These three presidency banks were re-organized and amalgamated to form a single entity named “Imperial Bank Of India” on 27th January ,1927. It was later transformed into “State Bank Of India” in 1955.
“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?
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?
|Primary Functions||Secondary Functions|
|Accepting Deposits||Clearence of Cheques|
|Making Advances||Sale / Purchase of Shares / Bonds|
|Credit Creation||Transfer of Money|
|To work as a Trusty and representative|
|To give / accept money|
|To Provide letter of credit|
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).
|Investment in productive assets (whose value increase over time) like plant and machinery for a business.||Investment in financial assets like stocks,bonds,mutual funds,etc.|
|Investment gives investors ownership right as well as management right||Investments gives investors only ownership right and not management right|
|Engage in decision making of a firm||Not involved in decision making|
|Investors enter a country with long-term||Investors can plan for long but often have a short – term plans|
|So investors cannot depart from the country easily||Investors can easily depart from the country|
|Investment is greater than 10%||Investment is less than 10%|
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.
|It is issued by an individual||It is issued by a bank|
|So, they are orders of payments from an account holder to the bank||They are orders of payments by a bank to another bank|
|In case of insufficient balance in the account, it can be dishonored||It cannot be dishonored because payments is already done for it|
|It is denied in the Negotible Instrument Act,1881||Although a type of negotlable instrument only, it is not defined in the act.|
|There are no bank charges to issue it||Different banks can charge differently for the issue of DD|
|Individual / Party issuing cheque must have a savings or current account in the bank||Individual / Party issuing DD may not necessarily have bank account in the bank|
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:
19. Know your customer(KYC):
20. Requirements for opening a bank account
Proof of identity:
Six documents as Officially Valid Documents (OVDs) for the purpose of producing proof of identity. These six documents are
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
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.
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.
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
These regulations were notified under the Insolvency and Bankruptcy Code, 2016 and will come into effect from 29 November 2016.
|IMF(International Monetary Fund)||World Bank|
|Objective: To deal with all the issues related to the financial sector and macroeconomics.||Objective: To lessen poverty and promote the long term development of the economy.|
|IMF is about balancing the international financial system in both rich and poor countries (Greece is a recent recipient).||World Bank is for development
projects in the developing world.
|You go to the IMF when you are so messed up that your currency is dropping like crazy. IMF comes and usually fixes stuff along with advice.||You go to the World Bank when you
want to build a dam or power plant or
|IMF is a fund. Meaning it has a pool of money given to it by 188 member countries in the past and lends out of that fund. It doesn’t usually borrow new money.||
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.
NBFCs but exempted from the requirement of registration:
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
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.
There are 4 printing presses in the country which are
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):
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.
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:
60. Self Help Groups(SHG):
61. Women’s Self-Help Groups (WSHGs):
The structure of cooperative network in India can be divided into 2 broad segments
63. Urban Cooperatives are scheduled and non-scheduled.
64. Rural Cooperatives are scheduled and non-scheduled.
Short-term cooperative banks are three tiered operating in different states.
78. Current Account:
79. Savings Account:
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.
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”.
82. Miscellaneous Deposits :
Miscellaneous Deposits are classified into two types.
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.
Personal Loans are again divided into 4 types.
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.
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).
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).
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.
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.
|NEFT(National Electronic Fund Transfer)||RTGS(Real Time Gross Settlement)|
|NEFT is a payment system facilitating one- to-one funds transfer.||Real Time: Instructions that are executed at the time they are received, rather than at some later time.
Gross Settlement: Settlement of funds transfer instructions occurs individually.
|Minimum Amount: Rs.2 lakhs||Minimum Amount: Rs.2 lakhs|
|Maximum Amount: No upper ceiling||Maximum Amount: No upper ceiling|
|Timings: 8 am to 7 pm(Monday through Friday and also on Working Saturdays i.e. Saturdays other than 2nd & 4th Saturdays)..||Timings: 8.00 hours to 16.30 hours(Monday through Friday and also on Working Saturdays i.e. Saturdays other than 2nd & 4th Saturdays).|
|Inward transactions: Free, no charges to be levied from beneficiaries|
Outward transactions: – For transactions up to Rs 10,000 : not exceeding Rs 2.50 (+ Service Tax) -For transactions above Rs 10,000 up to Rs 1 lakh: not exceeding Rs 5 (+ Service Tax) -For transactions above Rs 1 lakh and up to Rs 2 lakhs: not exceeding Rs 15 (+ Service Tax) -For transactions above Rs 2 lakhs: not exceeding Rs 25 (+ Service Tax.
|Inward transactions: Free, no charge to be levied
Outward transactions: Rs 2 lakh to Rs 5 lakh – Not exceeding Rs 30 per transaction; Above Rs 5 lakh – not exceeding Rs 55 transactions;
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).
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?
Reasons for Occurrence of NPAs:
Result of NPAs:
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.
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:
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:
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.
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
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.
Example: stock, work in progress, money owed by customers, cash in hand or at the bank, short- term investments, pre-payments
These are amounts owed to you and due within one year.
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?
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:
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.
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 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.
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.
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):
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.
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.
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.
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:
Examples: Gift vouchers issued by banks and NBFCs, Ola Money, etc.
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?
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.
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.
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:
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:
116. NPCI (National Payments Corporation of India):