Bank

A banker or bank is a financial institution that acts as a payment agent for customers, and
borrows and lends money. Banks act as payment agents by conducting checking or current
accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques
deposited to customer’s current accounts. Banks also enable customer payment via other
payment methods such as telegraphic transfers, and ATM.

Banks borrow money by accepting funds deposited on current account, accepting term deposits
and by issuing debt securities such as banknotes and bonds. Banks lend money by making
advances to customers on current account, by making installment loans, and by investing in
marketable debt securities and other forms of lending.

Banks provide almost all payment services, and a bank account is considered indispensable by
most businesses, individuals and governments. Non-banks that provide payment services such as
remittance companies are not normally considered an adequate substitute for having a bank
account.

Banks borrow most funds borrowed from households and non-financial businesses, and lend
most funds lent to households and non-financial businesses, but non-bank lenders provide a
significant and in many cases adequate substitute for bank loans, and money market funds, cash
management trusts of other non-bank financial institution in many cases provide and adequate
substitute to banks for lending savings to.

Definition
Under English law, a bank is defined as a person who9 carries on the business of banking, which
s specified as:

 Conducting current accounts for customers

 Paying cheques drawn on a given person, and

 Collecting cheques for their customers.

In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law
in relation to negotiable instruments, including cheques, and this Act contains a statutory
definition of the term banker: banker includes a body of persons, whether incorporated or not,
who carry on the business of banking (Section 2, Interpretation). Although this definition seems
circular, it is actually functional, because it ensures that the legal basis for bank transactions such
as cheques do not depend on how the bank is organized regulated.

Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with
the Government of Indiaholding a stake), 31 private banks (these do not have government stake; they
may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined
network of over 53,000 branches and 49,000 ATMs. According to a report by ICRA Limited, a rating
agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the
private and foreign banks holding 18.2% and 6.5% respectively

Wider commercial role

However the commercial role of banks is wider than banking, and includes:

 Issue of banknotes (promissory notes issued by a banker and payable to bearer on

demand).

 Processing of payments by way of telegraphic transfer, EFTPOS, internet banking or

other means.

 Issuing bank drafts and bank cheques.

 Accepting money on term deposit.

 Lending money by way of overdraft, installment loan or otherwise.

 Providing documentary and standby letters of credit, guarantees, performance bonds,

securities underwriting commitments and other forms of off balance sheet exposures.

 Safekeeping of documents and other items in safe deposit boxes.

 Currency exchange.

 Sale, distribution or breakage, with or without advice, of insurance, unit trusts and similar
financial products as a “financial supermarket”.

Economic functions
The economic functions of banks include:

1. Issue of money, in the form of banknotes and current accounts subject to cheque or
payment at the customer’s order. These claims on banks can act as money because
they are negotiable and/or repayable on demand, and hence valued at par and
effectively transferable by mere delivery in the case of banknotes, or by drawing a
cheque, delivering it to the payee to bank or cash.

2. Netting and settlement of payments—banks act both as collection agent and paying
agents for customers, and participate in inter-bank clearing and settlement systems to
collect, present, be presented with, and pay payment instruments. This enables bank
to economies on reserves held for settlement of payments, since inward and outward
payments offset each other. It also enables payment flows between geographical areas
to offset, reducing the cost of settling payments between geographical areas.
 3. Credit Intermediation – banks borrow and lend back-to-back on their own account as
middle men.

4. Credit quality improvement – banks lend money to ordinary commercial and personal
borrowers (ordinary credit quality), but are high quality borrowers. The improvement
comes form diversification of the bank’s assets and the bank’s own capital which
provides a buffer to absorb losses without defaulting on its own obligations.
However, since banknotes and deposits are generally unsecured, if the bank gets into
difficulty and pledges assets as security to gray to get the funding it needs to continue
to operate, this puts the note holders and depositors in an economically subordinated
position.

5. Maturity transformation – banks borrow more on demand debt and short term debt,
but provide more along term loans. Bank can do this because they can aggregat3
issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g.
withdrawals and redemptions of banknotes), maintain reserves of cash, invest in
marketable securities that can be readily converted to cash if needed, and raise
replacement funding as needed form various sources (e.g., wholesale cash markets
and securities markets) because they have a high and more well known credit quality
that most other borrowers.

Law of banking

Banking law is based on contractual analysis of the relationship between the bank and the
customer. The definition of bank is governed above, and the definition of customer is any person
for whom the bank agrees to conduct an account.

The law implies right and obligations into this relationship as follows:

1. the bank account balance so the financial position between the bank and the customer,
when the account is in credit, the bank owes the balance to the customer, when the
account is over drawn the customer owes the balance to the bank.

2. The bank engages to ap0ay the customer’s cheques up to the amount standing to the
credit of the customer’s account, plus any agreed over draft limit.

3. The vanl a may not pay from the customer’s account without a mandate dome the
customer, e.g. a cheques draw by the customer.

4. The bank engartes to promptly collect the cheque deposited to the customer’s account as
the customer’s agent, and to credit the proceeds to the customer’s account.
 5. The bank has a right to combine the customer’s accounts, since each account is just as
aspect of the same credit relationship.

6. The bank has lien on cheques deposit to the customer’s account, to the extent that the
customer is indebted to the bank.

7. The bank must not disclose the details of the transactions going through the customer
account unless the customer consents, there is a public duty to disclose, the bank’s
interests require it, or under compulsion of law.

8. The bank must not closer a customer’s account without reasonable notice to the customer,
because cheques are outstanding in the ordinary.

These implied contractual terms may be modified by express agreement between the customer
and the bank. The statutes and regulations in force in the jurisdiction may also modify the above
terms and/ or create new right obligations or limitations relevant to the bank customer
relationship.

Entry regulation
Currently in most jurisdictions commercial banks are regulate by government entities and require
a special bank license to operate.

Usually the definition of the business of banking for the possess of regulations is extended to
include acceptance of deposits, even if they are not repayable to the customer’s order, however
money lending, by itself, is generally nor included in the definition.

Unlike most other regulated industries the regulator is typically also a participant in the marker,
I.e government owned bank (a central bank).

Central banks also typically have a monopoly on the business of issuing banknotes however ,
in some countries this is not the case, e.g. on the UK the financial services authority licenses
banks ansns some commercial banks, such as the Bank is Scotland, issue their own banknotes in
competitions with the Bank of England, the UKL government’s central bank. Some typed of
entity may vie partly or wholly exa\emp0t form bank license requirements and are regulated by
separate regulators, e.g. building societies and credit unions.
The requirements for the issue of bank license vary between jurisdictions but
typically include:

1. Minimum Capital

2. Minimum Capital Ratio

3. ‘Fit and proper’ requirements for the bank’s controllers’ owners, directors, and/ or
seniors officers.

4. Approval of the bank’s business plan as being sufficiently prudent and plausible.

Banking channels

Banks offer many different channels to access their banking and other services:

 A branch, banking centre or financial centre is a retail location where a bank or financial
institution offers a wide array of face to face service to its customers.

 ATM is a computerized telecommunications device that provides a financial institutions

customer’s method of financial transactions in a public spaced without the need fro a
human clerk or bank teller. Most banks now have more ATMs than branches and ATMs
are provided a wider range of services to a wider range of users. For example in Hong
Kong most ATMs enable anyone to deposit cash to any customer of the bank’s account
by feeding in the notes and entering the account number to be credited. Also most ATMS
enable card holder form other banks to get their account balance and withdraw cash, even
if the card is issued by a foreign bank.

 Mail is part of the postal system which itself is a system wherein written documents
typically enclosed if envelopes, and also small packages containing other matter, are
delivered to destinations around to the worked. This can be used to deposit cheques and
to send orders to the bank to pay money to third parties. Banks also normally use mail to
deliver account statements to customers.

 Telephone banking is a service profited by financials institution which allows its

customer to 0perform transactions over the telephone. This normally inched bill
payments for bills from major billers (e.g. for electricity).

 Online banking is a term used for performing transactions, payments etc. over the
internet through a bank credit union or building society’s secure website.

Types of banks

Banks’ activities can be divided into retail banking dealing directly with individuals and small
businesses; business banking’ providing services to mid- market business; corporate banking ‘
directed at large business entitles; private banking proving wealth management services to High
Net Worth individuals and families; and investment banking relating to activates on the financial
markets. Most banks are profit making, private enterprises. However, some are owned by
government, ore are non-profits.

Central banking is normally government owned banks, often changed with quasi- regulatory
responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They
generally provide liquidity to the banking system and act as lent\der of last resort in event of
crisis.

Types of retail banks

 Commercial bank; the arm uses for a normal bank to distinguish it form an investment
bank after the Great Depression, the U.S. congress required that banks only engage in
banking activities, whereas investment banks were limited to capital market activities
since the two no longer have to be under separate ownership, some use the term
“commercial bank” to refer to a bank or a division of a bank that mostly deals with
deposits and the loans form corporations of large businesses.

 Community banks; locally operated financial institutions that empower employees to

make local decisions to server their customers and the partners.

 Community develpenmt banks: regulated banks that provide financial services and credits
to undeserved markets or populations.

 Postal saving banks: saving banks associated with national postal’s systems.

 Private Banks: manage the assets of high net worth individuals.

 Offshore banks: banks located in jurisdiction with low taxations and regulation. Many
offshore banks are essentially private banks.

 Savings bank: in Europe, saving banks take their roots ion the 19 th or sometimes even 18th
century. Their originals objective was to provide easily assessable saving products to all
strata of the population. In some countries, saving banks were created on public initiative,
while in other socially committed individuals created foundations to put in others socially
committed individuals created foundations to put in place the necessary infrastructure.
Nowadays, European savings banks have kept there focus on retail banking: payments,
saving products credit and insurances for individuals oar small and medium sized
enterprises. Apart from thesis real focus, they also differ from enterprises. Apart form the
retail focus, they also differ from commercial banks by their broadly decentralized
distribution network, providing local and regional outreach and by their socially
responsible approach to business and society.

 Building societies and landesbanks: conduct retail banking.

 Ethical banks: banks that prioritize the transparency of all operations and make only what
they condoler to be socially responsible investments.
  Islamic banks: banks that transact according to Islamic principles.

Types of investment banks

 Investment banks “underwrite “(guarantee the sale of) stock and bond issues, trade for
their own account, make markets, and advise corporations on capitals markers activities
such as mergers and acquisitions.

 Merchant’s banks were traditionally banks which engaged in trace financial. The modern
definition, however, refer to banks which provide capitals to form in the dorm of shares
rather than loans. Unlike venture capital films, they tend no to invest t in new companies.

Both combined.

 Universal banks, more commonly known as and financial services company, engage in
several of these activities. Fir example, first bank (a very large bank) is involved in
commercial and retail lending, and its subsidiaries in tax havens offers offshore banking
services to customers in other counties. Other large financial institution is similarly
diversified and engage in multiple actives. In Europe and Asia, big banks are very
diversifies groups that among other services, also distribute insurance, hence the term
bank assurances it’s the term used to describe the sale if insurance products in bank. The
word is a combinations of “banque or bank “and assurance “signifying that both banking
and insurance are provided by the same corporate entity.

Other types of banks

Islamic banking

 Islamic banks adhere to the concepts of Islamic law. Islamic banking revolves around
several well established concepts which are based on Islamic canons. Since the concepts
of interest is forbidden is Islam, all a banking activities must avoid interest. Instead of
interest, the bank earns profit (mark- up) and fees fiinancing facilities that it extents to the
customers.

Bank crisis

Banks are susceptible to many forms for risk which have triggered occasional systemic crises.
Risks include liquidity risk that many depositors will request withdrawals beyond available
funds), credit risk ( the risk that those who owe money to the bank will not replay), and interest
rate risk( the risk that the bank will become unprofitable if fishing interest rates force it to pay
relatively more on its deposits than it receives on its loans), among others.

Banking crises have developed many times throughout history when one or more risks
materialize for banking sector as a whole. Prominent examples include the U.S. saving and loan
crisis in 1980s and early 1990s the Japanese banking crisis during the 1990s , the bank run that
occurred during the Great depression, and the recent liquidation by the central bank of Nigeria,
where about 25 banks were liquidated.
Profitability

A bank generates a profit from the differential between the level in interest it pays for deposits
and other sources of funds, and the level of interest it charges in its lending activities. This
difference is referred to as the spread between the cost off funds and the load interest rate.
Historically, profitability from lending activates has been cyclical and dependent on the needs
and strengths of loan customers. In recent history, investors have demanded a more stable of
revenue stream and banks have therefore placed more emphasis on transaction fees. Primarily
loan fees but also including service charges on an array of deposit activities and ancillary
services (international banking foreign exchange, insurance, investments, wire transfers etc.).
Lending activities however, still provide the bulk of commercial banks income.

In the past 10 years American banks have taken many measures to ensure that they remain
profitable whole responding to increasingly changing market conditions. First this includes the
Gramm-Leach – Bliley act, which allows banks again to merge with investment and insurance
and insurance houses. Merging banking, investment, and insurance fainting allows traditional
banks to respond to increasing consumer’s demands for “one-stop” shopping” by enabling cross
– selling of products (which, the clanks hope, will also increase profitability). Second, they have
expanded the use of risk-based pricing from business lending to customers that are considered to
be a higher credit risk and thus increased chance of default on loans. This helps to offset the
losses from bad loans, lowers the price of loans to those who have better credit histories, and
offers credit products to high risk customers who would otherwise been denied credit. Third,
they have south to increase the methods of payment processing available to the general public
and business clients. These products include debit cards, pre-paid cards, smart-cards, and credit
cards. These products make it easier for consumers to conveniently make transactions and
smooth their consumption over time (in some countries with under-developed financial systems,
it is still common to deal strictly in cash, including carrying suitcases filled with cash to purchase
a home). However, with convenience there is also increased risk that consumers will mismanage
their financial resources and accumulate excessive debt. Banks make money from card products
through interest payments and fees charged to consumers and transaction fees to companies that
accept the cards.

List of banks in India

Public sector banks

SBI Group:

State Bank of India, with its seven associate banks commands the largest banking resources in
India. SBI and its associate banks are:

 State Bank of India

 State Bank of Bikaner & Jaipur

  State Bank of Hyderabad

 State Bank of Indore

 State Bank of Mysore

 State Bank of Patiala

 State Bank of Saurashtra

 State Bank of Travancore

After the amalgamation of New Bank of India with Punjab National Bank, currently there are 19
nationalized banks in India:

 Allahabad Bank

 Andhra Bank

 Bank of Baroda

 Bank of India

 Bank of Maharashtra

 Canara Bank

 Central Bank of India

 Corporation Bank

 Dena Bank

 Indian Bank

 Indian Overseas Bank

 Oriental Bank of Commerce3

 Punjab & Sind Bank

 Punjab National Bank

 Syndicate Bank

 Union Bank of India

 United Bank of India

  UCO Bank of India

 Vijaya Bank

Private Sector Banks:

 Axis Bank (formerly UTI Bank)

 Bank of Rajasthan

 Bharat Overseas Bank

 Catholic Syrian Bank

 Centurion Bank of Punjab (merged with HDFC Bank)

 Cit Union Bank

 Development Credit Bank

 Dhanalakshmir Bank

 Federal Bank

 Kumfu Blade Bank

 Ganeseh Bank of Kurundwad

 HDFC Bank

 ICICI Bank

 IDBI Bank

 INudsInd Bank

 ING Vysya Bank

 Jammu & Kashmir Bank

 Karnataka Bank Limited

 Karur Vysya Bank

 Kotal Mahindra Bank

 Lakshmir Vilas Bank

  Lord Krishan Bank (now Centurion Bank of Punjab)

 Nainital Bank

 Ratnakar Bank

 Rupee Bank

 Saraswat Bank

 SBI COmemrcial & INternationalBan k

 South Indian Bank

 Tamilnad Mercantile Bank LTd.

 Thane Janata Sahakari Bank

 Bassein Catholic Bank

 United Western Bank (now IDBI Bank)

 YES Bank

 IDBI Bank

Foreign Banks:

 ABN AMRO Bank N.V.

 Abu Dhabi Commercial Bank Ltd.

 American Express Bank

 Antwerp Diamond Bank

 Arab Bangladesh Bank

 Bank International Indonesia

 Bank of AMericda

 Bank of Bahrain & Kuwait

 Bank of Ceylon

 Bank of Nova Scotia

  Bank of Tokyo Mitsubishi UFJ

 Barclays Bank

 BNP Paribas

 Calyon Bank

 China Trust Commercial Bank

 Cho Hung Bank

 Citribank

 DBS Bank

 Deutshe Bank

 HSBC (Nongkong & SInghai Banking Corporation)

 JP Morgan Chase Bank

 Krugn Thai Bank

 Mashreq Bank

 Mizuho Corporate Bank

 Oman International Bank

 Societe Generale

 Standard Chattered Bank

 State Bank of Mauritius

 Scotia

 Taib Bank

Total : 88 Banks.

Regional Rural Banks (RRBs)

 Adhiyaman grama bank

 Alaknanda gramin bank

 Aligarh gramin bank

 avadh gramin bank

 Balasore gramy a bank

 ballia kshetruiya gramin ank

 banaskantha mehsana gramoin bank

 Bareilly kshetriya gramin bank

 Bijapur grameena bank

 Bilaspur raipur kshetriya gramin bank

 Bolangir anchalik gramya bank

 Bundelkhand kshetriya gramin bank

 Bundi chittorgarh kshtriya gramin bank

 Cauvery grameen abank

 Chatitanya grameen bank

 Chambal kshetriya graminb bank

 Chamoparan kshetriya gramin bank

 Chhatrasal gramin bank

 Cuttack gramya bank

 Damoh panna dagar kshetriy gramin bank

 Devfipatzn kshtriy gramin bank

 Dhenkanal gramya bank

 Dungarpur banswara kshtriya gramion bank

 Ellaquai dehati bank

 Farrukhabad gramin bank

 Gaur gramin bank

 gurgoan gramin bank

 Hadoti kshetriya gramin bank

 Himachal gramin bank

 Hissar-sirsa kshetriya gramin bank

 Indore ujjain kshtriya gramin bank

 Jamnagar rajkot gramin bank

 Jaipur nagaur aanchalik gramin bank

 Jamina gramin bank

 Jhabua dhar kshtriya gramin bank

 Kakathiya gramena bank

 Kamraz rural bank

 Kanpur kshtriya gramin bank

 kapurthjala ferozpur kshtriya gramin bank

 kasha grmion bank

 Kisan Gramin Bank Budaun

 Kolar Gramin Bank

 Krishna Grameen Bank

 Kshetriya Gramin Bank Hoshangabad

 Kutch Gramkeen bank

 Malaprabha Grameena Bank

 Mandla Balaghat Kshtriya Gramin Bank

 Manjira Grameena Bank

 Marwar Ganganagar Bikaner Gramin Bank ( previously: marwar Gramin Bank)

 Mewar Aanchalik Gramin Bank

 Nagarjuna Grameena Bank

 Natravati Grameen Bank

 Nimar Grameen Bank

 North Kshetriya Gramin Bank

 North Malabar Gramin Bank

 Panchmahal Vadodara Gramin Bank

 Pandyan Grama Bank

 Pinakini Grameen Bank

 Pragjyotich gaonia Bankl

 Prathama Bank

 Raigarh Kshtriya Gramin Bank

 Rani Lakshmin Bai Kshetriya Gramin Bank

 Ratlam Mandsaur Ksdhtriya Gramin Bank Rayalaseema Gramneena Bank

 Rayalaseema Grameen Bank

 Rewa Sidhi Gramin Bank

 Sahyadri grmin Bank

 Samyut Kshetiya Grameen Bank

 Sangameshwara Grameena Bank

 Shahjahanpur Kshetriya Gramkin Bank

 Shivpuri Guna KShetriya Bank

 South Malabar Gramin Bank

 Sree Anantha Grameena Bank

 Sri Saraswati Grameen Bank

 Sri Viskha Grameena Bank

  Surat Bharuch Gramin Bank

 Thar Aancxhalik Gramin Bank

 Tripura Gramin Bank

 Tungabhadra Gramin Bank

 Vidur Gramin Bank

Reserve Bank Of India

The reserve bank of India (RBI) is the central bank of India and was established on april1, 1935
in accordance with the prevision of the Reserve Bank of India Act, 1934. Since its inception it
has been headquartered in Mumbai. Though originally privately owed, RBI has been fully
opened by the government of India since nationalization in 1949.

RBI is governed by a central boras (headed by a governor) appointed by the Central;

Government. The current government of RBI is Dr Y. Venugpal Reddy (who succeeded Dr.
Bimal Jalan on September 6, 2003). RBI has 22 regional offices across India.

 The reserve bank of India was set up ion the recommendations of the Hilton young
commission, the commission; the commission submitted its report in the year 1926,
though the bank was not set upon for nine years.

Main objectives:
Monetary authority

 Formulates implements and monitors the monetary policy.

 Objectively: maintaining price stability and ensuring adequate flow of credit to

productive sectors.

 Maintain optimum liquidity in the economy.

Regulator and supervisor of the financial system

 Prescribes board parameters of banking operations within which the country’s banking
and financial system functions.

 Objective: maintain public confidence in the system product depositors’ interest and
provide cost effective banking service to the public. The banking ombudamna Scheme
had been formulated by the reserve bank of India (RBI) for effective redresal of
complaints by bank customers.

Manager of exchange control

  Managers the foreign exchange management act 199.

 Objectives: to facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange markets in India.

Issuer of currency

 Issues and exchanges or destroys currency and coins not fit for circulation

 Objectives: the main objective is to give the public adequate supply of currency of good
quality and providing loan to commercial banks.

Developmental role

 Performs a wide range of promotional factions to support national objectives.

Related functions

 Banker to the government: performs merchant baking faction for the central and the
state governments: also their banker.

 Banker to banks: banking accounts of all schedule banks.

 Owner and operate of the depository (SGL) and exchange (NDS) for government
bonds.

There is now an international consequence about the need to focus the tasks of a central bank
upon central banking. RBI is for out of touch with such a principle owing to the sprawling
mandate described above.