheet at fixed
intervals as laid down by the law of the country .
The real financial position of the bank can be known
only after an analysis of its Balance sheet.
The balance sheet also tells us about the assets as well as
liabilities of the Bank .

17. Assets
An asset is something that has value and is owned by
an entity . Asset add to the net worth of the entity that
owns it. The entity that owns an asset can be a person
, a company or any other type of organization.
E.g.:- Cars , Buildings , land , Machines etc ..

18. Liabilities
The liabilities refers to those items in account of which
the bank is liable to pay an amount to others . They
represent other’s claim on bank .