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M.A.M B-SCHOOLSiruganur, Tiruchirappalli 621 105

Preliminary Test 1

Batch: 2010-2012 TRIMESTER V

BA 6038: BANKING & INSURANCE

Date: 17/01/2012 MARKS: 50DURATION: 1 Hrs.

Part A (2x10=20 Marks)

1. State any two reasons for co-operative banking sickness in India.

2. Define Banker of the Banker.

3. Write short notes on Investment Banking.

4. Mention any 4 roles of reserve bank and give its significance.

5. What is the prime function of SIDBI?

6. What do you mean by core banking?

7. Define Mobile Banking

8. List out the function of NABARD?

9. Define Smart Card

10.Define International Banking.

Part B (2x15=30 Marks)

11. a .Explain the role of RBI in the changing scenario. (8M)

b.Evaluate the performance of EXIM bank in the light of LPG. (7M)

OR

12. a. Describe the evolution of Banking System in India. (7M)

b. Describe the different aspects of Banking Regulations Act and its amendments. (8M)

13. a. Discuss the merits and demerits of ATMs and internet banking. (8M)

b. Explain the various dimensions of Mobile banking Process. (7M)

OR

14. a. Compare the features and advantages of EFDs with RTGS. (7M)

b. Explain the various dimensions of Internet Banking Processes. (8M)

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Prepared by: ___________________(Staff Concerned with date of submission to ECC)

Approved by: ____________________(Director)

1.excessive overdues,inefficient societies,regional disparities,benefits to big land owners,dependence on outside resources,political

interference,inadequate coverage,lack of other facilities,dual control,competition from private agencies,credit linked to assets.

2.A central bank is a lender of last resort -- Prof.HawtryIt is a bank of banker -- Samuelson

Bank which has monopoly over note issue -- Vera SmithCentral bank is the governments bank -- Sayers

3. Investment banking is a particular form of banking which finances capital requirements of enterprises. Investment bankingassists as it performs IPOs, private placement and bond offerings, acts as broker and carries through mergers and acquisitions.4. To regulate the issue of banknotes

To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage.

5. Credit Guarantee Fund Trust for Micro and Small Enterprises provides guarantees to banks for collateral free loans extended to

SME.

SIDBI Venture Capital Ltd. is Venture Capital company focused at SME.

SME Rating Agency of India Ltd. (SMERA) provides composite ratings to SME.6. Core Banking Solution (CBS) is networking of branches, which enables Customers to operate their accounts, and avail banking

services from any branch of the Bank on CBS network, regardless of where he maintains his account. The customer is no more the

customer of a Branch. He becomes the Banks Customer. Thus CBS is a step towards enhancing customer convenience through

Anywhere and Anytime Banking.

7. Mobile banking is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as amobile phone.8. 1.Providing refinance to lending institutions in rural areas

2.Bringing about or promoting institutional development and3.Evaluating, monitoring and inspecting the client banks.

9.Smart card is an electronic card used to trade.10.The International Bank is an international standard for identifying bank accounts across national borders with a minimal of risk of

propagating transcription errors. It was originally adopted by the European Committee for Banking Standards (ECBS), and was later

adopted as an international standard under ISO 13616:1997 and now as ISO 13616-1:2007.

11.a.RBI and its originCommenced Operations on 1st April 1935 as per The Reserve Bank of India Act, 1934 (II of 1934) and Nationalise on 1st

Jan 1949.To regulate the issue of banknotes

To maintain reserves with a view to securing monetary stability andTo operate the credit and currency system of thecountry to its advantage. Structure of Banking in India

Functional Chart,Organisational StructureFunctions of RBIBank of Note issueThe Governments BankBankers BankCustodian Foreign Exchange Reserves forcountryLender of last resort and bank of rediscounting.Controller of creditMonetary Policy

Monetary policy is essentially a programme of action undertaken by central bank,to control and regulate the supply of money with

the public and flow of credit with a view of achieving predetermined macroeconomic goals.-Macroeconomics-Theory & policy-

D.N.Dwivedi-Tata Magraw Hill comp,Instruments of Monetary Policy (Economic variables)

Weapons of Monetary controlsNuts & Bolts of Monetary policy -- Samuelson & Nordhaus

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http://www.economywatch.com/banking/investment/http://www.economywatch.com/banking/investment/http://www.economywatch.com/banking/investment/http://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Transcription_errorhttp://en.wikipedia.org/wiki/European_Committee_for_Banking_Standardshttp://www.economywatch.com/banking/investment/http://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Transcription_errorhttp://en.wikipedia.org/wiki/European_Committee_for_Banking_Standards

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Quantitative credit control (General credit control) Control of quantity or volume of money

Qualitative credit control ( Selective credit control) Quality /Purpose/Direction of credit Conclusion Central bank plays important role in achieving economic growth of a developing country. It promotes economic growth with stability. It helps in attaining full employment of resources, in overcoming balance of payment disequilibrium & in stabilizing

exchange rates.

11.b. Exim Bank (full name: The Export-Import Bank of India) is anIndiangovernment-ownedfinancial institutionfor the

public sectorcreated by and Act of theParliament of India: the Export-Import Bank of India Act 1981.

11.b. Exim Bank is managed by a Board of Directors, which has representatives from the Government, Reserve Bank of India,Export Credit Guarantee Corporation of India(ECGC), a financial institution, public sector banks, and the business community. The Bank's functions are segmented into several operating groups including:

Corporate Banking Group which handles a variety of financing programmes for Export Oriented Units (EOUs), Importers,and overseas investment by Indian companies.

Project Finance / Trade Finance Group handles the entire range of export credit services such as supplier's credit, pre-shipment Agri Business Group, to spearhead the initiative to promote and support Agri-exports. The Group handlesprojects and export transactions in the agricultural sector for financing.

Small and Medium Enterprise: The group handles credit proposals from SMEs under various lending programmes of theBank.

Export Services Group offers variety of advisory and value-added information services aimed at investment promotion

Export Marketing Services Bank offers assistance to Indian companies, to enable them establish their products inoverseas markets.

Besides these, the Support Services groups, which include: Research & Planning, Corporate Finance, Loan Recovery,Internal Audit, Management Information Services, Information Technology, Legal, Human Resources Management andCorporate Affairs.

12.a.Chart12.b.The Act contains following five parts :

Part 1 PreliminaryPart 2 Business of Banking CompaniesPart 3 Suspension of business and winding-up of banking

CompaniesPart 4 MiscellaneousPart 5 Application of the Act to cooperative banks

13.a.AN ATM COUNTERATMs are aquick and convenient way to accessmoney in youraccount.

HISTORY

Don Wetzel, vice-president of product planning at Docutel (USA), was the chief conceptualist of ATM. He along with Tom Barnes and George Chastain began work in 1968.

The working prototype came about in 1969.

The first ATM was installed at the Rockville Centre(New York) based Chemical Bank.

PARTS OF AN ATM

Consists of embedded software and

hardware.Two input devices: Card reader & Keypad

Four output devices: Spaker Display screen Receipt printer Cash dispenserElectric eyeJournal

Sensor Reject bin

13.b.Introduction Mobile banking is a term used for performing balance checks, account transactions, payments etc. via a

mobile device such as a mobile phone.

REASONS OF GENESIS OF MOBILE BANKING

Introduction of new technologies.Control costs, removal of cost duplication Cater to increasing online channel customers

Personalize customer interactionsnparalleled convenience and proactive customer service CLASSIFYING SERVICES

On the basis of originator of service sessionPushPullOn the basis of nature of service

Transaction BasedEnquiry BasedMobile banking services Account InformationPayments, Deposits, withdrawals, and

TransfersInvestmentSupportContent Services

14.a.Electronic Fund Transfer (EFT)

EFT is money transfer service from account to account of any bank branch to any other bank branch in places where such

services are offered.The transactions are routed through RBI.

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http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Public_sectorhttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Export_Credit_Guarantee_Corporation_of_Indiahttp://en.wikipedia.org/wiki/Export_Credit_Guarantee_Corporation_of_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Public_sectorhttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Export_Credit_Guarantee_Corporation_of_India

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The EFT system presently covers all the branches of the 27 public sector banks and 55 scheduled commercial banks at

the 15 centres (viz., Ahmedabad, Bangalore, Bhubaneswar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur,

Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthpuram).

Operation of EFT Step-1: The remitter fills in the EFT Application form giving the particulars of the beneficiary (city, bank,

branch, beneficiarys name, account type and account number) and authorises the branch to remit a specified amount to

the beneficiary by raising a debit to the remitters account.

Step-2: The remitting branch prepares a schedule and sends the duplicate of the EFT application form to its Service

branch for EFT data preparation Step-3: The Service branch prepares the EFT data file by using a software package

supplied by RBI and transmits the same to the local RBI (National Clearing Cell) to be included for the settlement.

Step-4: The RBI at the remitting centre consolidates the files received from all banks, sorts the transactions city-wise and

prepares vouchers for debiting the remitting banks on Day-1 itself. City-wise files are transmitted to the RBI offices at the

respective destination centres. Step-5: RBI at the destination centre receives the files from the originating centres,

consolidates them and sorts them bank-wise. Thereafter, bank-wise remittance data files are transmitted to banks on Day

1 itself. Bank-wise vouchers are prepared for crediting the receiving banks accounts the same day or next day.

Step-6: On Day 1/2 morning the receiving banks at the destination centres process the remittance files transmitted by RBI

and forward credit reports to the destination branches for crediting the beneficiaries accounts.

Benefits

Faster mode of transfer of funds Customer-savvy systemSecured means of transfer

Beneficiary need not go to the bank since funds are credited automatically.

RTGS

Real Time Gross Settlement (RTGS) is a funds transfer mechanism where transfer of funds takes place from one bank to

another on

real time payment transaction is not subjected to any waiting period and

gross settlement the transaction is settled on one to one basis without bunching any other transaction.

Large value transactions minimum remittance amount is Rs.1 lakh. (no upper ceiling)

The RTGS is available from 9 am to 4.30 pm on weekdays and 9 am to 12.30 noon on Saturday.

The credit is instant. If the crediting , the receiving bank would have to return the funds within 2 hours.

At present there are 58720 bank branches which are RTGS enabled.

Details required from the remitter Account to be remittedAccount number to be debitedName of the beneficiary bank

Name of the beneficiary customerSender to receiver information, if anyThe IFSC code of the receiving branch

(the IFSC code can be obtained from the bank and also available on the cheque leaf.)

Benefits of RTGS

Faster transfer of large value funds.Less risky as funds are routed through RBI.

Reduction in transaction cost. Companies are expected to save Rs. 2000 per Rs. 1 crores worth of transaction using

RTGS.Innovative payment products have been developed utilising the RTGS infrastructure.

14.b.Internet bankingInternet banking services is an additional delivery channel is just like telebanking, ATM with internet as the

medium of operation.The major advantage of internet banking is that the user can utilize the services from anywhere at any time.It simply require a personal computer & as internet connection. The user connects to the bankss website

through internet and log in to the services by using valid corporate id, user-id and password.

Need for Internet bankingIt provide faster, accurate, efficient services at the touch of a button & at a very low cost.

Banks initiating new technological innovation have an edge over other banks

The internet offers an avenue to the issue of competitive advantage in the face of redefinition of financial servicesindustryPhenomenal growth of customers & branches

Time has come for banks to bring fundamental changes in their strategy to redefine customer banker relationship.

Advantages Convenience banking Available anywhere/ anytime -24*7*365Low cost, unlimited access & lesser hassels Better customer / banker relationship, integrated customer dataWides reach to public, competitive edge for banks,

enhance image of banks as technology driven bankEffective marketing tool for promotion of various schemes of banks

Internet banking- working User can utilise the services from anywhere & at any time Require P C & an internet connection

User connects to the banks websites through internet Login to the services by using valid user-id and password

Utilities the services & facilities available & obtains the desired information

Functions Checking account balanceMaking account enquiryOrdering a demandRequesting a cheque book

Transferring funds Opening additional deposit a/cMaking a stop payment request

Requesting to make payment of utility bills, electricity, water, telephone etc

Distinct features of online banking over traditional banking Customer can do banking transactions round the clock

Personal visit to the branch is no longer requiredCustomer can access & operate their a/c from anywhere in the world

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Cost of each transaction is much reducedQuick & effective customer service is possible

Requirement of staff at the banks get reducedFaster decision making & better operational efficiency are possible

Used as a platform for electronic delivery of varied banking services to the customer

Increases customers convenience at all levels reates strong basic infrastructure for the bank to venture in the new fields.

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