It had been widely felt earlier that one of the biggest bottlenecks in the banking system in the country was the lack of a system that ensures fast, safe and secure intra-bank and inter-bank communication. In fact, this deficiency had been hampering to a large extent the development of a modern, integrated payment system in the nineties. Most of the cases of complaint against banks, in those days related to the time taken for transfer of funds across banks and between cities and to the delays in the collection of outstation cheques. Clearly, the non-availability of a reliable communication backbone had been one of the main contributors to this state of affairs. The functioning of the terrestrial line networks was hardly optimal in terms of efficiency, although of late, there has been some change in this area for the better. But, the wide geographical spread of branches of banks and Continue reading
Indian Banking System
Different Modes of Acceptance of Deposits by Commercial Banks
The most important activity of a commercial bank is to mobilize deposits from the public. People who have surplus income and savings find it convenient to deposit the amounts with banks. Depending upon the nature of deposits, funds deposited with bank also earn interest. Thus, deposits with the bank grow along with the interest earned. If the rate of interest is higher, public are motivated to deposit more funds with the bank. There is also safety of funds deposited with the bank. The following types of deposits are usually received by banks: Current Deposit: Also called ‘demand deposit’, current deposit can be withdrawn by the depositor at any time by cheques. Businessmen generally open current accounts with banks. Current accounts do not carry any interest as the amount deposited in these accounts is repayable on demand without any restriction. The Reserve bank of India prohibits payment of interest on current Continue reading
Case Study- “Entry of LIC into Banking: Is it a Wise Decision?”
Life Insurance Corporation of India (LIC) is a long-term player with long-term resources garnered at a low cost. It has chosen Corporation Bank and Oriental Bank of Commerce, for investments in their equity shares. These two public sector banks have the distinction of turning out superlative performance. The business per employee and intermediation costs for these two banks are the lowest in the industry. So are there Non-Performing Assets. Corporation bank incidentally, is the only public sector bank, where the recent voluntary retirement schemes has not been implemented, as it does not have any excess staff to be sent out. In the Mangalore based Corporation bank are perhaps the biggest gambles over undertaken by the two giants. That, despite the state banks status as one of the best-managed bank in the country. Competition is intense in both domence at last count there were 19 public sectors, 34 private sectors, and Continue reading
The Concept of Debt Recovery Management
Banks were never so serious in their efforts to ensure timely recovery and consequent reduction of Non-Performing Assets (NPAs) as they are today. It is important to remember that recovery management, be of fresh loans or old loans, is central to NPA management. This management process needs to start at the loan initiating stage itself. Effective management of recovery and Non-Performing Assets comprise two pronged strategy. First relates to arresting of the defaults and creation of NPA thereof and the second is to handling of loan delinquencies. The tenets of financial sector reforms were revolutionary which created a sense of urgency in the minds of staff of bank and gave them a message that either they perform or perish. The prudential norm has forced the bank to look into the asset quality. A debt from a loan, credit line or accounts receivable that is recovered either in whole or Continue reading
Universal Banking In India
RBI states: “The emerging scenario in the Indian banking system points to the likelihood of the provision of multifarious financial services under one roof. This will present opportunities to banks to explore territories in the field of credit/debit cards, mortgage financing, infrastructure lending, asset securitisation, leasing and factoring. At the same time it will throw challenges in the form of increased competition and place strain on the profit margins of banks” The evolving scenario in the Indian banking system points to the emergence of universal banking. The traditional working capital financing is no longer the banks major lending area while FIs are no longer dominant in term lending. The motive of universal banking is to fulfill all the financial needs of the customer under one roof. The leaders in the financial sector will be aiming to become a one-stop financial shop. In recent times, ICICI group has expressed their aim Continue reading
Merchant Banking Services: Corporate Counseling
Corporate counseling denotes the advice provided by the Merchant Banking to the corporate unit to ensure better corporate performance in terms of image building among investors, steady growth through good working and appreciation in market value of its equity shares. The scope of corporate counseling, capital restructuring and, portfolio management and the full range of financial engineering includes venture capital, public issue management, and loan syndication, working capital, fixed deposit, lease financing, acceptance credit, etc. However counseling is limited to only opinions and suggestions and any detailed analysis would form part of a specific service. The scope of corporate counseling is restricted to the explanations of concepts, procedures and laws to be observed by the client company. Requirement of any action to be taken or compliance of statutory formalities to be made for implementation of those suggestions would mean the demand for a specific type of service other than corporate Continue reading