Do you know about the Indian banking system?
If you want to work in a bank so you should know this information about the Indian banking system
Today we are going to tell you about the Indian banking system?
Do you know about BFSI Sector?
BFSI stands for Banking Financial Services and Insurance.
BFSI Introduction
Bank gives interest on Deposits & takes interest on loans.
According to Sec 5(B) of Banking Regulation Act, 1949 defines banking as " accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise & withdrawal by cheque, draft or otherwise.
1. The Indian banking system has its foundation in the 18th century.
2. Bank of Hindustan was established in 1770, as the first bank of India
3. The second bank " General bank of India " established in 1786.
About RBI.
Introduction of Reserve Bank of India.
In every country, there is one organization which works as the central bank. The function of the central bank of a country is to control and monitor the banking and financial system of the country.
In India, The Reserve Bank of India (RBI) is the Central bank.
The Reserve bank of India was established on 1st April 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
* RBI Nationalized on 1st January 1949.
* The banking regulation was enacted in 1949.
* Role and Responsibility of RBI.
1. Note issuing authority
2. Government's Banker
3. Banker's bank
4. Supervising authority
5. Banking Ombudsman Scheme
6. Banking Codes and standards board on India
* Several Important rates are formulated by RBI.
These affect the money supply in the economy. These are
1. Cash Reserve Ratio(CRR)
2. Statutory Liquidity Ration( SLR)
3. Repo Rate
4. Reverse Repo Rate
5. Bank Rate
If you want to work in a bank so you should know this information about the Indian banking system
Today we are going to tell you about the Indian banking system?
Do you know about BFSI Sector?
BFSI stands for Banking Financial Services and Insurance.
BFSI Introduction
Banking, financial services and insurance (BFSI) Is a sector term for companies that provide a range of such financial products or services.
This includes Universal Bank that provides a range of financial services or companies that operate in one or more of these financial sectors.
In this sector include such type of companies, Commercial Banks, Insurance companies, Non-banking financial companies, mutual funds companies, and other smaller financial entities.
The BFSI sector includes core banking, retail, private, corporate, investment and cards, life insurance and general insurance as well.
This includes Universal Bank that provides a range of financial services or companies that operate in one or more of these financial sectors.
In this sector include such type of companies, Commercial Banks, Insurance companies, Non-banking financial companies, mutual funds companies, and other smaller financial entities.
The BFSI sector includes core banking, retail, private, corporate, investment and cards, life insurance and general insurance as well.
The term bank is derived from the Italian word "Banco" which means Long Bench.
Banks were established in Venice in 1171 and Genoa in 1320.
What is Bank?
The bank is an intermediary which accepts the deposits & channels those deposits into lending activities.
Bank gives interest on Deposits & takes interest on loans.
According to Sec 5(B) of Banking Regulation Act, 1949 defines banking as " accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise & withdrawal by cheque, draft or otherwise.
1. The Indian banking system has its foundation in the 18th century.
2. Bank of Hindustan was established in 1770, as the first bank of India
3. The second bank " General bank of India " established in 1786.
About RBI.
Introduction of Reserve Bank of India.
In every country, there is one organization which works as the central bank. The function of the central bank of a country is to control and monitor the banking and financial system of the country.
In India, The Reserve Bank of India (RBI) is the Central bank.
The Reserve bank of India was established on 1st April 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
* RBI Nationalized on 1st January 1949.
* The banking regulation was enacted in 1949.
* Role and Responsibility of RBI.
1. Note issuing authority
2. Government's Banker
3. Banker's bank
4. Supervising authority
5. Banking Ombudsman Scheme
6. Banking Codes and standards board on India
* Several Important rates are formulated by RBI.
These affect the money supply in the economy. These are
1. Cash Reserve Ratio(CRR)
2. Statutory Liquidity Ration( SLR)
3. Repo Rate
4. Reverse Repo Rate
5. Bank Rate
1. Cash Reserve Ratio-
A certain proportion known as Cash Reserve Ration (CRR) of the Net time and Demand liabilities of the bank is also to be placed with RBI like Case Reserve.
Every scheduled bank is required to maintain with RBI, an average daily balance equal to at least 4% of its net demand and time liabilities.
* Average balance signifies the average of balance held with RBI at the close of business oon each day of the fortnight ( Reporting Friday )
* Current CRR rate is 4.00%
2. Statutory Liquidity Ratio (SLR)
• It is obligatory on the part of a bank to invest a fixed proportion – known as Statutory liquidity ratio(SLR) of their liabilities which include time and time and term deposits in certain approved government securities. Liquidity Ratio (SLR) – of their liabilities which include time and term deposits in certain approved government securities.
• The requirement to maintain an amount in cash, gold or unencumbered approved securities (liquid assets)
• SLR is to be maintained on a daily basis with the bank
• SLR excludes the CRR maintained
• Current SLR rate is 19.5.
3. Repo Rate
• Discount the rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system
• To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash), and to contract the money supply it increases the repo rates.
• Currently, Repo rate is 6.25%
4.Reverse Repo Rate
• This is the exact opposite of repo rate. The rate at which RBI borrows money from the banks (or banks lend money to the RBI) is termed the reverse repo rate.
• The RBI uses this tool when it feels there is too much money floating in the banking system. If the reverse repo rate is increased, it means the RBI will borrow money from the bank and offer them a lucrative rate of interest.
• As a result, banks would prefer to keep their money with the RBI (which is absolutely risk-free) instead of lending it out (this option comes with a certain amount of risk). Consequently, banks would have lesser funds to lend to their customers.
• This helps stem the flow of excess money into the economy. Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks, while repo signifies the rate at which liquidity is injected.
• Current Reverse Repo Rate is 6%.
5.Bank Rate
• Rate at which RBI lends money to other banks and financial institutions.
• If the bank rate goes up, long-term interest rates also tend to move up, and vice-versa. Thus, it can say that if bank rate is hiked, in all likelihood, banks will soon hike their own lending rates to ensure that they continue to make profit
•Current Bank Rate is 6.50 %
• It is obligatory on the part of a bank to invest a fixed proportion – known as Statutory liquidity ratio(SLR) of their liabilities which include time and time and term deposits in certain approved government securities. Liquidity Ratio (SLR) – of their liabilities which include time and term deposits in certain approved government securities.
• The requirement to maintain an amount in cash, gold or unencumbered approved securities (liquid assets)
• SLR is to be maintained on a daily basis with the bank
• SLR excludes the CRR maintained
• Current SLR rate is 19.5.
3. Repo Rate
• Discount the rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system
• To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash), and to contract the money supply it increases the repo rates.
• Currently, Repo rate is 6.25%
4.Reverse Repo Rate
• This is the exact opposite of repo rate. The rate at which RBI borrows money from the banks (or banks lend money to the RBI) is termed the reverse repo rate.
• The RBI uses this tool when it feels there is too much money floating in the banking system. If the reverse repo rate is increased, it means the RBI will borrow money from the bank and offer them a lucrative rate of interest.
• As a result, banks would prefer to keep their money with the RBI (which is absolutely risk-free) instead of lending it out (this option comes with a certain amount of risk). Consequently, banks would have lesser funds to lend to their customers.
• This helps stem the flow of excess money into the economy. Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks, while repo signifies the rate at which liquidity is injected.
• Current Reverse Repo Rate is 6%.
5.Bank Rate
• Rate at which RBI lends money to other banks and financial institutions.
• If the bank rate goes up, long-term interest rates also tend to move up, and vice-versa. Thus, it can say that if bank rate is hiked, in all likelihood, banks will soon hike their own lending rates to ensure that they continue to make profit
•Current Bank Rate is 6.50 %
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