Banking

About the Book: This book is structured to cover entirely the syllabi of B.Com., B.B.M., M.B.A., M.Com., M.A., L.L.B., etc. and also serves as a basic guide for various competitive examinations such as I.A.S., I.E.S., C.A., N.E.T. and I.I.B. The present volume contains 19 chapters devoted mainly to the study of Commercial Banks, Central Bank, Reserve Bank of India, State Bank of India, Money and Capital Markets, Indian Banking Systems, Banker and Customer Relationship, Operation of Bank Accounts, Collection and Payment of Cheques, Loans and Advances, Types of Securities, Modes of Creating Charge, Guarantee, Letter of Credit, Accounts and Audit of Banks. The last chapter contains multiple choice and short-type questions for in-depth study related to banking. Contents: Commercial Banking Central Banking Reserve Bank of India State Bank of India Money Market and Capital Market Structure of Banking in India Opening and Operating Bank Accounts Pass Book Cheques Development Banks Banker and Customer The Paying Banker Collecting Banker Loans and Advances Types of Securities Modes of Creating Charge Guarantees Letter of Credit Accounts and Audit of Banks Multiple Choice Questions with Answers. Preface......Page 8 Contents......Page 10 Definition of a Bank......Page 20 Types of Banks......Page 21 Functions of Commercial Banks......Page 23 Sources of Bank's Income......Page 28 Investments Policy of Banks......Page 29 Liabilities......Page 31 Assets......Page 33 Basis of Credit Creation......Page 34 Process of Credit Creation......Page 35 Limitation on Credit Creation......Page 37 A. Unit Banking......Page 39 B. Branch Banking System......Page 41 Commercial Banks and Economic Development......Page 43 Conclusion......Page 45 Definition of Central Bank......Page 46 Functions of the Central Bank......Page 47 Credit Control......Page 50 Methods of Credit Control......Page 51 Theory of Bank Rate......Page 52 Conditions for the Success of the Bank Rate Policy......Page 53 Limitations......Page 54 Theory of Open Market Operations......Page 55 Conditions for the Success of Open Market Operations......Page 56 Popularity of Open Market Operations......Page 57 B. Theory of Variable Reserve Ratio......Page 58 Working of Variable Reserve Ratio......Page 59 Selective or Qualitative Methods......Page 60 Measures of Selective Credit Control......Page 61 Conclusion......Page 64 Introduction......Page 66 Organisation......Page 67 Offices of the Bank......Page 68 Departments of the Reserve Bank......Page 69 Functions of the Reserve Bank......Page 70 Weapons of Credit Control......Page 77 Methods of Selective Credit Controls Adopted By Reserve Bank......Page 80 Limitations of Selective Controls in India......Page 82 Reserve Bank of India and Monetary Controls......Page 83 Limitations of Monetary Policy......Page 85 Chakravarthy Report on the Working of the Monetary System......Page 86 Recommendations of the Committee......Page 87 Recommendations of Goiporia Committee......Page 89 Role of RBI in Economic Development......Page 90 Contribution to Economic Development......Page 91 Conclusion......Page 94 Management......Page 96 Functions......Page 97 Role of the State Bank in Economic Development......Page 98 Conclusion......Page 99 Functions of Money Market......Page 102 Composition of the Money Market......Page 103 Financial Institutions of the Money Market......Page 104 Characteristics of a Developed Money Market......Page 105 Usefulness of a Developed Money Market......Page 106 Structure of the Money Market......Page 107 Defects of Indian Money Market......Page 108 Measures for Improvement of the Money Market......Page 110 Suggestions to Remove Defects in the Indian Money Market......Page 112 The Repo Market......Page 114 The Commercial Bill Market......Page 115 The Certificate of Deposit (CD) Market......Page 116 Money Market Mutual Funds......Page 117 Classification of Indian Capital Market......Page 118 Functions of Capital Market......Page 119 Components of Indian Capital Market......Page 120 Recent Trends in the Capital Market......Page 121 Comparison of Money Market and Capital Market......Page 123 Conclusion......Page 124 1. Indigenous Banks......Page 126 Functions of Indigenous Bankers......Page 128 Defects of Indigenous Bankers......Page 129 Suggestions for Reform......Page 130 Differences Between Moneylenders and Indigenous Bankers......Page 131 3. Co-operative Banks......Page 132 Structure of Co-operative Banks......Page 133 Progress of PACS......Page 134 Functions......Page 135 Defects of CCBs......Page 136 Present Position of Co-operative Banks......Page 137 Problems or Weaknesses of Co-operative Banks......Page 138 Suggestions for the Improvement of the Co-operative Credit Structure......Page 139 4. Land Development Bank......Page 140 Defects......Page 141 Objectives of Regional Rural Banks......Page 142 Progress Achieved by Regional Rural Banks......Page 143 Problems......Page 144 Suggestions for Reorganisation and Improvement......Page 146 Management......Page 147 Functions of NABARD......Page 148 Achievements of NABARD......Page 149 Achievements of Nationalised Banks......Page 151 Conclusion......Page 155 Features......Page 158 1. Industrial Finance Corporation of India Ltd.......Page 159 Financial Resources of IFCI......Page 160 Appraisal of IFCI’s Performance......Page 161 Lending Operations of ICICI......Page 162 Appraisal of ICICI’s Performance......Page 163 3. State Financial Corporations......Page 164 Cumulative Assistance by IDBI......Page 167 Composition of Financial Assistance......Page 168 Critical Appraisal......Page 169 6. The Industrial Reconstruction Bank of India (IRBI)......Page 170 7. The State Industrial Development Corporations (SIDCs) and the State Industrial Investment Corporations (SIICs)......Page 171 Present Position......Page 172 9. Life Insurance Corporation of India (LIC)......Page 173 Present Position......Page 174 Present Position......Page 175 Conclusion......Page 176 Meaning and Definition of a Banker......Page 178 Meaning and Definition of a Customer......Page 180 Special Types of Customers......Page 182 Legal Provisions Regarding Guardianship of a Minor......Page 183 1. Primary Relationship......Page 190 2. Secondary Relationship......Page 191 1. Obligation to Honour the Customer’s Cheques......Page 198 2. Obligation to Maintain Secrecy of Customer’s Account......Page 200 4. Obligation to Give Reasonable Notice before Closing the Account......Page 201 Conclusion......Page 202 Types of Accounts......Page 204 Procedure of Opening Current and Savings Accounts......Page 208 Forms Used in Operation of Bank Account......Page 210 Closing of a Bank Account......Page 211 Credit Guarantee Function......Page 212 Nomination Facility......Page 213 Recent Development......Page 214 Conclusion......Page 215 Meaning of Pass Book......Page 216 Examination of Entries......Page 217 Effect of Entries in the Pass Book......Page 218 Precautions in Writing a Pass Book......Page 220 Conclusion......Page 221 Meaning......Page 222 Essentials......Page 223 Types of Cheques......Page 224 Advantages of Using Printed Forms......Page 225 Examples of Material Alterations......Page 226 Effects of Material Alteration......Page 227 Types of Crossing......Page 228 Special Crossing......Page 229 Other Types of Crossing......Page 230 Significance of Crossing......Page 231 Essentials of a Valid Endorsement......Page 232 Kinds of Endorsement......Page 233 Differences between a Bill of Exchange and Cheque......Page 234 Distinguish Between a Cheque and a Promissory Note......Page 235 Holder in Due Course......Page 236 Privileges of a Holder in Due Course......Page 237 Distinction between Holder and Holder in Due Course......Page 238 Conclusion......Page 239 Meaning......Page 240 Precautions......Page 241 Protection Available Under the Negotiable Instruments Act......Page 244 Dishonour of Cheques......Page 246 When a Banker can Dishonour Cheques......Page 247 Conclusion......Page 248 Collecting Banker as Holder for Value......Page 250 Collecting Banker as an Agent of the Customer......Page 251 Statutory Protection to Collecting Banker......Page 252 Duties and Responsibilities of a Collecting Banker......Page 254 Who Can Get the Cheque Marked?......Page 255 Conclusion......Page 256 General Rules of Sound Lending......Page 258 Forms of Lending (Advances)......Page 260 Demerits......Page 261 Demerits......Page 262 Distinction between Cash Credit and Overdraft......Page 263 Types of Loans and Advances......Page 264 Sources of Credit Information......Page 265 Conclusion......Page 266 Characteristics of Good Security......Page 268 General Principles of Secured Advances......Page 269 Types of Securities on which Loans or Advances can be Granted......Page 270 Precautions......Page 276 Merits of Advances Against Stock Exchange Securities......Page 277 Precautions to be Taken in Advancing Against Securities......Page 278 Precautions in Advancing Against Real Estate......Page 281 Demerits of Policies as Securities......Page 283 Precautions in Advancing Against LIC Policies......Page 284 Precautions in Advancing Against Fixed Deposit Receipt......Page 285 Precautions in Advancing Against Book Debts......Page 286 Conclusion......Page 287 Modes of Creating Charge......Page 288 Difference between Pledge and Lien......Page 289 Who can Pledge the Goods?......Page 290 Right and Obligations of Pledgee or Pawnee......Page 291 Essential Features of a Mortgage......Page 292 Types of Mortgages ......Page 293 Demerits of Equitable Mortgage over the Legal Mortgage......Page 295 Rights of Mortgagee (Banker)......Page 296 Precautions to be Taken by a Banker in Case of Lending Against Hypothecation......Page 297 Conclusion......Page 298 Definition......Page 300 Essentials of a Valid Guarantee......Page 301 Kinds of Guarantees......Page 302 Contract of Guarantee......Page 304 Analysis of the Definition......Page 305 Rights of the Surety......Page 306 Liabilities of the Banker (Obligation)......Page 307 Demerits of Guarantee......Page 308 Precautions to be Taken by the Banker in a Contract of Guarantee......Page 309 Conclusion......Page 310 Definition......Page 312 Types of Letters of Credit......Page 313 I. Travellers’ Letter of Credit......Page 314 Types of Letters of Commercial Credit......Page 315 Opening a Letter of Credit......Page 317 Advantages to the Importer......Page 318 Conclusion......Page 319 Salient Features of Bank’s Accounts......Page 321 Penalty......Page 322 Books to be Maintained......Page 323 Audit of Accounts (Section 30)......Page 326 Publication and Filing of Accounts (Section 30)......Page 327 Conclusion......Page 329 Multiple Choice Questions with Answers......Page 331