S.Y.B.B.

I Group 2

Significant change in the operations of banks and development financial institutions. Deregulatioon of interest rates, disintermediation and increasing participation of banks in project finance. DFIs were setup to meet the long-term financing needs of a project. With DFIs making forays into the realm of working capital the traditional operational division between banks and DFIs became increasingly blurred.

Development banks are specialized financial institutions. They provide medium and long-term finance to the industrial and agricultural sector. They provide finance to both private and public sector They do term lending and investment in securities and other activities. They even promote saving and investment habit in the public. As per Banking Development banks are financial institutions established to lend (loan) finance (money) on subsidized interest rate. Such lending is sanctioned to promote and develop important sectors like agriculture, industry, import-export, housing and allied activities

Lay Foundations for Industrialization Meet Capital Needs Need for Promotional Activities Help Small and Medium Sectors To accelerate the growth of the economy. To sub serve the social goals planned objectives, products and targets at national planning level.

An institution which accepts deposits , makes business loans , and offers related services . Commercial banks also allow for a variety of deposits accounts , such as checking, savings , and time deposits These institutions are run to make a profit and owned by a group of individuals, yet some may be member of the Federal Reserve System While commercial banks offer services to individuals, they are primarily concerned with receiving deposits and lending to businesses

A Financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries Most financial institutions are regulated by the government . Financial institutions provide service as intermediaries of financial markets. They are responsible for transferring funds from investors to companies in need of those funds. Financial institutions facilitate the flow of money through the economy Since all people depend on the services provided by financial institutions, it is imperative that they are regulated highly by the federal government. For example, if a financial institution were to enter into bankruptcy as a result of controversial practices, this will no doubt cause wide-spread panic as people start to question the safety of their finances. Also, this loss of confidence can inflict further negative externalities upon the economy

Important activities of Banks and Financial Institution

Commercial Investment banking or banking similar in nature BANKS Accepting deposits , Granting loans and advances Fl s granting long term loans and advances , shortterm loans and advances , working capital finance Investment in securities , underwriting issue , loan syndication Underwritings and subscribing directly to shares / bonds of corporates Other financial services Factoring , leasing , hire purchase , mutual fund etc Commercial banking , credit rating , brokerage , H.F , project consultancy

FLS

High level of non performing assets Lower spreads due to extensive competition Increasing competition from commercial banks in retail financial market High competition in the market to attract top rated borrowers at low rates Low demand for long term funds , due to absence of heavy project investment especially in the area of infrastructure

Reserve requirement Permissible activities Disposal of non banking assets Composition of the board Nature of subsidiaries Licensing Branch network Restriction on investment

It has suggested setting up of a standing (coordination) committee with banks, financial institutions, and RBI as members to achieve the coordination. The approach to universal banking must be guided by international experience and domestic experience KWG recommended that a suitable level of SLR may be stipulated for DFIs on incremental outstanding fixed deposit raised from the public

ICICI( merged with ICICI bank in march 30/2002 ) established in 1955 facilitated the economic objective. ICICI played a highly significant role in assisting industrial development through long term lending and variety of other services to industry The Huge shift towards corporate financing has come at the expense of financing the projects of traditional manufacturing sector . 40 % of ICICI total portfolio today is deployed towards corporate financing . To put that in perspective around 60 % of the incremental lending over the last 4 yrs has been directed towards corporates finance

IDBI was established on July 1st 1964 under an act of the parliament as a wholly owned subsidiary of the RBI

IDBI provided financial assistance in rupees and foreign currency for green field projects as also for expansion, modernization and diversification projects
IDBI act 2003 was passed in parliament in 2003 the act provides for repeal of IDBI act , corporatization of IDBI ( with majority Govt. holding current share 58.47 % ) and transformation into commercial bank IDBI enlarged the basket of products and services covering almost the entire spectrum of industry activities including manufacturing and services

the Merger was approved by the shareholders of both companies in Jan 2002 , by the high court of Gujarat in march 2002 , and by high court of judicature at Mumbai and the RBI in April 2002
While merger became effective on may 3, 2002 in accordance with the provision of the scheme of amalgamations and terms and approval of the RBI , the appointed date for the merger was march 30th 2002 . The merger created India first universal bank and the second largest bank in the country with total assets of about 1 trillion and about 540 branches and offices and about 1000 ATMs The merged entity has now an access to low cost deposits , higher income and participation in the payment system , entry into new business segments , higher market share in various segments especially in fee based services and vast talent pool.

Important channel for mobilizing business in insurance companies and an income sourcing activity for the universal bank. the overlap between banking and insurance is that, they can be competitors on one hand and hence can substitute each other, whereas on the other hand, they can complement each other. It helps to build the relation of customer for a longer period. It contributes to profit performance of both banks and insurance companies. It creates competitive advantages through cross selling synergy.