FOUNDATIONS OF BANKING BLENDED COURSE – MODULE 3

STUDENT WORKBOOK

TABLE OF CONTENTS

Sr.No. Topic Page No1 Sales Management 12 Allied Services 193 Retail Credit 2345

Indian Financial SystemRegulatory Environment

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6 Trends in Banking 46

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SALES MANAGEMENT - STUDENT WORKBOOK

Objective:

To understand the sales process To apply the concepts in relationship management , cross selling and

selling To appreciate the universal application of sales techniques

Sub Topics: Understanding the concept of selling Sales Planning Sales Process

Pre Sale Activity Sales Process

Opening Developing a Need Proposing Eliminating doubt Closing the sale

Post sale servicing

Training Sequence

Activity Duration (in hours)

E-learning Post classroom

Complete the e-learning module on Bankers Selling Skills BuilderCASA simulator

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Pre Classroom

1. Collect brochures of Savings and Fixed deposits from different banks

2. Check product offering on the websites and other media

3. Check the range of products and services offered by banks

4. Check the special offers for High Net worth customers and NRI customers

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Classroom Activities1. Everyone is a salesperson

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2. Sales in everyday life3. Life cycle of a customer. Understanding customer

needs4. Features and benefits of Products5. Sales Planning – Demand Funnel – Group

discussion6. Sales Process – Role Play7. Cross Selling and Relationship Management –

Case studyStory TimeSummarising

Reference Books

Philip KotlerBanking Principles and Operations by Mr.M.N.Gopinath

CLASSROOM ACTIVITY

Activity 1: Everyone is a sales person

Just reflect for a minute:How many of us in this class are sales people?

Your answer might be that nobody is a sales person in class.

The truth is that all of us are selling everyday – consciously or unconsciously.

What are we selling?

Ideas, our wants, ourselves… can you think how?

What is the teacher selling?

Now that you have an idea, can you reflect and write down the names of some of the best sales persons?One more clue: Leaders sell their ideas to a large number of followers…

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Activity II – Sales in every day life

Read the scenarios given below – discuss in your groups and identify the sales process and the components of selling

Scenario 1 – Selling Good Health

Mira, a 30 year old housewife, is happy to know that there are vegetable shops adjacent to her new home. Her husband Sekhar had bought the new flat and they had moved in the day before. Mira takes her daughter Sweta alongwith her to the vegetable shop.

Mira sees four or five vegetable shops in a row in the adjacent street. As she approaches the first shop she finds there are two or three women bargaining with the shop keeper. The shopkeeper has a three month old beard, sports a dirty t shirt and is in an irritated mood arguing with the buyers. She takes a look at the vegetables which appear fresh. The shopkeeper hardly notices her and Sweta tugs her Sari to move on.

As Mira turns away, she sees a bright watermelon piece hanging from the third shop. The sign on top of the shop says “Sivam’s Good health Fruits and Vegetables” She walks towards the shop. The shopkeeper Sivam is clean shaven and is wearing clean clothes. He smiles brightly at Mira and Sweta.

Sivam: (smiling broadly) Good morning, welcome to good health! Looking at Sweta, welcome young lady; are you new to this area?

Sweta: Yes uncle, showing her hands towards the new block, we came there yesterday.

Sivam: This is a nice place. You will have lot of friends to play with. Which fruit, vegetables do you like?

Sweta: I like apple and potato. Where do you get these from?

Mira: (Smiling): Sweta, don’t trouble him. (Looking at Sivam) Can you give me one kg of potato and one kg onion?

Sivam: (Smiling) Sure madam, I will take out the best potatoes for the little girl. Here are the potatoes and onions. (He puts them in a big basket). (To Sweta) I get these fresh from our garden in the outskirts of the city.

(to Mira) Shall I give you apples? There are three varieties. The Kashmir apples are really good.

Mira: Ok, give me half a kg of apples

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Sivam: (weighing the apples), looking at the child - what is your name?

(Looking at Mira) Would you like some green vegetables? – Palak, beans, cabbage are fresh.

Mira: Sweta doesn’t like these vegetables

Sivam: Hi Sweta, would you like to be strong and play all games?

Sweta: Yes. I like to play cricket and tennis but the children in the park are big and I can’t play with them.

At that moment a bubbly youngster dashes in. “Hi uncle, give me two bundles of greens”

Sivam: Hi Arjun, how are you? Here are your greens.

Sivam: To Sweta, see how tall Arjun has grown. You can play with him and other children if you are strong and healthy. The greens will help you become strong.

Now can you catch this? He throws a small apple to her hand and she holds on to it.

Great. See you have already started catching. You eat green vegetables and you will become strong. You can play cricket with these boys.

Sweta: (beaming) Ok Ma, I will eat greens. Please make it tasty.

Sivam: (To Mira) These are fresh greens. You cook it with dhal and jeera, it will be very tasty and Sweta will like it. The vitamin A and iron in the greens is very good for children.

Mira: (Smiling) Ok give me one bundle. Let me try.

Sivam: Here is your bag madam. The total is Rs.80/-. And here is my card. Incase you are busy, you can give me a call, I will have the vegetables delivered at home.

Mira: Thank you

Sivam: (Smiling) Welcome madam. Bye Sweta, come again. I will get some more fresh apples for you from my garden. You will become strong and be able to play all games.

Discuss: Was Sivam selling vegetables or health? Do you think he is a successful salesman? What are the steps in the sales process that you can identify? Did you notice that Mira did not bargain about the price? Why?

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Scenario 2 – Selling Good Health

Akash knocks at the door of his neighbour Mr.Kapur, on a Sunday morning. Akash is a college student and works part time for a company as salesperson.

Akash: (Smiling cheerfully and in an enthusiastic tone) Good morning Mr.Kapur, I am your neighbour Akash. I live in B Block in the same compound. Can I have a few minutes of your time?

Mr.Kapur: Sure. Come in.

Akash: Is madam also in? Good to meet you both. I study in St. Peter’s college, and my parents are also working in a bank, we are out all day and have hardly visited our neighbours. Heard you are in textile business Sir.

Mr.Kapur: Yes, I have a textile manufacturing unit and she has a boutique in Bandra; We also are at home only on Sundays.

Akash: (to Mrs.Kapur) Great madam, I will bring my mother to your boutique next week. You must be very busy on Sundays catching up with cleaning.

Mrs.Kapur: Don’t talk about cleaning. The maid has not come today.

Akash: I understand madam. It is the same issue faced by my mother. I am here to give you a quick demonstration which offers a solution to our cleaning problems. You don’t have to buy anything unless you are convinced.

Mrs.Kapur: Sure, go ahead.

Akash: Thank you madam. This is the new model handy vaccum cleaner. Let me do the cleaning for you.

Akash quickly cleans the hall floor, dusts the book shelf and the windows. Takes out the bag and shows off the dirt collected in the bag.

See here madam, there is so much dust and dirt that goes unnoticed. This could be very bad for our health. Most of the respiratory problems are because of this pollution. This handy vaccum cleaner helps you live in a clean environment at home.

You can come to our home any time to see how good it is. We have been using it for the past twelve months.

Mrs.Kapur: It is good, but I have to use this to do the cleaning. I cannot give this to my maid.

Akash: True mam. At our home, my dad and I do the cleaning with this vaccum cleaner. It

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is so much fun. Once it is done, we have a very relaxed Sunday in a clean atmosphere.

Mrs.Kapur: Great. Then I can ask my husband to do the cleaning. But it must be very costly.

Akash: It costs just Rs.3000/- . It saves the cost of dusting that you pay your maid for and which she does not do properly.

Mrs.Kapur: This seems to be a new brand. What if it fails to work?

Akash: We give you one year warranty. Moreover, we have been using it and have had no problem for the past one year.

Akash: Woudn’t you like to relax on Sundays in a dust free, clean environment?

Mrs.Kapur: Yes, that would be great. But I don’t have cash right now.

Akash: Mam, you just have to sign a cheque, I will deliver a new piece in the next one hour. Our office is close by.

Mrs.Kapur: Here is the cheque.

Akash: Thank you Mam, Have a great Sunday. I will be back in an hour.

Akash delivers the new vaccum cleaner in the next half hour. Akash: Thank you mam, and here is a special gift from our company – “A laughing Ganesha idol”

Mrs.Kapur: (delighted) How sweet, Thank you so much.

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Are you ready to play the role of a banker offering products that satisfy needs of customers?

Activity III – Life Cycle of customers – Needs of customers and products that satisfy the need

Now that you have understood the concept of selling, try to apply the same to banking products and services.

This involves understanding the customer segment and being aware of what products we can offer.

Given below are the different types of accounts that banks offer. Visit the website of ICICI Bank www.icicibank.com and go through the products on offer under each type of deposit: Savings, Current and Fixed.

Identify the stage in life cycle when each product would be useful.

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Types of Accounts Savings account

Single account holder Joint account Mandate account holder Minor account holder Illiterates, Incapacitated, and Aged Persons Special Savings account (SSA)- TASC Hindu Undivided Family (HUF)

Current Account Proprietorship Partnership Joint Stock Companies

Fixed deposits

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Stages in Life cycle:

ChildCollege StudentTaking up a jobStarting a businessSenior executiveWealthy traderSenior citizen

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Activity IV – Features and Benefits of Savings and Term Deposit Products

Remember the exercise under the topic Overview of Banking?

Understanding the difference between benefits and features

1. Group exercise: Work with your group and note down the features and benefits of the following products. You can visit the website www.icicibank.com for information. Savings account Titanium account Gold account Silver account Freedom savings account Senior plus account Women advantage account Young Star account

To help you in this activity, find below the note on features and benefits.

2. Understanding the difference between features and benefitsAs a banker you are expected to have an in-depth knowledge of your banks products and services, including their features and benefits. This information can help you recommend the products that best meet your customer’s needs. It is important to keep in mind that customers do not need to know as much detail as you do

3. A Feature is a characteristic of your product or serviceIt is probably very clear to you how features will satisfy a customer’s need. But just talking about features doesn’t mean that your customer will share the same understanding. In fact, you may overwhelm the customer with too much information.

A feature is a characteristic of your product or service

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A feature answers two questions:What is it?What does it do?

Example :Product FeaturesValue Added Savings account High Interest rate

4. A Benefit is the value of the feature to a customerWhat really sells a product or service is the benefits it offers. While features are important, they should not be the focus of your recommendation. Your ability to distinguish between features and benefits can have a major impact on your success in selling

A benefit is the value of a feature to a customer. A feature may have more than one benefit.A benefit answers the question, “How will it help?”

Product Feature Benefit

Bank@ campus Funds transfer Convenient for parents to transfer money when required

Salary Accounts Electronic upload Saves time onof payroll paperwork

5. Relating features and benefits:Features are cold, neutral facts; benefits personalize those factsFeatures are the same for all customers; benefits to one customer may not be a benefit

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to another customer.For example: a passbook may represent security to one customer; to someone else, it may represent the nuisance of just one more document to keep track of

Therefore, when making recommendations, it’s important to relate benefits to features for your customer. In other words, you explain how the features will satisfy that customer’s need

The easiest way to remember how to do this is to use the word “so what” rule. When making a recommendation, put yourself in the shoes of the customer and ask, “So What?” If you can’t answer that question, you probably are talking feature without explaining the benefits – that is, how the product or service will help your customer.

Now that you have seen the difference between feature and benefit, list down the features and benefits of savings and term deposit products

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Activity V

Bring in customers for a new branch of XYZ Bank. – Group Discussion

Your group has been assigned the responsibility of bringing in new customers and accounts for the new branch of XYZ Bank which has got opened at Sai Colony in the city one week before.

Details that you have with you are:

Sai colony is a residential area with around 500 residential blocks. Each block has around ten flats = 5000 households. The average cost of each flat is around Rs.50 lakhs, and the rental in the area is Rs.25000/- for a two bedroom flat.

There are two upmarket schools in the locality and a few shops. The colony has a beautiful park which is filled with walkers in the morning and children in the evening. There is a 24 hour multi speciality hospital which has more than 50 specialist doctors and surgeons visiting on various days.

What are the aspects of Sales planning that you would do? – Discuss in your group and bring out the points.

Hints:

Suspects and prospects

1. Profile of customers and their needs.2. Identify your potential customer segments. Who will need your products the

most?3. Identify your wish list. Whom will you like to have as your customer?

Sales Planning

4. Activities to attract customer attention5. Generation of leads6. Sales process – meeting the customer and closing the sale.

Notes :

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Activity VI – Role play - Sales Process

Converting potential customers into actual customers.

Pre Sales Planning – Fixing appointments, homework on customer profile

Sales Process – Opening, developing need, proposing based on benefits, eliminating doubt, closing the sale

You have got the following leads in an activity that you conducted in the school in the vicinity of your branch.

Enact role plays to demonstrate the sales process.

1. Ms. Asha Kumar, aged 32, housewife, has two children aged 5 and 8. Husband is a software engineer with a leading software company in India. Is interested in saving for children.

2. Mr. Arvind Agarwal, doctor, aged 35 years, is a visiting neuro surgeon at the multispeciality hospital, is interested in savings account with convenience of access in the night. He travels abroad for attending conferences.

3. Mr.Suryanarayan, senior citizen, aged 62 years, has retirement funds of around Rs.10 lakhs which he wants to invest and get a good monthly income. He also needs a debit card so that he can withdraw cash at different cities when he goes on a pilgrimage. He is staying with his daughter Akshaya, taking care of his grandchild Roshan aged 7 years.

4. Ms.Dhanya, aged 25 years, is working as a finance executive in a multinational company. Her salary is getting credited to a multinational bank but she has no time to plan her investments. She has no time to visit the bank for her transactions. She travels frequently across India as well as goes abroad on assignments. She is staying with her sister Ananya, who works as a school teacher.

5. Ms.Sadhana, aged 40 years, has started her boutique in the locality. She is looking for a savings account to deposit her surplus income. Her husband Sagar is a businessman based in Dubai. Her daughter Nirosha is 12 year old.

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Activity VII – Cross selling and Relationship Management - CASE STUDY

Mrs. Rama has been maintaining a savings account with the Chennai branch of ABC Bank for the past 10 years. She is a housewife who operates her account as well as her husband Mr. Narayanan’s account with the branch. Their total relationship value with the bank branch is Rs.1 lakh.

Mrs. Rama is very systematic and organized in her transactions and pulls up the staff for any mistake made in her accounts. The counter staff has not been able to build a rapport with her as she is quite reserved otherwise.

Mr. Narayanan is heading the Finance department of XYZ Company which maintains a salary relationship with the branch. The Branch Manager Mr. Kalyan, meets Mr. Narayanan at his office to discuss how the branch can offer better services to the employees of XYZ company.

Mr. Narayanan advises Kalyan that since the salary account was opened at the branch on the instructions of their corporate office, employees including him maintain their savings account at ABC Bank. They route all other investments and transactions through the First Commercial Bank which is closer to their office.

Mr. Narayanan also shares that his wife Rama is not very happy with the services at the ABC Bank.

Kalyan spends some time with Mr. Narayanan to understand the requirements of the staff as well as the problems faced by his wife Rama at the branch. He comes to know the following information:

There are 100 employees in the company with an average salary of Rs.25000/- , salary ranging from Rs.10000 to Rs.100000/- per month. 80 % of the employees are in the age group of 20 to 35 years.

The employees remove their salary from ABC Bank by depositing a cheque in First Commercial Bank on the first day of each month. They visit First commercial Bank during lunch time for all their transactions. They maintain only the minimum balance required in ABC Bank

They are not aware of the internet banking and mobile banking facilities offered by ABC Bank.

a) Many of the employees travel frequently and do not have time to manage their finances.

a) Mrs. Rama is receiving a settlement of Rs. 1 crore, being the proceeds of the Bank account of her deceased mother. She has not yet planned what to do with the

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funds.

What the opportunities are for cross sell and relationship management in the above case?

Discuss the initiatives that the branch manager should take up to win over the relationship of the employees, the company and that of Mrs. Rama.

Which are the products and services that can be offered to the employees and to the top executives?

Presentation

Two groups to present on how to win the relationship of employees and cross sell to them

Two groups to present on how to win the relationship of Mrs.Rama and Mr.Narayanan and advise them on financial planning

Each group should make notes while the other groups are presenting. The class should

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engage in a group discussion to arrive at a consensus on the action plan to be followed by the branch manager.

Learning from group 1

Learning from group 2

Discussion points

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STORY TIME :

In the spring of 1997 I visited a grocery store called Whole Foods Market in Devon, Pennsylvania. It’s about 30 minutes from my home, but I had heard that the company focused on healthy foods, and that interested me.During my visit there, I sauntered by the bakery counter when my eyes were drawn toward the cookies. As a recovering cookie-holic, I really was not interested in buying any. However, as I yielded to temptation, I focused on the healthy ones—you know, the ones with fiber and such. So I asked if they had any crumbs or samples I could taste.

The young man serving me was kind and unusually patient as he mused over my obvious buy-don’t buy dilemma. Instead of crumbs, he simply gave me an oatmeal cookie to taste. He then suggested the luscious (and expensive) chocolate chip cookies beside them—he said they were really good. Proudly, I refused.

But somehow he seemed to notice a twinge of doubt in my refusal, so he asked again. Again, I refused. Do you know how much I wanted to try that chocolate chip cookie? I’ll bet you can guess. And so did he, because when I returned home and opened the package of oatmeal cookies I bought, I found two chocolate chip cookies that he had secretly slipped into the package! Today I am a regular shopper at Whole Foods Market. OK, not just because of this cookie incident, but it helped.

What is your learning from the above story?

Suggest a name for the story

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ALLIED SERVICES - STUDENT WORKBOOKObjective :

To understand the features and benefits of different third party products. To apply the concepts to offer financial planning to different segments of

customers

Sub Topic :

Distribution - Mutual Funds, Insurance, Government Bonds, Gold Coins, Others Collection -Taxes, Utility Bills Demat Safe Keeping Advisory services

Training sequence :

Activity Duration (In hours)

E-learning Following E-learning modules to be completed 1) AMFI Mutual Funds Part I & Part 22) Basics of Investing 3) Basics of Life insurance 4) Basics of General Insurance 5) Retail Demat Program

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Pre – Classroom Collect information from brochures, forms and websites of different mutual funds and insurance companies and prepare a comparative analysis

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Classroom Activity

Role Play 4Questions for facilitationCheck your understanding-Quiz

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CLASSROOM ACTIVITY

Role play

Form four groups. Each group will be assigned topics by the facilitator for enacting the role play.

Points to be kept in mind while enacting the role play

Topics Distribution -Mutual Funds, Insurance, Government Bonds, Gold Coins, Others Collection -Taxes, Utility Bills Demat Safe Keeping & Advisory services

Type of customer segment (to whom the other person will be giving financial advice)

High Net worth Individuals Senior citizens Businessman Household women Salaried individual

Groups should keep the following points in mind while preparing the role play

To practice the role of a banker Recall the customer service skills Ensure compliance to regulations while handling different situations You would be required to make relevant and logical assumptions To understand the emotions and expectations of a customer To display customer service skills as well as provide correct solutions to

customers in compliance with rules and regulations

Pen down your observation while each group is presenting

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Group 1 Observation

Group 2 Observation

Group 3 observation

Group 4 observation

CHECK YOUR UNDERSTANDING

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Quiz Time!!

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RETAIL CREDIT - STUDENT WORKBOOK Objective:

To understand the significance of retail credit in the economy. To explain the process of retail credit

Sub Topic:

Features of Retail Credit Retail Credit Process

Training Sequence

Activity Duration (In hours)

Pre Classroom Activity

E-learning Modules to be completed 1- Basics of Retail Asset Finance

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Group Activity - Each group to take up one loan product - Home loan, car loan - collect brochures and information from websites of different banks, advertisements and articles in newspapers & present

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Classroom activity

Presentation on Product features Market trends & Challenges & comparative analysis of the loan

products offered by banks

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Questions for facilitationCheck your understanding

Banking Principles and Operations by Mr.M.N.GopinathReference BooksPost classroom Gaming Zone- DQM Express 1

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CLASS ACTIVITY

Group leader to present on the learning from the pre- classroom activity

Groups to present the retail credit on the following lines

- Product features- Market trends & - Challenges & comparative analysis of the loan products offered by banks

Try and formulate a table that will highlight on the above points

Pen down your learning from the presentation

Form groups and discuss on the below lines and present in the class

What is the role of retail credit in economic growth?

How can banks add value to customers through retail credit?

What is meant by quality in retail credit?

What is the importance of the retail credit process in ensuring quality?

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CHECK YOUR UNDERSTANDING

A. Choose the correct answer

1. Which of the following is true about Retail Credit?

a) It reduces funding needs of manufacturersb) Less risky and more profitable as compared to business creditc) Low transaction costd) The event of default for retail borrower is highe) It is detrimental to economic growth of a nation

2. Some of the types of retail credit

a) Consumer credit cardsb) Personal Loansc) Trade Financed) Loans against securitiese) Working capital finance

3. The primary concerns of a retail credit are

a) Repayment capacity of the borrowerb) Interest rate c) Security provided for the loand) Monthly installments and tenure of the loan

4. Borrower A has a current account with ICICI Bank. He has over drawn his account to the extent of Rs. 500000. On approaching the bank it was agreed upon that he should be sanctioned a permanent overdraft facility. Which of the following is not true?

a) He can repay any amount according to his convenience.b) An amount once repaid towards this facility cannot be withdrawn again.c) He has to provide security for the amount sanctioned.d) He is expected to repay the amount in a week

5. Mr. D, a salaried person, has applied for a loan of for a flat to be purchased in Mumbai valued at Rs. 20 lakhs. On assessing his repayment capacity it was determined that his loan eligibility was Rs. 15 lakhs and the maximum permissible

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LVR is 90%. The amount of loan disbursed to him would be :

a Rs 20 lakhsb Rs 15 lakhsc Rs 18 lakhs

6. The advantages of Credit scoring are

a) Minimize subjectivity in credit approvalb) Can be used as a basis for portfolio ratingc) Facilitates quicker decision makingd) Risk ranks all applications

7. Credit appraisal of any retail loan involves analyzing the proposal in terms of the following risks

a) Customer Riskb) Business Riskc) Asset Risk

8. The repayment record of a customer needs to be monitored with regard to

a) The collateral provided for the loan disbursedb) Payment of interest and repayment of principalc) PDC's submitted by him.

9. To mitigate asset risk one should:

a) Carefully select assets offered as collateral b) Offer a higher tenor for assets with higher riskc) Adjust the Loan to Value ratio

B. Indicate whether the following statements are True or False

1. The charge created against an immovable property is known as hypothecation.

2. Lien gives the lender the right to appropriate the deposit or bond against the loan.

3. There are legal formalities to be complied with while invoking a pledge in the case of default.

4. Credit scoring is a statistical method which is used to convert information of a

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prospective client into a meaningful number which can be used as a delinquency indicator.

5. All retail loans are secured.

6. A guarantor is a person who promises to repay the loan in the event of a default by the borrower.

7. A floating interest rate is benchmarked to the bank's Prime Lending Rate.

8. The tenure and loan to value ratio for varies according to the nature of asset financed.

9. Capacity and Liquidity to repay a loan are the two important criteria to be considered while sanctioning a loan.

10.PDC's help the bank to initiate both criminal and civil proceedings against the borrower without having to produce any other papers or evidence.

GAMING ZONE: DQM EXPRESS

DQM Express - A game that will give you an experience in handling a branch efficiently. Keep a tab on the gifts that you have to give as penalty to customers waiting for long and the time you need to pitch in to address customer queries quickly. So let the CD roll and you roll up your sleeves to maximise profits for the branch!!

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Indian Financial System - Student Workbook

Objective:

To understand the importance of the Indian financial system in the economy To widen the knowledge and awareness about the players and instruments in the

financial system

Sub Topics:

Introduction Financial Markets Capital Market Money Market Forex Market Treasury Management

Training Sequence

Activity Duration (In hours)

E-learning E-learning Module to be completed -Indian Financial System 6Pre Classroom

Visit RBI website, read the latest credit policy, annual/quarterly reports and policy statements, check the SEBI website for the ;latest on capital markets www.sebi.gov.in

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Classroom Presentation 2Question for facilitationCheck your UnderstandingStory Time

CLASSROOM ACTIVITY Presentation

Participants will present their learning from the RBI, SBI site and trends on the capital markets. Points to be highlighted

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How to read an annual report. Important points

Learning from the SEBI website

a) What are capital markets, its definition, trends etc...?

Pen down your learning from the presentation

Fill in the blanks

1. The moneylenders constitute ________________ Sector of Financial markets.

2. Capital Market constitutes _____________ sector of the Financial markets.

3. Every listed company making an IPO of any security for Rs __________ or more is required to do so only in dematerialised form.

4. No broker/ sub-broker is allowed to buy/ sell or deal in securities unless he/ she holds a certificate of Registration granted by _____________.

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5. At present the settlement of trade is on ______________basis.

6. The three components of the organized sector are capital market, ________________ and foreign exchange market.

7. Equity and debt markets are components of ____________________________.

8. Capital market operations are regulated by __________________________.

9. The primary market deals with ________________________ of equity and debt instruments.

10.An offer for sale of shares to the public by an already listed company is called ___________________________________________.

11.Nationwide on-line, fully-automated screen based trading system (SBTS) was introduced by ____________________________.

12.An NSE member can punch into the computer the quantities of a security and the price at which he would like to transact, and the transaction is executed as soon as _____________________________________________________________________________________________________________________________________________________.

13. Dematerialisation refers to converting paper securities (share certificates) to ____________________________.

14.The depository participants maintain the accounts with the two depositories namely, __________________________(NSE promoted) and _____________________(BSE promoted).

15.Since trades put through every day are settled on the third day, including the date of trade, the settlement process is called________________________.

16.A clearing corporation assures the ____________________risk of each member and guarantees ___________________________in respect of trades executed on the exchanges.

17.___________________________is a scientifically developed, 50 stock index, reflecting accurately the market movement of the Indian markets.

18.____________________is a company, like a stock exchange, organizing futures trading

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in commodities.

19.The main commodity exchanges in India are the _____________and __________________both of which offer on line trading facility.

20.The largest volume of instruments issued and traded in the money market is issued by_____

Choose the correct answer

1. A contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and at a stated price.

Futures Warrants Options Forward contract

2. An index of 50 stocks, reflecting accurately the market movement of the Indian markets.

Nifty Sensex BSE Teck Bankex

3. Demat accounts are maintained with

Banks Clearing houses Brokers Depository Participants

4. Issue of shares to public by an already listed company

a) Initial Public offerb) Follow on Public offerc) Rights issued) Private placement

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5. Regulator of financial markets

a) RBIb) SEBIc) FIMMDAd) Government of India

6. The rate of interest offered on Government securities is calleda) Interestb) Yieldc) Coupond) Rate

7. Identify the institutions that can lend and borrow in call money market (Multiple Response Question)

b) LICc) Bank of Indiad) Maharashtra Central Cooperative Banke) Udyog Sahayak Nidhif) State Bank of India

8. The lowest risk category instrument issued by RBI in the short term

a) Call moneyb) Date Securities of Government of Indiac) Participatory certificatesd) Treasury Bills

9. SEBI has introduced ___________________to curb excessive volatility in markets

a) Controlsb) Licensingc) Price Bandsd) Regulations

10.Trading in stock exchanges can be done only through

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a Corporate dealersb Financial institutionsc Banksd Brokers registered with SEBI

STORY TIME

'A Leader Should Know How to Manage Failure'

(Former President of India, APJ Abdul Kalam, at Wharton India Economic forum, Philadelphia, March 22,2008)

Question: Could you give an example, from your own experience, of how leaders should manage failure?

Kalam: Let me tell you about my experience. In 1973 I became the Project Director of India's satellite launch vehicle program, commonly called the SLV-3. Our goal was to put India's "Rohini" satellite into orbit by 1980. I was given funds and human resources -- but was told clearly that by 1980 we had to launch the satellite into space. Thousands of people worked together in scientific and technical teams towards that goal.

By 1979 -- I think the month was August -- we thought we were ready. As the project director, I went to the control center for the launch. At four minutes before the satellite launch, the computer began to go through the checklist of items that needed to be checked. One minute later, the computer program put the launch on hold; the display showed that some control components were not in order. My experts -- I had four or five of them with me -- told me not to worry; they had done their calculations and there was enough reserve fuel. So I bypassed the computer, switched to manual mode, and launched the rocket. In the first stage, everything worked fine. In the second stage, a problem developed. Instead of the satellite going into orbit, the whole rocket system plunged into the Bay of Bengal. It was a big failure.

That day, the chairman of the Indian Space Research Organization, Prof. Satish Dhawan, had called a press conference. The launch was at 7:00 am, and the press conference -- where journalists from around the world were present -- was at 7:45 am at ISRO's satellite

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launch range in Sriharikota [ in Andhra Pradesh in southern India]. Prof. Dhawan, the leader of the organization, conducted the press conference himself. He took responsibility for the failure -- he said that the team had worked very hard, but that it needed more technological support. He assured the media that in another year, the team would definitely succeed. Now, I was the project director, and it was my failure, but instead, he took responsibility for the failure as chairman of the organization.

The next year, in July 1980, we tried again to launch the satellite -- and this time we succeeded. The whole nation was jubilant. Again, there was a press conference. Prof. Dhawan called me aside and told me, "You conduct the press conference today."

I learned a very important lesson that day. When failure occurred, the leader of the organization owned that failure. When success came, he gave it to his team. The best management lesson I have learned did not come to me from reading a book; it came from that experience.

This was just one of the many incidents mentioned from the book “Wings of Fire” by Dr. APJ Abdul Kalam.

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REGULATORY ENVIRONMENT - PARTICIPANT WORKBOOK

Objective:

To understand the role of RBI in regulation as well as development of the financial system

Sub Topics:

Rationale for regulation Banking Regulation in India Account opening and banking operations

Training Sequence

Activity Duration (In hours)

E-learning E-learning module to be completed on Banking Ombudsman Scheme, Regulatory environment

2

Pre classroom Check the RBI website for the latest speech by the Governor, Deputy Governor of RBI

1

Classroom Presentation 2Group Discussion

Reference books Banking Principles and Operations by Mr.M.N.Gopinath

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CLASSROOM ACTIVITY

Presentation

Participants to present the additional information from the RBI website and budget speech of the governor to the class

Pen down your learning from the presentation made

Group discussion

Participants to form groups and discuss on the below topic

‘The initiatives taken by RBI for improving the financial system in India.’

List the learning from the discussion from each group

Questions for discussion

Without RBI , the financial system cannot survive – discuss

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CHECK YOUR UNDERSTANDING

Choose the correct answers

1. Regulation of Banks is important becausea) They play a crucial role in the economyb) Banks are the custodians of the savings of people.c) Economic growth will be hampered if the financial system is not stabled) All of the above

2. Which of these statements about Banks is not true?a) Banks create money by lendingb) Banking is a business of trustc) Banks are powerful and are not affected by systemic failures in the financial

systemd) Financial transactions will come to a halt if banks do not function

3. Banking regulation seeks to ensure that banks: (MRQ)a) Maintain adequate liquid resources at all times

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b) Have an effective risk management system c) Provide efficient service to customersd) Are run in a profitable manner, ensuring safety of funds of the depositorse) Function with due diligence to prevent misuse of the system by anti

social elements

4. Which of these is not a function of the Reserve Bank of India?a) Issuing currency notesb) Supervision and control of banksc) Opening new banks d) Formulate and implement monetary policy in the country

5. Issue of currency is centralized with RBI (MRQ)a) To have control on money supply in the economyb) To maintain the value of currency c) To make available to the public adequate currency of good qualityd) To prevent misuse by anti social elements

6. The Cash Reserve Ratio is an important tool for RBI to a) Ensure the liquidity and solvency of Banksb) Restrict money supply to control Bank creditc) Release liquidity in the economy, when requiredd) All of the above

7. Which of the following is NOT a major aim of KYC?a) Social relationship

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b) Customer identification c) Transaction mappingd) Proof of address

8. Which of the following statements is NOT true?a) KYC applies to a person b) KYC applies to an entity c) KYC applies to politicians onlyd) KYC applies to beneficiaries of professional intermediaries

9. Compliance with KYC provisions in letter and spirit will help Banks : (MRQ)a) To ensure that accounts are opened only for desirable personsb) To avoid problems relating to illegal, antisocial transactions which need to

be tracked and reported as evidence in legal and criminal cases.c) To prevent frauds on banks which could lead to financial lossesd) To get protection available for collecting bankers under NI Act in

10. Which of the following statements is true?a) Banker should open accounts for all personsb) The type of documents to be obtained should be based on risk perception

and requirement under KYC guidelinesc) Banker should not be unduly bothered about KYC in case it affect the

mobilization of depositd) None of the above

11. Money laundering meansa) Clean notes to be issued by Banksb) Conversion of illegal money into legal money through banking channelsc) Distribution of money in the economy

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d) All of the above

12. To prevent money laundering, Banks have to take the following precautions. (MRQ)a) Do not open new accountsb) Compliance with KYC guidelines while opening accountsc) Monitor transactions of high valued) Monitor and report transactions of suspicious nature

13. A high net worth customer deposits Rs.50 – Rs.60 lakhs of cash every week into his savings account. The Banker shoulda) Inquire about the source of funds and report the transaction under AMLb) Not inquire about the transaction as the customer would be offendedc) Request the customer to place the amount in fixed depositd) All of the above.

14. A movie star wants to open a savings account without submitting the id and address proof .He would like to make a fixed deposit of Rs.80 lakhs a) The account can be opened as he is well known in the localityb) The account can be opened and later Bank can follow up for the id and address

proofc) Account cannot be opened without KYC documentsd) Open a fixed deposit without the documents

15. As an issuer of license, the RBI CANNOT do the following:a) Review the books of accounts of the companyb) Ascertain the earning capabilities of the companyc) Assure itself that issuing license is in the interest of the public at larged) Issue the license without much review

16. Current interest rate fixed by RBI for savings account is:a) 3.2% p.a.b) 3.5% p.a.c) 2.5% p.a.

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d) 4.5% p.a.

17. What is the current SLR set at?a) 25%b) 15%c) 10%d) 20%

18. BCSBI stands for:a) Banking Codes and Standards Board of India b) Bank Codes and Standards Board of Indiac) Banking Conduct and Standards Body of Indiad) Banks Code and Conduct Body of India

19. The function of BCSBI is NOT to:

a) monitor the compliance codes of service deliveryb) access the minimum standards of service to individual customersc) ensure adherence to the Code of Bank’s Commitment to customersd) resolve the customers complaints lodged with them

20. For delivering quality customer service the following Regulatory bodies are instrumental:a) IBAb) RBIc) BCSBId) All the Above

21. The service charges levied by commercial banks are controlled by:a) RBIb) IBAc) Individual Banksd) Banking Ombudsman

22. Who is a Banking Ombudsman?a) A bank official appointed by banks to collect loan outstanding duesb) A bank official appointed at the bank branches to attend to complaintsc) A branch manager of a branch is called by this name tood) An official appointed by RBI to redress customer complaints against deficiency

in banking services

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23. Following banks are NOT covered under the Banking Ombudsman Scheme, 2006:a) Scheduled Commercial Banksb) Regional Rural Banks c) Scheduled Primary Cooperative Banks d) Foreign Banks operating outside India

24. Which of these functions does RBI as Banker to the Government not perform?a) Maintain current accounts of Governments – central and stateb) Provide short term credit to Governmentsc) Manage issue of securities by the Governmentd) Issue currency to the Government whenever they need funds

25. The following functions are performed by RBI as banker to banks (MRQ)a) Maintain the current accounts of Banks and hold their cash reservesb) Lending to banksc) Provide clearing and funds transfer facilities between banks d) Maintain accounts of customers

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STORY TIME

An elderly couple retired to the countryside - to a small isolated cottage overlooking some rugged and rocky heath land.One early morning, the woman saw from her window a young man dressed in working clothes walking on the heath, about a hundred yards away. He was carrying a spade and a small case, and he disappeared from view behind a copse of trees.The woman thought no more about it but around the same time the next day she saw the man again, carrying his spade and a small case, and again he disappeared behind the copse.The woman mentioned this to her husband, who said he was probably a farmer or gamekeeper setting traps, or performing some other country practice that would be perfectly normal, and so not to worry.However after several more sightings of the young man with the spade over the next two weeks the woman persuaded her husband to take a stroll - early, before the man tended to arrive - to the copse of trees to investigate what he was doing. There they found a surprisingly long and deep trench, rough and uneven at one end, becoming much neater and tidier towards the other end. "How strange," the old lady said, "Why dig a trench here - and in such difficult rocky ground?" and her husband agreed.Just then the young man appeared - earlier than his usual time."You're early," said the old woman, making light of their obvious curiosity, "We wondered what you were doing - and we also wondered what was in the case.""I'm digging a trench," said the man, who continued, realising a bigger explanation was appropriate, "I'm actually learning how to dig a good trench, because the job I'm being interviewed for later today says that experience is essential - so I'm getting the experience. And the case - it's got my lunch in it."He got the job.

Suggest a name for the story. What is your learning from the story?

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Annexure: Here is an extract from an interesting speech about RBI’s archives and history. * Comments of Dr. Duvvuri Subbarao, Governor, Reserve Bank of India, while inaugurating the RBI Archives Museum, “Evolution of Reserve Bank of India- 1935-2010”, in Pune, June 1, 2010. Check the RBI website for more.

“… The word ‘archive’ traces its origin from the Greek word ‘arkheion’, which refers to the home or dwelling of the ‘archon’ or the ruler, in which important official state documents are filed and interpreted under the archon’s authority. The documents and other material preserved in these archives are similarly valuable for the rich historical content they embody. As they say, the hierarchy of transition is from data to information to knowledge to wisdom. Archives such as these aid that hierarchical transition. These Archives of the Reserve Bank are not just an internal store of information for the Bank’s staff; they are a record of the events and times that should be of great historical significance. 4. Haunted as we often are by an essential dilemma that Nobel Laureate Saul Bellow had once posed, ‘can we ever forget about remembering?’, for many of us Archives also allow the pursuit of our ‘incurable thirst for the sense of escape’ from the immediacy of the present. The historic records and documents that we have here provide visuals and vignettes that transcend time and help us go down our institutional memory lane. 5. Come to think of it, “it is surprising how much of memory is built around things unnoticed at the time”. Every document, every object, every artifact here records or refers to an event that may just have been an unnoticed part of contemporary setting in real time. But looking back at them from this distance of time, we get a treasure trove of stories about the Reserve Bank that are diverse and fascinating. There is, for example, the share issue of the Reserve Bank, the largest in the country, the apprehension that it may get into the hands of ‘an exploiting group or caucus’; and the attempt to prevent that. Then there is the story about the first advertisement by the Bank for staff recruitment that caused a traffic jam on the streets of what was then Calcutta. 6. Or take the story of the RBI Seal. The seal was approved by the RBI Board. Even so, Sir James Taylor, the then Deputy Governor of the Bank, was disappointed with it. He ordered preparation of fresh sketches by the Government of India Mint and the Security Printing Press at Nasik. His dissatisfaction was with the image of the tiger on the seal, presumably because it did not quite look like a tiger. 7. Sir James could not find anyone to photograph a live tiger. So he did the next best thing, and ordered the photographing of the statue of the tiger on the entrance gate at the Belvedere in Calcutta. Sir James was clearly a man hard to please; he was not happy with those sketches either. 8. “The tiger”, wrote Sir James, apparently inclined to be a bit ribald, “looks too like some species of dog, and I am afraid that a design of a dog under a tree would arouse derision among the irreverent”. 9. A second effort produced better results with the tiger. But the palm tree went wrong. The fastidious Sir James wrote again, “The tiger is distinctly good, but the tree has spoiled

44

it. The stem is too long and the branches too spidery, but I should have thought that by putting a firm line under the feet of the tiger and making the tree stronger and lower, we could get quite a good result from the design”. 10. The Security Printing Press at Nasik had to go to work again until it could get better results that eventually passed muster with Sir James. 12. The history of RBI over the past 75 years is indeed replete with such interesting events and developments. These archives tell many of those stories and they include extracts from the Report of the Edward Young Commission recommending the establishment of a central bank for India to be named Reserve Bank of India, the congratulatory telegram dated 1st April 1935 from the Viceroy of India to the RBI Governor on the commencement of operations of the Reserve Bank of India, the draft of RBI Bill 1934, the minutes and photograph of the first meeting of the Central Board of Directors, the design of currency notes and the weights earlier used for weighing coins and gold, a letter from our first Prime Minister Pandit Nehru to Sir C.D. Deshmukh, the first Indian Governor of the Reserve Bank, requesting him to send an analytical report on the deteriorating economic condition and suggest remedial measures, a letter from Prime Minister Indira Gandhi requesting release of foreign exchange for her son Rajiv’s studies abroad, the reasons for closure of the RBI office in London and the devaluation of the rupee in 1966. 13. The Archives also contain important records that predate the establishment of the RBI. For example, the RBI Archives preserves the cancelled securities and bonds of the East India Company and the Government of India pertaining to the period 1777-1894. Records such as these capture the economic situation of the time and are of great historical significance. 14. Established in August 1981, the Reserve Bank Archives were among the earliest corporate archives in the country. This was a pioneering effort to preserve the invaluable archival heritage of the Bank which was at that time scattered all over the country, in the Central Office Departments, and in the Regional Offices. The RBI Archives were driven by the twin objective of (i) serving as the central archives of the Bank; and (ii) acting as an archival repository of the non-current records of enduring value to the Bank. 15. Over the last 28 years, the RBI Archives has been engaged in pursuing these objectives, in particular in identifying, acquiring, preserving and making accessible the non-current records of enduring historical and legal value. This is a legacy for future generations….”

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Trends in Banking – Student Workbook Objective:

To appreciate the changing dynamics of banking, the drivers of change and the impact on the economy

Sub Topics

Trends in Banking Challenges in Banking

Training Sequence

Activity Duration (In hours)

Pre Classroom

e-learning module “Trends in Banking”Visit any modern private sector bank and one nationalised bank. Collect details of products, services, technology- compare and contrast. Visit websites of different banks. Visit the website of RBI for the latest speech/report on banking in India

1

Classroom Presentation 1Group DiscussionStory time

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CLASSROOM ACTIVITY

Presentation

The group leader will present the learning from the pre-classroom activity

Also, highlight “The trends and challenges in Banking”

Group discussion

Read the annexure “New Paradigms in IT security in Indian Banks”. Discuss the following questions in your group and come out with the group presentation

What is the impact of technology on banking? What are the new products and services offered through technology? ( eg. ATM,

RTGS) What are the advantages to the customer, banks, the economy? What are the security issues? How has it changed the role of the banker?

Also discuss the change in customer expectations due to demographical changes and globalization.

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STORY TIME :

A blind man had been waiting a while at a busy road for someone to offer to guide him across, when he felt a tap on his shoulder."Excuse me," said the tapper, "I'm blind - would you mind guiding me across the road?"The first blind man took the arm of the second blind man, and they both crossed the road.Apparently this is a true story. The first blind man was the jazz pianist George Shearing. He is quoted (in Bartlett's Anecdotes) as saying after the event, "What could I do? I took him across and it was the biggest thrill of my life." There are times when we think we cannot do something and so do not stretch or take a risk. Being forced to stretch and take a risk can often help us to reduce our dependencies (on others, or our own personal safety mechanisms), and to discover new excitement and capabilities. The poem ‘Come to the Edge’ is another wonderful perspective on risk and stretching.

What is your learning from the story?

Suggest a Name :

Annexure: Extract from Speeches on RBI website

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New Paradigms in IT Security in Indian Banks. .1. Inaugural Address by Dr K C Chakrabarty, Deputy Governor, Reserve Bank of In-

dia, at the IBA – DSCI Conference on :Security Framework in Indian Banks”, Mumbai, In-dia, April 26, 2010.

2. “… Information is at the heart of today’s business, and the all-pervasive impact of Information Technology in harnessing, collating and processing huge volumes of infor-mation is definitive. In this scenario, the need for ensuring that information is kept confi-dential adhering to accepted norms of privacy and making it available to authorized users at the appropriate time assumes great significance. This is particularly valid for the bank-ing sector where day-to-day operations are centered on information and information pro-cessing, which in turn is highly dependent on Technology. This conference on “ Security Framework in Indian Banks” jointly organized by the Indian Banks’ Association, the Data Security Council of India in collaboration with the Institute for Development and Research in Banking Technology as the Knowledge partner is thus not only appropriate but also of topical relevance to banks. This joint effort on the subject is extremely laudable and I deem it a privilege to be present amidst this distinguished gathering for sharing my thoughts on the theme of today’s conference.

3. Banking as a business involves the management of risks based on a repository of trust extended by the customers. If this objective has to be accomplished, it becomes imperative for all security concerns especially customer sensitive data to be addressed in an effective way so as to ensure that the trust levels are well preserved and information assets perform the role that they are supposed to. While every banker understands the implications of financial risks, the risks arising out of the large scale implementation of technology and IT is not so well defined. Security in banks thus assumes significant pro-portions, comprising physical security in addition to the factors relating to security of In-formation and Information Systems, all of which have an impact on the reputational risk faced by banks.

4. Technology has augmented the scope, reach and coverage of banking through significant networking and the availability of a wide variety of new delivery channels to such an extent that the death of distances and death of identity has already been accom-plished. In addition, banking is poised to be omnipresent through facilities such as ‘Any-where and Anytime Banking’, proliferation of services offered through ATM networks, IT enabled instant remittances across banks, customer payments, mobile payments and many more. The giant project of ICT supported Financial Inclusion is all set to change the face of Indian banking by making banking services fully inclusive.

5. Technology implementation has benefited the banks also due to the facilitation of the Reserve Bank – both from the operational and legal perspectives. In addition, the Reserve Bank had provided the broad framework for many innovative technology based systems. The guidelines on Internet Banking, and the Guidelines for Information Systems

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Security / Audit in 2001 were early initiatives aimed at ensuring safe and secure technol-ogy based operations by banks. Keeping pace with time and marshalling international practices, RBI has issued broad guidelines on mobile banking and prepaid (stored) value cards. These, along with the setting up of systemically important payment and settle-ment systems such as Real Time Gross Settlement System (RTGS) and other retail pay-ment systems like the Electronic Clearing Systems (Credit and Debit Clearing), the Na-tional Electronic Funds Transfer (NEFT) System, National Electronic Clearing System (NECS), Regional Electronic Clearing System (RECS), have transformed the way of bank-ing and today’s customers have a wide array of options to choose from. All these have safety and security at the heart of the respective systems.

6. A major area where IT security assumes significance pertains to the transmis-sion of information using IT as a channel for communication. Traditionally, paper based systems have been subject to certain controls to ensure that the basic requirements per-taining to genuineness, authenticity, etc. are met with. These included verification of sig-natures, ensuring that there are no corrections, or if there are corrections, these are au-thenticated properly and so on. In the IT-based scenario, these aspects gain greater im-portance not only because of the speed with which IT based electronic information flows but also on account of the potential havoc that could arise on account of incorrect in-structions.

7. The last decade witnessed a sea change in the way banking services are made available to customers. The implementation of Core Banking Systems has proven to be a big boon in providing anywhere access to banking services and the treatment of a cus-tomer as that of a bank and not as a constituent of a specific branch. With the interlinking of ATMs, the customer has been further transformed into constituent of the financial sec-tor rather than a bank. Alongside, the banking sector has made significant efforts to iden-tify security gaps in an IT enabled scenario and have addressed them effectively as well. The time is now appropriate to review the adequacy of the measures taken by banks. As the banks and IT industry came up with layers of protection for their systems, fraudsters, hackers and a bewildering variety of other such entities made voracious attempts at breaking the security layers. When the application layer was fortified, the attention was on to break the network layer. When the network equipment manufacturers hardwired the security protocol making it extremely difficult to break them, the attack switched over to the internet servers. Activities like phishing require customers and bankers to migrate to the higher levels of security. While these examples relate to Internet-based banking, the latest dimension relates to security for mobile banking. As the horizon of ICT keeps widening, the security gaps also keep rising, leaving the banks and customers lagging. It becomes essential that bankers, regulators, ICT manufacturers and system providers, software professionals and auditors all work in unison to proactively identify, anticipate and plug the gaps as a regular activity instead of acting after fraudulent attempts fruc-tify. It is to be recognized that Information Security has two important dimensions, namely:–

(i) protection of investment in information assets and to the actual information thereon, and,

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(ii) availability of assets for use whenever and wherever required

8. Management of fraud or attempted fraud throws open the challenge of response time in reacting which is very critical to avert further frauds and loss of valuable cus-tomer information. With advancement and globalization, cross border banking, cyber crimes from specific geographic zones would take deep roots if the cyber crimes are not responded in quick time. The entire industry would be benefited by swift action and sys-tem of reporting under a common umbrella, for which set standards specifying the action to be initiated at such times is clearly indicated. . Though compliance to CERT (i.e Com-puter Emergency Response Team) requirements would address this issue to some extent, it would be preferable to have a dedicated institutional set-up for the financial sector to report security breaches, quick responding team for major breaches, monitoring compli-ance and reporting to the regulators. I believe that IDRBT can play a nodal role towards building such a set up. The major challenge would be to foresee the possibility of a fraud taking place and to have systems in place to avert them let alone responding to them af -ter the event. It is necessary to address basic concerns relating to safety and security of Information and Communication Technology (ICT) assets, to data and to information per-taining to the bank as a whole and the customer in particular. 9. Against this background, I thought that it would be appropriate to define a set of best practices which would enhance the value of IT security. I prefer to christen them as the ‘Ten Commandments of IT Security/Management in Banks’…”

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