banking and institutions presentation group#2 (1)

8/3/2019 Banking and Institutions Presentation Group#2 (1)

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Banks and Financial Institutions


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Presented By Group 2

Deepak Bhakt

Dinesh Kumar Karnam

Debashish Kumar Dhar

Bipin Kumar

Bharath B N

Deepthi S


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Contents

$ Introduction

$ Operations and Special Roles of Banks

$ Rural Business/ Banking

$ Entry of Foreign Banks

$ Specialized Financial Institutions

$ Universal/ Global Banking

$ Securitization

$ Co-operative Banks

$ What is RD/CA/SB/FD/PF/Pension Accounts and Types of Accounts

$ What is Life Insurance. Some light on Insurance Companies


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Introduction

$ The name bank derives from the Italian word banco it means

desk/bench.

$ A bank is a financial intermediary that accepts deposits and channels

those deposits into lending activities.

Banker includes a body of persons, whether incorporated or not, who

carry on the business of banking.

-Bills of Exchange Act (contains statutory definition of the term

banker)
http://en.wikipedia.org/wiki/Italian_languagehttp://en.wikipedia.org/wiki/Financial_intermediaryhttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Financial_intermediaryhttp://en.wikipedia.org/wiki/Italian_language


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Introduction

Under English common law, a banker is defined as a person who

carries on the business of banking, which is specified as:-

Conducting current accounts for his customers

Paying cheques drawn on him, and

Collecting cheques for his customers.
http://en.wikipedia.org/wiki/English_common_lawhttp://en.wikipedia.org/wiki/English_common_law


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$ Banking in India originated way back in 1786.

$ First banks were General bank of India and Bank of

Hindustan.

$ Oldest bank into existence in India is State Bank of India.

$ Pre -Independence Era-

Bank of

Calcutta(June 1806)

- Bank of Bengal- Bank of Bombay- Bank of Madras

ImperialBankof India(1925)

RBI took over centralbankingresponsibilities from

IBI(1935)

State Bankof India(1955)

&

Nationalization of RBI

(1949)


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Introduction

$ Banking system occupies an important place in Indian economy.

$ These banks provides credit to industry, commerce, trade & agriculture.

$ Now a days banks expanding themselves. They entered into foreign trade,

insurance, mutual funds, capital market for their expansion.

$ It also plays pivotal role in the economic development of a country &

forms the core of the money market in the advanced country.

$ Bank is a part of Money Market. As if we see the segments of money

market all most working is done by banks.


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Introduction

Money Market

Organized segment Unorganized

segment


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Classification of banks

Reserve Bank of India

Ownership Performance Functions WorkingPlace Norms

Public sector bank Schedule Commercial Urban

Private sector bank Non-scheduled Development Rural

Co-operative Import Export


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Commercial Banking Structure

$ Oldest institution having wide network of branches.

$ Having lions shares in total banking operations.

$ Initially, they were established as corporate bodies with the share

holdings of private individuals but after they has been a drift towards

state ownership & control.

$ Today, bank constitute a strong public sector in Indian commercial

banking.

$ Commercial banks accepts short term deposits & provides short term


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Commercial Banking Structure

$ STRUCTURE OF COMMERCIAL BANKS

Commercial banks

Public sector banks Private sector banks

State bank Nationalized Indian Foreign

Group Banks Banks Banks


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Operations and Special Roles

of

Banks and Financial Institutions


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OPERATIONS

$ Issue of Money

$ Netting and Settlement of Payments

$ Credit Intermediation

$ Credit Quality Improvement

$ Maturity Transformation

$ Money Creation


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SPECIAL ROLES

$ Facilitating the need of credit for all sections of the society

$ Mobilizing of savings at reasonable rates with several options

$ Internet Banking

$ Lending and Deposit Business

$ Securities Issuing

$ Asset Management

$Foreign Exchange Trading


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Rural Banking


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RURAL BANKING

$ Rural Banks were established under the provisions of the Regional

Rural Banks Act, 1976 with a view to develop the rural economy.

$ Rural Banks are jointly owned by Government of India, the concerned

State Government and Sponsor Banks in the proportion of 50%, 15%

and 35% respectively.

$ Rural Banks operation is limited to notified area comprising a few

districts in a State.


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Benefits of Rural Banks

$ Promoting sustainable and equitable agriculture and rural prosperity

through effective credit support, related services and institutional

development .

$ Improve the quality of service and developments in InformationTechnology.

$ Improve the high standards of performance and operations of

NABARD.

$ Improves credit flow.

$ Opportunity for diversification and growth.

$ Provides short term and term loans for investment purposes.


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LIST OF SOME RURAL BANKSIN INDIA:

$ NABARD

$ Haryana State Cooperative Apex Bank Limited

$ United Bank of India

$ Syndicate Bank

$ Co-operative Bank

The Government should play a supportive and regulatory role in

developing the banking business in Rural India. It should facilitate private

and public sector investments.

REGIONAL RURAL BANKS


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REGIONAL RURAL BANKSFACILITATES SMEs

SR.NO NAME OF RRB NAME OF SPONSORBANKS

STATE

1 UTTAR BIHAR GHAMIN BANK

CENTRAL BANK OFINDIA

BIHAR

2 BARODA GUJRATGHAMIN BANK BANK OF BARODA GUJARAT

3 HARYANAGHAMIN BANK

PUNJAB NATIONALBANK

HARYANA

4 TRIPURAGHAMIN BANK

UNITED BANK OFINDIA

TRIPURA

5 CHAITANYAGODAVARI

GHAMIN BANK

ANDHRA BANK ANDHRAPRADESH


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Entry Of Foreign Banks inIndia


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Government Plan For Foreign Banks

$ Government has come up with a road map for expansion of foreign banks

in India.

$ The road map has two phases:

During the first phase between March 2005 and March 2009, foreign

banks may establish a presence by way of setting up a wholly owned

subsidiary (WOS) or conversion of existing branches into a WOS.

The second phase had commenced in April 2009 after a review of the

experience gained after due consultation with all the stake holders in the

banking sector.


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Eligibility$ The setting up of branches in India should have the approval of the

home country regulator.

$ Economic and political relations between India and the country of

incorporation of the foreign bank

$ Financial soundness of the foreign bank

$ Ownership pattern of the foreign bank

$ International and home country ranking of the foreign bank

$

Rating of the foreign bank by international rating agencies


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Accounting, Prudential Normsand Other Requirements

$ Will be subject to the licensing requirements and conditions,

broadly consistent with those for new private sector banks

$ Will be governed by the provisions of Companies Act, 1956,

Banking Regulation Act, 1949Tax treatment


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Minimum Capital Requirement

The capital requirement of existing private sector banks should be on

par with the entry capital requirement for new private sector banks

prescribed in RBI guidelines of January 3, 2001, which is initially Rs.200

crores, with a commitment to increase to Rs.300 crores within three

years.

In order to meet with this requirement, all banks in private sector should

have a net worth of Rs.300 crores at all times.

The banks which are yet to achieve the required level of net worth will

have to submit a time-bound program for capital augmentation to RBI.

Where the net worth declines to a level below Rs.300 crores, it should be


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Specialized Banking

Institutions


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SPECIALISED FINANCIALINSTITUTIONS

$ INDUSTRIAL DEVELOPMENT BANK

$ INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF

INDIA

$ STATE FINANCIAL CORPORATIONS

$ EXIM BANK

$ NATIONAL BANK FOR AGRICULTURAL AND RURAL

DEVELOPMENT


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Universal Banking and

Innovations


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Universal Banking

$ It is a multi-purpose and multi functional financial supermarket

providing both banking and financial services through a single

window

$ Most common in European countries Germany, Switzerland

$ Indias emerging universal banks ICICI, SBI, HDFC, Kotak

Mahindra


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Universal Banking

$ ICICI was the first financial institution to convert itself into truly

universal bank

$ Infosys Technologies Ltd has launched finacle Bank-in-a-Box (BIAB),

a preconfigured and fully integrated framework for banking

transformation


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Advantages of Universal Banking

$ Economies of scale - Lower cost, higher output and better products

$ Resource utilization Possesses the information on risk

characteristics of the clients

$ Easy marketing on the foundation of a brand name

$One-stop shopping


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Disadvantages of Universal Banking

$ Grey area of universal bank Differences in regulatory requirement

for a bank and DFI

$ No expertise in long term lending

$ NPA problem remained intact Unlikely to improve the situation

concerning NPAs


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Innovations in Banking Industry

$ Internet Banking

$ Mobile Banking

$ Real Time Gross Settlement (RTGS)

$ Electronic Clearing System (ECS)

$ Automated Teller Machines (ATMs)

$ Core Banking

$ Debit and Credit cards


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Securitization


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Introduction

$ In era of 1970 market interest rate rose

$ Demand for loans were raising as compared to deposits collected by

banks

$ Process of securitization born

$ Assumptions :

$ Home is the most preferred possession

$ Default rate were minimal and predictable


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Continued. . .

$ Initially only mortgage loan were securitized

$ First auto loan deal was secutrized in 1985

$ Credit card securitization came up in 1986

$ In 1990s securitization entered insurance market


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What is Securitization???

Pooling and repackaging of cash flow producing

financial assets into securities that are then sold to

investors.


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Need for Securitization

$ Raising funds

$ Enhancing Liquidity

$ Attainment of CAR

$

Increased Operating Efficiency


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Generic deal diagram

SPV Investo

rs

Originator

Obligor

sCredit

Enhancement

Providers

RatingAgency

Structurer

9 Issue ofsecurities

Collections

Creditenhancement

Rating

8 Subscription tosecurities

Cashflows

10

11

Servicingofsecuriti

esContractsOngoingcash flows

Initial cashflows

CollectionAgent

Original

Loan SaleofassetPurchaseconsideration

Arran

ger

12 3

4

5

6

7


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Types of Risk Involved

I di S i i i k i


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Indian Securitization market isdivided as below:


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Overview

$ Securitization began in India in early 1990s

$ First deal between Citibank and GIC Mutual Fund worth Rs 160 mn

$ Indias retail securitization market shows greater stability as

compared to the US market-CRISIL

$ ICICI bank has carried out the largest securitization deal amounting

to Rs 19,299 mn in 2007.


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Benefits to Originator

$ Raising fund at a cheaper rate

$ Increases Borrowing Capacity

$ Improves Profitability

$ Diversification of credit risk

$ Reduces Asset- Liability mismatch


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Benefits to Investors

$ Portfolio Diversification

$ Higher yields and good liquidity

$ Flexibility

$ Less Volatile


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Benefits to National Economy

$ Capital market development

$ Source Of Capital

$ Data Transparency

$

Dispersion of Financial Assets


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Threats of Securitization

$ Passes on database to investors

$ Leaves the entity with junk assets

$ Costly source

$Uneconomical for lower requirements


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Co-operative Society


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Co-operative Society

An autonomous association of persons united voluntarily to

meet their common economic, social, and cultural needs and

aspirations through a jointly-owned and democratically

Controlled enterprise.

-International Co-operative Alliance (ICA)

Characteristics of


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Characteristics ofCooperative Society

$ Open membership

$ Voluntary Association

$ State control

$ Sources of Finance

$ Democratic Management

$ Service motive

$ Separate Legal Entity

$ Distribution of Surplus

$ Self-help through mutual cooperation


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Types of Cooperative Societies

$ Producers Co-operative societies

$ Consumers Co-operative societies

$ Marketing Co-operative societies

$ Credit Co-operative societies

$ Farmers Co-operative societies

$ Housing Co-operative societies

$ Labor Co-operative societies


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Co-operative Banks in India

$ Cooperative banks in India finance rural areas under:

Farming

Cattle

Milk

Hatchery

Personal finance


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Co-operative Banks in India

$ Cooperative banks in India finance urban areas under:

Self-employment

Industries

Small scale units

Home finance

Consumer finance

Personal finance


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Types of Deposits


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TYPES OF DEPOSITS

1. DEMAND DEPOSITS

SAVING ACCOUNT

Savings deposits are subject to restrictions on the number of

withdrawals as well as on the amounts of withdrawals during any

specified period. Further, minimum balances may be prescribed in order

to offset the cost of maintaining and servicing such deposits.

RATE OF INTEREST : 4.00% p.a. (w.e.f. 03.05.2011)


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TYPES OF DEPOSITS

CURRENT ACCOUNT

A current account is always a Demand Deposit and the bank

is obliged to pay the money on demand. The Current accounts bear

no interest and they account for the smallest fraction among the

current, saving and term deposits. They provide the convenient

operation facility to the individual/ firm. The cost to maintain the

accounts is high and banks ask the customers to keep a minimum

balance.


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TYPES OF DEPOSITS

2. TERM DEPOSITS

$ FIXED DEPOSITS [FDs]

This type of deposit account allows deposit to be made of an

amount for a specified period. This period of deposit may range from 15

days to three years or more during which no withdrawal is allowed.

However, on request, the depositor can en-cash the amount before its

maturity.


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TYPES OF DEPOSITS

$ RECURRING DEPOSITS [RD]

Fixed amount is deposited at regular intervals for a fixed term

and the repayment of principal and accumulated interest is made at the

end of the term. These deposits are usually targeted at persons who are

salaried or receive other regular income. A Recurring Deposit can usually

be opened for any period from 6 months to 120 months.


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TYPES OF DEPOSITS

PROVIDENT FUND

Provident Fund is the fund which is composed of the contributions made

by the employee during the time he has worked along with an equal

contribution by his employers. It is calculated as a percentage of his salary

and is returned to him on his retirement.


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TYPES OF DEPOSITS

TYPES OF PROVIDENT FUND

$ Statutory Provident Funds

$ Voluntary Provident Funds

$ Recognized Provident Fund

$ Unrecognized Provident Fund

$ Public Provident Fund


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PUBLICPROVIDENTFUND-1968

SchemeintroducedbyCentralGovernmentin1968.TheSchemeenablesthemembersofthepublictomakecontributionstotheFundandobtainIncomeTaxrebateundertherelevantprovisionsoftheIncomeTax.

Eligibility

$Individuals$Individualsonbehalfofaminor

Minimum/MaximumInvestment(w.e.f.15-11-2002)

MinimumRs.500/-perannuminmultiplesofRs.5/-MaximumRs.70,000/-perannum

Duration$15years$Canbeextendedforoneormoreblocksof5years$Accountcanbediscontinuedbutrepaymentofsubscriptionsalongwithinterestonlyafter15years.

RateofInterest

8%perannumcreditedinaccounton31stMarcheveryyearcalculatedontheminimumbalancebetween5thdayandendofthemonth.
http://www.statebankofindia.com/user.htmhttp://www.statebankofindia.com/user.htm


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PENSION ACCOUNT

A pension is an arrangement to provide people with an income when

they are no longer earning a regular income from employment.

Pensions should not be confused with severance pay; the former is

paid in regular installments, while the latter is paid in one lump sum.

A Pension Saving Account is a Zero Balance Account that

accumulates your pension over the years. It comes with a free

International Debit Card and facilities like Phone and Net Banking.


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PENSION ACCOUNT

FEATURES & BENEFITS

$ The Pension Saving account is a Zero Balance Account

$

Timely credit of receivables

$ Free International Debit Card

$ Enjoy facilities such as Net Banking, Phone Banking, Bill Pay, ATM

facility, inter-city and inter-branch banking

$ Pension Accounts are transferable from one branch/bank to another

as er the rocess laid down b the ension authorities


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Insurance Companies


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INSURANCE COMPANIES

Insurance is the equitable transfer of the risk

of a loss, from one entity to another, In

exchange for payment.

INSURABILITY


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INSURABILITY

$ Large number of similar exposure units

$ Definite loss

$ Accidental loss

$ Large loss

$ Affordable Premium

$ Calculable loss

$ Limited risk of catastrophically large losses


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TYPES OF INSURANCE

$ Vehicle Insurance

$ Home Insurance

$ Health Insurance

$ Accident, sickness and unemployment

$ Casualty Insurance

$ Life Insurance

$ Burial Insurance

$ Property Insurance

$ Credit Insurance


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INSURERS BUSINESS MODEL

$ The business model is to collect more in premium and investment

income than is paid out in losses, and to also offer a competitive price

which consumers will accept.

$ Profit can be reduced to a simple equation:

Profit = Earned Premium + investment income - incurred loss

-underwriting expenses.

$ Insurers make money in two ways:

i. Through Underwriting, the process by which insurers select the risks

to insure and decide how much in premiums to charge for accepting those

risks


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CLASSIFICATION


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SOME INSURANCE COMPANIES

$ Bajaj Allianz Life Insurance Company Ltd

$ Birla Sun Life Insurance Co. Ltd

$ HDFC Standard life Insurance Co. Ltd

$ ICICI Prudential Life Insurance Co. Ltd.

$ING Vysya Life Insurance Company Ltd.

$ Life Insurance Corporation of India

$ Max New York Life Insurance Co. Ltd



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$ Met Life India Insurance Company Ltd.

$ Kotak Mahindra Old Mutual Life Insurance Ltd

$ SBI Life Insurance Co. Ltd.

$ Tata AIG Life Insurance Company Ltd.

$ Reliance Life Insurance Company Ltd.


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LIFE INSURANCE

Life insurance is a contract between the policy holder and

the insurer, where the insurer promises to pay a

designated beneficiary a sum of money upon the death of the

insured person. Depending on the contract, other events such

as terminal illness or critical illness may

also trigger payment.


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Challenges for Banks

Challenge Faced by Foreign Bank in


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g y gIndia

With liberalisation, the Financial Institution plays a larger role in the

allocation of resources.

Focus at ensuring greater financial stability.

Enhance efficiency and productivity de-regulation of interest rates,

establishment of new banks, more liberal entry of foreign banks,

enhancing the role of public shareholders in nationalised and allowing

foreign direct investment in the private sector banks.


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Banks Exposed To Various Challenges

Customer service

Branch banking

Competition

Technology

Improving Risk Management Systems

Implementation of new accounting standards

'Know Your Customer'


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Conclusion

Economic Development Through


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Economic Development ThroughBanking Systems

BankingSystem

B k & E i D l t


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Banks & Economic Development

IMPORTANCE

Capital formation

Creation of money

Strengthen the link between organised and unorganised sector

Provision of long-term loans

Helping agriculture and small scale industries

Entrepreneurial development

B k & E i D l t


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Banks & Economic Development

Regulation of the flow of national savings

Comprehensive infrastructural facilities

Maintaining Balance of Trade

Mitigating the effects of trade cycle

Sectoral Priorities

Catalyst in social change

Effective implementation of monetary policy


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THANK YOU

banking and institutions presentation group#2 (1)

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