3. Accepting deposits from public/others
Lending money to public
Transferring money from one place to another
H Acting as trustees
S Keeping valuables in safe custody
V Government business
7. The Reserve Bank of India has the sole right to
issue currency notes except one rupee notes
which are issued by the Ministry of Finance.
Currency notes issued by the Reserve Bank are
declared unlimited legal tender throughout the
country.
8. As banker to the government the Reserve
Bank manages the banking needs of the
government. It has to-maintain and operate
the government’s deposit accounts. It
collects receipts of funds and makes
payments on behalf of the government. It
represents the Government of India as the
member of the IMF and the World Bank.
9. The commercial banks hold deposits in
the Reserve Bank and the latter has the
custody of the cash reserves of the
commercial banks.
10. The Reserve Bank has the custody of the
country’s reserves of international currency,
and this enables the Reserve Bank to deal with
crisis connected with adverse balance of
payments position.
11. The commercial banks approach the Reserve
Bank in times of emergency to tide over
financial difficulties, and the Reserve bank
comes to their rescue though it might charge a
higher rate of interest.
12. Since commercial banks have their surplus cash
reserves deposited in the Reserve Bank, it is
easier to deal with each other and settle the
claim of each on the other through book
keeping entries in the books of the Reserve
Bank. The clearing of accounts has now become
an essential function of the Reserve Bank.
13. Since credit money forms the most important
part of supply of money, and since the supply
of money has important implications for
economic stability, the importance of control of
credit becomes obvious. Credit is controlled by
the Reserve Bank in accordance with the
economic priorities of the government.
16. Wholesale banking
Wholesale banking is the provision of services by banks
to organizations such as Mortgage Brokers, large
corporate clients, mid-sized companies, real estate
developers and investors , international trade finance
businesses, institutional customers (such as pension
funds and government entities/agencies), and services
offered to other banks or other financial institutions.
17. Retail banking
its a major form of commercial banking, but mainly
targeted to consumers rather than corporate clients .it
is the method of banks approach to the customers for
sale of their products.
18. Cash and Cash Equivalents
One of the major services of a bank is to supply cash on demand,
whether it is a depositor withdrawing money or writing a check, or a
bank customer drawing on a credit line. A bank also needs funds to
pay bills, but while bills are predictable in both amount and timing,
cash withdrawals by customers are not.
Hence, a bank must maintain a certain level of cash compared to its
liabilities to maintain solvency.
Loans
Loans are the major asset for most banks. They earn more interest
than banks have to pay on deposits, and, thus, are a major source of
revenue for a bank. Often banks will sell the loans, such as
mortgages,credit card and auto loan receivables , to be securitized
into asset-backed securities which can be sold to investors. This
allows banks to make more loans while also earning origination fees
and/or servicing fees on the securitized loans.
19. A Certificate of Deposit (CD ) is a time deposit
where the depositor agrees to keep the money in
the account until the CD expires. The bank
compensates the depositor with a higher interest
rate. Although the depositor can withdraw the
money before the CD expires, banks charge a hefty
fee for this.
repurchase agreement (aka repo ), where the bank
gives the lender securities, usually Treasuries, as
collateral for a short-term loan. Most repos are
overnight loans that are paid back with interest the
very next day.
20. In accounting, the term liquidity is defined as the ability of
a company to meet its financial obligations as they come
due. The liquidity ratio , then, is a computation that is used
to measure a company's ability to pay its short-term debts.
21. A money market is a market for borrowing and
lending of short-term funds. It deals in funds
and financial instruments having a maturity
period of one day to one year. It is a
mechanism through which short-term funds
are loaned or borrowed and through which a
large part of financial transactions of a
particular country or of the world are cleared.
22.
23. Securitization is the process of taking an
illiquid asset, or group of assets, and through
financial engineering, transforming them into a
security.
A typical example of securitization is a
mortgage-backed security (MBS), which is a
type of asset-backed security that is secured by
a collection of mortgages
24.
25. It reduces risk for the banks
It enables banks to grow
It may be a cheap way of borrowing for banks
Pooling of assets reduces the cash flow risk for
investors
26. A lower national liquidity ratio might lead to
an excessive expansion of credit
A moral hazard problem occurs ,in that banks
might be tempted to take greater risk in their
lending
There is increased systemic risk of banking
collapse because the fortunes of the banks are
event more intertwined
