Faculty of GA&GS in Delhi Since 2010.Selected in LIC(ADO),BankPO,CGL,2 Times Mains in CSE,Founder:-GovtJobsAcademy @Youtube/Telegram/FB/Web.

Vikas Kumar Singh Tomar

This course will cover important Current Affairs on Banking and Financial Awareness.

Discover, Learn and Master all the tricks and strategy to demolish the Banking examination and achieve your goal with flying colours

Bank Exams

Hindi

(Hindi) All About Indian Banking System and Reserve Bank of India for UPSC/SSC/BANKS etc

Banking Examination (IBPS/ SBI)

Financial Awareness

Banking Awareness

Awareness

Bank, SSC & Railway Exams

Ace the toughest competitive and government exams in India 

Test Preparation

Introduction of General Awareness for Banking Exams
Banking is one of the fastest growing industry in India and they are considered as sunrise sector of Indian Economy. More so, the government is focusing on providing banking facilities in every village and town, under its Financial Inclusion scheme. And hence, more and more branches of the banks are being opened in every part of the country.
Current Affairs:

Banks in NEWS, Economy based current affairs, Business NEWS, Agreements, New Appointments, Visits, Government Schemes, Awards and Honors, Summits, Committees, National and International, Obituaries, Reports and Indexes, Books and Authors, Defense, Sports.

Introduction of Current Affaires for Banking Exams - 1(in Hindi)

Introduction of General Awareness
Banking is one of the fastest growing industry in India and they are considered as sunrise sector of Indian Economy. More so, the government is focusing on providing banking facilities in every village and town, under its Financial Inclusion scheme. And hence, more and more branches of the banks are being opened in every part of the country.
Banking:

RBI, Function of RBI, Banking Abbreviations, Banking Regulation Act 1949, Policy Rates, Types of Accounts, NEGOTIABLE INSTRUMENTS ACT 1881, BANKING OMBUDSMAN SCHEME 2006, FINANCIAL INCLUSION, PRIORITY SECTOR LENDING, MONEY MARKET INSTRUMENTS, Capital Market

Introduction of Banking and Financial Awareness for Banking Exams - (in Hindi)

Banking System in India or the Indian Banking System can be segregated into three distinct phases:
A. Early Phase of Indian Banks,from 1786 to 1969: The first bank, namely Bank of Bombay was established in 1720 in Bombay. Later on Bank of Hindustan was established in Calcutta in 1770. General Bank of India was established in 1786. Bank of Hindustan carried on the business till 1906.

First Joint Stock Bank with limited liability established in India in 1881 was Oudh Commercial Bank Ltd.
East India Company established the three independently functioning banks, also known by the name of “Three Presidency Banks” - The Banak of Bengal in 1806, The Bank of Bombay in 1840, and Bank of Madras in 1843. These three banks were amalgamated in 1921 and given a new name as Imperial Bank of India. After Independence, in 1955, the Imperial Bank of India was given the name "State Bank of India". It was established under State Bank of India Act, 1955.

In the surcharged atmosphere of Swadeshi Movement, a number of private banks with Indian managements had been established by the businessmen from mid of the 19th century onwards, prominent among them being Punjab National Bank Ltd., Bank of India Ltd., Canara Bank Ltd, and Indian Bank Ltd. First bank with fully Indian management was Punjab National Bank Ltd. established on 19 May 1894, in Lahore (now in Pakistan).

Historical Background Of Banking in India (in Hindi)

Nationalization of Banks and the Banking Sector Reforms, from 1969 to 1991: The number of banks in India in 1951 were the highest – 566. In 1960, RBI was empowered to force the compulsory merger of the weak banks with the strong ones. This led to reduction in the number of banks to 89 in 1969.

On July 19, 1969, 14 major banks were nationalized.
On April 15, 1980, another six banks were nationalized, and thus raising the number of nationalized banks to 20.

Nationalization Of Private Sector Banks In India (in Hindi)

Reserve Bank of India (RBI) gave in-principle approval to 11 entities to open a new category of banks, ‘payment banks’ as part of the government’s bid to increase financial inclusion and help expand banking services. Payment banks, targetted towards people without access to the formal banking system, will provide savings, deposit, payment and remittance services. Unlike conventional banks, payment banks will not be in the business of lending. Essentially, these banks are targeted towards financially excluded customers like migrant workers, low-income households and small businesses. The list of 11 entites includes nine organisations, including Aditya Birla Nuvo Ltd, Airtel M Commerce Services Ltd, Cholamandalam Distributions Ltd, Reliance Industries Ltd, Tech Mahindra Ltd, Vodafone m-Pesa Ltd, Fino Pay Tech Ltd, Department of Posts and National Securities Depository Ltd (NSDL). Two individuals, Dilip Shanghavi, founder of Sun Pharmaceutical Industries Ltd, and Vijay Shekhar Sharma, founder of One97 Communications Ltd that runs mobile payment company PayTM, were also included in the list.

Hailed for their disruptive, almost Uber-like effect on the banking industry, the newly licensed payment banks will join India’s vast banking system, which has several layers of banks, performing different roles and objectives, once they full criteria laid down by RBI in 18 months.

Commercial Banks

According to the RBI, “Commercial Banks refer to both scheduled and non-scheduled commercial banks which are regulated under Banking Regulation Act, 1949.” Commercial banks operate on a ‘for-profit’ basis. They primarily engage in the acceptance of deposit and extend loans to the general public, businesses and the government.

Scheduled Banks

By definition, any bank which is listed in the 2nd schedule of the Reserve Bank of India Act, 1934 is considered a scheduled bank. The list includes the State Bank of India and its subsidiaries (like State Bank of Travancore), all nationalised banks (Bank of Baroda, Bank of India etc), regional rural banks (RRBs), foreign banks (HSBC Holdings Plc, Citibank NA) and some co-operative banks. These also include private sector banks, both classified as old (Karur Vysya Bank) and new (HDFC Bank Ltd).

To qualify as a scheduled bank, the paid up capital and collected funds of the bank must not be less than Rs5 lakh. Scheduled banks are eligible for loans from the Reserve Bank of India at bank rate, and are given membership to clearing houses.

Non-scheduled Banks

Non-scheduled banks by definition are those which are not listed in the 2nd schedule of the RBI act, 1934. Banks with a reserve capital of less than 5 lakh rupees qualify as non-scheduled banks. Unlike scheduled banks, they are not entitled to borrow from the RBI for normal banking purposes, except, in emergency or “abnormal circumstances.” Jammu & Kashmir Bank is an example of a non-scheduled commercial bank.

Co-operative Banks

Co-operative banks operate in both urban and non-urban areas. All banks registered under the Cooperative Societies Act, 1912 are considered co-operative banks. These are banks run by an elected managing committee with provisions of members’ rights and a set of “communally developed and approved bylaws and amdendments.”

In the urban centers, they mainly finance entrepreneurs, small businesses, industries, self-employment and cater to home buying and educational loans. Likewise, co-operative banks in the rural areas primarily cater to agricultural-based activities, which include farming, livestocks, dairies and hatcheries etc. They also extend loans to small scale units, cottage industries, and self-employment activities like artisanship.

Unlike commercial banks, who are driven by profit, co-operative banks work on a “no profit, no loss” basis. These are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949 and Banking Laws (Application to Co-operative Societies) Act, 1965.

Regional Rural Banks

Regional Rural Banks or RRBs, simply put, serve the rural areas and agricultural sectors with basic banking and adequate financial services. They were set up in 1975, based on the recommendations of a committee. Based in Moradabad, Prathama Bank, established on 2 October 1975, is the first RRB to open in India. It was sponsored by Syndicate Bank. The RRBs are owned by the central government (50%), the state government (15%) and the sponsor bank (35%). Several commercial banks have sponsored RRBs. Prominent examples include the Maharashtra Gramin Bank (sponsored by the Bank of Maharashtra) and the Himachal Gramin Bank (sponsored by Punjab National Bank). RRBs were set up to eliminate other unorganized financial institutions like money lenders and supplement the efforts of co-operative banks etc.

Types of Banks in India (in Hindi)

These functions of banks are explained in following paragraphs of this article.

A. Primary Functions of Banks ↓

The primary functions of a bank are also known as banking functions. They are the main functions of a bank.
These primary functions of banks are explained below.

1. Accepting Deposits

The bank collects deposits from the public. These deposits can be of different types, such as :-
Saving Deposits
Fixed Deposits
Current Deposits
Recurring Deposits
a. Saving Deposits

This type of deposits encourages saving habit among the public. The rate of interest is low. At present it is about 4% p.a. Withdrawals of deposits are allowed subject to certain restrictions. This account is suitable to salary and wage earners. This account can be opened in single name or in joint names.

b. Fixed Deposits

Lump sum amount is deposited at one time for a specific period. Higher rate of interest is paid, which varies with the period of deposit. Withdrawals are not allowed before the expiry of the period. Those who have surplus funds go for fixed deposit.

c. Current Deposits

This type of account is operated by businessmen. Withdrawals are freely allowed. No interest is paid. In fact, there are service charges. The account holders can get the benefit of overdraft facility.

d. Recurring Deposits

This type of account is operated by salaried persons and petty traders. A certain sum of money is periodically deposited into the bank. Withdrawals are permitted only after the expiry of certain period. A higher rate of interest is paid.

2. Granting of Loans and Advances

The bank advances loans to the business community and other members of the public. The rate charged is higher than what it pays on deposits. The difference in the interest rates (lending rate and the deposit rate) is its profit.
The types of bank loans and advances are :-
Overdraft
Cash Credits
Loans
Discounting of Bill of Exchange
a. Overdraft

This type of advances are given to current account holders. No separate account is maintained. All entries are made in the current account. A certain amount is sanctioned as overdraft which can be withdrawn within a certain period of time say three months or so. Interest is charged on actual amount withdrawn. An overdraft facility is granted against a collateral security. It is sanctioned to businessman and firms.

b. Cash Credits

The client is allowed cash credit upto a specific limit fixed in advance. It can be given to current account holders as well as to others who do not have an account with bank. Separate cash credit account is maintained. Interest is charged on the amount withdrawn in excess of limit. The cash credit is given against the security of tangible assets and / or guarantees. The advance is given for a longer period and a larger amount of loan is sanctioned than that of overdraft.

c. Loans

It is normally for short term say a period of one year or medium term say a period of five years. Now-a-days, banks do lend money for long term. Repayment of money can be in the form of installments spread over a period of time or in a lumpsum amount. Interest is charged on the actual amount sanctioned, whether withdrawn or not. The rate of interest may be slightly lower than what is charged on overdrafts and cash credits. Loans are normally secured against tangible assets of the company.

d. Discounting of Bill of Exchange

The bank can advance money by discounting or by purchasing bills of exchange both domestic and foreign bills. The bank pays the bill amount to the drawer or the beneficiary of the bill by deducting usual discount charges. On maturity, the bill is presented to the drawee or acceptor of the bill and the amount is collected.

squareB. Secondary Functions of Banks ↓

The bank performs a number of secondary functions, also called as non-banking functions.
These important secondary functions of banks are explained below.

1. Agency Functions

The bank acts as an agent of its customers. The bank performs a number of agency functions which includes :-
Transfer of Funds
Collection of Cheques
Periodic Payments
Portfolio Management
Periodic Collections
Other Agency Functions
a. Transfer of Funds

The bank transfer funds from one branch to another or from one place to another.

b. Collection of Cheques

The bank collects the money of the cheques through clearing section of its customers. The bank also collects money of the bills of exchange.

c. Periodic Payments

On standing instructions of the client, the bank makes periodic payments in respect of electricity bills, rent, etc.

d. Portfolio Management

The banks also undertakes to purchase and sell the shares and debentures on behalf of the clients and accordingly debits or credits the account. This facility is called portfolio management.

e. Periodic Collections

The bank collects salary, pension, dividend and such other periodic collections on behalf of the client.

f. Other Agency Functions

They act as trustees, executors, advisers and administrators on behalf of its clients. They act as representatives of clients to deal with other banks and institutions.

2. General Utility Functions

The bank also performs general utility functions, such as :-
Issue of Drafts, Letter of Credits, etc.
Locker Facility
Underwriting of Shares
Dealing in Foreign Exchange
Project Reports
Social Welfare Programmes
Other Utility Functions
a. Issue of Drafts and Letter of Credits

Banks issue drafts for transferring money from one place to another. It also issues letter of credit, especially in case of, import trade. It also issues travellers' cheques.

b. Locker Facility

The bank provides a locker facility for the safe custody of valuable documents, gold ornaments and other valuables.

c. Underwriting of Shares

The bank underwrites shares and debentures through its merchant banking division.

d. Dealing in Foreign Exchange

The commercial banks are allowed by RBI to deal in foreign exchange.

e. Project Reports

The bank may also undertake to prepare project reports on behalf of its clients.

f. Social Welfare Programmes

It undertakes social welfare programmes, such as adult literacy programmes, public welfare campaigns, etc.

g. Other Utility Functions

It acts as a referee to financial standing of customers. It collects creditworthiness information about clients of its customers. It provides market information to its customers, etc. It provides travellers' cheque facility.

Roles and Functions Of Banks in India (in Hindi)

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Lessons

7 lessons • 1h 23m