2. AIDS TO TRADE
• Aids to trade can be defined as the activities which facilitates trade
process such as transportation, marketing, banking, insurance etc …
• These activities help in removing various hindrances which arises in
connection with production and distribution of goods.
• Transportation helps in movement of goods, marketing gives
information of new products, insurance helps in covering the risk,
banking helps in providing financial assistance for various firms.
• In this project we will be learning about banking.
3. • A banking company is one which transacts the business of banking
which means accepting, for the purpose of lending and investment of
deposits of money from the public, repayable on demand or otherwise
and withdrawable by cheques, draft, order etc…
INTRODUCTION TO BANKING
4. TYPES OF BANKS
• COMMERCIAL BANKS:-
These are the banks governed by Indian Bank regulation Act 1949 and
according to it banking means accepting deposits of money from the
public for the purpose of lending or investment.
Examples of commercial banks- SBI, PNB, IOB are public banks, HDFC,
ICICI, are private banks.
5. COOPERATIVE BANKS:-
• These are the banks which are governed by the provisions of state
Cooperative Societies Act and meant especially for providing cheap
credit to their members. It is an important source of rural credit.
6. SPECIALISED BANKS:-
• These banks are foreign exchange banks, export-import banks, catering
to specific need of these unique activities. These banks provides
financial aid to heavy turnkey projects and foreign trade.
7. CENTRAL BANK:-
• The central bank of any country supervises, controls and regulates the
activities of all commercial banks of that country. It also acts as a
government banker. It controls and coordinates currency and credit
policies of any country. The Reserve Bank of India is central bank of
India.
8. FUNCTIONS OF COMMERCIAL BANKS
• ACCEPTANCE OF DEPOSITS:-
Deposits are the basis of the loan operations since banks are both
borrowers and lenders of money. As borrowers they pay interest and as
lenders they grant loan and interest. Deposits are taken through savings
account, current account, fixed deposit account.
Savings account are for encouraging savings by individuals. Banks pay
rates of interest decided by RBI
9. • Current account deposits can be withdrawn to the extent of balance at
any time without any prior notice.
• Fixed deposits account means are the accounts which charges high
rates of interest than savings account. A premature withdrawal is
permissible with a percentage of interest being forfeited.
10. • Second major activity of commercial banks is to give loans to people
through the deposits which are taken from public. They charge high
rates of interest on loans and low rates of interest on deposits
difference in the interest rate is the main source of their income.
LENDING OF FUNDS:-
11. • Banks provide very important service to customers by collecting their
cheques drawn on other banks. The cheque is the most developed
credit instrument a unique feature and function of banks for the
withdrawal of deposits.
• Bearer cheques which are encashable immediately at bank counters.
• Crossed cheques which are to be deposited only in payees account.
CHEQUE FACILITY:-
12. • Another salient function of commercial banks is providing the facility of
fund transfer from one place to another place through
interconnectivity of branches. This process is carried by drafts, pay
orders or mail transfers.
REMITTANCE OF FUNDS:-
13. • In addition to above services banks also provide other services such as
bill payments, locker facilities, underwriting services and other services
like selling and buying of shares and debentures on instructions and
other personal services such as payment of insurance premium,
collection of dividend etc….
ALLIED SERVICES:-
14. • The growth of internet and ecommerce is drastically changing everyday
with the world wide web and transforming the world into a digital
global village. In simple terms user with a pc and a browser can get
connected to the banks and avail all the functions provided by the
bank.
• The range of services offered by e-banking are- Electronic Fund
Transfer, Automated Teller Machine, Credit Cards etc..
e-BANKING
15. • e-banking provides 24 hours and 365 days services.
• Customers can make some permitted transactions from the office or
house.
• It inculcates a sense of financial discipline by recording each and every
transaction.
• Load on branches can considerably reduced by establishing centralised
control.
ADVANTAGES OF e-BANKING
16. • Commercial banks do not create money--they are simply the
intermediaries that move money from the capital markets to
businesses and institutions. Banks get their money through business
checking or deposit accounts, service fees and by issuing certificates of
deposit (CD) and banker's acceptances--money market instruments
that are collateralized by letters of credit (LOC) used in trade finance--
and commercial paper.
• Companies always need to borrow money to cover purchases of raw
materials, machinery parts, inventory and/or payroll. Banks with
overseas branches or affiliates can simplify the process of corporate
finance throughout a company's organization by consolidating the
transaction procedures, reporting and record keeping.
ROLE OF BANKS IN BUSINESS
17. • Without commercial banks, the international finance and import-export
industry would not exist. Commercial banks make possible the reliable
transfer of funds and translation of business practices between
different countries and different customs all over the world.
18. DISCOUNTING OF BILL OF EXCHANGE
There are also bills drawn with a credit period (usance) which are
payable after the credit period. Bank lending against such receivables
is called discounting. The banks deduct the interest for the credit
period and release the balance, that is they discount the bill.
19. • A letter of credit is a document from a bank guaranteeing that a seller will receive payment in
full as long as certain delivery conditions have been met. In the event that the buyer is unable
to make payment on the purchase, the bank will cover the outstanding amount.
• They are often used in international transactions to ensure that payment will be received where
the buyer and seller may not know each other and are operating in different countries. In this
case the seller is exposed to a number of risks such as credit risk, and legal riskcaused by the
distance, differing laws and difficulty in knowing each party personally. A letter of credit
provides the seller with a guarantee that they will get paid as long as certain delivery conditions
have been met. For this reason the use of letters of credit has become a very important aspect
of international trade.
LETTER OF CREDIT
20.
21. • A non-bank financial institution (NBFI) is a financial institution that does not have a
full banking license or is not supervised by a national or international banking
regulatory agency. NBFIs facilitate bank-related financial services, such
as investment, risk pooling, contractual savings, and market brokering.[1] Examples of
these include insurance firms,pawn shops, cashier's check issuers, check
cashing locations, payday lending, currency exchanges, and microloan
organizations.[2][3][4] Alan Greenspan has identified the role of NBFIs in strengthening
an economy, as they provide "multiple alternatives to transform an economy's
savings into capital investment [which] act as backup facilities should the primary
form of intermediation fail."[5]
NON INSTITUTIONAL SOURCES OF
CREDIT
22. • The issues of land clearance and intensification of agriculture cannot be seen as issues
related exclusively, or in many cases even primarily, to loan-making decisions by formal
banking institutions. While banks are the principal institutional source of capital, they are
not always the most important source of credit for agriculture. In fact, in most of the
developing world, in terms of aggregate lending volumes, banks generally lend far less to
agriculture than does the informal sector.
• In most countries, banks offer lower nominal lending rates to farmers than do
informal lenders. However, the processing time, repeated travel from the borrower's
home to the bank, the paperwork, literacy requirements, the demanding (and
sometimes impossible) loan conditions as to equity, collateral, and credit histories,
developed by bureaucrats in a distant urban area, as we]1 as the need to repay the
loan in cash, add substantially to the cost of borrowing for small farmers. As a result,
the effective borrowing rate, even in subsidized credit programs, is quite high. So
high, in fact, that many farmers who could borrow at a formal banking institution opt
for borrowing in the informal market.
DEPENDENCE ON NON INSTITUTIONAL
SOURCES OF CREDIT
23. • Banking is one of the most sought after career choice among the students. It is an entry into a well
paid, secure and status career. Though it may appear that these jobs are meant for
commerce/economics students but the fact is that majority of bank officers are from different
streams of education. Further, it is also not a fact that top positions in Foreign/Multinational Banks
are held by MBA's from Premier Management Institutes. Though the Public sector Banks are now
appointing management graduates, CAs and CFAs but bright graduates from any subject can get
entry in the Public sector Banks through an All India Examination conducted by them.
• The emergence of technology-driven new private banks have broadened the scope and range of
banking service and entry of Financial Institutions are into the short-term lending business, is
resulting in needs for more professionals. Now banks are in the mutual funds , securitisation
business credit cards, consumer loans, housing loans, housing loans besides trading in gold and
forex activities.
• Generally banks look for good communication skills, good interpersonal skills, the ability to deal with
customers, an alert nature, and basic knowledge of the industry. However to join foreign or private
sector banks at higher than entry level one needs specialisation in some specific areas. For example
expertise in project analysis, credit appraisal skills, managing huge loan portfolios general and
foreign exchange and money .Good computer knowledge is always preferred.
CAREERS IN BANKING
