1. What is a Bank?
Suppose you have got Rs.1,000 you don’t need for or say for a year and want to earn income from the money until then or you want to buy a house and need to borrow Rs.100,000 and pay it back over 20 years.

It would be difficult for someone acting alone to find either a potential borrower who needs exactly Rs.1,000 for a year or a lender who can spare Rs.100,000 for 20 years. That’s where banks come in.

“Bank is a financial institution that undertakes the banking activity i.e. it accepts deposits and then lends the same to earn certain profit.” Now-a-days, banking sector acts as the backbone of modern business. Development of any country mainly depends upon the banking system.
2. How do the Banks work?

• The primary function of banks is to put their account holders' money to use by lending it out to others who can then use it.


• When you deposit your money in the bank, your money goes into a big pool of money along with everyone else's, and your account is credited with the amount of your deposit.

3. How banks create money?
Here are the ways in which banks make money
1) Loans: Lending loans to borrowers from the public is a major way for commercial banks to earn money. These could be personal loan, home loan, car loan and other type of mortgages. Banks generally restrict the amount of withdrawals to remain solvent, especially for forwarding loans. This ensures that the money remains within the bank. The amount is lent to a person at a higher interest rate for a fixed period of time. As the loan amount starts getting recovered, the bank pays a portion of the interest value to other depositors and keeps the remaining as its earning.
2) Credit Cards: Credit cards are unsecured loans extended by a commercial bank with the sole intention of earning heavy interest. Availing a credit card, limited or unlimited value, gives the person access to immediate funds and the person is charged premium fees by the bank for extending this facility.
3) Public Deposits: Money kept by the public in savings and checking accounts is the largest source of funds for commercial banks. The amount account holders entrust the bank with safekeeping earns them a very basic interest amount. These deposits are pooled together and loaned out to other individuals or invested elsewhere. The banks earn interest money and share the basic percentage with the savings or checking account holder.
4) Service Fees: Commercial banks levy service fees on its customers and even though the service fees are marginal, it forms a large chunk of commercial bank earning medium. Commercial banks charge service fees for ATM’s, overdrafts, operating a simple savings account, issuing debit cards, renewing debit cards, accessing internet banking and mobile banking, issuing checks, maintaining bank lockers and more. These fees are unavoidable since every commercial bank charges them.
Intermediary: Banks act as an intermediary between depositors (who lend money to the bank) and borrowers(to whom the bank lends money). The amount banks pay for deposits and the income they receive on their loans are both called interest.
4. How many ways we can we can an account?
Accounts can be opened in two ways: Going to a bank branch or though Business Correspondents (BCs). Business correspondents are the individuals or any other entities just like insurance agents and reach the people in far flung or remote areas which are unbaked areas. They are called bank representatives. They help the people in any banking activity like opening accounts, depositing money, withdrawing money, give away loan, or any other transaction. Sometimes opening a bank branch in village or remote areas is not feasible, so a BC model was initiated by RBI.
5. Function of Banks?

6. Assets Vs. Liabilities
Assets: Assets are the ones which are useful or valuable things a person/organization has like goods, property, vehicles, equipment, machinery, etc.
If we talk about bank’s assets: They are those which the bank has and can be readily converted to cash whenever bank requires money.
Liabilities: Liabilities are the ones for which an amount of money is owed like in a company the salaries of employees are to be given, etc.
If we talk about bank’s liabilities: They are those which the bank has from the customer deposits and borrowed money for bank’s purpose.
7. Letter of credit Vs. Bank Guarantee
These are given by buyers to their sellers both in India and outside India. When products are imported from a foreign company, how the company will assure that they will get the payment in time ans full amount? So the solution is Letter of credit and Bank Guarantee.
A letter of credit is a letter issued by bank which guarantees buyer’s payment on time and in correct amount up to the time the services will be delivered to the buyer.
Unlike in letter of credit, in a bank guarantee the payment is done only when the buyer is not able to pay the required amount of money to the seller.
So the difference between the two is that if you give letter of credit to seller, that will ensure that bank will pay on your behalf up to the day the services are being provided to you by the seller and if you give bank guarantee to seller, that will ensure that bank will pay on your behalf if you are not able to pay the amount.
8. Insolvency Vs Bankruptcy
When a person/organization is unable to pay their debts when they become due and payable, it is called insolvency.
When a person/organization is unable to pay their debts when they become due and payable and is also declared as bankrupt by court, it is called bankruptcy.
All bankrupts will be called insolvent, but not vice-versa.
9. FDI Vs FII
Foreign Direct Investment (FDI) as the name suggests is investing directly in another country. A foreign company which is based in some other country like France invests in India either by setting up a wholly owned subsidiary or getting into a joint venture with some company based in India and then conducts its business in India.
Examples: IBM India, Maruti Suzuki, SBI life insurance, etc
Foreign Institutional Investor (FII) is similar to FDI in a way that this is also direct investment but investment in only financial assets such as stocks, bonds etc. of a company located in another country.
Example: Any foreign company invests in the shares of Infosys (based in India).

10. Dormant account Vs. Frozen account
The account which has not been used for 24 months (2 years) by its operator is termed as dormant account while the account in which all the activities have been stopped by the bank is a freezed account.
The dormant accounts can be made as operative as per bank policy. According to RBI guidelines, banks cannot charge any money to make dormant or inoperative accounts as operative. The interest on amount of money in saving accounts will be credited in account in case of inoperative account also.
Freezing of account means the transactions in such account cannot be performed until further notice. The payments will be stopped in such accounts and even cheques drawn before freezing are also not allowed to be encashed by anyone. Only RBI, SEBI, Income-tax authorities, and court can give orders to freeze account and not the respective banks.

11. Cross selling Vs. Up Selling
Cross selling means selling of products/services to an already existing customer. And then if we talk about banks, when they sell any extra banking products/services to their customer along with the product the customer wants. Like selling a credit card and internet banking to a savings or current account customer, selling their any bancassurance products, etc.
Unlike cross selling, up selling means encouraging customers to purchase a higher-end product or we can say a more costly product than the customer has asked for. Like the customer asks for a credit card with overdraft facility of Rs 10,000 but the banking representative tells him benefits of having the card with more facilities, etc.
12. Consortium Financing Vs. Multiple Banking
There are cases in which big businesses require large finances which it cannot get from single lender. In Consortium financing, several banks (or financial institutions) finance a single borrower. In this case there is a common documentation, joint supervision and follow-up exercises between all banks/financial institutions. So the participating banks form a new consortium bank. The whole loan amount is divided among those banks forming consortium, so the risk also gets divided. The bank which takes the higher risk (by giving the highest amount of loan) will act as a leader and thus it acts as an intermediary between the consortium and the borrower.
Multiple banking is an arrangement where a borrower takes loan amount from several banks. In this case no bank knows that his borrower has taken loan from other banks too. There is no contractual relationship between various banks like that in consortium banking and each bank holds its individual security and own credit rates.
13. Moratorium period Vs. Grace period
When we take a loan from bank, we do not have to start paying the EMIs immediately. The bank gives some time before start paying EMIs which are generally paid on a monthly basis. This time before start of paying EMIs is called Moratorium period.
Unlike moratorium period, during the grace period, interest is not charged. Actually it is a period of time after a payment becomes due.
Example: Grace period is given for paying off the overdraft value of credit card. If the money is not paid back within the grace period, interest rate is charged according to the lending institution policy.
14. NRO Account Vs. NRE Account Vs. FCNR Account
NRO Account: Non Resident Ordinary (NRO) account is a Savings Account or Current Account or Fixed Deposit Account or Recurring Deposit account opened by NRIs and PIOs. It is a rupee denominated account i.e. the amount in the account is maintained in Indian Rupees.
NRE Account: Non Resident External (NRE) account is a rupee denominated account which can be Savings Account or Current Account or Fixed Deposit Account or Recurring Deposit account opened by NRIs and PIOs.
FCNR Account: Foreign Currency Non Resident (FCNR) account is a term deposit account that can be maintained by NRIs and PIOs in foreign currency. So this means it is not a savings account. Authorized dealer banks in India can allow deposits in any of the permitted currency (currency freely convertible).
15. Cheque Vs. Demand Draft
A cheque is bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and cheque also includes the electronic image of a truncated cheque and a cheque in the electronic form.
Also known as DD, it is kind of a pre-paid negotiable instrument that is used to direct payments from one bank to another bank or one of its own branches to pay a certain sum to the specified party.

16. Types of Cheques:
Order Cheque: A cheque which is payable to a particular person on his order is called an order cheque. This is a cheque whereby the printed word Bearer on the cheque is cancelled. The cancellation of the word Bearer automatically makes the cheque an order cheque.
Bearer Cheque: A cheque which is payable to a person whosoever bears, is called bearer cheque. The cheque sometimes can be made payable to “Cash” or bearer or made payable to a specific name.
Stale Cheque: Check presented at the paying bank after a certain period typically six months of its payment date. A stale check is not an invalid check, but it may be deemed an ‘irregular’ bill of exchange. A bank may refuse to honor it unless its drawer reconfirms it payment either by inserting a new payment date or by issuing a new check. Also called stale dated check.
Mutilated Cheque: If a cheque is torn into two or more pieces such cheque is Mutilated Cheque. If it presented for payment, such a cheque the bank will not make payment against such a cheque without getting confirmation of the drawer. In case, if a cheque is torn at the corners and no material fact is erased or cancelled, the bank may make payment against such a cheque.
Post Dated Cheque: If a cheque bears a date later than the date of issue, it is termed as post dated cheque. Any check or draft that has a future date written upon it by the user. The amount of the check will not be drawn from the account until the date written on the check. For example, a check written on the 14th of the month but dated for the 28th will not be cashed for another two weeks.
Open Cheque: A cheque that is not a crossed cheque. The person whose name appears on the cheque can write the name of another person on it, and the money will be paid to them. An open cheque is a cheque that is not crossed on the left corner and payable at the drawee bank on presentation of the cheque.
Crossed Cheque: A crossed cheque is one which has two short parallel lines marked across its face. A cheque which carries too parallel transverse lines across the face of the cheque with or without the words “I and co”, is said to be crossed. Crossed cheques are of two types. By simply crossing a cheque or with the words ” & Co”, by the payer, the payee can either deposit it in his/her account or endorse it in favour of another person on the reverse. This practice is nowadays not accepted by the banks.
17. Cheque Truncation System (CTS):
Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en-route to the paying bank branch. In its place an electronic image of the cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc.
This means that with this system, physical cheques will not move for clearing at different banks. This enables the outstation cheques to get cleared in a single day and also the associated cost with the movement of physical cheques gets eliminated. If a customer wants to see the physical cheque, he can request it to the bank. To meet legal requirements, the presenting banks which truncate the cheques need to preserve the physical instruments for a period of 10 years.
18. Negotiable Instruments:

• Negotiable instrument is a document which guarantees the payment of a specific amount of money, either on demand, or at a set time, with the payer named on the document.


• A negotiable instrument can be transferred from one person to another.


• According to Section 13 of the Negotiable Instruments Act, 1881, “A Negotiable Instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer.”

19. Know your customer(KYC):

• It is a process by which banks obtain information about the identity and address of the customers.


• It helps to ensure that services of the banks are not misused.


• It is to be completed by the banks while opening accounts and also periodically update the same.

20. Requirements for opening a bank account

• Proof of identity


• Proof of address

Proof of identity:
Six documents as Officially Valid Documents (OVDs) for the purpose of producing proof of identity. These six documents are

• Passport


• Driving Licence


• Voters’ Identity Card


• PAN Card


• Aadhaar Card issued by UIDAI


• NREGA Card

One need to submit any one of these documents as proof of identity. If these documents also contain one’s address details, then it would be accepted as proof of address. If the document submitted by person for proof of identity does not contain address details, then he/she will have to submit another officially valid document which contains address details.
Difference between small accounts and other accounts
Small Accounts have certain limitations such as

• balance should not exceed Rs.50,000 total credits in one year should not exceed Rs.1,00,000 total withdrawal and transfers should not exceed Rs.10,000 in a month.


• Foreign remittances cannot be credited to such accounts.

Small accounts remain operational for a period of twelve months and thereafter, for a further period of twelve months, if the holder of such an account provides evidence to the bank of having applied for any of the officially valid documents within twelve months of the opening of such account. The bank will review such account after twenty four months to see if it requires such relaxation.
What is e-KYC:
e-KYC refers to electronic KYC. e-KYC is possible only for those who have Aadhaar numbers.
How does it work?
While using e-KYC service, you have to authorize the Unique Identification Authority of India (UIDAI) to release your identity/address through bio metric authentication to the bank branches/business correspondent(BC). The UIDAI then transfers your data comprising name, age, gender, and photograph of the individual, electronically to the bank/BC. Information thus provided through e-KYC process is permitted to be treated as an Officially Valid Document under PML Rules and is a valid process for KYC verification.

21. All about RBI:
Reserve Bank of India regulates the entire banking system of the nation, has the job of ensuring monetary stability for us, is responsible for printing our currency notes, operates the country’s credit and currency system, and does a lot more from its position at the top of the banking system pyramid. RBI was originally privately owned but is now owned wholly by the Indian government. Set up on April 1, 1935 under the Reserve Bank of India Act, RBI’s central office was initially in Kolkata but moved to Mumbai in 1937.

• The RBI logo was inspired from the East India Company Double Mohur.


• Formed on April 1, 1935 as a private entity, but is a government entity now. Nationalization of the central bank did not happen till 1949.


• The financial year of RBI is from 1 July to 30 June.


• The first woman to become the deputy governor of RBI is K. J. Udeshi.


• RBI demonetized notes in the denominations of Rs. 5,000 and Rs. 10,000 in 1938. They were reintroduced in 1954 and again demonetized in 1978. RBI can print these notes according to the RBI act of 1934.


• RBI was also the central bank for two other countries. It played the role of Central Bank of Pakistan till June 1948 and the Central Bank of Burma ( Myanmar) till April 1947.


• The bank was established on the recommendation of the Hilton Young Commission.


• Manmohan Singh is the only Prime Minister to have also served as the Governor of RBI.


• The first Indian to hold the position of the Governor of RBI was Mr. C.D. Deshmukh. He was the third governor of RBI.


• RBI runs a Monetary Museum in the premises of the Mumbai head office.

22. Wholly owned subsidiaries of RBI:
4 subsidiaries as: Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), DICGC, NABARD, and National Housing Bank.
BRBNMPL: It was established with a view to produce bank notes in India and enable RBI to bridge the gap between the supply and demand for bank notes in the country.
The company manages 2 Presses: Mysore in Karnataka and Salboni in West Bengal.
23. Objectives of RBI:

• Regulating the issue of currency in India


• keeping the foreign exchange reserves of the country


• establishing the monetary stability in the country


• developing the financial structure of the country on sound lines consistent with the national socio- economic objectives and policies.

24. Major functions of RBI
Monetary Authority of India: RBI works as the monetary authority of India and there by operates the monetary policy. Monetary policy is used for the control of money supply in the economy with objective to maintain economic and financial stability and ensure adequate financial resources for the purpose of development.
Issuer of Currency: Reserve Bank of India has the sole right to issue Banknotes of all denominations.

• First paper notes were issued by the private banks such as Bank of Hindustan and the presidency banks during late 18th century.


• Currently, paper currency notes in India are issued in the denomination of Rs. 5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1,000. RBI can issue any note of any denomination but not exceeding Rs. 10,000. The notes denomination is notified by Government and RBI acts accordingly.


• RBI follows a minimum reserve system in the note issue. Initially, it used to keep 40 per cent of gold reserves in its total assets. But, since 1957, it has to maintain only Rs. 200 crores of gold and foreign exchange reserves, of which gold reserves should be of the value of Rs. 115 crores.


• Currency chests are storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank.


• The amount of a banknote is written on it in 17 languages out of 22 official languages of India.

RBI as Banker of Banks:
The other banks keep their current accounts with RBI and RBI helps them in maintaining statutory reserves with itself.
Management of foreign exchange reserves:
RBI manages the Foreign Exchange Management Act, 1999 to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
RBI as a regulator and supervisor of financial system:
It is the most important function of RBI. It not only regulates and supervises the Indian Banks but also Foreign Banks, Regional Rural Banks, Local Area Banks, Cooperative Banks, Financial Institutions including Development Financial Institutions (DFIs) and Non-Banking Financial Companies.
RBI as Banker and Debt Manager to the Government:
Central Government entrusts the Reserve Bank with all its money, remittance, exchange and banking transactions in India and the management of its public debt. Moreover, Government also deposits its cash balances with RBI.
Developmental & Promotional roles:
By encouraging the commercial banks to expand their branches in the semi-urban and rural areas, the Reserve Bank helps to reduce the dependence of the people in these areas on the defective unorganized sector of indigenous bankers and money lenders and to develop the banking habits of the people.
25. What is Nationalization?
Nationalization is a process whereby a national government or State takes over the private industry, organisation or assets into public ownership by an Act or ordinance or some other kind of orders. This strategy has been frequently adopted by socialist governments for transition from capitalism to socialism. In India since independence following major nationalizations have taken place
1770 : First bank Bank of Hindustan.
1949 : RBI was nationalized (RBI was state owned at the time of Indian independence).
1955 : Control of Imperial Bank of India was acquired by RBI
1969 : 14 Indian private banks were nationalized
1972 : 106 insurance companies were nationalized into four insurance companies
1980 : 6 more Indian private banks were nationalized
1993 : New Bank of India Merged into Punjab National Bank
Story behind Nationalization in the 1960s:

• Banks in India except the State Bank of India (SBI), continued to be owned and operated by private persons.


• By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer and a debate had followed the nationalization of the banking industry.


• Indira Gandhi, the then Prime Minister of India expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization".


• Government of India issued an ordinance (Banking Companies Ordinance,1969) and nationalized the 14 largest commercial banks with effect from 19 July 1969.


• Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969


• The Indian banking sector is classified into scheduled banks and non-scheduled banks.


• All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are Scheduled Banks.


• These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks.


• Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled Urban Cooperative Banks.

Scheduled Commercial Banks in India are categorized into five different groups:

• State Bank of India and its Associates


• Nationalized Banks


• Private Sector Banks


• Foreign Banks


• Regional Rural Banks

26. What are Public Sector Banks?
PSBs in India are banks where a majority stake i.e. more than 50% is held by a government. Thus at present all the nationalized banks are Public Sector banks. In addition to these, IDBI Bank Ltd and SBI are too Public Sector Bank (though not nationalized bank) as GoI has over 50% stake in these banks too.
27. What are Private Sector Banks?
Private Banks are banks that do not have any government stakes. Private Banks have gained quite a strong foothold in the Indian banking industry over the last few years especially because of optimum use of technology. The Private Banks are accountable for a share of 18. 2 percent of the Indian banking industry. IndusInd Bank was the first private bank in India and among the fastest growing Bank Private Banks in the country.
28. Comparison between Private and Public Sector Banks?

Private sector banks introduced the concept of online banking in India. This was mostly because the private banks were technologically well equipped.

Private sector banks were using state of the art technology and fully computerized systems since the time they entered the Indian market whereas the Public sector banks were not.

However despite the technological challenges the public sector banks in India are still the preferred destinations for many as they are considered as safer options for money deposit.

29. What are Foreign Banks?
A foreign bank is a bank with head office outside the country in which it is located. e.g. Standard Chartered Bank.
30. What are Regional Rural Banks?
After nationalization, of banks in 1960 there were problems which made it difficult for commercial banks even under government ownership to lend to farmers. Government set up Narasimham Working Group in 1975. On the basis of this committee’s recommendations, a Regional Rural Banks Ordinance was promulgated in September 1975, which was replaced by the Regional Rural Banks Act 1976.
First RRB: Prathama Grameen Bank
The RRBs were owned by three entities with their respective shares as follows:

• Central Government → 50%


• State government → 15%


• Sponsor bank → 35%

Developments Banks in India:

• Industrial Development Banks


• Agricultural Development Banks


• Export - Import Development Banks


• Housing Development Banks

Industrial Development Banks:

• IFCI


• IDBI


• SIDBI

Agricultural Development Banks:

• NABARD

Export - Import Development Banks:

• EXIM

Housing Development Banks:

• NHB

31. RBI to study Block chain technology to curtail paper currency
i. India’s Central Bank Reserve Bank of India mulling to set up a committee to study the use of Block chain technology. It will be used to reduce the use of paper currency.
ii. The system’s database consists of blocks that hold time-stamped batches of valid transactions which is seen as the main technical innovation of bitcoin.
32. RBI is all set to monitor the customer rights in the commercial banks.
i. RBI is all set to monitor the issues related to the customer rights in the five broadare as of banking soon. This step is adopted by the banker’s bank to enhance the banking experience of the customers.
ii. The five core areas to be monitored by the RBI are:-

• Right to privacy


• Right to fair treatment & transparency


• Fair and honest dealing


• Right to suitability


• Right to grievance redress & compensation.

33. RBI launches portal to curb illegal money pooling by firms.
i. The Reserve Bank of India has launched a website sachet.rbi.org.in– in a bid to curb illegal and unauthorized pooling of funds by unscrupulous firms. It was launched by RBI Governor Raghuram Rajan.
ii. The move will help people obtain information about entities allowed to collect deposits and also would help in arriving logical conclusion by punishing the guilty is paramount to deter entities.
34. RBI panel to benchmark India’s household finance
i. Reserve Bank has constituted a panel to study the various facets of household finance in India and to benchmark India’s position visav is both in other major world markets and advanced economies.
ii. The panel headed by Financial Economics Professor Tarun Ramadorai at Oxford University.
35. RBI makes no changes in Repo rate and CRR in its third Bi-Monthly Monetary Policy Review
As expected The Reserve of India (RBI) in its third bi-monthly monetary policy review kept the repo rate unchanged at 6.50 per cent citing upside risk to March 2017 inflation target.
36. RBI’s Draft for Limiting Liability of Customers in Unauthorized Electronic Banking Transactions
RBI has come up with a Draft Circular for public comments on “Limited Liability” for customers in case of frauds in Internet Banking and Card transactions.

• RBI has also proposed zero liability on the customer if the loss is reported within three working days even if the cause is not directly linked to deficiency on the part of the lender and the fault lies elsewhere in the system.

37. RBI allows start-ups to raise $3 million through ECBs
i. Reserve Bank of India (RBI) issued rules permitting these to raise External Commercial Borrowings (ECBs) per start-up was capped at $3 million per financial year to support financing for start- ups
ii. The borrowing could be either in rupees or a convertible foreign currency or a combination of both.The money could be used for any expenditure of the borrower’s business.
38. RBI Opened Second Banking Ombudsman Office In New Delhi
i. The RBI has opened a second office of the Banking Ombudsman in New Delhi, taking into account the significant increase of the banking network.
ii. The first office of the banking ombudsman at RBI, New Delhi, would have jurisdiction over Delhi and Jammu & Kashmir. The second office would have jurisdiction over Haryana(except Panchkula, Yamuna Nagar and Ambala districts)
39. RBI doubles the E-wallet Limit to Rs. 20,000
i. The Reserve Bank of India on November 23, 2016 declared to increase the limit of the Prepaid Payment Instruments (PPIs) from Rs. 10,000 to Rs. 20,000 per month and Rs. 50,000 for Merchant Bank to facilitate digital transactions.
ii. The decision was taken to ease the problem faced by the public with the demonetization move of the Government.
40. RBI introduces incremental CRR to manage excess liquidity
The Reserve Bank of India increasing the Cash Reserve Requirement (CRR) for incremental deposits between September 16 and November 11 to 100% while the current CRR is 4%, effective from November 25, 2016.
41. RBI appoints M Rajeshwar Rao as new Executive Director
i. The Reserve Bank has appointed M Rajeshwar Rao as Executive Director to look Department of Statistics and Information Management, Financial markets Operations Department and International Department. He will replace G Mahalingam who is retired from the RBI.
ii. Prior to this, Rao was the Chief General Manager, Financial Markets Operations Department.

42. NABARD:
NABARD is an apex development bank, established in 1982 by a Special Act of the Parliament, with a mandate to uplift rural India by facilitating credit flow in agriculture, cottage and village industries, handicrafts and small-scale industries. NABARD functions to promote sustainable rural development for attaining prosperity of rural areas in India.
RBI has sold its own stake to the Government of India. Therefore, Government of India holds 99% stake in NABARD.

• It has power to deal with all matters concerning policy, planning as well as operations in giving credit for agriculture and other economic activities in the rural areas.


• A refinancing agency for those institutions that provide investment and production credit for promoting the several developmental programs for rural development.


• Improving the absorptive capacity of the credit delivery system in India, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, and training of personnel.


• Co-ordinates the rural credit financing activities of all sorts of institutions engaged in developmental work at the field level.


• Prepares rural credit plans, annually, for all districts in the country.


• Promotes research in rural banking, and the field of agriculture and rural development.

43. NABARD to spend Rs 228 Crore to encourage digital transaction in rural area:
i. To promote digital transaction in rural areas of the country, National Bank for Agriculture and Rural Development (NABARD) made an announcement on December 8, 2016 to provide monetary support of Rs 228 Crore to the responsible banks to install PoS Machines and EMV based Debit Cards for Farmers.
ii. The move is aimed at encouraging rural India to moe towards cashless payment systems.
44. NABARD sanctions Rs 21,000 crore to district cooperative banks:
i. NABARD has sanctioned Rs. 21,000 crores to the District Central Cooperative Banks (DCCBs) to help farmers in Rabi agricultural seasons.
ii. The DCCBs will disburse loans to farmers through the network of Primary Agricultural Cooperative Societies (PACS). Government has chosen DCCB for loan disbursal because 40% of the small-scale farmers go to co-operative banks.

45. IDBI: Industrial Development Bank of India (IDBI) came into being on 1st July, 1964 as a Development Financial Institutions under IDBI Act 1964.

• Regarded as a Public Financial Institution in terms of Companies Act. It continued as DFI till 2004 when it was transferred into a Bank. To transform this into Bank Industrial Development Bank Act 2003 was passed.


• A new company under the name of Industrial Development Bank of India Ltd. was incorporated as a Govt company under the Companies Act on 27th September, 2004, and thus now it came to be known as IDBI Ltd wef 1st October 2004 but it also worked as a Bank in terms of the Repeal Act.


• W.e.f. 2nd April, 2005, IDBI Bank Ltd. was finally amalgamated with IDBI Ltd. and was known as IDBI Ltd. It is a Public Sector Bank as GoI has above 70% shareholding in this Bank.

46. IBBI Notifies regulation Under Bankruptcy Code, 2016
i. The Insolvency and Bankruptcy Board (IBBI) of India on 23 November 2016 notified three sets of regulations directing the eligibility criteria of becoming a professional member of an Insolvency Professional Agency or for registering with the IBBI as an Insolvency Professional Agency.
ii. The regulation is applicable to

• Insolvency Professionals


• Insolvency Agencies


• Model Bye-Laws and Governing Board of Insolvency Professional Agencies.

These regulations were notified under the Insolvency and Bankruptcy Code, 2016 and will come into effect from 29 November 2016.

47. IFCI:

• Government of India set up the Industrial Finance Corporation of India (IFCI) in 1948 under a special Act.


• This is the first financial institution set up in India with the main object of making medium and long term credit to industrial needs.


• It issue bonds and debentures in the open market, to borrow foreign currency from the World Bank and other organisations, accept deposits from the public and also borrow from the Reserve Bank.

Functions:

• Grants loans and advances to industrial concerns.


• Granting of loans both in rupees and foreign currencies.


• Underwrites the issue of stocks, bonds, shares etc.


• Grant loans only to public limited companies and co-operatives but not to private limited companies or partnership firms.

48. EXIM:

• Export-Import Bank (Exim bank) was set up in 1982 to take over the operations of international finance wing of the IDBI and to provide financial assistance to exporters and importers.


• The authorized capital of Exim bank is Rs. 200 crore and paid-up-capital is Rs. 100 crore wholly subscribed by the Central Government.

Functions:

• Provides direct financial assistance to exporters of plant, machinery and related service in the form of medium-term credit.


• Provides re discount of export bills for a period not exceeding 90 days against short-term usance export bills discounted by commercial banks.
  
• Gives overseas buyers credit to foreign importers for import of Indian capital goods and related services.


• Developing and financing export oriented industries.


• Collecting and compiling the market and credit information about foreign trade.

49. NHB:

• National Housing Bank(NHB), a wholly owned subsidiary of Reserve Bank of India (RBI), was set up by an Act of Parliament in 1987.


• NHB is an apex financial institution for housing. It commenced its operations in 1988.

Objective:

• To promote housing finance institutions both at local and regional levels and to provide financial and other support incidental to such institutions and for matters connected therewith


• NHB registers, regulates and supervises Housing Finance Company (HFCs), keeps surveillance through On-site & Off-site Mechanisms and coordinates with other Regulators.

50. SEBI:

• Securities Exchange Board of India was set up in 1988 to regulate the functions of securities market.


• It promotes orderly development in the stock market but initially it was not able to exercise complete control over the stock market transactions.


• It was left as a watchdog to observe the activities but was found ineffective in regulating and controlling them.


• So in 1992, SEBI was granted legal status.


• Reason for establishment: With the growth in the dealings of stock markets many malpractices started in stock markets such as price rigging, and delay in delivery of shares, violation of rules and regulations of stock exchange.


• Due to these malpractices the customers started losing confidence in the stock exchange.


• So government of India decided to set up an agency or regulatory body known as Securities Exchange Board of India (SEBI)

.
Functions:

• Checks Price Rigging


• Prohibits Insider trading


• Prohibits fraudulent and Unfair Trade Practices


• Registers and regulates the working of stock brokers, sub-brokers,share transfer agents, trustees, merchant bankers and all those who are associated with stock exchange in any manner.


• Registers and regulates the working of mutual funds etc.


• Regulates takeover of the companies

51. World bank and IMF are called the "Bretton wood institutions". In July 1944 during the United Nations Monetary and Financial conference in Bretton woods, New hampshire, representatives of 45 governments agreed to set up the World bank (which came into existence during the conference) and IMF (which came into existence in 1945).
Reasons:
Great Depression in the 1930s. Countries tried to protect their domestic economy by putting barriers on foreign trade and devaluing their currency to gain market share in export markets. These led to decline in world trade and living standards fell sharply. By 1940s it was clear that the world needed global institutions for economic cooperation.

World Bank is a much bigger institution and has two arms:
IBRD (International Bank for Reconstruction and Development):
Charges a slightly higher interest rate than it borrows and it is mainly for profitable commercial projects [such as roads and dams].
IDA(International Development Association): This is a grant body. No interest and usually countries are given long periods for repaying. The focus is on social projects such as immunization and education, open only for the poorest nations.

52. NBFC:
It is engaged in the business of loans and advances, acquisition of bonds/debentures/securities issued by Government or local authority or other marketable securities, leasing, hire purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods or providing any services and sale or purchase of immovable property.
Difference between Banks & NBFCs:

• NBFC cannot accept demand deposits


• NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself


• deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

NBFCs but exempted from the requirement of registration:

• Housing Finance Companies


• Merchant Banking Companies


• Stock Exchanges


• Companies engaged in the business of stockbroking/sub-broking


• Venture Capital Fund Companies


• Nidhi Companies


• Insurance companies


• Chit Fund Companies

53. Banking Ombudsman:
The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services.
Key Points:

• One can file a complaint if the reply is not received from the bank within a period of one month after the bank rejects the complaint or if the complainant is not satisfied with the reply given by the bank.


• Compensation to be paid by the bank to the complainant is limited to the amount arising directly out of the act or omission of the bank or Rs 10 lakhs, whichever is lower.


• Compensation not exceeding Rs 1 lakh to the complainant only in the case of complaints relating to credit card operations for mental agony and harassment.


• If one is not satisfied with the decision passed by the Banking Ombudsman, one can approach the appellate authority vested with a Deputy Governor of the RBI.

Bharatiya Reserve Bank Note Mudran Private Ltd.:
It was established with a view to produce bank notes in India and enable RBI to bridge the gap between the supply and demand for bank notes in the country. The company manages 2 Presses: Mysore in Karnataka and Salboni in West Bengal.
The machinery at Mysore Site has been supplied by Switzerland and that of Salboni by Japan.
54. Minting of coins:
According to the Coinage Act, 1906, the Government of India has the sole right to mint coins. GOI supplies the coins to Reserve Bank of India which then circulates the coins.
Coins are minted at the four India Government Mints at

• Mumbai, Maharashtra – established in 1929 by the British Government


• Alipore (Kolkata), West Bengal – established in 1929 by the British Government


• Saifabad and Cherlapally (Hyderabad), Telangana – established in 1903 by the Government of the erstwhile Nizam of Hyderabad and was taken over by the Government of India in 1950 started minting since 1953.


• Noida, Uttar Pradesh - set up in 1986 and started minting ferritic stainless steel coins from 1988.

55. Security Printing and Minting Corporation of India Limited (SPMCIL):
The work of SPMCIL includes manufacturing of security paper, minting of coins, printing of currency and bank notes, non-judicial stamp papers, postage stamps, travel documents, etc.
Printing Presses: There are 4 printing presses in the country which are

• Currency Note Press, Nashik Road


• Bank Note Press, Dewas


• India Security Press, Nashik


• Security Printing Press, Hyderabad

56. Paper Mill:
The Security Paper Mill (SPM), Hoshangabad is responsible for manufacturing of different types of Security Papers.
57. DICGC(Deposit Insurance and Credit Guarantee Corporation):
Aim:
To bring financial stability to the banking system through deposit insurance, special for the benefit of small depositors. So it is a deposit insurance provider for small depositors.
58. Banks insured by the DICGC:
Commercial Banks: All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks.
Cooperative Banks:
All co-operative banks other than those from the State of Meghalaya and the Union Territories of Chandigarh, Lakshadweep and Dadra and Nagar Haveli
59. Primary cooperative societies are NOT insured by the DICGC:

• Maximum deposit amount insured by the DICGC Each depositor in a bank is insured up to a maximum of Rs.1,00,000


• If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.


• Kinds of deposits insured: All deposit accounts including savings, fixed, current, recurring, except: Deposits of the Foreign Governments Deposits of the Central and State Governments.
  
• Insurance cost is fetched by the bank which is insured. The DICGC charges 10 paise per Rs. 100 as insurance premium.

60. Self Help Groups(SHG):

• Self help groups refer to group of 15-20 people (generally women) , who pool or collect their resources like money so as to help each other in times of need.


• Self help groups give loans to its members at a general interest rate which is less than interest rate of moneylenders.


• Self help groups are also able to take loans from bank when they have pooled good amount of money.


• Also SHG act as building groups of village and provide platform to discuss village issues.

61. Women's Self-Help Groups (WSHGs):

• Formed under the state government's Nava Jatan programme to address malnourished children.


• WSHGs adopt malnourished children in their area and provide them food with the help of Anganwadi centers.

62. Cooperative Banks:

• Banks in India can be broadly classified under two heads — commercial banks and co-operative banks.


• While commercial banks (nationalized banks, State Bank group, private sector banks, foreign banks and regional rural banks) account for an overwhelming share of the banking business, co-operative banks also play an important role.

The structure of cooperative network in India can be divided into 2 broad segments

• Urban Cooperative Banks


• Rural Cooperatives

63. Urban Cooperatives are scheduled and non-scheduled.

• Banking activities of Urban Cooperative Banks are monitored by RBI.


• Registration and Management activities are managed by Registrar of Cooperative Societies (RCS). These RCS operate in single-state and Central RCS (CRCS) operate in multiple state.

64. Rural Cooperatives are scheduled and non-scheduled.
Short-term cooperative banks are three tiered operating in different states.

• State Cooperative Banks: Operate at the apex level in states


• District Central Cooperative Banks: Operate at the district levels


• Primary Agricultural Credit Societies: Operate at the village or grass-root level.

65. Core points related to Monetary & Fiscal Policy:
Both are complimentary to each other in balancing growth, unemployment and inflation.
Fiscal policy is by the government relates to the revenue and expenditure policies of the government and also it is the use of government funds to influence the economy, like the annual budget and taxation.
Monetary policy is administered by the central bank of the nation with regard to money supply, interest rates etc. Following are the instruments of Monetary Policy in India.
66. Cash Reserve Ratio (CRR) It is the share of net demand and time liabilities (deposits) that banks must maintain as cash balance with the Reserve Bank.
67. Effect of increase and decrease:
Lower CRR means bank can give more money as loan--> lower interest rates--> cheap loan--> more people take loan to start business or building house or buying car-->boost in economy. However, can also lead to inflation, if people have more cash in their hands than the items available for purchase in the market.
Higher CRR: Bank can give less money as loan-->Higher interest rate-->it becomes expensive to start a new factory, buy a new house / car/bike. This can curb inflation but may also lead to slowdown in economy because people wait for the interest rates to go down before taking loans.

68. Demand Liabilities:
Current Deposits, Savings bank deposits, Margins held against letters of credit/guarantees, Balances in overdue fixed deposits, Outstanding DDs, Unclaimed deposits, Credit balances in the Cash Credit account and deposits held as security for advances which are payable on demand & Money at Call and Short Notice from outside the Banking System (Liability to others).
69. Time Liabilities:
Fixed deposits, cash certificates, cumulative and recurring deposits, time liabilities portion of savings bank deposits, staff security deposits, margin held against letters of credit, if not payable on demand, & deposits held as securities for advances which are not payable on demand and Gold deposits.

71. Refinance facilities: Sector-specific refinance facilities aim at achieving sector specific objectives through provision of liquidity at a cost linked to the policy repo rate.
72. Liquidity Adjustment Facility (LAF): Consists of overnight and term repo/reverse repo auctions. Reserve Bank has increased the proportion of liquidity injected in the LAF through term-repos.
73. Term Repos: Reserve Bank introduced term repos of different tenors, such as, 7/14/28 days to inject liquidity over a period that is longer than overnight.
Aim : To help develop inter bank money market which in turn can set market based benchmarks for pricing of loans and deposits and through that improve transmission of monetary policy.
74. Marginal Standing Facility (MSF): Scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their SLR portfolio up to a limit (currently 2% of their NDTL) at a penal rate of interest (currently 100 basis points above the repo rate). This provides a safety valve against unanticipated liquidity shocks to the banking system. MSF rate and reverse repo rate determine the corridor for the daily movement in short term money market interest rates.
75. Open Market Operations (OMOs): These include both, outright purchase/sale of government securities for injection or absorption of liquidity.
76. Bank Rate: Rate at which the Reserve Bank is ready to buy or re discount bills of exchange or other commercial papers. This rate has been aligned to the MSF rate and therefore changes automatically as and when the MSF rate changes alongside policy repo rate changes.

77. Bank Accounts are classified into four different types. They are,

• Current Account


• Savings Account


• Recurring Deposit Account


• Fixed Deposit Account

78. Current Account:

• For business persons, firms, companies, public enterprises etc and are never used for the purpose of investment or savings.


• These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day.


• No interest paid on amount held in the account, banks charges certain service charges, on such accounts. Do not have any fixed maturity as these are on continuous basis accounts.

79. Savings Account:

• For saving purposes


• Any individual either single or jointly can open a savings account. Most of the salaried persons, pensioners and students use Savings Account.


• Advantage of having Savings Account is Banks pay interest for the savings. The saving account holder is allowed to withdraw money from the account as and when required.


• Rate of interest ranges between 4% to 6% per annum in India.


• There is no restriction on the number and amount of deposits. But withdrawals are subjected to certain restrictions. Some banks recommend to maintain a minimum amount to keep it functioning.

80. Recurring deposit account (or) RD account is opened by those who want to save certain amount of money regularly for a certain period of time and earn a higher interest rate.

• A fixed amount is deposited every month for a specified period and the total amount is repaid with interest at the end of the particular fixed period.


• Period of deposit is minimum six months and maximum ten years.


• Interest rates vary for different plans based on the amount one saves and the period of time and also on banks.


• No withdrawals are allowed from the RD account. However, the bank may allow to close the account before the maturity period.


• Can be opened in single or joint names. Banks are also providing the Nomination facility to the RD account holders.

81. Fixed Deposit Account(FD)
A particular sum of money is deposited in a bank for specific period of time. In some other countries these are known as "Term Deposits" or even called "Bond".

• It’s one time deposit and one time take away (withdraw) account. The money deposited in this account can not be withdrawn before the expiry of period.


• In case of need, the depositor can ask for closing the fixed deposit prematurely by paying a penalty(usually of 1%, but some banks either charge less or no penalty) The penalty amount varies with banks.


• A high interest rate is paid on fixed deposits. The rate of interest paid for fixed deposit vary according to amount, period and also from bank to bank.

82. Miscellaneous Deposits :
Miscellaneous Deposits are classified into two types.

• CASA Deposits


• Term Deposits

CASA Deposits:

• It refers to Current Account Saving Account Deposits.


• Low interest deposits for the Banks compared to other types of the deposits. So banks tend to increase the CASA deposits and for this they offer various services such as salary accounts to companies and encouraging merchants to open current accounts also use their cash-management facilities.


• The Bank is High CASA ratio(CASA deposits as % of total deposits) are in a more comfortable position than the Banks with low CASA ratios , which are more dependent on term deposits for their funding, and are vulnerable to interest rate shocks in the economy, plus lower spread they earn.

Term Deposits:
Term Deposits are of three kinds
1. Fixed deposits: A fixed rate of interest is paid at fixed, regular intervals.
2. Re-investment deposits: Interest is compounded quarterly and paid on maturity, along with the principal amount of the deposit. In the Flexi Deposits amount in savings deposit accounts beyond a fixed limit is automatically converted into term-deposits.
3. Recurring deposits: 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.

83. Plastic Money:
Different types of plastic money available in the market today. Be it credit cards, debit cards,charge cards, co-branded cards. More and more Indians are using them as a convenient mode of payment.
Debit Card: Money you are spending is your own and is drawn from an account you have with the bank/institution issuing you the debit card.
Credit Card: Money you are spending is the bank’s and at the end of each month the bank/institution will issue you bill letting you know how much of their money you've spent, how much in total you owe them and how much they require you to pay this month. There is of course usually a limit to how much of the bank's money they will allow you to use, if you have used all of those funds - no spendy.
Prepaid cards: A prepaid card works a bit like a gift card – you top it up with money, and you can only spend up to that amount. Often used by travelers to carry holiday money, and by anyone without a normal bank account – generally kids, teens and people with poor credit ratings.
Smart card: It contains an electronic chip which is used to store cash. This is most useful when you have to pay for small purchases. For example bus fares and coffee. No identification, signature or payment authorization is required for using this card. The exact amount of purchase is deducted from the smart card during payment and is collected by smart card reading machines. No change is given.
Co-branded cards: Co-branded cards are credit cards issued by card companies that have tied up with a popular brand for the purpose of offering certain exclusive benefits to the consumer. For example, the Citi-Times card gives you all the benefits of a Citibank credit card along with a special discount on Times Music cassettes, free entry to Times Music events, etc.

84. Loans:
Home Loan: Home loan as name suggest is the loan against buying property. Every individual currently have dreams to have their own home.
Personal Loan:

• It is the loan granted to fulfill your expenses which ranges from buying some expensive electronic gadgets to booking your air tickets.


• People used to use this facility for anything they can.


• They forget that usually rate of interest on such loans will be higher than other types of loans.


• But still to have something in advance end up them to borrower of such type of loans.

Personal Loans are again divided into 4 types.

• Secured Loans


• Unsecured Loans


• Car Loan or Vehicle Loan


• Education Loan

Secured Loans: Where you provide some collateral as a safety against loans.
Unsecured Loans: In such type of loans borrower collateral not required.
Car Loan or Vehicle Loan: Used to meet your financial requirement when one is planning to have his dream car or bike. It is usually a secured loan where collateral is your vehicle and in case of default lender may recover it by taking back your vehicle. But some lenders offer unsecured loans where your credit score matters more.
Education Loan: This is actually a handy tool for parents who not planned well for their kid’s higher education.
Maximum Loan Available:
Studies in India Maximum Rs.10,00,000.
Studies in India Maximum Rs.20,00,000.
Security
Up to Rs.4,00,000 Parents need to be joint borrowers but security is not required.
Above Rs.4,00,000 and below Rs.7,50,000 Besides parents joint borrower condition, you need to bring collateral security in the form of suitable third party guarantee will be taken. But if banks satisfied with financial condition of the borrower then they may waive the condition of third party collateral.
Securities: Pledge, Hypothecation, Mortgage:
Pledge: Pledge is when the property is offered as collateral or security. It is a right to reserve a legal interest in something.
Example: a lot of banks and credit unions have what is called "cross collateral". So for instance, if you have a vehicle loan with a bank and also have a checking account with the bank, there is an excellent chance that you've signed a contract provision where you've "pledged" whatever funds you may have in your checking account from time to time as additional security on the loan.
Hypothecation: It is used when you(borrower) have the actual possession of the asset, for which you have taken the loan. Generally, this is charged against loans for movable assets, like car, bus, etc. (vehicle loans).

• Here, the assets (bus, car, etc.) remain with you, and you are hypothecated to the bank for the loan granted.


• In case you are unable to repay the loan amount, then the bank has the right to sell the asset (bus, car, etc.), (which is possessed by you) and recover the total amount (with interest).

Mortgage: It is used when you (borrower) have the actual possession of the assets, for which you are granted loan (e.g., house loan), or against which you are granted loan (e.g., house mortgaged). Mortgages are generally those assets, which are permanently attached with Earth surface, like house, land, factory etc. In case you are unable to repay the loan amount, the bank has the right to seize and sell the mortgage, and recover the loan amount (with interest).

85. MICR:
MICR stands for Magnetic Ink Character Recognition

• It is a technology which allows machines to read and process cheques enabling thousands of cheque transactions in a short time.


• MICR code is usually a nine digit code


• First three digits: Represent the city code that is the city in which the bank branch is located.


• Next three digits: Bank code


• Last three digits: Bank branch code


• For example, if you have an account with Axis Bank, New Delhi (Defence Colony) then its nine digit


• MICR code will be 110211004 where: 110, the first three digits representing the city code for New Delhi


• 211, the next three digits representing the bank code for Axis bank


• And 004, the last three digits representing the bank branch code for Defence Colony.

86. IFSC: IFSC(Indian Financial System Code)
The Payment Systems such as National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) & Centralized Funds Management System (CFMS) used IFS Codes. IFSC developed by the Reserve Bank of India.

• The code consists of 11 Characters


• First 4 characters represent the entity


• Fifth position has been defaulted with a 0 (Zero) for future use


• Last 6 characters denotes the branch identity


• e.g ICIC0000438

87. SWIFT Code: It is a unique identification code for both financial and non-financial institutions approved by the International Organization for Standardization (ISO). SWIFT Standards, a division of The Society for Worldwide Inter bank Financial Telecommunication (SWIFT), handles the registration of these codes. SWIFT Codes are used when transferring money between banks, particularly for international wire transfers, and also for the exchange of other messages between banks.

Maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances and remittances to Nepal
88. Immediate Payment Service (IMPS):
It is a tool through which one can transfer money instantly within banks across India through mobile, internet and ATMs. Unlike NEFT and RTGS this facility is available 24x7x365. The IMPS facility is provided by National Payments Corporation of India (NPCI).

• Customer should do Mobile Banking Registration if he wants to transact through mobile.


• The customer gets a unique Mobile Money Identifier (MMID) which is one of the inputs to start the transaction.


• It is a 7 digit number issued by banks. Every mobile phone be it a basic phone or smartphone is eligible for IMPS.

Unified Payments Interface (UPI):
This system is been developed for all retail payments in the country. It has been developed by National Payments Corporation of India (NPCI) to make the transfer of money easy and simple. Like IMPS, this facility is also available 24x7x365, then why this new system?

• There are variety of things need to be fulfilled while doing transactions through NEFT and RTGS like going to bank, form filling, giving various details like account number, IFSC code, etc. IMPS is somewhat better.


• But with UPI, you only need a smartphone with an app that has enabled UPI platform.


• Only one app for all your accounts, be it be of any bank.


• You will be given a virtual ID and a mobile personal identification number (MPIN) which are all required to do transactions using this new platform.

89. NPA:

• An asset (loan) including a leased asset, becomes non performing when it stops generating income for the bank.


• Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a non-performing asset.


• If the status of NPAs in banks is not controlled, banks can become bankrupt.

Reasons for Occurrence of NPAs:

• Normal banking operations


• Bad lending practices


• Incremental component due to internal bank management, like credit policy, terms of credit, etc.


• Competition banks are enormously selling unsecured loans

Result of NPAs:

• Decrease profitability.


• Reduce capital assets and lending limits.


• Increase loan loss reserves.

90. How to reduce NPA
SARFAESI ACT 2002:
The Secularization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) empowers Banks to recover their non-performing assets without the intervention of the Court.
3 alternatives:

• Secularization


• Asset Reconstruction


• Enforcement of Security without the intervention of the Court.

Applicable only for NPA loans with outstanding above Rs.1 lakh. NPA loan accounts where the amount is less than 20% of the principal and interest are not eligible to be dealt with under this Act.
The Act empowers the Ban:

• To issue demand notice to the defaulting borrower and guarantor, calling upon them to discharge their dues in full within 60 days from the date of the notice.


• To give notice to any person who has acquired any of the secured assets from the borrower to surrender the same to the Bank.


• To ask any debtor of the borrower to pay any sum due or becoming due to the borrower.


• Any Security Interest created over Agricultural Land cannot be proceeded with If the borrower fails to comply with the notice, the Bank may take recourse to the following measures:

1. Take possession of the security
2. Sale or lease or assign the right over the security
3. Manage the same or appoint any person to manage the same

Lok Adalats:
For the recovery of small loans. They cover NPA up to Rs. 5 lakhs, both suit filed and non- suit filed are covered.
Compromise Settlement: It is applied to advances below Rs. 10 Crores.
Credit Information Bureau: Help banks by maintaining a data of an individual defaulter and provides this information to all banks so that they may avoid lending to him/her.
Debt Recovery Tribunal (DRT): The debt recovery tribunal act was passed by Indian Parliament in 1993.
Objective: Facilitating the banks and financial institutions for speedy recovery of dues in cases where the loan amount is Rs. 10 lakhs and above.
91. Balance Sheet:

• A balance sheet is a snapshot of a business financial position on one particular day.


• It provides a summary of what a business owns or is owed.


• It states what assets the business owns and what liabilities it owes, at a particular date.


• The balance sheet is used to show how the business is being funded and how those funds are being used.

92. Why it is called Balance Sheet?
Because there is a debit entry and a credit entry for everything, so the total value of the assets is always the same value as the total of the liabilities.
Contents
Fixed assets: Long-term
Current assets: Short-term
Current liabilities: What the business owes and must repay in the short term
Long-term liabilities: Owner's or shareholders' capital
Fixed assets
Tangible assets - e.g. buildings, land, machinery, computers, fixtures and fittings.
Intangible assets - e.g. goodwill, intellectual property rights (such as patents, trademarks and long-term investments.
Current assets
Example: stock, work in progress, money owed by customers, cash in hand or at the bank, short- term investments, pre-payments
Current liabilities:
These are amounts owed to you and due within one year.
Long-term liabilities
Creditors due after one year:
Amounts due to be repaid in loans or financing after one year, eg bank or directors loans, finance agreements
Capital and reserves
Share capital and retained profits, after dividends (if your business is a limited company), or proprietors capital invested in business (if you are an unincorporated business)
93. What does a balance sheet show?

• How solvent the business is


• How liquid its assets are - how much is in the form of cash or can


• Be easily converted into cash, i.e. stocks and shares


• How the business is financed


• How much capital is being used

94. Banks Board Bureau (BBB):
The main aim of Banks Board Bureau is to recommend appointment of directors in Public Sector Banks (PSBs) and advice on ways of raising funds and dealing with issues of stressed assets. Besides this task, the BBB will also be a link between the government and banks and will be engaged with banks to evolve strategies for them.
The first chairman of Banks Board Bureau selected is Vinod Rai who is former CAG.
95. Demat account:
Demat account is an account in which the shares and securities are held in dematerialized form i.e. electronically without any physical papers held. To carry out transactions in the stock market, one should get open a demat account. Multiple demat accounts can be opened. Demat accounts are held by a single person i.e. no joint accounts can be operated.
96. Electronic Clearing System:

• ECS is used for faster payments and collections.


• It is used for either making bulk payment of amounts or for bulk collection of amounts.


• The institutions who apply for ECS can initiate the process, no need to go to bank branch again and again.

Two variants
97. ECS Credit:
ECS Credit is for making bulk payment of amounts. Under this scheme, a single account is debited and then multiple accounts are credited.
Example: A company has 50 employees and at the start of month it gives salary to all the employees so instead of crediting each account separately, the company can use the ECS Credit Scheme.
ECS Debit: ECS Debit is for bulk collection of amounts. Under this scheme, multiple accounts are debited and then a single account is credited.
Example: Many people go for insurance policies and they have allowed the payment of their premiums from their account.
Now it is possible that on a single day, many customer accounts are to be debited to have the premium from them. Here ECS Debit scheme can be used.
98. Marginal Cost of funds based Lending Rate (MCLR):
MCLR got effective after April 1, 2016. How RBI decided to implement MCLR system?
Before 2010, there was Benchmark Prime Lending Rate (BPLR) system. Under this banks were allowed to lend loans to their most trust worthy customers at a low rate. But this system was not transparent.

• After this, banks were advised by RBI to apply the system of base rate i.e. below this rate banks will not be able to lend credits, except in the cases allowed by RBI. Different parameters were used.


• These parameters include average cost of funds, marginal cost of funds or any other methodology which seemed reasonable. But then banks used to change their methodology as when they wanted.


• Whenever the RBI cuts the repo rate, same has to be done by banks also in their base rates, but they lower the base rate in small because most banks currently follow average cost of funds based calculation for arriving at respective base rates. This is the main reason for changing the policy to Marginal Cost of Funds based Lending Rates (MCLR).

Marginal Cost of Funds: They are the funds which banks have to give to its customers and RBI instead of investing them in other ways.
Para banking
Para banking activities are the activities carried out by the bank which are apart from its normal day-to-day activities. Its not that bank can perform any activity other than daily activities, it can perform only those para banking activities which are permitted by RBI.
Examples: insurance business, portfolio management services, to become pension fund managers, mutual funds business, money market mutual funds, underwriting of bonds of PSUs, investment in venture capital funds, etc.
Bancassurance:

• Bancassurance as the term suggests is Bank + Insurance.


• Bancassurance means selling insurance product through banks.


• It is one of the para banking activity which the RBI has allowed the banks to take up.


• For selling the insurance product, bank and insurance company come up in a partnership where the bank sells the insurance company’s insurance products to its clients.

Some examples include:
SBI General Insurance Company Limited: joint venture between SBI and Insurance Australia Group (IAG).
SBI Life Insurance: joint venture life insurance company between SBI and BNP Paribas Cardiff of France.
99. E-Lobby:
E-Lobby is a facility which is now provided by banks so that their customers can do their banking transactions as per their convenience 24×7 i.e. without any time restriction. E-Lobby provides the facility on bank holidays also.
Self service facilities which can be done at banking e-lobbies include: ATM withdrawals, cash deposits, card-to-card transfers, mobile phone top-ups, railway booking, passbook printing, NEFT, opening of FD/RD accounts, SMS alerts, cheque drop box, bill payments, mini statements, etc.
100. Clean Note Policy of RBI:
In order to increase the life of currency notes, Reserve Bank of India (RBI) issued Clean Note Policy in 2001.
According to the policy: The note packets should not be stapled, while the banding of packets should be done with paper/polythene bands so that the life of the currency notes is increased.
101. Debt Consolidation:
In simple words Debt Consolidation is going for another loan to pay the existing loan. Technical definition says that Debt Consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. Refinancing means replacement of an existing debt to be paid with another one.
102. External Commercial Borrowing (ECB):

• ECB refers to the loans taken from non-resident lenders i.e. the foreign companies to finance commercial activities in India.


• ECBs cannot be used for investment in stock market or speculation in real estate.


• At some times, borrowings from external companies can be cheaper than that borrowed within the country.

There are two ways in which ECB can be accessed in the country:
1. Automatic Route: Under this, the borrower is not to take any permission from RBI or GOI.
2. Approval Route: Under this, the borrower has to take approval from RBI or GOI.
103. Bharat Bill Payment System (BBPS):
With a need of bill payments system, various organizations decided to provide a single platform to make all these payments. So an integrated bill payment system called BBPS was proposed for which the policy guidelines were issued by the Reserve Bank of India on November 28, 2014.

• National Payment Corporation (NPCI) had been identified to act as Bharat Bill Payment Central Unit (BBPCU) which will be a single authorized entity for operating the BBPS.
  
• The biggest advantage is that the bill can be paid anywhere and anytime.


• The system will provide multiple payment modes and instant confirmation of payment.


• Payments may be made through the BBPS using cash, transfer cheques, and electronic modes.


• The BBPS outlets would include banks, ATMs, business correspondents, kiosks etc.

104. Lead Bank Scheme:
The Lead Bank Scheme was introduced in 1969 to provide lead roles to individual banks (both in public sector and private sector) for the districts allotted to them.

• Commercial banks did not have adequate presence in rural areas and also lacked the required rural orientation and so the rural areas were not able to enjoy the benefits of banking.


• So a bank (public or private) was given some area in which that bank had to play a lead role in providing financial services to the people, making them aware about the banks and various benefits of banks and also generating trust among people so that they deposit their money without any fear of loss or fraud.


• So this bank was the lead bank of area.

105. Gold Monetisation Scheme:
The Gold Monetisation Scheme enables individuals (households) and institutions to deposit their gold holdings with the banks by earning interest. The deposit is treated as a term deposit in the form of gold. So one can deposit his gold lying idle in bank lockers by earning interest at the same time.
106. Money laundering:
It is an act of converting illegal money to legal money. A person who is found having money from illegal sources can be made to go to prison, or any other liable punishment. So the persons or rather criminals try to convert their illegal money to legal money so that their money appears clean which is known as money laundering.

• The act related is Prevention of Money laundering Act 2002.


• A step to prevent money laundering is KYC (Know Your Customer) policy.


• The KYC helps to ensure that banks services are not misused.

107. Priority Sector Lending (PSL):
Priority Sectors are those sectors in the economy which may not get timely and adequate credit. One of the reasons of this is that many people in weaker sections wanting of loans do not have assets to keep as security against credits.
As notified by RBI, categories under priority sector are Agriculture, Micro and Small Enterprises, Education, Housing, Export Credit, Others.
108. Types of Pre-paid Wallet Instruments:
Closed System Payment Instruments:

• These are pre-paid cards issued by a person/organization to facilitate the purchase of goods and services from him/it.


• So they do not facilitate payments and settlement for third party services like no bill payments, etc.

Examples: Gift vouchers issued by banks and NBFCs, Ola Money, etc.

One cannot withdraw cash from it and also they are not re loadable with cash.

109. Semi-Closed System Payment Instruments:
These are pre-paid cards issued by a person/organization to facilitate the purchase of goods and services from clearly identified merchants (third-party) which have a specific contract with the issuer to accept the payment instruments along with him/it. They can be reloaded. One cannot withdraw cash from it.
Examples: Paytm wallet, MobiKwik, PayU, Airtel Money, etc.
Open System Payment Instruments:
These are payment instruments which can be used for purchase of goods and services, including financial services like funds transfer at any card accepting merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs / Business Correspondents. These can be re loadable or non-re loadable. They can only be issued by banks.
Example - Visa, MasterCard or Rupay card issued in India, Vodafone’s M-Pesa which is in alliance with ICICI Bank, etc.
110. ULIP (Unit Linked Insurance Plan):
A ULIP is a product offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan. So a ULIP is basically a combination of insurance as well as investment.
How it works?

• Like a premium is paid for an insurance policy, same way a premium is paid under ULIP. The difference lies in the part that a part of the premium paid is utilized to give insurance cover to the policy holder and the remaining part is invested in various equity and debt schemes.


• Some of the ULIP providers are LIC of India, SBI Life, HDFC Life, ICICI Prudential, Kotak Mahindra Life, etc.

111. Payments Bank:
Payment Banks are banks which will reach their customers mainly through mobile phones rather than traditional bank branches. They can be thought of as mobile wallets.

• They offer only current account and savings account in which deposit only up to Rs 1 lakh per customer is permitted.


• The savings account will earn interest also like a normal savings bank account does. Unlike a regular bank, they cannot lend money to people and cannot issue credit cards also.


• However ATM or debit card can be issued.

112. Small Finance bank:
Small Banks are physical banks whose aim is to provide basic banking products such as deposits and supply of credit, but in a limited area of operation. Their work is to supply credit to ,u>small farmers, micro and small industries, and other unorganized sector entities through high technology-low cost operations.

• They can accept any deposit (savings, current, fixed deposits, recurring deposits) like commercial banks.


• Unlike payment banks, small finance banks will be allowed to lend money also. Their target is small businesses and MSMEs.


• Capital Local Area Bank Limited, Jalandhar is the first to start its operations as small bank in the country.

113. Indradhanush plan:
Finance minister Arun Jaitley launched a seven pronged plan called Indradhanush in August 2015. The mission is also known as A2G for public sector banks.
Mission of the plan:

• To revamp or improve the functioning of public sector banks.


• Indradhanush mainly focuses on systemic changes in state-run lenders, including a fresh look at hiring, a comprehensive plan to de-stress bloated lenders, capital infusion, accountability incentives with higher rewards including stock options and cleaning up governance.


• The plan is called Indradhanush because it contains seven elements as: Appointments, Bank Board Bureau, Capitalization, De-stressing, Empowerment, Framework of Accountability and Governance Reforms.

114. CIBIL (Credit Information Bureau (India) Limited):
CIBIL is India’s first Credit Information Company (CIC) founded in August 2000. Whether it is to help loan providers manage their business or help consumers secure credit faster and at better terms, the use of CIBIL’s products have led to a massive change in the way the credit life cycle is managed by both loan providers and consumers.
115. Role of CIBIL to loan providers and consumers:

• CIBIL collects the data from member institutions (banks and other lenders) and maintains records of a customer’s (individual or any business) payments pertaining to loans and credit cards.


• This information is then used to create Credit Information Reports (CIR) and credit scores. These credit scores and reports can be used by the lenders to evaluate and approve loan applications.

116. NPCI (National Payments Corporation of India):

• NPCI is an umbrella organization for all retail payments system in India.


• It was set up with the guidance and support of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).


• Services provided by NPCI: National Financial Switch (NFS) ATM Network, Cheque Clearing System, Immediate Payments Service (IMPS), Electronic Benefit Transfer, RuPay Card, Unified Payments Interface (UPI).

117. State Bank of India secured $625 million from World Bank for Solar programme
State Bank of India has signed agreements with the World Bank for $625 million to support grid connected rooftop solar programme in the Country SBI Capital Markets was keen advisor for structuring and setting up the facility.
118. RIL, SBI sign shareholder agreement for payments bank JV
i. Reliance Industries Limited went into partnership with banking major State Bank of India have signed the shareholder for the payment Bank.
ii. Upon this Agreement that was signed by RIL as promoter with a 70 per cent equity contribution and SBI as joint venture with a 30 per cent equity contribution.
119. India’s first SME Bank opened by HDFC Bank
i. HDFC bank launched a full-fledged digital banking service for small and medium enterprises (SME).
ii. This will help the customers to utilize a complete set of services on their choice at anytime and at anywhere in India.
120. Cabinet approves increase in FDI limit in Axis Bank to 74%
The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri NarendraModi, has approved increased limits in foreign investment in Axis Bank from 62% to 74% of the total paid up share capital of the Axis Bank on a fully commodity basis.
121. NPCIL gets India’s first nuclear liability policy
i. India’s first insurance policy covering public liability to an atomic power plant operator has been issued to Nuclear Power Corporation of India Limited(NPCIL)
ii. The total premium of such policy is Rs 100 crore for a risk cover of Rs 1,500 crore.
122. SIDBI partners with Yes Bank for loan guarantee under World Bank scheme.
SIDBI(Small Industries Development Bank of India) entered into a partnership with YES Bank to guarantee 75% of loans of up to Rs 15 crore extended to energy efficiency projects under the WORLD BANK initiative.
123. Credit of $290 million for Bihar’s JEEViKA II by World Bank.
A USD 290-million credit agreement signed by Center, Bihar government and World Bank to help improve livelihood opportunities for poor rural households across 300 blocks and 32 districts of the eastern state.
124. HDFC to become first issurer of Masala Bonds to overseas investors in order to raise Rs.3,000 crore.
Housing Development Finance Corporation (HDFC) Ltd is planning to raise about Rs.3,000 crore by issuing the first unrated Synthetic Indian Rupee (INR) Notes to overseas investors. It is the first Indian public issuer of the Synthetic INR Notes. Our country’s largest private sector mortgage lender HDFC, plans to raise Rs 3,000 crore through these synthetic bonds.
125. BRICS bank to issue $448 million of yuan green bonds.
i. The New Development Bank (NDB) of the BRICS countries is set to issue green bonds in Chinese yuan to raise funds for clean energy and infrastructure projects.
ii. The green bonds will be issued with a 5-year tenor and will be the first such issuance by a bank of its type under guidelines issued by China’s central bank in December.
126. Axis Bank ties up with Vistara to introduce cobranded credit card.
Guragon based India’s fastest developing air carrier“VISTARA” ties up with AXIS bank to release a con tactless Vistara credit card using the VISA platform.
127. Cauvery Delta’s Irrigation Facilities to be Boosted up through ADB’s Loan Agreement with GOI.
In order to fortify and develop the important Irrigation and Drainage management system in the Cauvery Delta of Tamil nadu, GOI AND ADB has signed a pact on July 14 which estimates around $100 million (670 Crores approx.). This system is going to revitalize the mounds and hills of the six major Irrigation systems in the Vennar system and also to renovate the existing Pumping stations.
128. IndusInd Bank opens IFSC Banking Unit at GIFT City.
i. Mumbai based Indian new generation lender IndusInd Bank has opened its IFSC Banking Unit (IBU) at the Gujarat International Finance Tec-City (GIFT City) to meet the requirements of offshore banking.
ii. It became the sixth bank to open an IBU at GIFT.
129. Ex-Google engineer, Paul Taylor launches block chain-based system for banks.
A former Google engineer Paul Taylor launched speech recognition software is used in more than a billion Android smartphones, that uses block chain technology to build a new operating system for banks.
130. Soiled Notes can be Exchanged for Free till certain Limits – RBI.
Reserve Bank of India advised banks to exchange up to 20 pieces of soiled Indian currency notes with a cap value of Rs 5,000 through the counter without any processing fee in order to improve the customer service.
131. Transactions above 3 Lakhs are to be Banned to curb Black Money – SIT.
In order to trace the Black and illegal Money, Special Investigation Team (SIT) has advocated for the ban of cash transactions above 3 lakh rupees and also restrict the Money Holding Capacity to 15 Lakhs in order to curb the Black Money in the nation.
132. IRCTC and SBI join hands to promote UTS and E-Ticketing System to ease the Service for Passengers.
Indian Railway Catering and Tourism Corporation (IRCTC) and one of the World’s Leading commercial Banks State Bank of India (SBI), have signed a Memorandum of Understanding (MoU) on July 20.
133. Federal Bank partners with Reliance Jio Money.
Kochi based Federal Bank have announced partnership with Reliance Jio Money for One-Click payment service that will make payment ease for their customers.
134. HDFC ERGO enters into bancassurance tie-up with SVC Bank.
HDFC ERGO General Insurance Company and Mumbai based Shamrao Vithal Co-operative (SVC) Bank bancassurance tieup to offer wide range of non-life insurance produts to the customers of the bank.
135. ICICI Bank organises Coin Exchange Mela during the ‘Ratha Yatra’ festival in Puri.
India’s largest Private Sector lender ICICI bank has conducted a coin exchange mela during Rath Yatra festival at the RBI financial literacy camp in Puri..
136. ICICI & AXIS bank teams with Global Payment Giant SWIFT Payment Group
Global payments leader SWIFT, which already has over 70 other leading banks globally now signs up with ICICI and Axis Bank, thereby become the first domestic leaders to enter the international payment group.
137. Bonanza for 7th pay commission beneficiaries – SBI unveils two new cheap housing loans
SBI unveiled a new cheaper home loan scheme for defense and other government employees. This new decision reflects to attract the donee of the 7th pay commission’s salary hike. SBI eyes that the surplus income of the employees can thus be utilized by government employees and defense personnel towards purchase of house.

138. SIDBI:
Small Industries Development Bank of India (SIDBI) was set up under an Act of Parliament in 1990. Though it was a wholly owned subsidiary of Industrial Development Bank of India, presently the ownership is held by 33 Government of India owned / controlled institutions.
Functions:

To initiate steps for technological up gradation and modernization of existing units.

To expand the channels for marketing the products of SSI sector in domestic and international markets.

To promote employment oriented industries especially in semi-urban areas to create more employment opportunities and thereby checking migration of people to urban areas.