BANKING SYSTEM

What is BANK?
A financial institution and a financial intermediary

that accepts deposits and channels those deposits into lending activities.
The earliest known state deposit bank, Banco di

San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy.

BANKING:
Accepting deposits from public/others(deposits).

Lending money to public(loans).

Transferring money from one place from

another(remittances). Acting as a trustees. Government business. Keeping valuables in safe custody.

CHANNELS:
Automated Teller Machines A branch is a retail location Call centre Mail Mobile banking Online banking Relationship Managers Video banking (via a remote video and audio

connection).

Types Of Banks
BANK

Private

Public

Co-operative

Development

What are Private banks?

Private banking is banking, investment

and other financial services provided by banks to private individuals investing sizable assets. The term "private" refers to the customer service being rendered on a more personal basis than in mass-market retail banking, usually via dedicated bank advisers. It should not be confused with a private bank, which is simply a nonincorporated banking institution.

Private sector banks

ICICI Bank

AXIS Bank CITI Bank

ABN-AMBRO

What are public bank?

Among the Public Sector Banks in India, United Bank of India is one

of the 14 major banks which were nationalised on July 19, 1969.

In the Public Sector Banks, the United Bank of India Ltd., was

formed in 1950 with the amalgamation of four banks viz. Comilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932).

Public Sector banks

Bank of India

Andhra Bank

Punjab National Bank

Central Bank of India

CO-OPERATIVE BANK
The co-operative banks in India started

functioning almost 100 years ago . The co-operative bank is an important constituent of the Indian financial systems. They are setup to provide easy loans to farmers or other persons to setup his business. They are non profitable banks.

Some co-operative banks

IDBI Bank

IFCI Bank
Apex Bank

Development Bank
These banks are mainly used for developing

industries and countries industries and countries Some Examples: Federal Bank HDFC Bank HSBC Bank Indian Overseas bank

BUSINESS MODEL
Deposits

BANK

Pay/Charge Interest

Customers

Loans

Economic Functions
Issue of money
Netting and settlement of payments Credit intermediation

Maturity transformation (they borrow short and

lend long). Money creation.

Bank Crisis
Liquidity risk Credit risk Interest rate risk

Regulation
Commercial banks are regulated by government

entities and require a special bank license to operate. The regulator is typically also a participant in the market, being either a publicly or privately governed central bank. Central banks also typically have a monopoly on the business of issuing banknotes. Banking law is based on a contractual analysis of the relationship between the bank and the customer.

Why banks in India are facing difficulty in getting deposits?

Two points for what was happening in banking and investment sector in the last 5 yearsIncreased consumerism: If we look at the consumption pattern in last 5 years, people were moving from being savers to consumers. Alternatives and risks: People were looking for more alternatives like mutual funds, different insurance schemes, stock market, etc.

Sources of Bank:
Long-Term Sources: Tier one and Tier two Capital in the form of equity/subordinate debts/debentures/preference shares. Long-term fixed deposits generated from public and corporate clients, financial institutions, and mutual funds, etc. Long-term borrowings from financial institutions like NABARD/SIDBI.

Short-Term Sources:
Call money market, i.e., funds generated

among inter banking transactions where there is online trading of money between bankers. Fixed deposits generated from public and corporate clients, FIs, and MFs, etc. Market-linked borrowings from RBI. Borrowing from RBI under Repo (Repurchase option). Short and medium-term fixed deposits generated from public and corporate clients, mutual funds, and financial institutions, etc.

Analyze the situation of present scenario for the banks:

This is not the right time to generate the funds

from long-term sources due to the bad market scenario. RBI borrowings and placing short term papers is not the best way to generate funds as the mutual funds and FIs are facing acute pressure due to withdrawals from the foreign investors including NRIs. This is a very good time to keep money in a 2- to 3-year lock deposit with nationalized banks. You may be offered 10.50 to 10.75%. It would be 0.25-0.50% higher in case of the private/foreign and co-operative banks.

I would like to give all credit to the regulatory system in India, which has withstood to the acute pressure on banking sector. You would remember the co-operative bank fiasco 3 years back and now foreign and private banks are under scanner. Thanks to the mature regulatory system, we are relatively safe as far as banking in India is concerned.