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.
Private Sector bank
8. What is KYC?
KYC Stands for “Know Your Customer”. The objective of KYC is to enable banks to know and understand their customers better and help them manage their risks prudently. The process of KYC entails identifying the customer and verifying the identity by using reliable and independent documents or information. Commercial bank’s balance sheet has two main sides i.e. the liabilities and the assets. From the study of the balance sheet of a bank we come to know about a system which a bank has followed for raising funds and allocation of these funds in different asset categories.
9. Difference between Liabilities & Assets of a bank?
|a. Share Capital||a.
|b. Reserve Funds||b. Loans & Advances Given|
||c. Investment of banks|
|e. other Liabilities||e. Other Assets|
10. What is Financial Inclusion?
Rangarajan committee (2008)1 defined financial inclusion as, “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.”
12. What is Plastic Money?
Plastic money is a term that is used predominantly in reference to the hard plastic cards we use everyday in place of actual bank notes. They can come in many different forms such as cash cards, credit cards, debit cards, pre-paid cash cards etc.
13. Difference between Demand Draft & Cheque?
Cheque and Demand drafts (DD) are both negotiable instruments. Both are mechanisms used to make payments.
A Cheque is a Bill of Exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
Demand Draft is a pre-paid Negotiable Instrument, where in the drawee bank acts as guarantor to make payment in full when the instrument is presented.
|Cheque is issued by customer||Demand draft is issued by the bank.|
|In cheque payment is made after presenting cheque to bank||DD is given after making payment to bank.|
|Cheque can bounce due to insufficient balance||DD cannot be dishonored as amount is paid before hand.|
|Payment of cheque can be stopped by drawee||Payment cannot be stopped in DD.|
|In cheque drawer and payee are different person.||In DD, both parties are banks.|
|A cheque needs signature to transfer amount||DD does not require signature to transfer funds|
14. Difference between NBFC & Bank?
|Basic For Comparison||NBFC||Bank|
|Meaning||An NBFC is a company that provides banking service to people without holding a bank license||Bank is a government authorized financial intermediary that aims at providing banking services to the general public.|
|Incorporated under||Companies Act 1956||Banking Regulation Act, 1949|
|Demand Deposits||Not Accepted||Accepted|
|Foreign Investment||Allowed up to 100%||Allowed up to 74% for Private Sector Banks.|
|Payment and Settlement system||Not a part of system.||Integral part of the system.|
|Maintenance of Reserve Ratio||Not Required||Compulsory|
|Deposits Insurance Facility||Not Available||Available|
15. What is MCLR?
The Reserve Bank of India has brought a new methodology of setting lending rate by commercial banks under the name Marginal Cost of Funds based Lending Rate (MCLR). It has modified the existing base rate system from April 2016 onwards. – As per the new guidelines by the RBI, banks have to prepare Marginal Cost of Funds based Lending Rate (MCLR) which will be the internal benchmark lending rates. Banks have to set five benchmark rates for different tenure or time periods ranging from overnight (one day) rates to one year.
16. Why the MCLR reform?
At present, the banks are slightly slow to change their interest rate in accordance with repo rate change by the RBI. Commercial banks are significantly depending upon the RBI’s LAF repo to get short term funds. But they are reluctant to change their individual lending rates and deposit rates with periodic changes in repo rate. Whenever the RBI is changing the repo rate, it was verbally compelling banks to make changes in their lending rate. The purpose of changing the repo is realized only if the banks are changing their individual lending and deposit rates.
17. How to calculate MCLR?
In economics sense, marginal means the additional or changed situation. While calculating the lending rate, banks have to consider the changed cost conditions or the marginal cost conditions. For banks the cost for obtaining funds is basically the interest rate given to the RBI for getting short term funds.
Following are the main components of MCLR.
Negative carry on account of CRR: is the cost that the banks have to incur while keeping reserves with the RBI. The RBI is not giving an interest for CRR held by the banks. The cost of such funds kept idle can be charged from loans given to the people.
Operating cost: is the operating expenses incurred by the banks
Tenor premium: denotes that higher interest can be charged from long term loans
Marginal Cost: The marginal cost that is the novel element of the MCLR. The marginal cost of funds will comprise of Marginal cost of borrowings and return on networth. According to the RBI, the Marginal Cost should be charged on the basis of following factors:
Interest rate given for various types of deposits- savings, current, term deposit, foreign currency deposit
Borrowings – Short term interest rate or the Repo rate etc., Long term rupee borrowing rate
Return on net worth – in accordance with capital adequacy norms.
18. How MCLR is different from base rate?
The base rate or the standard lending rate by a bank is calculated on the basis of the following factors:
On the other hand, the MCLR is comprised of the following are the main components.
But the most important difference is the careful calculation of Marginal costs under MCLR. On the other hand under base rate, the cost is calculated on an average basis by simply averaging the interest rate incurred for deposits. The requirement that MCLR should be revised monthly makes the MCLR very dynamic compared to the base rate.
Costs that the bank is incurring to get funds (means deposit) is calculated on a marginal basis
19. What is S4A?
“S4A” new scheme has been introduced by the Reserve Bank of India (RBI) for resolution of stressed assets and bad loans of large projects. The S4A will cover those projects which have started commercial operations and have outstanding loan of over Rs.500 crore. The purpose of the S4A is to strengthen the lenders’ ability to deal with stressed assets and put real assets back on track by providing an avenue for reworking the financial structure of entities facing genuine difficulties. The scheme is an optional framework for resolution of large stressed account.
20. What is mission Indradhanush?
Finance Minister in its attempt to revamp functioning of public sector banks has launched a seven prolonged plan known as – Indradhanush. The seven elements include appointments, board of bureau, capitalization, de-stressing, and empowerment, framework of accountability and governance reforms.