Introduction
PYQP
Banks
Evolution of Govt Banking Policy
Structure of Banks in India
Types of Banks - According to Schedule
Scheduled Banks
Non Scheduled Banks
Not Listed in Schedule 4 of RBI Act 1934
- Local Area Banks
- Concept in 1980
- Branches Not More than in 2 to 3 Districts
- Only 2 Examples
- Karnataka - Krishna Bhima Samruddhi Bank
- Andhra - Coastal Bank
List of All Types of Banks
Scheduled Public Sector Banks
Scheduled Private Sector Banks
Scheduled Foreign Banks in India
Scheduled Small Finance Bank
Scheduled Payments Banks
Difference Between Scheduled and Non Scheduled Banks
LAF → Repo and Rev Repo → Borrowing from RBI
All Cooperatives, SFB & PB are NOT Scheduled Banks
Not all SFB and Payment Banks are Scheduled → Example: Jio Payments Banks is a Non Scheduled Bank
Types of Banks - According to Nature
Commercial Bank - Profit Making Nature
Special Case of IDBI
IDBI is owned Primarily by LIC which is in Turn owned by Govt
It is listed as Private Bank as of Now
Public Sector Bank - Govt Owns > 51% Ownership → Total 12
- SBI
- Nationalised Banks - in 1969 & 1980
Domestic Private Banks
- Domestic - Started by Indians
Foreign Banks - 44 Banks
- By Foreigners
- Ex: Citi Bank
RRB - with “Gramin”
Examples of RRB Banks
Payment Bank & Small Finance Banks
Class Notes
- Payment Banks: When Bank Closes → 2 Lac Rupees Cannot Accept Fixed Deposits
Small Finance Bank: No Such Restriction
- For Payment Banks 75% SLR has to be maintained with Govt in the Form of G SEC Only
Here SLR is → There is No Percentage of NDTL as there is no time deposit only !
Here SLR is → % of Deposits
- PSL doesn't apply to Payment Banks
- FDI Allowed in PSB is upto 20%
- FDI Allowed in Pvt Bank upto 74%
- PPI = Pre Paid Investment Providers
Cred, PayTM, Flipkar, Amazon Wallet, Ola Money, Metro Card, Uber Money
- RWA - Risk Weighted Assets
Summary
Co Operative Banks - Welfare Nature
Cooperative Banks - Promote Cooperation
- Banking is Under : Union List
- Cooperatives : State List
- Multi State CP
- Single State CP
- CP Banks are regulated by both Centre and State
- Centre Regulates - RBI
- CRR SLR
- Safety of Depositors Money
- State Manages - Registrar of Cooperative Societies
- Criteria
- Election
- Registration
- Can Carry Audit
- Can Supersede BOD
- Qualification for Members of BOD
Important Note 1
- Scheduled Banks → RBI & BRA
- Non Scheduled Banks → BRA Only
- Anything Outside Purview of BRA 1949 is Reg by Reg of Soc
- Reg of Soc
- Long Term Rural Cooperative - Both Village and State called PACDB & SACDB
- Short Term Rural Cooperative - PACS
Summary Structure of Cooperative Banking
BRA, 2020 on Co Operative Banks
Types of CP Banks
Urban CP Banks- Can be Sch & Non Sch
Scheduled UCP - Dual Reg ( RBI Act & BR Act)
- Dual Regulation
- P&M Banks Crisis: They weren't able to give back the money
- This Crisis was Primarily due to Dual Regulations
- Govt Came up with Banking Regulation Amendment Act, 2020
- Reported: that Govt has finally ended Dual Regulations
- Truth: RBI Power to regulate has been Increased
- For Example → Powers of RBI
- To Appoint BOD
- Supersede BOD
- Procedure for Emergency
- Banking Regulation Act, 2020
Non Scheduled UCP - Solely by Reg of Soc
- Regulated by Registrar of Societies
- RBI has very Minimal Role. It is under
Rural CP Banks - Are All Non Sch Banks
Non Scheduled Banks - 👇
- Short Term CP - Loans for < 1 Year
- Village Level CP PACS : Primary Agri Credit Society Reg By : Registrar of Societies
- District Level CP Central CP Banks Reg By : NABARD & Reg of Soc
- State Level CP State CP Banks Reg By : NABARD & Reg of Soc
- Long Term CP - Loans for > 1 Year
- NOT REG BY : RBI
Difference Between Scheduled Commercial and Cooperative Banks
Need for Digital Banks
Need for Digital Banks in India
Important Details
- DBU - Digital Banking Units - 75 Digital Bankings Units Across India
- Countries with 100 Percent Digital Banks
- UK - Starling Bank, Monese Bank
- China - MyBank
- Challenger Banks or Neo Banks
- No License for 100% Digital Banks in India
- Banks Must Have Physical Services
- Digital Services by Physical Banks
Ex: 811 Banking by Kotak Mahindra Bank
Ex: DBS DigiBank
Ex: ICICI iMobile
- Why is India NOT Experimenting 100% Digital Banks → NITI Aayog Recommended
Benefits
- Basic Points
- Efficient
- No Geographic Restriction
- Economic Democracy
- Ease of Transaction
- Economic Pointing
- Comparison to Size of Economy, Indian Banking is Dwarf
- Credit to GDP Ratio → 67
- Dominance of PSB i.e 70% → Here 80% NPA are with PSB’s
Indian Eco 5th
India’s Largest Bank SBI is 55th in Rank
with 100% Digital Banks → 100% Digital Banks in Country
- Imp
- Paperless
- 24*7
- By Existing Scheduled Commercial Banks
Digital Banking Units
A Step Towards 100% DB is DBU
Types of Banks - According to Work Limit
Universal Banks
No Restriction wrt
- Area of Operation
- Banking Services
- Loan Given to
Differentiated Banks
Introduction
- Evolution
RRB 1975 → LAB 1990 → PB & SFB
- Restrictions
- Area of Operation Limited by
- Payment Banks cannot have fixed deposits
- Small Finance Bank and Payment Banks cannot Give Loans to All the People
Govt or RBI
Example:
RRB Restricted by Govt
Payment Bank & Small Fin Bank Restricted by RBI
PB and SFB as Differentiated Banks in India
Difference Between Universal and Differentiated Banks
Types of Banks - According to Credit Creation
What is Shadow Banking ?
They may be Partly Regulated or They Might not be Regulated at all
Who is NOT Regulating it NOT Important, The Point is, that is it regulated or Not
Note: Shadow Banks do NOT create money → Said by RBI
Differences Between Conventional banks and Shadow Banking
PCAF (Prompt Corrective Action Framework) for Banks
Background
Interest Coverage Ratio - Question Aaya tha Pre 2016 Main
ICR = Profit / Interest Payment on Loan (Taken or Will Take)
ICR > 1 → High Capacity to Pay Existing Loans or Repay Future Loans
ICR < 1 → Not able to repay existing loan & future loans → These Firms are called Zombie Companies
Zombie Firms have ICR Less Than 1
Parameters for Threshold
- Non Performing Assets
- Capital Adequacy Ratio
- Leverage Ratio
PCA Put on Bank by RBI with Restriction like
- No Loan to a Specific Sector
- Stop Expansion of Banks
- Improve Financial Performance
- Supersede BOD
- Cut Down Expenses
Details about PCA Framework
New PCA Framework
Urban CP - Covered Under RBI’s Supervisory Action Framework → Focus on Revised Regime while Revising ; Earlier is Just for Reference
Non-Banks
NBFI Structure - National Banking Finance Institutes
Introduction
Remember:
- All India Financial Institution
- NBFC
- Primary Dealers
are all Non Banking Financial Institutions
1. AIFI
Introduction to AIFI
Important Allied Concept
Credit Enhancement
Take Out Financing
Patient Capital
Sovereign Wealth Fund
Money Invested in AIFI if PSL Norms are not Met
- RIDF (Rural infrastructure Development Fund) - NABARD
- SEDF (Small Enterprise Development Fund) - SIDBI
- AHF (Affordable Housing Fund) - NHB
Types of AIFI
NABARD
FPO - Farmer Producer Organisation
NHB
SIDBI
EXIM
NaBFID
2. NBFC
How is a NBFC Decided
- There are Multiple Categories of NBFC
- Criteria - 50 50 Test → If Fulfilled, They Should get Registered with RBI
- 50 50 Test
Company has Financial and Non Financial Asset
Financial Assets → Loan to Real Estates, Share, Bond, Deposits with Banks etc
Non Financial Assets → Land, Commercial Property, Residential Property etc
Summary of NBFC
Types of NBFC by Means of Nature of Activity
Regulated by RBI
Investment and Credit Company (ICC)
Infrastructure Finance Company (IFC)
Core Investment Companies (CIC)
Infrastructure Debt Fund (IDF)
Micro Finance Institution
NBFC Factoring Companies - Invoice Factoring
- TReD - Trade Receivable Discounting System
- It is Regulated by RBI
P2P
Account Aggregator
Facilitate Cash Flow Base Lending
Concept of Collateral Based Lending
Gold Loan Companies
Housing Finance Companies
Regulated by SEBI
Stock Broking Companies
Mutual Fund Companies
Venture Capital Fund
Regulated by Ministry of Corporate Affairs
Nidhi Companies
Regulated by State Government
Chit Fund Companies
Types of NBFC by Means of Asset Liability
- Deposit Taking NBFC - Deposit is NOT Insured
- Non Deposit Taking NBFC
Capital By Means of Capital Papers, Bonds, Debentures etc
Types of NBFC by Means of Systematic Importance
Scale Based Regulation of NBFC
PCA Framework for NBFC
Difference Between Banks and NBFC
3. Primary Dealer
Bank Primary Dealers - Ek Bank jo RBI se G Sec Khareedta Hai
Stand Alone Primary Dealers - Ek Entity jo RBI se G Sec Khareedti hai par Bank Nahi Hai
AIF - Alternative Investment Fund
Funds of Fund - Father Funds
DFI - Development Finance Institutions Option
Details of DFI
Projects Partly in India and in Foreign - Maladan India Myanmar
Venn Diagram
IL&FS Crisis
Micro Finance Sector
Remember: Sir has asked to Focus on Present Framework, Earlier Framework is Just for Reference
A 360-Degree Analysis of PSB & Allied Issues
Factsheet of PSB
Present Status of Public Sector Bank
Problems faced by PSBs
Privatisation of PSBs
Strategies to Improve PSBs
Important Bodies
Ombudsman Scheme - Grievance Mechanism for Banks and Non-Banks
BIC - Banking Investment Company
BBB - Banks Board Bureau
FSIB - Financial Services Institution Bureau
Extra Concepts
Difference Between Commercial Paper CP and Corporate Bonds CB
CB > 1 Year → Long Term Capital → secured
CP < 1 Year → Short Term Capital → unsecured
Difference Between Corporate Bonds and Debentures
Corporate Bonds - Secured Debt → Less Risky → Lower ROI
Debentures - Unsecured Debt → Can Be Defaulted on Repayment of Debenture → More Risky → Higher ROI
