Deposits Deposits constitue the main stream of funds for the banker. So he has to make sustained efforts to mobilise deposits from all parts of the country and from all sections of the people. Emphasis is placed on collection of savings from the affluent as well as from small earners in agriculture, industry, trade, profession [...]

Bank advances are commonly known as loans. Loans are made by banks to industrialists, businessmen, traders and others. Such loans are credited to customer’s account. The borrower is allowed to issue cheques upto the amount of loan sanctioned. Thus every loan creates bank deposits. Bank can create more deposits by sanctioning more loans and advances. [...]

A letter of credit is defined as “Letter issued by the importer’s bank in favour of the exporters authorising him to draw bills upto an amount specified in it and assuring him of payment against the delivery of the prescribed documents in his own country”. A letter of credit is a guarantee to the exporter [...]

Extensive speculation was prevailing in stock markets in U.S.A before the stock market crash of 1929. The Federal Reserve Bank of America ordered commercial banks to restrict their loans and advances to stock brokers by raising their margin requirements. Since then many central banks have been following this method. The operation of margin requirements is [...]

Branch banking is a system where the banking business is carried on through a network of branches spread throughout the length and the breath of the country. The head office of the bank is located in a big city or a state capital. In the early period of development of banking in England there were [...]

Banker acts as a special agent in buying and selling stocks on behalf of his customer. The banker is bound to act in strict confirming with the customer’s instructions. He must follow the usual course of business essential for these operations. Apart from this, the banker should get precise instructions from the customer. A special [...]

Investment Banking (Industrial banks) Investment Banks are organisations which assist business corporations and governmental bodies to raise funds for long-term capital reqiurements through sale of shares, stocks and bonds. Unlike commercial banks they act primarily as middlemen between business corporations and investors. Generally, they purchase entire issue of new securities of the business corporations and [...]

The Reserve Bank of India has formulated and enforced liquidity rules. They are of two types, i) Cash Reserve Ratio (CRR) Reserve Bank of India Act 1934 requires every commercial bank to keep certain minimum cash reserve with Reserve Bank of India. This statutory cash reserve ratio (CRR) was raised to a maximum of 15% [...]

The traveller’s letter of credit consists of letter of identification. It ensures safety. It has to be produced each time an amount is drawn in respect of it. The customer puts his signature to the letterof identification in the presence of issuing banker. The foot note required the beneficiary to keep letter of identification apart [...]

Most of the banks have now opened up ‘Merchant Banking’ departments. It is a British concept introduced by Grindlays Bank in 1969. Following the footlines of Grindlays Bank, in India, a number of banks have set up mmechant banking. State Bank of India, Bank of Baroda, Bank of India, Canara Bank, Indian Bank, Indian Overseas [...]

Primary functions peformed by commercial banks include two. They are i) Receiving deposits from the public: The commercial banks are to attract deposits from the public. People who have cash balances and who want to keep them in a safe place, deposit the same with a bank. Commercial banks accept deposits from any person in [...]

The growth of commercial banking during the first three plan periods has been lopsided. Without demanding proper security some banks were diverting funds to large and medium industries. Bank branches were opened only in big cities. Rural areas were neglected. Banks made discrimination between private sector and public sector between rural and urban and between [...]