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MEANING OF BANKING
People need money for day to day life as well as to meet for future
expenses such as higher education of children ,marriage of children ,house
,building and even in the old age.
Saving of money is also necessary for old age and ill health when it may
not be possible for people to work and earn their living ,but there is risk of
theft or loss of money,robbery another accidents.
So people where money could be saved safely and would be available
Bank are such places where people can deposit their savings with the
assurance that they will be able to withdraw money from the deposit
The activities carried on by banks are called ‘banking’ activity.
TYPES OF BANKING
Types of banking
Central bank of india
CENTRAL BANK OF INDIA :
The reserve bank bank of india is india’s central banking
institution, which controls the monetary policy of the
On 1st april 1935 , during the british rule in accordance
with the provisions of the reserve bank of india act,1934 it
came into existence.
Following india indepndence, the RBI was nationlaized
in the year 1949.
The RBI plays an important part in the development
startegy of the government of india.
It is a member of asian clearing union.
FUNCTIONS PERFORMED BY
CURRENCY ISSUING AUTHORITY.
CONTROL OF MONEY SUPPLY AND CREDIT.
MANAGEMENT OF FOREX .
BANKER OF BANKS.
MAINTENANCE OF INDIAN FINANCIAL
BANKER OF THE BANKS.
SUPERVISION OF THE BANKS.
DIFFERENT TYPES OF BANKING
Following are different rates and ratios which playa an
important role in the growth of economy.
There are different types of rates are there which are as follows:
Cash reserve ratio (CRR).
Reserve repo rate.
Statutory liquidity ratio (SLR).
CASH RESERVE RATIO (CRR)
CRR is a cash reserve ratio.
Under CRR a certain percentage of the total
banks do not have access to that much amount
for any economic activity or commercial
Banks can’t lend the money to corporates or
individual borrowers, banks can’t use that
money for investment purposes.
Bank rate is the rate at which RBI lends money to
others banks (or financial institutions ) without selling or
buyiny any security.
The bank rate signals the central banks’s long-term
outlook on interest rates.
If the bank rate moves up, long-term interest rates also
tend to move up, and vice versa.
Banks make a profit by borrowing at a lower rate and
lending same funds at a higher rate of interest.
Repo rate is the rate at which the central bank
of a country(reserve bank of india in case india )
lends money to commercial banks in the event of
any shortfall of funds with keeping some securities
with the RBI.
The buy backs that security at certain
Repo rate is used by monetary authorities to
control inflation .
REVERSE REPO RATE
Reverse repo rate is the rate at which the RBI
borrows money from commercial banks.
Banks are always happy to lend money to the
RBI since their money are in safe hands with a
It is also a tool which can be used by the RBI to
drain excess liquidity(money) out of the banking
STATUTORY LIQUIDITY RATIO
Statutory liquidity ratio is the amount of money
that a commercial bank need to keep in cash, or
invested in certain specified securities predominantly
central government and state government securities .
Once this percentage is of the percentage of the total
bank deposit available as far s the particular bank is
The SLR , the money goes into investment
predominantly in the central government securities and
on that amount bank earn some amount of interest.