STUFF SIMPLIFIED: foundation course III

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

RETAIL BANKING - MEANING FEATURES | CORPORATE BANKING - OVERVIEW OF ITS PRODUCTS

Retail banking, also known as consumer banking or personal banking, is a form of banking that provides financial services to individual consumers rather than businesses.

Retail banks offer a wide range of services to the general public, such as bank accounts, fixed deposits, credit and debit cards, loans, etc. These services help people efficiently manage their finances. Retail banking services, like deposits and withdrawals, can be done both online and at the bank branch.

Features of Retail Banking

Retail banking services are tailored to each person's interests
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Retail banks provide a broad range of services to the general public
Deposits and withdrawals can be made for retail banking services both online and in a bank location
Retail banking is intended to help consumers manage their money by giving them access to basic banking services, a source of credit, and a way to deposit their funds in a secure manner

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Significance of Corporate Banking

Corporate banking is a type of banking that deals with corporate customers, including large companies, small and medium-sized enterprises (SMEs), and government entities

Corporate banking is significant because it provides a range of financial services to these customers, such as loans, trade finance, cash management, and investment banking services

Corporate banking is also important because it helps to drive economic growth by providing businesses with the capital they need to expand and create jobs

Overview of Corporate Banking Products

Corporate banking products include:

Loans: Corporate banks provide loans to businesses for various purposes, such as working capital, capital expenditures, and project finance

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Trade Finance: Corporate banks provide trade finance services to businesses engaged in international trade, such as letters of credit, guarantees, and documentary collections

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Cash Management: Corporate banks provide cash management services to businesses to help them manage their cash flows, such as account management, payment processing, and liquidity management
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Investment Banking Services: Corporate banks provide investment banking services to businesses, such as underwriting, mergers and acquisitions, and securities trading

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.

ELECTRONIC BANKING

Electronic banking, also known as e-banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the internet.

In India, e-banking has become increasingly popular in recent years, with many banks offering a range of services to their customers.

Types of E-banking: The major types of e-banking are online internet banking, mobile banking, automated teller machine (ATM), and debit and credit cards. Through e-banking, a client can acquire his record and manage numerous exchanges utilising his cell phone or personal computer.

Services Offered: E-banking enables digital payments which are secure, transparent, and fast. it allows customers to transfer funds to a single account or with multiple accounts within a bank or other financial institutions.

E-banking is also helpful for non-financial transactions such as changing your ATM PIN, getting a mini statement, updating your personal details, balance inquiry or printing an account statement

Benefits: Electronic banking further enhances functionality and improves the efficiency of banking activities. With e-banking, customers can carry out banking transactions at any place and at any time, from their home or office, all they need is internet access

E-banking also offers better efficiency by allowing the computerisation of everyday, regularly scheduled payments.

Overall, e-banking has revolutionized the way people manage their finances in India, offering a range of benefits and services that make banking more convenient and accessible.

Wednesday, 13 September 2023

CRITICAL EVALUATION OF BANKING INDUSTRY IN INDIA

A critical evaluation of the banking industry in India reveals a complex and evolving landscape that combines both strengths and weaknesses.

Regulatory Framework: The Reserve Bank of India (RBI) plays a pivotal role in regulating and supervising banks. While this ensures stability, critics argue that excessive regulations can stifle innovation and competition.

Financial Inclusion: The government's efforts to promote financial inclusion through schemes like Jan Dhan Yojana have made banking services accessible to a larger portion of the population. However, the quality of services, particularly in rural areas, remains a concern.

Non-Performing Assets (NPAs): The issue of NPAs in Indian banks has been a major concern. High levels of bad loans have strained the financial health of several banks and raised questions about their risk management practices.

Public Sector Dominance: Public sector banks continue to dominate the Indian banking sector. Critics argue that their inefficiencies, bureaucratic structures, and political interference hinder their ability to compete effectively.

Private Sector Banks: Private sector banks have shown remarkable growth and efficiency. However, concerns about their corporate governance, especially in light of high-profile scams and controversies, have been raised.

Digital Transformation: The banking industry in India is undergoing a digital transformation. While this has enhanced customer convenience, it also raises cybersecurity concerns and leaves behind those who lack access to technology.

Customer Service: Customer service in many Indian banks often receives criticism for being slow, bureaucratic, and impersonal. Improvements are needed to enhance the overall customer experience.

Financial Stability: Despite challenges, India's banking sector has demonstrated resilience, especially during global financial crises. The adoption of Basel III norms and other regulatory measures has contributed to stability.

Competition: The entry of new players like payment banks and fintech startups has increased competition. However, it also challenges traditional banks to innovate and adapt.

Global Integration: Indian banks are increasingly expanding internationally. While this provides opportunities, it also exposes them to global risks and regulations.

The Indian banking industry has made significant progress over the years but faces ongoing challenges. Striking a balance between regulation and innovation, addressing NPA concerns, improving customer service, and ensuring financial inclusion are critical areas that require attention. Moreover, fostering a healthy mix of public and private sector banks can contribute to a more robust and competitive banking sector in India.

BANKING CRISIS IN INDIA

Bank crises in India have been periodic events that have posed significant challenges to the country's financial stability and economic growth.

These crises can be broadly categorized into two main types: systemic and specific bank crises.

Systemic Bank Crises: These crises affect the entire banking system and are characterized by widespread financial distress and panic among depositors and investors.

Historical Context: India has faced several systemic bank crises in its modern history. The most notable ones occurred in the late 1960s and early 1990s.

Causes: Systemic bank crises are often triggered by a combination of factors, including weak regulatory oversight, non-performing assets (NPAs), inadequate risk management, and economic downturns.

Response: The Indian government and the Reserve Bank of India (RBI) typically respond to systemic bank crises by implementing financial sector reforms, recapitalizing banks, and introducing stricter regulations to prevent future crises.

Recent Examples: In the early 1990s, India experienced a severe systemic bank crisis that led to significant policy reforms, including the liberalization of the financial sector. More recent crises have included the IL&FS crisis in 2018 and the Yes Bank crisis in 2020.

Specific Bank Crises: These crises are limited to individual banks or financial institutions and do not necessarily threaten the entire banking system.

Causes: Specific bank crises can arise due to mismanagement, fraud, high NPAs, or other internal issues within a particular bank. These crises may not always be indicative of broader problems in the banking sector.

Response: The RBI and regulatory authorities take action to address specific bank crises. This may involve the takeover of the troubled bank by a stronger institution, imposition of restrictions on withdrawals, or investigations into fraudulent activities.

Recent Examples: The Punjab National Bank (PNB) fraud case involving Nirav Modi in 2018 and the crisis at Yes Bank in 2020 are examples of specific bank crises in India.

In recent years, India has taken steps to strengthen its banking sector, improve regulatory oversight, and address the issue of NPAs. However, the risk of bank crises remains a concern, given the complexity and size of the country's financial system. Continued vigilance, reforms, and effective risk management are essential to mitigate the impact of future bank crises on India's economy.