Showing posts with label basics of banking. Show all posts
Showing posts with label basics of banking. Show all posts

Friday, 15 September 2023

AN OVERVIEW OF BANKING SECTOR SYLLABUS SYBBI Sem III NOTES

  Module I An Overview of Banking Sector

- Definition of Banks, Types of Banks, Principles of Banking

Functions of banks

- Banking system in India, Overview of RBI, Public, Private, Cooperative, Payment Bank, Regional Rural Banks 

- Emerging trends of banking - Universal banking, Electronic Banking, globalization of banking

- Brief History of banking sector reforms from 1991-2002 and Current developments in banking sector 

- Regulatory Architecture - Overview of Banking Regulation Act 1949, Banking Regulation Act (Amendment 2015), Payment and Settlement Act 2007, Negotiable Instrument Act 1881, BIS, Basel I, II and III. 

- Bank Crises in India

- Critical Evaluation of Banking Industry in India. 


Module II Commercial Banking and Customer- Banking Relationship

- Definition and meaning of Commercial Bank, Evolution of Commercial Banking in India, Functions of Commercial Bank, Services offered by Commercial Bank

- Retail Banking- Meaning, Features, Significance of Corporate Banking and Overview of its products

- Corporate Banking - Meaning, Features, Significance of Corporate Banking and Overview of its products 

- Banking Ombudsman- Meaning and Functions 


Unit III Universal Banking and Technology in Banking Sector

A. Universal Banking- Concept of Universal Banking, Evolution of Universal Banking, Services to Government, Payment and Settlement, Merchant Banking, Mutual Fund, Depository Services, Wealth Management, Portfolio Management Bancassurance, NRI Remittance. 

B. Technology in Banking- Features, norms and limitations of E-Banking, Mobile Banking, Internet Banking, RTGS, POS Terminal, NEFT, IMPS, Brown Label ATMs, White Label ATMs, NUUP, AEPS, APBS, CBS, CTS, Digital Signature, M- Wallets, Online opening of bank accounts- savings and current, and application for credit cards, loan. 

- Applicability of KYC norms in banking sector. 

Module IV Microfinance and Financial Inclusion 

A. Microfinance

- Introduction, need and Code of Conduct for Microfinance Institutions in India 

- Advantages, purpose, limitations and Models of SHG - Bank Linkage Program

- Role of NABARD and SIDBI

- Portfolio Securitization 

- SHG-2, NRLM, and SRLM

- Priority Sector and it’s classification 

B. Financial Inclusion 

- Need and extent

- RBI Committee Report of Medium Term Path on Financial Inclusion 2015, World Findex Report 2015, NISN Report 2015 (Only brief extracts relating to bank account holdings and credit taken and contrast between developing and developed nations.)

- Features and Procedures of Pradhan Mantri Jan Dhan Yojana and PM Mudra Yojana. 

- Features, procedures and significance of Stand up India Scheme for Green Field


GLOBALIZATION OF BANKING

The globalization of banking refers to the increasing interconnectedness and integration of banking systems and institutions across national borders. This process has been driven by various factors, including advancements in technology, deregulation, and the liberalization of financial markets.

Diversified ownership and increased foreign ownership: Globalization has led to diversified ownership or increased foreign ownership in the banking industry in host countries. This means that banks from different countries have a presence in various markets, contributing to the integration of the global banking system.  

Benefits and risks: International banking has the potential to contribute to faster growth and stability by making financial services more accessible. however, it also poses risks, as global banks can enhance the international transmission of shocks through their activities.

Effects on macroeconomic variables: Research has shown that bank globalization has significant impacts on macroeconomic variables. For example, the availability of international banking services can contribute to economic growth and financial development

Effects on micro or bank level: Bank globalization can also have effects at the micro or bank level. Some studies have examined whether bank globalization helps improve bank performance. As stock markets develop and better availability of information increases, the potential pool of borrowers also grows making it easier for banks to identify and monitor them.

Structural transformations and regional focus: Global banking is going through some important structural transformations, with a greater variety of players and a more regional focus. This means that while the global banking system is becoming more integrated, there is also a growing emphasis on regional markets and players.

Technology and Fintech: Technology, especially in the form of Fintech firms that work globally, is playing a significant role in the globalization of banking. This can both facilitate and disrupt traditional banking services, leading to new challenges and opportunities for the global banking industry.

Wednesday, 13 September 2023

PORTFOLIO MANAGEMENT

Portfolio management is the art and science of creating and managing a collection of investments, known as a portfolio, to achieve specific financial objectives while managing risk. Here is a short note on key aspects of portfolio management.

Diversification: is a fundamental principle in portfolio management. It involves spreading investments across different asset classes, such as stocks, bonds, real estate, and commodities, to reduce risk. Diversifying helps to mitigate the impact of poor performance in any one investment.

  1. Risk Tolerance: involves assessing how much risk an investor is willing and able to take on. Risk tolerance varies from person to person and is influenced by factors like age, financial goals, and investment horizon.


  2. Asset Allocation: is the process of deciding how much of the portfolio should be invested in each asset class. The goal is to achieve a balance between risk and return that aligns with the investor's objectives. Common asset classes include equities (stocks), fixed income (bonds), and cash or cash equivalents.


  3. Risk Management: Portfolio managers employ various strategies to manage risk, including using derivatives, hedging techniques, and stop-loss orders. The aim is to limit potential losses while allowing for the potential for gains.


  4. Active vs. Passive Management: Portfolio managers can take an active or passive approach. Active managers aim to outperform the market by selecting and adjusting investments based on research and analysis. Passive managers, on the other hand, seek to match the performance of a specific market index by holding a diversified set of investments.


  5. Monitoring and Rebalancing: Portfolios should be regularly monitored to ensure they remain in line with the investor's goals and risk tolerance. Rebalancing involves adjusting the portfolio by buying or selling assets to maintain the desired asset allocation.


  6. Long-Term Focus: Successful portfolio management often takes a long-term perspective. Short-term market fluctuations are normal, and investors should resist the temptation to make impulsive decisions based on short-term volatility.


  7. Costs and Fees: Investors should be mindful of the costs associated with portfolio management, including management fees, transaction costs, and taxes. Minimizing expenses can have a significant impact on overall returns.


  8. Regular Review: Portfolios should be reviewed and adjusted periodically to reflect changes in an investor's financial situation and goals. Life events, such as marriage, retirement, or the birth of a child, may necessitate changes in the portfolio's strategy.

Portfolio management is a crucial aspect of investing that involves making informed decisions about asset allocation, risk management, and investment strategies to achieve financial goals while considering an investor's risk tolerance and time horizon. It requires ongoing monitoring and adjustment to adapt to changing market conditions and personal circumstances.

PAYMENT BANKS

Payment banks are a unique category of banks in India that focus primarily on providing basic financial services and payment-related solutions to the unbanked and underbanked segments of the population.

  1. Payment banks are a relatively new addition to the Indian banking sector, established under the guidelines of the Reserve Bank of India (RBI). They were introduced to promote financial inclusion and expand the reach of banking services to remote and underserved areas.


  2. Services Offered: Payment banks are allowed to offer a limited range of financial services, including savings accounts, current accounts, remittances, and mobile payments. They cannot provide loans or issue credit cards.


  3. Ownership and Capital Requirement: Payment banks in India can be owned by a variety of entities, including telecom companies, non-banking finance companies (NBFCs), and other eligible entities. They must have a minimum paid-up capital of Rs. 100 crore.


  4. Deposit Limitations: Payment banks can accept deposits from individuals and small businesses, but they are restricted in the maximum deposit amount, usually capped at Rs. 2 lakh per account.


  5. Interest Rates: Payment banks offer interest rates on savings accounts, typically higher than those offered by traditional banks. This attracts customers and encourages them to open accounts.


  6. Digital Focus: Payment banks rely heavily on technology and digital infrastructure to provide services. They often partner with mobile network operators and use mobile apps to facilitate transactions and account management.


  7. Financial Inclusion: Payment banks play a crucial role in promoting financial inclusion by providing banking services to the unbanked and underbanked population, especially in rural and remote areas.


  8. RBI Regulations: Payment banks are subject to regulatory oversight by the RBI, ensuring that they adhere to the specified guidelines and maintain financial stability.


  9. Partnerships: To expand their reach, payment banks often

  10. enter into partnerships with various businesses and government agencies to facilitate services like direct benefit transfers (DBT), subsidy payments, and utility bill payments.


  11. Challenges: Payment banks face challenges such as profitability due to limited revenue sources, competition from traditional banks and digital wallets, and the need to establish a robust distribution network.

Payment banks are financial institutions that focus on providing basic banking and payment services to the financially underserved population. They leverage digital technology and partnerships to bridge the gap and promote financial inclusion while operating under the regulatory framework of the RBI.

UNIVERSAL BANKING

Universal banking refers to the concept of financial institutions offering a wide range of banking and financial services under a single roof.

In India, universal banking has evolved over the years, and many banks now provide a comprehensive suite of services to cater to the diverse financial needs of individuals, businesses, and the economy as a whole.

  1. Diverse Services: Universal banks in India offer a broad spectrum of financial services, including retail banking (savings accounts, loans, credit cards), commercial banking (working capital finance, trade finance), investment banking (underwriting, advisory services), asset management (mutual funds, portfolio management), and insurance products (life, non-life insurance).


  2. Regulatory Framework: The Reserve Bank of India (RBI), as the country's central bank and regulator, sets the regulatory framework for universal banks. It monitors their activities to ensure compliance with prudential norms, risk management standards, and customer protection guidelines.


  3. Prominent Universal Banks: Several banks in India operate as universal banks, with a presence in both retail and corporate banking sectors. Some well-known universal banks in India include State Bank of India (SBI), ICICI Bank, HDFC Bank, Axis Bank, and Kotak Mahindra Bank, among others.

  4. Financial Inclusion: Universal banks play a significant role in promoting financial inclusion in India by providing banking services to rural and underbanked areas. They operate through extensive branch networks and digital channels to reach a wide customer base.


  5. Technology Integration: Universal banks in India have embraced technological advancements to enhance customer experience and streamline operations. They offer digital banking services, mobile apps, internet banking, and online investment platforms to cater to the tech-savvy population.


  6. Challenges: Universal banking in India faces challenges related to regulatory compliance, risk management, and the need to balance diverse business interests. The RBI continually updates regulations to address these challenges and maintain financial stability.

Universal banking in India reflects the convergence of various financial services under one institution's umbrella, making it more convenient for customers to access a wide range of financial products and services. It plays a vital role in the country's economic development and financial inclusion efforts while operating within the regulatory framework set by the Reserve Bank of India.