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ROLE of Commercial Banks in Financial Market

INTERNET BANKING
The internet Banking refers to the banking services provided by the banks over the
internet, some of these services include paying of bills, the funds transfer, viewing
account statement.
The banks also deliver their latest products and services over the internet, Internet
banking is performed through a computer system or similar devices that can connect to
the banking site via the internet.

ADVANTAGES OF INTERNET BANKING


The banks that offer the internet banking are open for the business transactions
anywhere a client might be as long as there is Internet connection, apart from the periods
of website maintenance, The services are available 24 hours a day and 365 days round
the year.

If the internet connection is unavailable, the customer services are provided round the
clock via the telephone, where the actual time account balances and the information are
availed, this hastens the banking processes hence increasing their efficiency and
effectiveness.
The online banking allows the automatic funding of accounts from the long-
established bank accounts via the electronic funds transfers, And the client can monitor
his spending via a virtual wallet through the certain banks and the applications and
enable the payments.
The speed of transaction is faster relative to use of ATM’s or the customary
banking, The online banking allows for easier updating and maintaining of direct
accounts, The time for changing mailing address is greatly reduced, ordering of
additional checks is availed and provision of actual time interest rates.
The accounts can be automatically funded from a traditional bank account via the
electronic transfer, most direct banks offer unlimited transfers at no cost, including
those destined for outside financial institutions, they will also accept the direct deposits
and withdrawals that you authorize such as the payroll deposits and the automatic bill
payment.
The online accounts are easy to set up and require no more information than a traditional
bank account, many offer option of inputting your data online or downloading the forms
and mailing them in.

The online banking is also environmentally friendly, the electronic


transmissions require no paper, So, they reduce the vehicle traffic and they are virtually
pollution free, and they also eliminate the need for the buildings and the office
equipment.
It is available all the time, you can perform your tasks from anywhere and at any time,
even in night when the bank is closed or on holidays, The only thing you need to have
is an active internet connection.
It is fast and efficient, the funds get transferred from one account to the other very fast,
and you can also manage several accounts easily through the internet banking.

COMPLEX ENCRYPTION SOFTWARE


The complex encryption software is used to protect the account information, there are
no perfect systems, So, the accounts are prone to the hacking attacks, the phishing, the
malware and the illegal activities.
The online banking is generally secure but it isn’t always secure, the identity theft is
running rampant, and the banks are by no means immune. And when your information
is compromised, It can take months or even years to correct the damage, And it can cost
you thousands of dollars.
The customer service can be below the quality that you’re used to, some people take
comfort in being able to talk to another human being face-to-face if they experience a
problem, although most major banks employ a dedicated customer service department
specifically for online users, going through the dreaded telephone menu can still be
quite irritating to many.
Not all the online transactions are immediate, the online banking is subject to the same
business day parameters as the traditional banking, So, printing out and keeping the
receipts is still very important, even when banking online.
Identity theft is a significant concern but some online banks take this risk more seriously
than others, before opening an online account, thoroughly investigate the bank’s
security policies and protections to ensure they meet your expectations.
The security is the biggest concern surrounding internet banks, with the consumers
worrying that the hackers will get into their account and spend their money.

FEATURES OF INTERNET BANKING


 Check Account Statement
 Transfer Funds
 Open a Fixed Deposit
 Pay Utility Bills
 Open Deposits
 Recharge prepaid mobile/DTH and a lot more.
 Buy General Insurance
 Pay Taxes
 And many more financial and non-financial services

NABARD – NATIONAL BANK FOR AGRICULTURAL AND RURAL


DEVELOPMENT
Set up in 1982, committed to Rural Prosperity through intervention of credit and
developmental activities.
MISSION
Promoting sustainable and equitable agriculture and rural development through
effective credit support, related services,
institution building and other innovative initiatives. In pursuing this mission, NABARD
focuses its activities on:
Credit functions, involving preparation of potential-linked credit plans annually for all
districts of the country for identification of credit potential, monitoring the flow of
ground level rural credit, issuing policy and operational guidelines to rural financing
institutions and providing credit facilities to eligible institutions under various
programmes
Development functions, focusing on overall development by way of capacity building
and income generating interventions aimed at supplementing the credit functions as
well as making credit more productive
Supervisory functions, ensuring the proper functioning of cooperative banks and
regional rural banks
Functions of NABARD-Refinance
Prod. credit (ST)
Mainly for RRBs and Cooperatives
PURPOSE-
I. Agricultural operations or the marketing of crops, or
II. The marketing and distribution of inputs necessary for agriculture or rural
development,
iii. Any other activity for the promotion of or in the field of agriculture or rural
development,
iv. the production or marketing activities of artisans or of small-scale industries,
industries in the tiny and decentralised sector, village and cottage industries or of those
engaged in the field of handicrafts and other rural crafts.
INVESTMENT CREDIT
1.medium term conversion loans for production credit,
2.MT and LT project lending
3.Loan to State Govt. for share capital contribution
4.Direct financing
4a. Rediscounting bills of exchange and promissory note

OTHER FUNCTIONS
NABARD is charged with the responsibility of co-ordinating its operations with those
of other institutions engaged in the field of rural development.
NABARD to provide facilities for training, dissemination of information and promotion
of
research in the field of rural banking, agriculture and rural development.
In the discharge of these functions, NABARD may also collect such credit information
as it may require and share the same with the Central Government and RBI.

INDUSTRIAL AND DEVELOPMENT BANKS


INDUSTRIAL FINANCE CORPORATION OF INDIA:
Government of India set up the Industrial Finance Corporation of India (IFCI) in July
1948 under a special Act. This is the first financial institution set up in India with the
main object of making medium and long term credit to industrial needs.

THE FUNCTIONS OF THE IFCI BASE AS FOLLOWS:

(i) The corporation grants loans and advances to industrial concerns.

(ii) Granting of loans both in rupees and foreign currencies.


(iii) The corporation underwrites the issue of stocks, bonds, shares etc.

(iv) The corporation can grant loans only to public limited companies and co-
operatives but not to private limited companies or partnership firms.

IDBI BANK (HINDI:आई.डी.बी.आई बैंक) is an Indian government-owned


financial service company, formerly known as Industrial Development Bank of India,
headquartered in Mumbai, India. It was established in 1964 by an Act of Parliament to
provide credit and other financial facilities for the development of the fledgling Indian
industry.

It is currently 10th largest development bank in the world in terms of reach, with 3350
ATMs, 1853 branches, including one overseas branch at Dubai, and 1382 centers. It is
one of 27 commercial banks owned by the Government of India.

INDUSTRIAL RECONSTRUCTION BANK OF INDIA (IRBI)


To provide financial assistance as well as to revive and revitalise sick industrial units in
public/private sectors, an institution called the Industrial Reconstruction Corporation of
India (IRCI) was set up in 1971 with a share capital of Rs. 10 crores.

In March 1985, it was converted into a statutory corporation called the Industrial
Reconstruction Bank of India (IRBI), with an authorised capital of Rs. 200 crores and
a paid-up capital of Rs. 50 crores.

FUNCTIONS:
i. To provide financial assistance to sick industrial units.

ii. To provide managerial and technical assistance to sick industrial units,

iii. To secure the assistance of other financial institutions and government agencies for
the revival and revitalisation of sick industrial units,

iv. To provide merchant banking services for amalgamation, merger, reconstruction,


etc.,

v. To provide consultancy services to the banks in the matter of sick units, and

vi. To undertake leasing business.

INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA:


Industrial Credit and Investment Corporation of India (ICICI) was established in 1955
as public limited company under Indian Company Act, for developing medium and
small industries of private sector.

Functions

 Long term and medium term loans both in terms of rupee and foreign currency.

 Participating in equity capital and in debentures.

 Underwriting new issues of shares and debentures.

 Guarantee to suppliers of equipment and foreign loaners.

The National Small Industries Corporation Ltd. (NSIC), an ISO 9000 certified
company, since its establishment in 1955, has been working to fulfill its mission of
promoting, aiding and fostering the growth of small-scale industries and industry related
small-scale services/businesses in the country.

Its main functions are to:

a. Provide machinery on hire-purchase scheme to small-scale industries.

b. Provide equipment leasing facility.

c. Help in export marketing of the products of small-scale industries.

d. Participate in bulk purchase programme of the Government.

e. Develop prototype of machines and equipment to pass on to small-scale industries


for commercial production.

f. Distribute basic raw material among small-scale industries through raw material
depots.

g. Help in development and up-gradation of technology and implementation of


modernization programmes of small-scale industries.

h. Impart training in various industrial trades.

i. Set up small-scale industries in other developing countries on turn-key basis.

j. Undertake the construction of industrial estates.

Small Industries Development Bank of India (SIDBI) was established as wholly


owned subsidiary of Industrial Development Bank of India (IDBI) under the small
Industries Development of India Act 1989. It is the principal institution for promotion,
financing and development of industries in the small-scale sector. It also coordinates
the functions of institutions engaged in similar activities. For this purpose, SIDBI has
taken over the responsibility of administrating Small Industries Development Fund and
National Equity Fund from IDBI.

The objectives of SIDBI


In the setting up of SIDBI, the main purpose of the government was to ensure larger
flow of assistance to the small-scale units. To meet this objective, the immediate thrust
of the SIDBI was on the following measures:

(i) initiating steps for technological upgradation and modernisation of existing units;

(ii) expanding the channels for marketing the products of the small scale sector; and

(iii) promotion of employment-oriented industries, especially in semi- urban areas to


create more employment opportunities and thereby checking migration of population to
urban areas.

FUNCTIONS OF SIDBI
SIDBI provides assistance to the small-scale industries sector in the country through the
existing banking and other financial institutions, such as, State Financial Corporations,
State Industrial Development Corporations, commercial banks, cooperative banks and
RRBs. etc. The major functions of SIDBI are given below:

(i) It refinances loans and advances provided by the existing lending institutions to the
small-scale units.

(ii) It discounts and rediscounts bills arising from sale of machinery to and
manufactured by small-scale industrial units.

(iii) It extends seed capital/soft loan assistance under National Equity Fund, Mahila
Udyam Nidhi and Mahila Vikas Nidhi and seed capital schemes.

(iv) It grants direct assistance and refinance loans extended by primary lending
institutions for financing exports of products manufactured by small-scale units.

(v) It provides services like factoring, leasing, etc. to small units.

(vi) It extends financial support to State Small Industries Corporations for providing
scarce raw materials to and marketing the products of the small-scale units.

(vii) It provides financial support to National Small Industries Corporation for


providing; leasing, hire purchase and marketing help to the small-scale units.
LAND DEVELOPMENT BANKS IN INDIA: STRUCTURE, WORKING
AND PROGRESS OF LDBS

Indian farmers need three types of credit, viz., short-term, medium-term and long-term.
Their short-term and medium-term credit requirements are fulfilled by the co-operative
banking institutions like PACs, CCBs and SCBs.

The Land Development Banks (LDBs) are essentially co-operative institutions. All the
LDBs are registered under the Co-operative Societies Act. In a strict sense, however,
they are semi co-operatives. In fact, they are limited liability associations of agricultural
borrowers, as their members have limited liability. Further, unlike other co-operatives,
LDBs do not have personal involvement in their functioning.

The LDBs provide long-term loans to the agriculturists for permanent improvements on
land. They usually charge 9 per cent interest. They grant loans against the security of
land or other agricultural property. Loans are usually given on the first mortgage and
sometimes even on the second mortgage of land or agricultural property. Generally,
they give loans up to 50 per cent of the market value of the mortgaged property.

SSI

(I) SMALL-SCALE INDUSTRIES:

These are the industrial undertakings having fixed investment in plant and machinery,
whether held on ownership basis or lease basis or hire purchase basis not exceeding Rs.
1 crore.

Characteristics of Small-Scale Industries:

(i) Ownership:

Ownership of small scale unit is with one individual in sole-proprietorship or it can be


with a few individuals in partnership.

(ii) Management and control:

A small-scale unit is normally a one man show and even in case of partnership the
activities are mainly carried out by the active partner and the rest are generally sleeping
partners. These units are managed in a personalised fashion. The owner is activity
involved in all the decisions concerning business.

(iii) Area of operation:

The area of operation of small units is generally localised catering to the local or
regional demand. The overall resources at the disposal of small scale units are limited
and as a result of this, it is forced to confine its activities to the local level.
(iv) Technology:

Small industries are fairly labour intensive with comparatively smaller capital
investment than the larger units. Therefore, these units are more suited for economics
where capital is scarce and there is abundant supply of labour.

(v) Gestation period:

Gestation period is that period after which teething problems are over and return on
investment starts. Gestation period of small scale unit is less as compared to large scale
unit.

(vi) Flexibility:

Small scale units as compared to large scale units are more change susceptible and
highly reactive and responsive to socio-economic conditions.

They are more flexible to adopt changes like new method of production, introduction
of new products etc.

(vii) Resources:

Small scale units use local or indigenous resources and as such can be located anywhere
subject to the availability of these resources like labour and raw materials.

(viii) Dispersal of units:

Small scale units use local resources and can be dispersed over a wide territory. The
development of small scale units in rural and backward areas promotes more balanced
regional development and can prevent the influx of job seekers from rural areas to cities.

Objectives of Small Scale Industries:

The objectives of small scale industries are:

1. To create more employment opportunities with less investment.

2. To remove economic backwardness of rural and less developed regions of the


economy.

3. To reduce regional imbalances.

4. To mobilise and ensure optimum utilisation of unexploited resources of the country.

5. To improve standard of living of people.

6. To ensure equitable distribution of income and wealth.


7. To solve unemployment problem.

8. To attain self-reliance.

9. To adopt latest technology aimed at producing better quality products at lower


costs.

What is RTGS?

RTGS stands for real time gross settlement, which means that it enables money to move
from one bank to another on a real time and gross basis. Simply put, real time means
the beneficiary bank receives the instructions for fund transfer immediately and gross
means that it is not bunched with any other transaction and settlements of funds transfer
instructions happen individually. Since the funds settlement takes place in the books of
the Reserve Bank of India (RBI), keep in mind that the payments are final and
irrevocable.

What is Neft?

Neft stands for National Electronic Funds Transfer and is a payment system which
facilitates one-to-one funds transfer. Like RTGS, Neft also transfers funds from one
bank, but unlike RTGS the settlement takes place in batches (that may include transfers
from various individuals) rather than individually. The batches are settled in hourly time
slots.

How is RTGS different from Neft?

Timing: As mentioned above, Neft operates in hourly batches. Currently, it has 11


settlements from 9am to 7pm on weekdays and five settlements from 9am to 1pm on
Saturdays. So, in case you initiate a transaction after a settlement time you have no
option but to wait till the next settlement time. But that’s not the case with RTGS
transactions, since they are processed constantly throughout the RTGS business hours.
The service window for RTGS at banks is available from 9am to 4.30pm on week days
and from 9am to 1.30pm on Saturdays for settlement at the RBI end. Keep in mind that
the timings that each bank follows may vary.
Amount: As far as Neft goes, it does not have a minimum or maximum limit of amount
you can transfer. But the maximum amount per transaction is limited to Rs 50,000 for
cash-based remittance and remittance to Nepal.
As far as RTGS goes, it is mostly meant for large transactions. The minimum amount
that can be remitted through it is Rs 2 lakh. RTGS does not have an upper ceiling for
transactions.
Charges: For Neft, inward transactions (when you receive funds via Neft) are free, as
no charges are to be levied from the person to whom fund are being transferred to. When
you use Neft to make an outward transaction (when you send funds via Neft) at a bank
branch for amounts up to Rs 1 lakh, the charge is up to Rs 5 plus service tax. For
transactions above Rs 1 lakh and up to Rs 2 lakh, the charge is up to Rs 15 plus service
tax. for transactions above Rs 2 lakh, the charges can’t exceed Rs 25 plus service tax.
For RTGS, inward transactions (when you receive funds through RTGS) are free. For
outward transactions (when you send funds via RTGS), if the amount is between Rs 2
lakh and Rs 5 lakh, the charges will be up to Rs 30 per transaction. If the amount
transferred is above Rs 5 lakh, the charges can’t exceed Rs 55 per transaction.

Personal identification number (PIN)

A personal identification number (PIN) is a numerical code used in many electronic


financial transactions. Personal identification numbers (PINs) are usually used in
conjunction with usernames or other passwords. They are also usually required when
using bank debit or credit cards, and most banks or financial institutions issue PINs
separately from the cards through the mail.