banking ope art ions

8/8/2019 Banking Ope Art Ions

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Commercial Banking Commercial Banking Commercial Banking Commercial Banking

Kamal K JindalKamal K JindalManaging Director Managing Director

Global Management ServicesGlobal Management ServicesNew DelhiNew Delhi

[email protected]@hotmail.com



According to section 5(c) of the Banking Regulation Actof 1949 a µBanking Company¶, means any companywhich transacts the business of banking an any state.

According to Sir John Paget : ´No one,and no body cor-porate or otherwise,can be a ¶banker· who does not

(i) Open current accounts(ii) Pay cheques drawn on himself and collect

cheques for customers.

BANKER



Depositor borrower BANK

For a bank, a loan that it gives out is an µAsset ' since it earns revenue,while a deposit is a ³Liability ' because it has to be repaid at some point intime.

Flow of Funds

Flow of Income

Depositor borrower BANK

Banking Operations (An Overview)Banking Operations (An Overview)

Core banking business: Mobilizing the deposits and utilizing itfor lending to industry.



EVO LUTIO N O F INDIAN BANKINGEVO LUTIO N O F INDIAN BANKINGSYST E MSYST E M

Globally banking evolution history common -

Moneylenders accepting deposits and issuingreceiptsMoney lending activity in India prevalent sinceV edic period , i.e ., 2000 to 1400 BC [CentralBanking Enquiry Committee (1931)]Banking System eminently suited to India¶srequirements existed many centuries beforescience of banking became an accomplished factin England[Royal Commission on Indian Currency andFinance, 1926]



Creation of Creation of IMPERIAL BANK OF INDIAIMPERIAL BANK OF INDIA

C reated by amalgamation of Presidency Banks in27 January 1921

Triple role - a commercial bank, a banker's bankand a banker to the government of IndiaµC eased to be banker to Govt. - post creation of RBI in 1934

Became agent of RBI - for government businessand Clearing at centres where RBI not establishedC ontinued to maintain currency chests andsmall coin depots



C RE ATIO N O FC RE ATIO N O FRE S E RVE BANK O F INDIARE S E RVE BANK O F INDIA

Banking crisis of 1913 - weaknesses in banking

systemIndian C entral Banking E nquiry C ommittee(1929 - 31) - looked into bank failuresRBI Act, 1934 - to regulate volume and cost of bank credit in economy through general creditcontrol, monetary management mandateC omprehensive Banking C ompanies Act, 1949(renamed as Banking Regulation Act from March

1966 ± RBI vested with licensing of banks, branchexpansion, liquidity of assets, management andmethods of working, amalgamation,reconstruction and liquidation; Urban Co -

operative Banks



Nat ion al is at ionNat ion al is at ion

1. By th e 1960s, th e Indi a n b a nking indus tr y ha s become a nimpo rta n t t oo l t o f a ci l i tat e th e deve l opmen t of th e Indi a n economy .

2. th e GOI issued a n o r din a nce a nd nat ion al ised th e 14 lar ges t comme r ci al ba nks wi th effec t f r om th e midnig ht of Ju l y 19 ,1969w h ic h go t parl i a men t¶ s a ssen t in Aug 1969.

3. A second dose of n at ion al isat ion of 6 mo r e comme r ci al ba nksfoll owed in 1980. T h e s tat ed r e a son fo r th e n at ion al isat ion w a s t ogive th e gove r nmen t mo r e con tr o l of c r edi t de l ive r y. Wi th th esecond dose of n at ion al isat ion, th e GOI con tr o ll ed ar ound 91% of th

e ba

nking business of Indi a

.

4. In 1993, th e gove r nmen t me r ged N ew B a nk of Indi a wi th P unj a bNat ion al Ba nk. I t w a s th e fi r s t me r ge r be t ween n at ion al ized b a nks.



L ibe ral is at ionL ibe ral is at ion1. In the early 1990s, the Narsimha Rao government embarked on a policy of liberalisation , licencing a small number of private banks.

These came to be known as New Generation tech-savvy banks.

2. They included Global Trust Bank (the first of such new generationbanks to be set up), which later amalgamated with Oriental Bank

of Commerce, UTI Bank (now re-named as Axis Bank ), ICICI Bank and HDFC Bank . This set the scenario for competitionamongst Banks and led to better services for the customer.

3. Based on Narasimhan & Rangarajan Committee recommendationsBanking Reforms were introduced like market driven interest rates, full computerisation of Banks etc.

4. Wide spread use of ATMs and Internet Banking has changed theway banking is done. Branches have become retail centres for other financial products like credit cards, mutual funds &insurance.



Reserve Bank of India

Schedule Banks Non-Schedule Banks

State C o-op Bank C ommercial Banks

SBI & Subsidiaries Public Sector Banks Private Sector Banks Foreign Banks

Regional Rural Banks

Structure O f Indian Banking System



FINANCIAL MARKET

MONEY MARKET CREDIT MARKET

FOREX MARKET CAPITAL MARKET



Banking business 28/05/2010Banking business 28/05/2010

DEPOSITS

CREDIT

INVESTMENTS

Credit/deposit Ratio

Investment/Deposit ratio

Rs 45,62,451 Crores

Rs 32,43,775 Crores

RS 14,37,373 Crores

71.10

31.50



Prudential normsPrudential norms

Cash reserve ratioStatutory liquidity ratioKYC normsExposure limitGroup exposure limitCapital adequacy ratioNPA normsInvestment normscapital market exposure



DEPOSIT ACCOUNTSDEPOSIT ACCOUNTS

CERTIFICATE

FLEXI

RECURRING

FIXED

SAVINGS

CURRENT

DEPOSITS



BANKING FACILITIES

Fund Based Non - Fund Based

Letter of Credit Bank Guarantee Co-acceptance

Overdraft Cash Credit Bill Finance Term Loan

Forfaiting Factoring



FUND BASED FINANCEFUND BASED FINANCE

B ILLSFINANCE

TERMFINANCE

RETAILFINANCE

OVERDRAFT

CASH CREDIT

LOANS&

ADVANCES



SECURITYSECURITY -- CHARGE ON ASSETSCHARGE ON ASSETS

HYPOTHECATIONPLEDGE

MORTGAGE ASSIGNMENTLIEN

SET OFF



Bank FinanceBank Finance

PurposeNeed basedTrack recordRisk assessmentMargin providedTenure of facilitySecurity availableRepayment sources



6 Cs6 CsCHARACTERCAPTIAL

CAPACITYCOLLATERALCONDITION

COMPLIANCE



Organization Structure Of BanksOrganization Structure Of Banks

HEAD OFFICE

ZONAL OFFICE

BRANCHES

REGIONAL OFFICE

Three Tier Structure



Functions at Various LevelsFunctions at Various Levels

CREDITCREDIT

PLANNING & DEVELOPMENTPLANNING & DEVELOPMENT

HUMAN RESOURCESHUMAN RESOURCES

NPA MANAGEMENTNPA MANAGEMENT

ACCOUNTS ACCOUNTSINTERNATIONAL BUSINESSINTERNATIONAL BUSINESS

TREASURY & INVESTMENTSTREASURY & INVESTMENTS



Banking Industry in India Banking Industry in India

Trend from Physical distribution to Virtual BankingTrend from Physical distribution to Virtual Banking

Change in the financial structure of BanksChange in the financial structure of Banks

Trend from Deposit taking to financial servicesTrend from Deposit taking to financial services

Trend from fragmentation to ConsolidationTrend from fragmentation to Consolidation



2424

ProfitabilityPressures

IncreasedC ompetition

ReinforcingTechnology

C ustomer Retention

InternationalStandards

C orporateGovernance

The Banking Industry : C h all e ng e s The Banking Industry : C h all e ng e s H uman Skills

RiskManagement



W holesale

Banking

Retail

Banking

dot.comVentures &Investments

Rural

Financing

TechnologyBackbone &

Services

C orporateFinanceProject FinanceC ommercialBankingInvestmentBanking

Venture C apital

DepositsBondsC redit C ardsMortgagesAuto loansPersonalLoans

W eb TradeH ousing portalO ther retailfinance portalsInvestments- Portals- Software- Networking

Financial verticalProcessing of

Global

TransactionsW eb Technologies

Customer Centric

Model for Banks

Rural Financing

SM E s

Agri Financing

banking ope art ions

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