Banking (Doubt) Flashcards
Bank gives __ progress
Commercial and Industrial
Bank derived from
Banco meaning joint stock fund
What are the types of banks?
- Central Bank
- Commercial Bank
- Cooperative banks
- Indigenous banks
- Industrial Bank
- EXCHANGE bANK
- Agricultural Bank
- Post office saving banks
Central bank:
Types
DEFINITIONS
By vera smith
By Kent
Reserve bank of India is the country’s central bank
Commercial Banks:
(Types):
An institution which accpets deposits of money from the public and provides loans and advances to businessman and others
also other related functions
Commercial Banks are Joint stock companies
Examples of Comemrical bank in India:
State bank Of India —> Largest
Bank of Barode
Punjab National Bank
Syndicate and allahabad bank
Types of Comercial bank in India:
1 Public sector: Owned and controlled by Governemtn.
Ex: Union bank of India
2. Private secotr (Owned ande contriolled by private business men.
Ex: ICICI and Global Trust Bank
3. Foreign Banks. Citi bank, American Express bank
Cooperative Bank:
Bank which are organized on the principles of cooperation. Set up as Co-operative societies Encourage saving among memebers Accept Deposits and Advances loans Ex: TNSC and PSC
industrial banks:
Thes provide long term finance to industries
Offer technical and managerial assistance
Purpose is to assist in the promotoion of new industrial units
AKA Develpoment banks
Ex: Industrial finance corporation of India
Industrial development bank of India
Indigenous bansk:
In rual and semi-urban ares
oneylenders carry on business.
They charge a high rate of interest
not managed by RBI—> not organized
Agricultural bank:
AKA Land mortage banks —> Loans are granted against mortage of agri land
Long term finance to agricultural secotr
National bank for agricultural and rural development (NABARD)
- Offers resonance facilitis to banks which provide loans to agri
Short term finance is provided by:
Regional Rural banks
Cooperative banks
Comemrcial banks
Ecnahange banks:
TYPE OF COMMERICAL BANK
Services:
- Financing foreign trade
- Facilitating foreign remittances
- Discounting foreign bills of exhanges
- Buying gold and silver
Direction and control of RBI
Ex: EXIM
Post office saving banks:
Only deposits, no loans
Mobilize small savings of public ancourage habit of thrift
Senior citizen saving scheme: Ex.
Necessity of credit control:
Preventing too much money supply in economy
Prevent price rise
- Bank rate policy:
The rate at which he central bank rediscounts the first class secutites of the commercial bank Bank rate determines the market rate of interest at which commercial bank grant loans to burrowers
To reduce credit —-> Increase Bank rate
- Open market operations;
The sale and purchase of securities by central bank in open market
Reduce the credit —> Sells securities, Props up cash reserves of commercial towards central bank
and vice versa, increases money in the banking system
In comparison to ____, ___ are a more direct and effective method
Bank rate, Open market
- Statutory Liquid Ratio:
Commercial bank has to keep a certain percentage of
Demand time liabilities
in liquid form
Consisting of cash and government securities
High –> Reduce credit —> MORE liquid assets
- Margin Requirements:
Commercial banks has to keep a margin between
amount of loan granted and the market value of the security against which the loan is granted
SELECTIVE METHOD
- Credit rationing:
Central bank fixes a limit to credit facilities available to commercial banks
Available credit is rationed according to the purpose of credit
Which method is used in exceprional situation of money stringency and cant be used to raise credit
Credit rationing
learn q too
- Moral suassion:
Under this method, Cnetral ban requests and persuades not to grant credit for speculative and non-essential purposes.
Informal and non-statutory method. Central bank is honored.
Directives to commercial banks to refrain from certain types of lending
- Publicity:
Issues reports and review statements of assets and liabilities
Keep comemrcial banks aware of conditions in:
1. Money market
2. Public Finance
3. Trade and Industry
Adjust their credit activities accordingly
