BASIC SAVING BANK ACCOUNT

Basic saving bank account has taken place of no frills account... but why?
reasons .......
1. social stigma- person having no frill a/c were consider as poor and no one wants to have any relationship.
2. no cheque book and atm card.

benefits of basic saving bank account( bsba)

1. No limit on the number of deposits that can be made in a month
2. Maximum 4 withdrawals in a month , including through ATM's
3. No minimum balance requirement 
4. cheque book and atm card is provided.

 restriction of bsba
1. deposited money in 1 year should not be more than 1 lakh. ( eg. if u deposited Rs. 10000 and withdraw Rs. 5000 and next day again u deposit Rs. 10000. then ur deposited money will be Rs. 20000 and not 15000).
2. maximum withdraw limit for whole month is 10000.
3. balance in account should not exceed Rs. 50000 at any time.  

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WHAT IS BANK?

bank is a lawful organisation whose basic function is to accept deposit and lends money to individual and business that need it.

TYPES OF BANK
1. scheduled bank -  are those which are registered in SCHEDULE 2(E) of RBI act 1934 with minimum paid up capital of Rs.200 crore.
2. non schedule- bank =s which are not listed in rbi schedule.


1. Central bank ( RBI ). CLICK ON LINK TO LEARN ABOUT RBI

2. commercial bank - banking institutions which accepts deposit and grant loans and advances to customer.
                                  it may be public sector bank, private sector or foreign bank.

3. development bank- business require medium and long term capital for purchase of machinery and equipment, for latest technology or for expansion, which in turn provided by the development banks like INDUSTRIAL FINANCE CORPORATION OF INDIA.

4. COOPERATIVE BANKS
5. SPECIALISED BANK- for providing support and over all requirements for setting up business in specific area or activity. eg. EXIM, SIDBI AND NABARD

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SARFAESI ACT 2002

Securitisation and reconstruction of financial asset and enforcement of security interest act 2002
it enables banks and other financial institution to auction the the properties against loans of the borrowers, if they fail to repay the loan. it helps in reducing NPA.

1. bank can buy the property if one else buys it in the auction.
2. difficult for borrowers to get stay order on sale of property.
3. bank can sell the property to asset reconstruction company ( ARC).

NOW IF BANKS CAN BUY THE PROPERTY IN AUCTION THEN WHAT IS THE NEED OF ARC?
If the land was in good urban area, SBI could open a new branch office there (or housing for its employees).
But if plot/factory/house is in some remote area= useless for SBI’s personal business. 
Under the Banking regulation Act, a bank cannot keep such immovable property beyond 7 years, (max 12 years with RBI’s permission). 



ARC buy bad loans from the banks and convert them in profit. they must be registered with RBI.
eg. ARCIL (India’s first and largest asset reconstruction company (ARC))
     Reliance Asset Reconstruction Company Limited by Anil Ambani


 arc arranges money from qualified institutional buyers.
 
now how ARC can convert bad loans into a profitable one?

1. Auction the assets fully or partially. (sell the machinary now, rent the building and wait for land prices to go up for two years and then sell it.)
2. Sell the property in combination with other NPA properties of other defaulter giving discount.
3. Change the Management of that asset, appoint its own directors/officers.
4. outsource or lease the business to a another company.
5.  ARC can convert the debt into equity.

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Banking amendment bill

Powers to RBI..
1. can remove entire board of bank. currently have the power to remove CEO or 1-2 directors.
2. connected lending prevention. Rbi can check the the record and a/c book of all mother companies associated with the bank.
3. money in the unclaimed a/c which has not been operated for 10 years to be deposited in a fund DEPOSITOR EDUCATION AND AWARENESS FUND. if a/c holders comes back the money will be returned to him with interest.
4. prior permission of RBI is required to buy more than 5% share of any bank.
5. if primary cooperative society wants to continue their banking business, they need a license from RBI.
6. penality on banks if they fail to maintain CRR for even one day.

points forwarded by sbi and other PSB......
1. consolidation of bank in india as to have few world class banks through SIMPLIFYING BANKING COMPANY ACQUSITION AND TRANSFER OF UNDERTAKING ACT.
2. banking merger should be approved only by RBI. ( it was not accepted. Copetition commission of india have the final word in case of merger)
3. increase in voting rights from 1% to 10% in PSB and from 10% to 26% in foreign banks.


DEMANDS OF FOREIGN BANKS.............
1. stamp duty to be called off when a foreign bank transfer its business from main company to its subsidiary.
2. want to invest in commodity market.( this was denied)



BANKING CONSOLIDATION.......
PNB ( DENA + VIJAYA)
BOI( OBC + ANDHARA BANK)
BOB (  IDBI + UCO)
UBI ( UNITED BANK + PUNJAB SINDH)
CBI ( INDIAN BANK + ALLAHABAD BANK + BANK OF MAHARASTRA)
CANARA ( IOB + SYNIDICATE+ CORP. BANK)


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NON BANKING FINANCE COMPANIES AND CTS

Company engaged in business of loans and advances, accusition of share bonds, g secs, stocks but does not include institution whose primary business is of agriculture, industrial activity and sale and purchase or construction of immovable properties.

1. can not accept demand deposit ( saving and current a/c can't be open with NBFC)
2. can't issue check drawn on itself.
3. deposit insurance credit guarantee corporation is not available.
4. maximum interest rate of 12.5% for minimum 12 months and maximum 60 months.
5. have to maintain SLR.

CTS

started in delhi ( 2006) , bengalore ( 2010), chennai ( 2009).

to be implemented from 1st april 2013.

improvements........

1. watermark CTS INDIA can be seen only under light.

2. pantograph with hidden void not visible in scanned image at resolution set by cts but visible in scanned 

      images at any other resolution.

3. bank logo visible in UV light


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RESERVED RATIO

CRR-  Under section 42(1) of rbi act 1934, every SCB in india has to keep a part of their NET DEMAND AND TIME LIABILITY with rbi in the form of ONLY CASH.
It is maintained by only schedule commercial bank and comes under rbi act 1934.



SLR- According to section 24(2A) of BANKING REGULATION ACT 1949, all financial institution ( NBFC, SCB, RRB etc.) has to maintain some percentage of their NET DEMAND AND TIME LIABILITY with themselves at all time.
Slr is maintain in the form of CASH, GOLD, G SEC, CURRENT A/C WITH OTHER BANKS AND LISTED DEPOSIT WITH RBI.

objective of SLR
1. to restrict the expansion of bank credit.
2. to enhance the investment in g sec
3. to ensure solvency of banks.
MAX SLR CAN BE 40%
MINIMUM IS whatever the percentage..


NOTE- if any bank have Rs. 100 as their net demand and time liability then how much of this is always secured?
ans -   CRR + SLR ( as they are called as reserve ratio.  they can not be lent by bank.)


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RESERVE BANK OF INDIA

RBI established on april 1935 under RBI ACT 1934.
nationalised in 1949
basic function is to regulate the issue of bank notes and keeping the reserves to maintain the monetary stability in india.

RBI formulates implements and monitors the monetary policy..... why?
1. to maintain price stability
2. to ensure adequate flow of credit to productive sector.
3. maintain financial stability.

RBI prescribed parameters of banking operation to....
1. maintain public confidence in system.
2. protects depositor interest.
3. provide cost effective banking facility.

RBI maintains foreign exchange under FEMA 1999.

RBI is called as government banks... why?
Ans. Under rbi act 1934 only rbi can provide money to the central government and no other bank can do the same. however RBI has other banks as his agent to provide loan the government.
NOTE- the money RBI gives to the government is called as WAYS AND MEANS ADVANCES.

Why RBI is called as banker's bank?
Ans- RBI maintain deposit a/c of all other banks and advances money to them when needed. it also provides guidance to banks whenever they face any problems.

 why RS.1 is not printed or signed by RBI governor?
ans- rupee is the currency of india therefore it can only be printed by the central government and rest all money is BEARER NOTES therefore they are printed by RBI.
you will never see following written on RS.1 " i promise to pay the BEARER a sum of" while the same is written on every other note...... 

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NO FRILLS ACCOUNT

No frill account is a type of bank account, with low / Zero balance requirement with extra-features removed.

In simple words it: If a company makes its service/product cheaper by removing the extra features, that is no frill.
eg. Dish TV package without 100 sports channels.

RBI came up with this No-frill concept, because poor people cannot open regular bank accounting having requirements like Rs.5000/- minimum balance etc.

So there are no frill accounts for them. So that poor people can open bank accounts and take loans, that’ll save them from the 36% interest rate charged by the evil money lenders.

1. - Account can be opened with a minimum initial deposits of Rs.5/- and maintained at the minimum balance of Rs 5, no penalty charges will be deducted in case the minimum balance reaches zero.
2. - The Account holders will not be eligible for Cheque Book and ATM card facilities
3. - Maximum numbers of withdrawals are restricted to 30 every 6 months.
4. - Duplicate passbook may be issued to the account holder with a charge of Rs.10/-

As you can see above, it doesn’t have the extra-features like Cheque book and ATM etc. So it is no-frill (because extra-features removed).

Advantages

·  Rural women can put their hard earned money in it, less chances of theft or husband spending it on Desi liquor.

·  Can get easy loans, saved from the clutches of moneylenders.

·  Some banks even offer free of charge DD (demand drafts) like 2 per month.

·  No frill account holder can convert his/her account to regular saving account later.

now no frill accounts have been replaced by BASIC SAVING BANK ACCOUNT CLICK  HERE


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