207107950 Banking Products r

8/9/2019 207107950 Banking Products r

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Section 5 (b) of the Banking Regulation Act 1949denes Banking as

Accepting fo the pupose oflending and in!est"ent#

deposits of "one$ fo" thepublic

epa$able on de"and o

othe%iseand %ithda%able b$ che&ue#daft# ode o othe%ise


3/53

'*R+*,'A'-

Bet%een those %ho sa!e "one$and those %ho need "one$ .inancial inte"ediation pla$s an

i"potant econo"ic function

R'S/S ' 0*,'23edit Risk

20i&uidit$ Risk2'nteest Rate RiskBanks ae essentiall$ isk"anages


4/53

a$"ent s$ste" a$ deposits on de"and

a$"ent though che&ues

.acilitate "o!e"ent of "one$ 3iculato$ s$ste" of the econo"$

.inancial se!ices po!ide

oducts of "utual funds andinsuance co"panies

3ollection of utilit$ bills# etc


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Banking is based on the tustthat banks %ill honou theico""it"ents

inciples on %hich bankingbusiness is based0i&uidit$Safet$otabilit$Secec$Se!ice 6ualit$


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A7+* S7S*+ 3-S'8* a$"ents and e"ittances 3ollection

.'A3'A0 '*R+*,'AR7 ,eposit 0oan

A00'*, S*R'3*S ,istibution 3ollection ,e"at se!ices Safe keeping Ad!iso$


7/53

A %itten instuction issued b$ acusto"e (,a%e) to his bank(,a%ee) to pa$ the specied

a"ount to the peson na"ed(a$ee) in the che&ue3ossed and uncossed che&uesRe&uie"ent of su:cientbalance fo "aking pa$"ent


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3he&ue issued b$ a bank onitself but pa$able at anothe

banch 'n case thee is no banch of theissuing bank# aange"ents can

be "ade %ith the othe bank(s)ha!ing its;thei banch(es)


10/53

A che&ue %hich can be paidat an$ banch of the bank

et%oking of the banchesand centalised co"pute

s$ste" is a pe


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.aste "ode of e"itting "one$ to faa%a$ places

3entalised co"pute s$ste" enables thetansaction

he pa$"ent can be "ade instantl$ if thepa$ee ; benecia$ has an account %ith thepa$"ent banch

'n case pa$e and pa$ee "aintain accounts

%ith t%o di=eent banks# the tansactioncan be co"pleted though the Rese!eBank of 'ndia

3ost e=ecti!e and fast "ode of tansaction


12/53

A substitute fo che&ues3an be used fo %ithda%ingcash fo" A+ as %ell as "aking

pa$"ents to thid patiesthough -S

Account of the custo"e is

debited instantl$Add4 ? @5 da$s banking


13/53

3usto"e gets cetain cedit li"itfo" the cedit cad issuing bank

he a"ount utilied is debited to

cedit cad account3usto"e gets so"e ti"e to"ake pa$"ent to the bank

3usto"e gets inteest feecedit fo upto 5C da$s


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A pe


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ansfe0ocal 3leaing*3S o *lectonic 3leaing3he&ue 3ollectionational 3leaing3+S D 3ash +anage"ent

Se!icesBills 3ollectionSe!ices in!ol!ing .oeign*Echange


16/53

ansactions in!ol!ing tansfe of "one$fo" one account to anothe account%ithin the banch of a bank o %ithin

the banches of the sa"e bank 'nte


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.acilitating collection of che&ues %hichae da%n on local banches of banks

Bankes "eet at 3leaing Fouse foeEchange of che&ues

RB' and ; o SB' and ; o co""ecialbanks "aintain 3leaing Fouse indi=eent locations

,a$Gs in%ad and out%ad che&ues

bet%een banks ae eEchanged andtansaction a"ounts ae netted

0ocal cleaing is * settle"ent


18/53

a$"ent instuctions ae tans"ittedelectonicall$

3o!es high !olu"e# lo% !alue tansactions Both debit (*3S ,ebit) and cedit (*3S 3edit)

tansactions ae co!eed +anaged b$ RB' o SB' 3edit *3S

*Ea"pleH 'nteest on Secuities#,i!idends# Regula Salaies

,ebit *3S *Ea"pleH 'nsuance pe"iu"s# 0oan

epa$"ents# 8tilit$ bill pa$"ents


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Benets

Speed

Accuac$

Secued channel

A!oids "anual inte!ention (pocessing oftansactions)

Sa!es ti"e due to s$ste"ic handling

Benets Io% to bank# custo"e and use

public


20/53

0ocal che&ues ae collected in localcleaing

-utstation che&ues (upcount$) ae

collected b$ sending the che&ues toespecti!e banksG banches 8nlike local cleaing# che&ue

collection takes ti"e due to ta!el

and ealisation of poceeds intocusto"eGs account


21/53

Speedie collection of outstationche&ues da%n on lage cities

RB' has linked lage cities Joks unde the sa"e pinciple as

local cleaing 3o""unication has enabled

net%oking and e:cienc$ incollection

8nlike outstation che&ue collection#national cleaing facilitates fastecollection


22/53

Best suited fo custo"es %ith %idenet%ok of opeations and deales

*nables to "anage li&uidit$ e:cientl$though speedie collection and

e:cient "anage"ent of pa$"ents A!ailabilit$ of +'S on collections and

pa$"ents D a "aKo benet of 3+S ,istibuted collection and pa$"ent at

point of occuence of tansactions *nables custo"es unde 3+S to

econcile thei pa$"ents andcollections on a dail$ basis


23/53

'nstead of pa$ing though che&ues# businesshouses da% bills of eEchange at ti"es

Bills can be de"and bills o usance bills 'n!oice# bill and docu"ent of title to goods (tade

docu"ents) ae handed o!e to the bank b$ selle he Bank sends the sa"e to the bu$eGs bank fo

collecting pa$"ent Bu$eGs bank hands o!e all tade docu"ents

upon eceipt of pa$"ent fo" bu$e on a de"andbill o eceipt of acceptance fo" the bu$e incase of usance bill

Bu$eGs bank e"its the poceeds to the selleGsbank and selle gets "one$ fo goods ; se!icessold


24/53

eed aises %hen pa$"ents ae to be"ade to a benecia$ in an o!eseascount$ in foeign cuenc$

a$"ents ecei!ed in foeign cuenc$

needs to be ealised in 'ndian cuenc$ Banks "aintain accounts in an o!eseas

count$ to facilitate tansactionsin!ol!ing foeign cuenc$

Such accounts ae kno%n as ostoaccounts


25/53

3uent Accounts ,e"and deposits o inteest is paid on balances in cuent

accounts Sa!ings Accounts

,e"and deposits fo non


26/53

Retail 0oans esonal -!edafts 3edit 3ads


27/53

Retail 0oans o!ided to indi!iduals

atue

3onsu"e duables

Fousing ehicle esonal eEpenses

*ligibilit$ +agin

'nteest application Repa$"ent D "onthl$ o &uatel$ 8nsecued and secued


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esonal -!edaft

.o uneEpected and peiodice&uie"ents

*ligibilit$ +agin 'nteest application Repa$"ent

8nsecued and secued


29/53

3edit 3ads

.o puchases ; %ithda%als

*ligibilit$

3edit li"it Repa$"ent D "onthl$ o in

install"ents 8nsecued


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Business cedit

.o ac&uisition of Eed assets

.o nancing cuent assets

*ligibilit$ A"ount Boo%ing;epa$"ent Secued and unsecued


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i!en fo ac&uiing of Eed assets Secued b$ a chage on the assets

ceated out of bank nance

+agin e&uies to be contibuted Repa$"ent is out of pots

geneated b$ the assets ceated andis spead o!e a ti"e in install"ents


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he assets e&uied b$ the businessae ac&uied b$ the bank and leasedout to the custo"e

0ease entals ae paid b$ thecusto"e ot !e$ popula no% as the taE

incenti!es a!ailable ealie ae no%

%ithda%n


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'n this section $ou %ill undestandthe !aious t$pes of %oking capitalfacilities

atue o!edaft

cash cedit

packing cedit

de"and loans and lines of cedit

business cads


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i!en fo nancing the %oking capital c$cle 3an be e sale o ost sale nancing -!edaft

.o "eeting shot te" e&uie"ents .o "eeting te"poa$ "is"atches in cash Io% 3an be secued o unsecued

3ash 3edit +ost 3o""on and popula facilit$ in 'ndia Running Account e"anent in natue

0i"it established and %ithda%als %ithin li"it Secued b$ a h$pothecation chage on cuent

assets +agin is "aintained o!e the !alue of assets


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acking 3editSi"ila to cash cedit

.o "eeting eEpot odes

-iginall$ on ode to ode basis

esentl$ unning account facilit$ ispe"itted

3oncessi!e inteest ate

0i&uidation can be onl$ b$ eEpot

poceeds,ela$ in li&uidation attacts penalt$

Secued b$ a chage on the cuentassets

Saga "al sha"a


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,e"and 0oans;0ines of 3edit,e"and loan is fo "eeting shot te"

e&uie"ents

Attacts cheape inteest

efeed b$ lage copoates as coste=ecti!e

0i&uidated at the end of the stipulated peiod

0ine of 3edit is an assuance b$ the banketo "ake a!ailable shot te" cedit %hen

needede"s and conditions ae pe


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Business 3ad

*&ui!alent of a cedit o debit cad toindi!iduals

*nables business entities to "ake thei

puchase of e&uied supplies %ithoutesoting to use of che&ues o de"anddafts

'nteest is chaged fo" da$ one

Being populaied in 'ndia


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'n this section $ou %ill undestandthe !aious "odes of nancing postsale o cedit sales

3he&ue puchase

Bill puchase

Bill ,iscount

0ette of 3edit

Bill egotiation

uaantees


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3he&ue uchase

A!oids dela$ in!ol!ed in collection of che&ues

.unds ae "ade a!ailable to selles i""ediatel$

'nteest is chaged fo" the date of puchase todate of ealiation of the che&ue

Bill uchase

Ad!ance against docu"enta$ bills is pa$able atsight

Bills ae then sent fo collection

Ad!ance is li&uidated fo" collection poceeds

'nteest is chaged fo" the date of puchase tothe date of eceipt of poceeds is eco!eedupfont


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Bill ,iscount

Ad!ance against docu"enta$ 8sancebills

'nteest chaged fo the 8sance peiod is

called discount ,iscount is eco!eed upfont


41/53

0ette of 3edituaantee gi!en b$ the puchaseGs

bank to the selle that the billepesenting sale of goods %ill be paid

aties to an 03 ae applicant (bu$e ofgoods)# issuing bank (bu$eGs bank)# andbenecia$ (Selle of goods)

eated as a cedit facilit$ b$ the bu$eGsbank

't is a non


42/53

Bill egotiation

uchase o discounting of a billacco"panied b$ an 03

Risk to negotiating bank is less

'nteest;discount is chaged upfont


43/53

uaantees'ssued b$ banks at the e&uest of

custo"es in espect of tansactionsothe than no"al tade tansactions

't can be as a eplace"ent of *+,# foeceipt of "obilisation ad!ance# foelease of etention "one$# to%adspa$"ent of penalt$ fo non pefo"ance

3o""ission is chaged fo issue ofguaantee esulting in fee inco"e tobank

't is a non


44/53

he se!ices po!ided b$ banksunde the ole of po!ide of alliedse!ices ae

,istibution

3ollection of taEes and bills

,e+A accounts

Safe keeping

Ad!iso$ se!ices


45/53

'n banking toda$# distibution ofpoducts and thid paties ha!eassu"ed geat i"potance due toeneation of fee inco"e

Abilit$ to po!ide single u"bella se!iceAbilit$ to ceate eEit baie Acti!ities in!ol!ed aeH

+utual .und 8nits'nsuance oducts

Sale of Bondsade in old ; old coins+obile hone RechageShaes of co"panies o=eing ublic

'ssues


46/53

he poducts o=eed b$banks %ithin the collection

se!ice aeaEes

8tilit$ Bills


47/53

A deposito$ is like a bank -nl$di=eence is that it holds $ousecuities and not cash

he account opened %ith a

deposito$ paticipant is called a,e+at account

,e"ateialisation is the pocess ofcon!eting ph$sical shaes into

electonic fo" Re"ateialisation is the pocess of

con!eting secuities fo" electonicfo" into ph$sical fo"


48/53

h$sical secuities ae tansfeed onbasis of tansfe deeds# ,e+atsecuities get tansfeedelectonicall$

*ach secuit$ (ie# shae of apaticula co"pan$) has a uni&ueidentication o called 'S'('ntenational Secuities'dentication u"be) though%hich the secuities ae ecognised


49/53

ansfes ae a=ectedhough the '., o ,eli!e$ SlipJhich is gi!en b$ the selle to his ,he shaes %ill be tansfeed out of the

selles ,e+at accountAnd into the bu$es ,e+at account %ith

his , he entie cleaing pocess is put

though a cental deposito$ At pesent %e ha!e t%o depositoies#

na"el$ 3,S0 L S,0 %ho aeegisteed %ith S*B'


50/53

Safe ,eposit aultHSafe keeping facilit$ is a taditional

function of banks

0ockes po!ided at !e$ easonable

atesRents ae chaged as pe sie of the

locke and ae pa$able in ad!ance

0ockes can be hied b$ indi!iduals#

"s# 0td 3o"panies# associations#societies etc

0ockes ae ented out fo a "ini"u"peiod of one $ea


51/53

Safe 3ustod$ Se!iceH8nde safe custod$# banks accept sealed

packets fo safe keeping in thei stongoo"s fo %hich a eceipt is issued

Aticles ae etuned upon the custo"ehanding o!e the eceipt

ot o=eed an$ "oe as a "atte ofcouse

Banks toda$ deposit the duplicate ke$sof banches fo safe custod$ %ith othebanks in the aea fo use in e"egencies


52/53

he poduct o=eed b$ banks%ithin the Ad!iso$ se!ice isH

'n!est"ent Ad!ice


53/53

Banking 3hannelsHA+s-S e"inals'ntenet bankinghone banking+obile bankingBanch

+igating fo" banch banking toothe channels< Ad!antagesH

3on!enience to custo"es3ost e=ecti!e to bankseal$ MCN of tansactions though non

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207107950 Banking Products r