ŪNIT-III

UNIT – III

CENTRAL BANK (0r) RESERVE BANK OF INDIA

Introduction:

The Reserve Bank of India (RBI) is India's central bank and regulatory
body under the jurisdiction of Ministry of Finance , Government of India. It is
responsible for the issue and supply of the Indian rupee and the regulation of
the Indian banking system. It also manages the country's main payment
systems and works to promote its economic development.

History:

The Reserve Bank of India was founded on 1 April 1935 to respond to

economic troubles after the First World War. RBI was conceptualized as per the
guidelines, working style and outlook presented by B. R. Ambedkar in his book
titled "The Problem of Rupee - Its origin and its solutions" and presented to
the Hilton Young Commission. Eventually, the Central Legislative Assembly
passed these guidelines as the RBI Act [Link] bank was set up based on the
recommendations of the 1926 Royal Commission on Indian Currency and
Finance, also known as the Hilton Young Commission The original choice for
the seal of RBI was the East India Company Double Mohur, with the sketch of
the Lion and Palm Tree. However, it was decided to replace the lion with the
tiger, the national animal of India. The Preamble of the RBI describes its basic
functions to regulate the issue of banknotes, keep reserves to secure monetary
stability in India, and generally to operate the currency and credit system in the
best interests of the country. The Central Office of the RBI was established in
Calcutta (now Kolkata) but was moved to Bombay (now Mumbai) in 1937.

The attempt to establish a central bank India took a deepens, when in 1927
a bill was introduced in the indecent legislative assembly to establish gold
standard currency for the British India & construe the reserve bank of India.

There after various attempt to made & finally the RBI act was passed in 1934
& the bank begun functioning from 1st April 1935. Later it was decided to
nationalized bank & the RBI act was passed (trust to public ownership) in
September 1948 with effect from 1st January 1949.

Reserve Bank of India (RBI) is the central bank of the country. RBI is a
statutory body. It is responsible for the printing of currency notes and managing
the supply of money in the Indian economy.
 Initially, the ownership of almost all the share capital was in the hands of
non-government shareholders. So in order to prevent the centralisation of the
shares in few hands, the RBI was nationalised on January 1, 1949.

Share capital:

At the time of establishment of RBI was a share holders bank with a capital of
Rs 5 cross divided into share of Rs 100 each fully paid. After the nationalization
of bank all the sates take over by government .

Structure of Management:

The RBI managed by a well structure on the administrative management . The

organized structure of RBI as follows .

Central board

Central board of directors

Governor

Department Governor

Executive director

Chief general management

General management

Department general management

Associated general management

Management

Associated management

Supported staffs

Department of RBI:

The various department of RBI are given below:

 1. Department of information technology
2. Department of economic analysis & policies.
3. Department of statistical Analysis & computer services
4. Department of monitory policy department
5. Premises department
6. Press relation division
7. Secretarial department
8. Exchange control department
9. Rural banking & credit department
[Link] intuition division
[Link] of banking supervision
[Link] of banking operation & development
[Link] of financial company’s
14. Department of non banking supervision
[Link] of administration & personnel management
[Link] of HR development
17. Deposit insurance & credit guarantee corporate
18. Inspection department
[Link] bank of department
[Link] of currency management
[Link] of external investment & operations
[Link] of expenditure & budgetary control
[Link] of government & bank account
24. Internal tap management cell
[Link] & export credit department

Functions of RBI:

1. Traditional Function
2. Modern function
3. Promotional function

I. Traditional function:

a. Monopoly are note issue

 b. Bankers to the government

c. Agent & advisor to the government

d. Bankers to the bank

e. country act as a cleaning house

f. lender of lost resort

g. control credit & foreign exchange

h. custodian of foreign exchange reserve

I. maintaining the external value of currencies

j. ensuring the internal value of currencies

k. publisher of economic statistics

l. fight against economic rise & ensuring price stability in the control

II. Promotional function:

 Promotional of banking habit & expansion of banking system

 Provide refinance for export promotion
 Expansion of facilities for agricultural credit through NABAR 1981
chant national bank for agricultural & rural development.
 Extension of facilities for small scale industries
 Helping the cooperative sectors
 Innovation in banking business
 Prescription of minimum stability requirements

III. Supervisory functions:

a. Granting license for opening for new bank.

b. Inspection & enquiry of all the banks under various section of RBI act
& banking regulation act.

c. Implementation of deposit insurance scheme.

d. Periodical audit of work of control bank.

 e. Giving direct to commercial bank.

f. Control the non banking finance corporation.

G .To encourage the healthy of finance system in India.

I. Traditional function:

1. Issue of Notes:
The Reserve Bank has a monopoly for printing the currency notes in the
country. It has the sole right to issue currency notes of various denominations
except one rupee note (which is issued by the Ministry of Finance).

2. Banker to the Government:

The second important function of the Reserve Bank is to act as the Banker,
Agent and Adviser to the Government of India and states. It performs all the
banking functions of the State and Central Government and it also tenders useful
advice to the government on matters related to economic and monetary policy. It
also manages the public debt of the government.
3. Banker’s Bank:
The Reserve Bank performs the same functions for the other commercial
banks as the other banks ordinarily perform for their customers. RBI lends money
to all the commercial banks of the country.

4. Controller of the Credit:

The RBI undertakes the responsibility of controlling credit created by
commercial banks. RBI uses two methods to control the extra flow of money in
the economy. These methods are quantitative and qualitative techniques to
control and regulate the credit flow in the country. When RBI observes that the
economy has sufficient money supply and it may cause an inflationary
situation in the country then it squeezes the money supply through its
tight monetary policy and vice versa.

5. Custodian of Foreign Reserves:

For the purpose of keeping the foreign exchange rates stable, the Reserve
Bank buys and sells foreign currencies and also protects the country's foreign
exchange funds. RBI sells the foreign currency in the foreign exchange market
when its supply decreases in the economy and vice-versa. Currently, India has
a Foreign Exchange Reserve of around US$ 487 bn.

6. Other Functions:-The Reserve Bank performs a number of other

developmental works. These works include the function of clearinghouse
arranging credit for agriculture (which has been transferred to NABARD)
collecting and publishing the economic data, buying and selling of Government
securities (gilt edge, treasury bills etc)and trade bills, giving loans to the
Government buying and selling of valuable commodities etc. It also acts as the
representative of the Government.
7. Custodian of Cash Reserves of Commercial Banks:
The commercial banks hold deposits in the Reserve Bank and the latter has
the custody of the cash reserves of the commercial banks.

8. Custodian of Country’s Foreign Currency Reserves:

The Reserve Bank has the custody of the country’s reserves of international
currency, and this enables the Reserve Bank to deal with crisis connected with
adverse balance of payments position.

9. Lender of Last Resort:

The commercial banks approach the Reserve Bank in times of emergency
to tide over financial difficulties, and the Reserve bank comes to their rescue
though it might charge a higher rate of interest.

10. Central Clearance and Accounts Settlement:

Since commercial banks have their surplus cash reserves deposited in the
Reserve Bank, it is easier to deal with each other and settle the claim of each on
the other through book keeping entries in the books of the Reserve Bank. The
clearing of accounts has now become an essential function of the Reserve Bank.

11. Controller of Credit:

Since credit money forms the most important part of supply of money, and
since the supply of money has important implications for economic stability, the
importance of control of credit becomes obvious. Credit is controlled by the
Reserve Bank in accordance with the economic priorities of the government.
II. Promotional Functions of RBI:

Every Central Bank has to perform numerous promotional and

development functions which vary from country to country. This is truer in a
developing country like India were RBI has been performing the functions of the
promoter of financial system along with several special functions and non-
monetary functions.

 Promotion of Banking habits and expansion of banking system: It

performs several functions to promote banking habits among different
sections of the society and promotes the territorial and functional
expansion of banking system. For this purpose, RBI has set several
Institutions such as Deposit and Insurance Corporation 1962, the
agricultural refinance Corporation in 1963, the IDBI in 1964, the UTI in
1964, the Investment Corporation of India in 1972, the NABARD in 1982,
and national housing Bank in 1988 etc.
 Export promotion through refinance facility: RBI promotes export
through the Export Credit and Guarantee Corporation (ECGC) and EXIM
Bank. It provides refinance facility for export credit given by the scheduled
commercial banks. The interest rate charged for this purpose is
comparatively lower. ECGC provides insurance on export receivables
whereas EXIM banks provide long-term finance to project exporters etc.
 Development of financial system: RBI promotes and encourages the
development of Financial Institutions, financial markets and the financial
instruments which is necessary for the faster economic development of the
country. It encourages all the banking and non-banking financial
institutions to maintain a sound and healthy financial system.
 Support for Industrial finance: RBI supports industrial development and
has taken several initiatives for its promotion. It has played an important
role in the establishment of industrial finance institutions such as ICICI
Limited, IDBI, SIDBI etc. It supports small scale industries by ensuring
increased credit supply. Reserve Bank of India directed the commercial
banks to provide adequate financial and technical assistance through
specialised Small Scale Industries (SSI) branches.
 Support to the Cooperative sector: RBI supports the Cooperative sector
by extending indirect finance to the state cooperative banks. It routes this
finance mostly via the NABARD.

 Support for the agricultural sector: RBI provides financial facilities to

the agricultural sector through NABARD and regional rural banks.
NABARD provides short term and long term credit facilities to the
 agricultural sector. RBI provides indirect financial assistance to NABARD
by providing large amount of money through General Line of Credit at
lower rates.

 Training provision to banking staff: RBI provides training to the staff of

banking industry by setting up banker s training college at many places.
Institutes like National Institute of Bank management (NIBM), Bank Staff
College (BSC) etc. provide training to the Banking staff.
 Data collection and publication of reports: RBI collects data about
interest rates, inflation, deflation, savings, investment etc. which is very
helpful for researchers and policymakers. It publishes data on different
sectors of the economy through its Publication division. It publishes
weekly reports, annual reports, reports on trend and progress of
commercial bank etc.

III. Supervisory Functions of RBI:

RBI performs certain non-monetary functions for the supervision of banks
and promotion of sound banking system in India. Supervisory functions ensure
improvement in the methods of operation of Banking in India. It controls and
administers the entire financial and banking system of India through these
functions.

 Giving license to banks: RBI has the authority to grant license to the
banks for carrying out business. It provides license for the opening of new
branches, opening extension counters, and also for closing down existing
branches. Reserve Bank of India through this power avoids unnecessary
competition among different banks at any particular location. It helps RBI
to remove undesirable people from entering into the banking business.
 Bank inspection and enquiry: RBI has the power to inspect and enquire
banks in various matters under the Banking Regulation Act, and the
Reserve Bank of India act. It can inspect loans and advances, deposits,
investment functions etc. which helps to ensure that financial Institutions
and banks carry out their operations in a proper manner. It carries out
periodical inspection once or twice a year and banks have to take remedial
measures pointed out during an inspection. It also asks for periodical
information regarding certain Assets and liabilities of banks.
 Implementation of deposit Insurance Scheme: RBI has the
responsibility to implement the deposit Insurance Scheme to ensure the
protection of deposits of small depositors. Under this scheme, deposits
below Rs 1 lakh are insured with the Deposit Insurance Guarantee
Corporation set up by Reserve Bank of India. It implements the deposit
Insurance Scheme in case of failure of any Bank. Deposits made in the
 accounts of commercial banks, cooperative banks and RRBs are covered
under this scheme. The fixed deposits with Institutions such as ICICI, IDBI
etc are not covered under this scheme.

 Control over Non-Banking Financial Institutions: The monetary policy

of RBI does not influence the Non-Banking Financial Institutions.
However, it gives directions to the Non-Banking Financial Institutions and
also conducts enquiry and inspection to exercise control over these
institutions. For example, it requires permission from the Reserve Bank of
India for deposit-taking operations by Non-Banking Financial Institutions.

 Periodic review of the working of commercial banks: the supervisory

functions of RBI also includes periodic review of the working of
commercial banks. It takes necessary steps to increase the efficiency of the
commercial banks, and for the implementation of policy changes and
schemes for the improvement of the banking system.

IV. Prohibitory Functions of RBI:

1. RBI cannot purchase the shares of any industrial undertaking or even its
own share.
2. It cannot provide direct monetary or financial assistance to any commercial
undertaking or trade etc.
3. RBI does not have the power to buy any immovable property.
4. RBI does not have the authority to give loans on the security of property
or shares.

CREDIT CONTROL

Introduction:
 RBI has so many functions is the main objectives of the maintaining of
internal & external value of currency. But also the promotional economic growth
with a reasonable price stability. It has to formulate suitable credit policy for
achieving his objectives. The major function in this regard is the formulation &
admen of the credit policy. The central monitory authority the RBI mail function
is to ensure the availability of credit to the external.

Objectives of Credit Control: The primary objectives according to RBI is “ to

control of inflationary tendencies present in the economy to ensure high
economic growth with adequate level of liquid and maximum utilisation of
resources”.

Objectives of Credit Control

 To achieve internal price stability.
 To achieve financial Stability i.e. stability in money market.
 To achieve stability in foreign exchange rate.
 To meet the financial requirement during slump in the economy. 
 To maximize income, output and employment in the economy. 
 To eliminate business cycle and meet business needs
 To promote economic growth and development of the country

Importance of Credit Control System: [Link] Inflation [Link]

Stability 3. Help to boosting economy 4. Adequate flow of funds in the bank
5. Providing adequate credit to all sectors.

Method of credit control:

It is one of the important function of RBI for controlling supply of money

or credit. There are 2 types of methods employed by the RBI to control credit
creation. The following methods adopted by the RBI can be classified as follows;

1. Quantitative Method 2. Qualitative Method

1. Qualitative Method:

i) Bank rate policy: According to RBI act rate deposit is the standard rate
is the RBI is preferred to by rediscounted hill or commercial paper. A bank
rate is the rate of interest at which RBI rediscover united the first class bill.
 ii) Open market operation: The RBI is authorized to purchase& sale of
securities in India is India is narrow and is dominated by financial intuition
is specially the commercial bank .when the RBI needed to control the credit
receive the bond to the commercial bank, otherwise liberalize the credit
control the credit receive the bond RBI purchase the securities.

iii) Statutory Reserve [section24]: Section 24th banking regulation act1949

the RBI is empowered to stimulate the liquid asset in Every banking
companies is required to hold against the demand & system liabilities.

iv) Case Reserve Ration: The remise of RBI act the secured bank were
required to maintain a minimum cash with RBI.

v) Fixation of Lending rate of control banks: The RBI fixing the lending
rate of the banks; when the lending rate fixed at high level the credit become
loosely & it may be conclude. Its similarly then the rate of buyer the credit
will be increased.

vi) Credit Queue: When the bank rate policy has not in successful this
method will be adopted under this method the maximum amount of bank
credit is fixed.

2. Qualitative method: Selective or Quantities creditors to ensure on

adequate credit flow to desire sector, and preventing. Excess credit for less
essential economic activity.

The RBI issues direction under section 21 of banking regulation act 1949
co regular the flow of credit against the security commodities.

Method of Qualitative Credit Control:

1) Fixation of margin requirements on secured loans: It is the difference

between the market value of loan and the security value of loan. At the time of
inflation the margin requirement value decreases by RBI for discouraging people
and commercial banks for approaching more and more amount of loan. On the
other hand at the time of deflation the RBI increases the value of margin just to
encourage issuing of more amount of loan to the commercial banks and general
public.

2) Moral suasion: It refers to written or oral advices given by central bank to

commercial banks to restrict or expand credit.
3) Direct Action: Sometimes the RBI directly takes action against the
commercial banks. It takes action to such type of commercial banks who are not
following the rules regulation of RBI. It cancels their registration or
nationalization of commercial banks.

4) Rationing of credit: It is the related to limiting the amount of credit, which is

issued by all the commercial banks. RBI fixes the size of issuing the credit
according to the requirement of the country.

5) Regulation of consumer credit: Regulation of consumer credit is designed to

check the flow of credit for consumer durable goods. This can be done by
regulating the total volume of credit that may be extended for purchasing specific
durable goods and regulating the number of installments through which such loan
can be spread. Central Bank uses this method to restrict or liberalise loan
conditions accordingly to stabilize the economy.

6) Control through directives

7) Direction through the banks

8) Credit authorization scheme (commercial bank approval RBI)

Effectiveness of Credit Control Measures:

The effectiveness of credit control measures in an economy depends upon
a number of factors. First, there should exist a well-organised money market.
Second, a large proportion of money in circulation should form part of the
organised money market. Finally, the money and capital markets should be
extensive in coverage and elastic in nature.

Extensiveness enlarges the scope of credit control measures and elasticity

lends it adjustability to the changed conditions. In most of the developed
economies a favourable environment in terms of the factors discussed before
exists, in the developing economies, on the contrary, economic conditions are
such as to limit the effectiveness of the credit control measures.
 Unit - IV
State Bank of India (SBI)
Introduction:
State Bank of India (SBI) is an Indian multinational, public
sector banking and financial services. It is a statutory body, headquartered
in Mumbai, Maharashtra. SBI is the 43rd largest bank in the world and
ranked 221st in the Fortune Global 500 list of the world's biggest corporations of
2020, being the only Indian bank on the list. It is a public sector bank and the
largest bank in India with a 23% market share by assets and a 25% share of the
total loan and deposits market
The bank descends from the Bank of Calcutta, founded in 1806 via
the Imperial Bank of India, making it the oldest commercial bank in the Indian
subcontinent. The Bank of Madras merged into the other two presidency banks
in British India, the Bank of Calcutta and the Bank of Bombay, to form
the Imperial Bank of India, which in turn became the State Bank of India in
1955.[10] The Government of India took control of the Imperial Bank of India in
1955, with Reserve Bank of India (India's central bank) taking a 60% stake,
renaming it State Bank of India.
History of SBI:

The east India company limited aid the foundation for modern banking. In
the first half after the 19th century with the establishment of the following 3
banks.

4) Bank of Bengal in 1809 ( 02/6/1806)

5) Bank of Bombay in 1840 ( 15/8/1840)
6) Bank of madras in 1843 (01/7/1843)

These bankers are also known as presidency bankers. Their

functions well as independent unit. During the last part of 19th century on their
earlier phase of 20th century the sudheasi movement introduced the establishment
of a number of bankers with India mgt.
In 1920 the imperial bank of India act was passed. For all the meeting the
3 presidency bankers. As such the imperial bank of India was established in
27/01/1921 .

It was given the power to hold the government fund & manage the public
debt. The branches of bank were functioning as clearing house.
 Pursuant to the provisions of the State Bank of India Act of 1955,
the Reserve Bank of India, which is India's central bank, acquired a controlling
interest in the Imperial Bank of India. On 1 July 1955, the Imperial Bank of India
became the State Bank of India. In 2008, the Government of India acquired the
Reserve Bank of India's stake in SBI so as to remove any conflict of
interest because the RBI is the country's banking regulatory authority.
Share Capital:
The state Bank of India has an authorised capital of Rs. 20 crore which has
been divided into 20 lakh shares of Rs. 100 each. The issued capital of the State
Bank is Rs. 5.6 crore. The shares of the State Bank are held by the Reserve Bank,
insurance companies and the general public. At the end of March 2001, the paid-
up capital and the reserves of the State Bank were Rs. 13461 crore.
Government of India held around 61.23% equity shares in SBI. The Life
Insurance Corporation of India, itself state-owned, is the largest non-promoter
shareholder in the company with 8.82% shareholding.

Shareholders Shareholding

Promoters: Government of India 56.92%

FIIs/GDRs/OCBs/NRIs 10.94%

Banks & Insurance Companies 10.63%

Mutual Funds & UTI 13.72%

Others 07.79%

Total 100.0%

Management: The management of the State Bank of India is under the control
of a Central Board of Directors consisting of 20 members.
The break-up of the Central Board is as given below:
(a) A Chairman and a Vice-Chairman are to be appointed by the Central
Government in consultation with Reserve Bank.
(b) Two Managing Directors are to be appointed by the Central Board with
the approval of the Central Government,
(c) Six directors are to be elected by the private shareholders.
(d) Eight directors are to be nominated by the Central Government in
consultation with the Reserve Bank to represent territorial and economic
interests. Not less than two of them should have special knowledge in the
working of cooperative institutions and of the rural economy,
(e) One director is to be nominated by the Central Government,
(f) One director is to be nominated by the Reserve Bank.
Subsidiary Banks:
These seven banks were 1 ) State Bank of Bikaner and Jaipur (SBBJ), 2)
State Bank of Hyderabad (SBH), 3) State Bank of Indore (SBN), 4) State Bank
of Mysore (SBM), 5) State Bank of Patiala (SBP), 6) State Bank of Saurashtra
(SBS) and 7) State Bank of Travancore (SBT). All these banks were given the
same logo as the parent bank, SBI.
SBI has five associate lenders are State Bank of Bikaner and Jaipur, State
Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank
of Hyderabad. Among the associate banks, State Bank of Bikaner and Jaipur,
State Bank of Mysore and State Bank of Travancore.
SBI LOGO:

SBI's logo is inspired by Ahmedabad's Kankaria Lake. State Bank of

India's logo, a blue circle with a cut in the centre, was designed by the National
Institute of Design, Ahmedabad and is said to be inspired by the city's Kankaria
Lake.

Operation:

SBI provides a range of banking products through its network of branches

in India and overseas, including products aimed at non-resident Indians (NRIs).
SBI has 16 regional hubs and 57 zonal offices that are located at important cities
throughout India.

Domestic presence:
SBI has over 24000 branches in India. In the financial year 2012–13, its
revenue was 2.005 trillion (US$28 billion), out of which domestic operations
contributed to 95.35% of revenue. Similarly, domestic operations contributed to
88.37% of total profits for the same financial year.
Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion
launched by Government in August 2014, SBI held 11,300 camps and opened
over 3 million accounts by September, which included 2.1 million accounts in
rural areas and 1.57 million accounts in urban areas.
International presence:
As of 2014–15, the bank had 191 overseas offices spread over 36 countries
having the largest presence in foreign markets among Indian banks.
Swaminathan Janakiraman and Ashwini Kumar Tewari as managing
directors (DMDs) of State Bank of India (SBI) for the next three years.

Objectives and Functions of State Bank of India: The main objectives and
functions of the State Bank of India are given bellows:
1. Objectives:
The State Bank of India has been established to operate on the normal
commercial principles, with the only difference that, unlike other commercial
banks in the country, it takes into consideration and responds in a progressively
liberal manner the financial requirements of cooperative institutions and small
scale industries, particularly in the rural areas of the country.
The main objectives of the State Bank are:
(i) To act in accordance with the broad economic policies of the government;
(ii) To encourage and mobilise savings by opening branches in rural and semi-
urban areas and to promote rural credit;
(iii) To establish government partnership in the provision of cooperative credit;
(iv) To extend financial help for the establishment of licensed warehouses and
cooperative marketing societies;
(v) To provide financial help to the small scale and cottage industries;
(vi) To provide remittance facilities to the banking institutions.
The State Bank of India acts as an agent of the Reserve Bank in all
those places where the latter does not have its branches.

As an agent of the Reserve Bank: the State Bank performs the

following functions:
(i) It acts as the government’s bank, i.e., it collects money and makes payments
on behalf of the government and manages public debt.
(ii) It acts as the bankers’ bank. It receives deposits from and gives loans to
commercial banks. It also acts as the clearing house for the commercial banks,
rediscounts the bills of exchange of the commercial banks and provides
remittance facilities to the commercial banks.

Ordinary Banking Functions:

The State Bank of India performs all kinds of commercial banking functions:
(i) It receives deposits from the public.
ii) It gives loans and advances against eligible securities including goods, bills
of exchange, promissory notes, fully paid shares of companies, immovable
property or documents of title, debentures, etc.
(iii) It invests its surplus funds in government securities, railway securities and
securities of corporations and treasury bills.
4. Other Functions:
The State Bank of India also performs the following other functions:
(i) It buys and sells gold and silver.
(ii) It acts as agent of cooperative banks.
(iii) It underwrites issues of stocks, shares, debentures, and other securities in
which it is authorised to invest funds.
(iv) It administers, singly or jointly, estates for any purpose as executor, trustee
or otherwise.
(v) It draws bills of exchange and grants letters of credit payable out of India.
(vi) It buys bills of exchange payable out of India with the approval of the Reserve
Bank; it subscribes buys, acquires, holds and sells shares in the capital of banking
companies.

5. Prohibited Functions: The State Bank of India has been prohibited from
doing certain businesses by the State Bank of India Act:
i) The State Bank cannot grant loans against stocks and shares for a period more
than six months.
(ii) It can purchase no immovable property other than its own offices.
(iii) It can neither rediscount nor offer loans against the security of exchange bills
whose maturity period exceeds six months.
(iv) It cannot rediscount bills which do not carry at least two good signatures.
(v) It can neither discount bills nor grant credit to individuals or firms above the
sanctioned limit.

Achievements of State Bank of India: The following are the major

achievements of the State Bank of India in different fields:
(A) General Progress:

i. Deposit Mobilisation:
There has been an increasing trend with regard to mobilisation of deposits
by the State Bank of India. Total deposits and other accounts which were Rs. 226
crore at the end of 1955, increased to Rs.1227 crore at the end of 1969 and further
to Rs. 242828 crore at the end of March 2001. Thus, there has been about 1075
times increase in Banks’s deposits during 1955 to 2001.
ii. Credit Expansion:
The progress in the field of credit expansion has also been considerable
over the years. At the end of 1955, total advances made by the State Bank were
Rs. 106 crore. These advances increased to Rs. 841 crore in 1969 and Rs. 113590
crore in March 2001. This indicates that there has been 1072 times increase in
advances during 1955 to 2001.
iii. Branch Expansion:
The number of branches of the State Bank of India has also grown
remarkably since its establishment. In 1955, the Bank had 497 offices, in 1969
and 2001, the number increased to 1673 and 9078 respectively. SBI has over
24000 branches in India.[15] In the financial year 2012–13.

iv. Present Position of State Bank Group:

By the end of March 2001, total deposits of the State Bank Group (i.e.,
State Bank of India and its seven associates) had reached Rs. 312117 crore, total
advances granted by the group were Rs. 150390 crore, and total number of
branches of the Group was 13509.
Thus, the State Bank of India Group accounted for about 41 per cent of
deposits, 35 per cent of advances and about 21 per cent of the offices of all
scheduled commercial banks in India. The paid-up capital and reserves of the
Group were Rs. 4751 crore at the end of March 1994. Net profits of the group
were Rs. 2222 crore (Rs. 1604 crore of the SBI and Rs. 618 crore of the associate
branches) during 2000-01.
v. Profits, Efficiency and Capital Adequacy:
Over the years, the SBI continued to show better performance in terms of
profits, efficiency and capital adequacy. It recorded a net profit of Rs. 1604 crore
for the year 2000-01 against Rs. 832 crore for 1995-96, indicating an increase of
48%.
The major contributing factors for improved net profits were higher interest
income from advances as well as investment operations, lower operating cost and
better performance of foreign offices. The Bank’s capital to risk-weighted assets
ratio was 12.79% during 2000-01. This is well above the internationally accepted
ratio of 8%. Net NPA of the Bank was 6.03% in March 2001 against 6.41% in
March 2000.
vi. International Banking:
At present (March 2001), the SBI has a network of 52 overseas offices with
their operations spread over 31 countries. These foreign offices mainly cater to
the needs of the country’s foreign trade and provide foreign currency resources
to the Indian corporates.
During 2000-01, the foreign offices of the SBI earned a net profit or Rs.
248 crore. The deposits and advances of the Bank’s foreign offices were Rs. 7932
crore and Rs. 14797 crore respectively at the end of March 2001.
vii. Technology Upgradation and Consumer Services:
The State Bank of India (SBI) has taken significant initiatives in the fields
of technology upgradation and better consumer services.
At present (March 2001), the following major facilities in these areas are
available:
(a) 2555 computerised branches operating in 620 centres and covering 76% of
the Bank’s domestic business;
(b) Network of 100 ATMs in 8 cities;
(c) Internet banking covering 35 branches by March 2002;
(d) 360 VSATs linking 130 centres ;
(e) Tele-banking;
(f) Remote banking for corporates;
(g) State Bank electronic payment system (STEPS) to facilitate instantaneous
electronic transfer of funds;
(h) Electronic Data Interchange projects for handling customer transactions at
airports and seaports;
(i) Introduction of computerised printing of drafts;
(j) Electronic Nostra Account Reconciliation (ELENOR) enabling online
reporting of forex transactions from 444 forex intensive branches;
(k) Extended business hours (7 to 12 hours) and 7 days banking.

(B) State Bank and Rural Credit:

The State Bank had made remarkable progress in the field of rural credit.
Since its establishment, it has been making tremendous efforts to develop rural
credit by extending credit facilities to cooperative institutions and agriculturists.
Important measures undertaken by the State Bank to promote rural credit
are as follows:
I. Expansion of Rural Branches:
The branch expansion of the State Bank has been largely rural – oriented.
Out of the total 12486 branches of the State Bank Group at the end of March
1990, 5811 (i.e., 44.8%) were located in the rural areas with population less than
10,000; 3483 (i.e., 27.9%) were in semi-urban areas with population 10,000 to
less than 1 lakh; and 3192 (i.e., 25.6%) in the urban areas and metropolitan cities.
II. Agricultural Finance:
The State Bank has been extending financial help to agriculture. In 1969,
the total agricultural advances by the State Bank were Rs. 92 crore, which
increased to Rs. 14982 crore in March 2001.

The State Bank of India has identified and is expanding its involvement in
the following critical areas in agricultural lending:
(i) The Bank has contributed to the spread of minor irrigation schemes;
(ii) To increase productivity at the farm level, the Bank provides production
finance directly to the farmers.
(iii) To develop dryland farming, the Bank- (a) grants loans for agricultural
development in dryland areas, and (b) prepares and finances dryland farming
projects in compact areas on the watershed basis.
(iv) The bank finances the farmers to install drip irrigation schemes in Karnataka,
Tamil Nadu and Maharashtra.
(v) The Bank provides assistance to farmers to take up cultivation on waste lands
under social forestry schemes for raising nurseries and planting of trees for fuel,
fodder, etc.
(vi) The Bank provides financial help for modernising agricultural practices and
raising farm productivity through the use of tractors and other agricultural
implements.
III. Village Adoption Scheme:
The State Bank has undertaken a village adoption scheme. Under this
scheme, a village is selected for development by meeting its complete financial
requirements, including the requirements of the farmers, artisans and others.
The total number of villages adopted by the State Bank (other than those covered
by the agricultural development banks) in 1987 was 54207. The total amount of
credit and the number of farmers financed under this scheme stood at Rs. 1559
crore and 26.4 lakh respectively in March 1989.
IV. Integrated Rural Development Programme:
Integrated rural development scheme aims at all round and integrated
development (i.e., economic, social, cultural, etc.) of the rural areas. The total
loans disbursed by the State Bank upto the end of March 1999 under this
programme amounted to Rs. 3212 crore spread over 69 lakh beneficiaries.
V. Regional Rural Banks:
Regional rural banks have been started with a view to provide credit to the
small and marginal farmers and other weaker sections of the society. The State
Bank is providing financial assistance to these banks. Upto the end of March 2001
the State Bank had sponsored 30 regional rural banks, covering 85 districts in the
country.
VI. Agricultural Development Branches:
An important feature in the field of agricultural financing by the State Bank
is the expansion of special agricultural development branches. These branches
aim at financing all – round development of agriculture and function in close
cooperation with Agricultural Refinance Development Corporation (ARDC),
now called National Bank for Agriculture and Rural Development (NABARD).
Upto March 1999, the Bank has contributed Rs. 1681 crore to NABARD.
VII. Remittance Facilities:
The State Bank provides liberalised remittance facilities to the institutions
operating in the rural areas like state and central cooperative banks, land
development banks, etc. With the implementation of the branch expansion
programmes, the State Bank is now in a position to extend these liberalised
remittance facilities more effectively to the rural and semi-urban areas.
VIII. Short-Term Credit to Cooperative Banks:
The State Bank has been providing short-term credit facilities to the state and
central cooperative banks against government securities at a rate half per cent
below the usual rate charged by it.
IX. Assistance to Land Development Banks:
The State Bank also gives financial assistance to the land development banks
which provide long-term credit to agriculture:
(a) The State Bank subscribes to the debentures issued by the land development
banks.
(b) The State Bank grants advances on the security of such debentures. This
improves the marketability and popularity of these debentures in the money
market.
(c) The State Bank provides loans and advances to cooperative central land
development banks.
X. Finance for Marketing and Processing Societies:
The State Bank gives direct financial help to marketing and processing
cooperative societies in the areas where the central cooperative banks are not in
a position to assist them. The marketing societies can get advance by pledging
their produce at favourable prices. Processing cooperative societies such as
cooperative sugar mills, cotton ginning and pressing societies, etc. are also
provided similar credit facilities by the State Bank of India.
XI. Warehousing Finance:
Warehousing aims at scientific storage of the products and is essential for
the development of agricultural marketing. The State Bank has been actively
associated with the warehousing development scheme and provides advances
against warehousing receipts.
It has also been making efforts to improve its procedures and terms with a
view to promote and popularise the warehousing scheme. Moreover, the State
Bank has permitted its officers to serve on the advisory committees for
warehouses.
(C) State Bank and Industrial Finance:
The State Bank of India has been extending financial help for the
promotion of industrial growth in the economy.

Various forms of assistance to the industries by the Bank are given below:
I. Industrial Finance:
In tune with the rapid industrial growth in the country, the loans and
advances of the State Bank to the industrial sector has shown substantial growth
over the years. As compared to the amount of Rs. 9771 crore at the end of 1987,
the advances to the industrial sector (including the small scale sector) increased
to Rs.15519 crore at the end of March 1990.

Bank’s Corporate Banking Group:

It consists of three strategic business units, i.e.- (a) Corporate Accounts
Group (CAG), (b) Leasing Strategic Business Units (Leasing SBU) and (c)
Projects Finance Strategic Business Unit (Project Finance SBU).
(i) The CAG is a single window shop for the entire range of financial services
needed for the large corporates. At present it caters to a more than 200 corporates
in India. CAGs advances were Rs. 16943 crore at end March 2001.
(ii) The Leasing SBU performs its role as a leading provider of big-ticket leases
to corporates.
(iii) The Project Finance SBU, an active infrastructure advisory services group,
focuses on core and infrastructure sectors like power, telecommunications, oil
and gas, roads, bridges, ports and urban infrastructure.

II. Finance to Small Scale Industries:

The State Bank of India’s finance to small scale industries has also
increased substantially over the years. In 1969, the advances to small scale
industries were Rs.104 crore, which increased to Rs. 12718 crore in March 2001.
Similarly, the Bank’s small business finance increased from Rs. 7 crore in 1969
to Rs. 3711 crore in March 1998.
Other facilities provided by the Bank to small-scale and cottage and village
industries are as given below:
(i) The Bank offers technical and financial consultancy to the units on its books
to enable them to overcome problems of technological obsolescence, marketing,
management, etc.
(ii) Under its Equity Fund Scheme, the Bank makes available the equity
assistance in the form of interest – free loans repayable on a long – term basis to
the needy entrepreneurs to set up new small- scale units.
(iii) The Bank conducts Entrepreneurial Development Programmes to promote
entrepreneurship for the development of ancillaries near large project areas and
of high – tech industries, such as electronics, computer peripherals, etc.
(iv) To assist the export efforts of the small – scale industrialists, arrangements
have been made to extend the Whole Turnover Packing Credit Guarantee Scheme
(WTPCG Scheme) to small – Scale industries from January 1, 1988.
(v) To increase opportunities for self – employment in the tertiary sector, the Bank
provides finance to small business enterprises.
(vi) Project Uptech, set up by the Bank in 1988 for bringing about technology
upgradation of small and medium enterprises, has taken up 19 projects upto
March 2001. Six new projects are in the pipeline.

Conclusion:
The State Bank of India has been progressing well in the right direction. It
has made remarkable achievements in the fields of expanding banking facilities
in the rural and semi- urban areas, and providing financial help to agriculture,
cooperative institutions and small scale industries.
 Unit - V
REGINAL RURAL BANK
INTRODUCTION:
The Regional Rural Banks in India are the Commercial Banks operating in
various rural areas of the country. It is Scheduled Commercial banks in India
conducting banking activities for the rural regions at the state level. There were
established with an objective of providing easily accessible banking and credit
services to the rural population and mobilising financial resources from the urban
areas to rural districts of India. It operate at the district level in the states, and they
may cover multiple districts within that state.

Origin or History:
 The Narasimhan Committee on Rural Credit under the rule of PM
Indira Gandhi made certain recommendations for formation RRBs, which
would be beneficial for the rural population as compared to commercial banks.
 An Ordinance for the establishment of Regional Rural Banks was passed
on September 26, 1975, this being the date of establishment of RRBs.
 The Regional Rural Banks Act (RRB Act) was passed in 1976.
 Five RRBs were first established on the occasion of Gandhi Jayanti, on
October 2nd, 1975. Later, many RRBs were established by the
Government of India and respective state governments. 
 The development process of RRBs started on 2 October 1975, Gandhi
Jayanti with the forming of the five RRBs. First RRB,the Prathama
Bank,Head Office at Moradabad (U.P.) with authorised capital of Rs 5
crore at its starting. Prathama bank was sponsored by Syndicate Bank. As
on 2 October 1975 Out of the remaining four RRBs in the country one
was Set up at Malda in West Bengal under the name of Gaur Gramin
Bank,(Sponsored Bank:UCO Bank) which was the first RRB in the
Eastern Region of India. Other three RRBs are Gorakhpur Kshetriya
Gramin Bank,Gorakhpur,U.P.(Sponsored Bank:SBI), Haryana
Kshetriya Gramin Bank Bhiwani, Haryana (Sponsored Bank:PNB),
Jaipur-Nagpur Anchalik Gramin Bank Jaipur, Rajasthan (Sponsored
Bank:UCO Bank) .

 The Government of India passed Regional Rural Banks Act 1976. After
passing the Act within a year at least 25 RRBs were established in different
parts of India.

Capital:
The Regional Rural Banks were owned by the Central Government, the
State Government and the Sponsor Bank (Any commercial bank can sponsor the
regional rural banks) who held shares in the ratios as follows Central
Government – 50%, State Government – 15% and Sponsor Banks –
35%.Recapitalization
The Government of India recently approved the recapitalization of
Regional Rural Banks (RRBs) to improve their Capital to Risk Weighted Assets
Ratio (CRAR) in the following manner:

 Share of Central Government i.e. Rs.1, 100 crore will be released as per
provisions made by the Department of Expenditure in 2010-11 and 2011–12.
 However, release of the Government of India share will be contingent on
proportionate release of State Government and Sponsor Bank share.
 A capacity building fund with a corpus of Rs.100 crore to be set up by Central
Government with NABARD for training and capacity building of the RRB
staff in the institution of NABARD and other reputed institutions. The
functioning of the Fund will be periodically reviewed by the Central
Government. An Action Plan will be prepared by NABARD in this regard and
sent to Government for approval.
 Additional amount of ₹700 crore as contingency fund to meet the requirement
of the weak RRBs, particularly those in the North Eastern. and Eastern R
egion, the necessary provision will be made in the Budget as and when the
need arises.

Management of RRB:

The Reserve Bank of India, which is the central bank of the country,
is responsible for regulating Regional Rural Banks in India.
The organizational structure for RRB's varies from branch to branch
and depends upon the nature and size of business done by the branch. The Head
Office of an RRB normally had three to nine departments.
The following is the decision making hierarchy of officials in a Regional
Rural Bank.

 Board of Directors
 Chairman & Managing Director
 General Manager
 Assistant General Manager
 Regional Manager/Chief Manager
 Senior Manager
 Manager
 Officer
 Office Assistant
 Office Attendant

Branches:
Presently there are 43 RRBs in India Since 1 April 2020

Pallavan Grama Bank Indian Bank HO: Salem

 Tamil Nadu Pandyan Grama Bank Indian Overseas Bank HO: Virudhunagar

Regulation of the Regional Rural Banks in India: 1) Reserve Bank of

India 2. NABARD

Objectives:

The Regional Rural Banks were established with a view to develop such
type of banking institutions which could function as a commercial organization
in rural areas. The Regional Rural Banks Act 1976 provide for incorporation,
regulation and winding up Regional Rural Banks with a view to developing the
rural economy by providing for the purpose of development of Agriculture,
Trade, Commerce, Industry and other productive activities in the rural
areas, credit and other facilities, particularly to the small and marginal
farmers, Agricultural Labourers, Artisans and small entrepreneurs and for
matters connected therewith and individuals thereto:
1. To provide cheap and liberal credit facilities to small and marginal farmers,
agriculture labourers, artisans, small entrepreneurs and other weaker sections.

2. To save the rural poor from the moneylenders.

3. To act as a catalyst element and thereby accelerate the economic growth in

the particular region.

4. To cultivate the banking habits among the rural people and mobilize savings
for the economic development of rural areas.

5. To increase employment opportunities by encouraging trade and commerce

in rural areas.

6. To encourage entrepreneurship in rural areas.

7. To cater to the needs of the backward areas which are not covered by the
other efforts of the Government?
8. To develop underdeveloped regions and thereby strive to remove economic
disparity between regions.

Functions of Regional Rural Banks: Since a Regional Rural Bank is a

Scheduled Commercial Bank, its primary functions are to accept deposits and to
disburse loans. The important functions of Regional Rural Banks are discussed
below.

1. Accept Deposits:

 RRBs accept deposits from their members who hold an account in the
bank.
 Deposits can be made in current or savings accounts.
 Depositors can also be made in fixed or recurring forms.

2. Loan Extension

 The RRB Act of 1975 states that the RRB can extend loans and credit
services to the Priority Sector (PS). The loans to this sector are classified
under PSL or Priority Sector Lending. The RBI announced the coverage
of RBBs in PSL from FY 1997.
 The priority sector comprises of small and marginal farmers, craftsmen and
artisans, local traders, medium and small scale businesses, education,
housing, renewable energy, etc. which needs development and financial
investment.
 75% of the total Bank Credit has to be provided to the Priority Lending
Sector. Out of this total credit, 10% has to be given to the economically
weaker sections.
 Hence, short- term loans on a low rate of interest are extended by these
banks to the priority sector. RRBs cannot, however, extend large or long-
term loans to its customers.

3. Wage disbursement

 The Regional Rural Banks in India perform the important function

of distribution of wages under the MGNREGA (Mahatma Gandhi National
Rural Employment Guarantee Act), the Pradhan Mantri Gram Sadak
Yojana (PMGSY).

 The pensions provided under the poverty alleviation schemes and pension
schemes of India are also distributed through these banks.
4. Secondary functions of RRBs

 Similar to commercial banks, the secondary functions of the Regional

Rural Banks in India are providing agency services and general utility
services to their customers.
 Agency services like foreign exchange, bill payments, money wire
transfer, etc. are performed by RRBs.
 Utility services like ATM, UPI, issuance of debit cards, locker facilities,
etc. are also provided by RRBs in India.

Role of Regional Rural Banking for Rural Development:

Regional Rural Banks were established with the following responsibilities

are:
1) Taking the banking services to the doorstep of rural areas.
2) Identify the financial need especially in rural areas.
3) Making available institutional credit to the weaker section of the society who
had by far little or no access to cheaper loans and had perforce been depending
on the private money lenders.
4) To enhance banking & financing facilities in backward or unbanked areas.
5) Mobilize rural savings and channelize them for supporting productive
activities in rural areas.
6) To provide finance to the weaker sections of society like small farmers, rural
artisans, small producer, rural labourers etc.
7) To create a supplementary channel for the flow the central money market to
the rural areas through refinances.
8) To provide finance to co-operative societies, Primary Credit societies,
Agricultural marketing societies.
9) Generating employment opportunities in rural areas and bringing down the
cost of providing credit to rural areas.
10) Enhance & improve banking facilities to semi urban, rural & other untapped
market. With these objectives in mind, knowledge of the local language by the
staff is an important qualification

PROBLEMS & CHALLENGES OF RRB:

1. RRB’s are facing the problem of inadequate finance: They are dependent
on NABARD to collect finance for their further operation. Poor rural people are
unable to save anything due to poverty and low per capita income. The low level
of saving of these customer create obstacle for RRB’s to collect sufficient
deposits.
2. High overdue and poor recovery of loan : It is one of the biggest concern
affecting the functioning of RRB’s. Reasons being poor access of granting loan,
insufficient and untrained staff, unproductive or less productive use of credit,
inadequate production, poor marketing facilities and improper channel of
recovery system.

3. There is also a problem of regional imbalance in banking facilities provided

by RRB’s. They are creating this problem by concentrating their branches in some
specific states and districts & loose other prospective group of
customers.
4. Many RRB’s are suffering from the problem of heavy: loans because of
low repaying capacity of their customer, untrained staff, low level of deposits
and heavy sanction of loan without checking the creditworthiness of their
customers.
5. These banks have still not played a significant role in poverty alleviation
of the country. Although various efforts have been made in this regard but lack
of economic infrastructure, poor marketing strategies, poor knowledge of
customers, low production, low awareness about savings have created many
hurdles for RRB’s.
6. Lack of proper co-ordination between RRB’s and other financial
institution like commercial banks, NABARD and other co-operative bank has
badly affected the performance of these banks.

Unit – V

CO - OPERATIVE BANK

Introduction:

The Economy of India is rural in character and is basically

concerned with agriculture and allied activities. The allied activities include
animal husbandry, fisheries, apiculture, sericulture, floriculture etc. There are
also a section of the rural population such as; small and self-employed
businessmen, small and marginal farmers, agricultural labourers & rural artisans
pursuing occupations as potters, blacksmiths, cobblers, weavers, barbers etc. by
way of inheritance & who are engaged in seasonal farming. This is due to the fact
that neither their basic occupation nor agriculture provides round-the-year
employment to many of them for sustaining their livelihood. These people are the
pillars of rural economy. On account of the division among the people engaged
in these limited means of earnings, unfair rivalry and dependence on village
money lenders for urgent and immediate financial accommodation have seriously
jeopardised the working and the socio economic life of each categories of
community.

Cooperative bank is an institution established on the cooperative

basis and dealing in ordinary banking business. Like other banks, the cooperative
banks are founded by collecting funds through shares, accept deposits and grant
loans.

History of Cooperative Banking in India:

The genesis of the cooperative movement and its implementation in a

modern technical sense can be traced after the Industrial Revolution in England
during the period of 18th and 19th century. The idea of Hermann Schulze and
Friedrich Wilhelm Raiffeisen during the economic meltdown to provide easy
credit to small businesses and poor sections of the society took shape as
cooperative banks of today across the world.

Cooperative movement in India was started primarily for dealing with the
problem of rural credit. The history of Indian cooperative banking started with
the passing of Cooperative Societies Act in 1904. The objective of this Act was
to establish cooperative credit societies “to encourage thrift, self-help and
cooperation among agriculturists, artisans and persons of limited means.”
Many cooperative credit societies were set up under this Act. The Cooperative
Societies Act, 1912 recognised the need for establishing new organisations for
supervision, auditing and supply of cooperative credit. These organisations were-
(a) A union, consisting of primary societies; (b) the central banks; and (c)
provincial banks.
Although beginning has been made in the direction of establishing
cooperative societies and extending cooperative credit, but the progress remained
unsatisfactory in the pre-independence period. Even after being in operation for
half a century, the cooperative credit formed only 3.1 per cent of the total rural
credit in 1951-52.
Cooperative Bank:
A co-operative bank is a financial entity which belongs to its members,
who are at the same time the owners and the customers of their bank. It is often
established by people belonging to the same local or professional community
having a common interest. It is formed to promote the upliftment of financially
weaker sections of the society and to protect them from the clutches of money
lenders who provide loans at an unreasonably high-interest rate to the needy. The
co-operative structure is designed on the principles of cooperation, mutual help,
democratic decision making and open membership. It follows the principle of
‘one shareholder, one vote’ and ‘no profit, no loss’.

Cooperatives Banks are registered under the Cooperative Societies Act,

1912. These are regulated by the Reserve Bank of India and National Bank for
Agriculture and Rural Development (NABARD) under the Banking Regulation
Act, 1949 and Banking Laws (Application to Cooperative Societies) Act, 1965.

Cooperative banks differ from commercial banks on the grounds of

organisation, governance, interest rates, the scope of functioning, objectives and
values.

Structure of Cooperative Banking:

There are different types of cooperative credit institutions working in India.

These institutions can be classified into two broad categories - a)
Agricultural and b) Non-agricultural. Agricultural credit institutions dominate
the entire cooperative credit structure.
Agricultural credit institutions are further divided into short-term
agricultural credit institutions and long-term agricultural credit institutions.

The short-term agricultural credit institutions which cater to the short-term

financial needs of agriculturists have three-tier federal structure- 1) at the apex,
there is the state cooperative bank in each state (SCB) 2) at the district level,
there are Central cooperative banks (DCCB) 3) at the village level, there are
Primary agricultural credit societies (PACB)

Long-term agricultural credit is provided by the land development banks.

The whole structure of cooperative credit institutions is shown in the chart given.
State Co- operative Bank:
State cooperative banks occupy a unique position in the cooperative credit
structure because of their three important functions:

1) They provide a link, through which the Reserve Bank of India provides credit
to the cooperatives and thus participates in the rural finance,
2) They function as balancing centres for the central cooperative banks by making
available the surplus funds of some central cooperative banks. The central
cooperative banks are not permitted to borrow or lend among themselves,
3) They finance, control and supervise the central cooperative banks, and, through
them, the primary credit societies.

Capital:
State cooperative banks obtain their working capital from own funds,
deposits, borrowings and other sources:
(i) Own funds include share capital and various types of reserves. Major portion
of the share capital is raised from member cooperative societies and the central
cooperative banks, and the rest is contributed by the state government. Individual
contribution to the share capital is very small;
(ii) The main source of deposits is also the cooperative societies and central
cooperative banks. The remaining deposits come from individuals, local bodies
and others.
(iii) Borrowings of the state cooperative banks are mainly from the Reserve Bank
and the remaining from state governments and others.
Loans and Advances:
State cooperative banks are mainly interested in providing loans and
advances to the cooperative societies. More than 98 per cent loans are granted to
these societies of which about 75 per cent are for the short-period. Mostly the
loans are given for agricultural purposes.

II. Central Cooperative Banks (CCBs):

Capital:
The central cooperative banks raise their working capital from own funds,
deposits, borrowings and other sources. In the own funds, the major portion
consists of share capital contributed by cooperative societies and the state
government, and the rest is made up of reserves.
Deposits largely come from individuals and cooperative societies. Some
deposits are received from local bodies and others. Deposit mobilisation by the
central cooperative banks varies from state to state.

Problems of DCCB:

a) Natural calamities such as floods, draughts, etc., affecting the repaying

capacity of the borrowers;
b) Inadequate and inefficient supervision exercised by the banks;
c) The poor quality and management of societies and banks;
d) Absence of linking of credit with marketing;
e) Reluctance to coercive measures; and
f) Where coercive measures were taken, the inability of the machinery to
promptly execute the decrees.

For the rehabilitation of the weak Central cooperative banks, the Central
Sector Plan Scheme has been formulated under which semi financial help is given
to write off the bad debts, losses and irrecoverable overdue against small and
marginal farmers.

III. Primary Agricultural Credit Societies (PACSs):

Functions and Organisation:

Primary agricultural credit society forms the base in the three-tier
cooperative credit structure. It is a village-level institution which directly deals
with the rural people. It encourages savings among the agriculturists, accepts
deposits from them, gives loans to the needy borrowers and collects repayments.
It serves as the last link between the ultimate borrowers, i.e., the rural
people, on the one hand, and the higher agencies, i.e., Central cooperative bank,
state cooperative bank, and the Reserve Bank of India, on the other hand.
A primary agricultural credit society may be started with 10 or more
persons of a village. The membership fee is nominal so that even the poorest
agriculturist can become a member.
The members of the society have unlimited liability which means that each
member undertakes full responsibility of the entire loss of the society in case of
its failure. The management of the society is under the control of an elected body.

Capital:
The working capital of the primary credit societies comes from their own
funds, deposits, borrowings and other sources. Own funds comprise of share
capital, membership fee and reserve funds. Deposits are received from both
members and non- members. Borrowings are mainly from central cooperative
banks. In fact, the borrowings form the chief source of working capital of the
societies. Normally, people do not deposit their savings with the cooperative
societies because of poverty, low saving habits, and non- availability of better
assets to the savers in term of rate of return and riskiness from these societies.

Importance of Cooperative Banks:

The cooperative banking system has to play a critical role in promoting
rural finance and is specially suited to Indian conditions.
Various advantages of cooperative credit institutions are given below:
I. Alternative Credit Source:
The main objective of cooperative credit movement is to provide an
effective alternative to the traditional defective credit system of the village money
lender. The cooperative banks tend to protect the rural population from the
clutches of money lenders. The money lenders have so far dominated the rural
areas and have been exploiting the poor people by charging very high rates of
interest and manipulating accounts.
II. Cheap Rural Credit:
Cooperative credit system has cheapened the rural credit both directly as
well as indirectly:
(a) Directly, because the cooperative societies charge comparatively low interest
rates, and
(b) Indirectly, because the presence of cooperative societies as an alternative
agency has broken money lender’s monopoly, thereby enforcing him to reduce
the rate of interest.
III. Productive Borrowing:
An important benefit of cooperative credit system is to bring a change in
the nature of loans. Previously the cultivators used to borrow for consumption
and other unproductive purposes. But, now, they mostly borrow for productive
purposes. Cooperative societies discourage unproductive borrowing.
IV. Encouragement to Saving and Investment:
Cooperative credit movement has encouraged saving and investment by
developing the habits of thrift among the agriculturists. Instead of hoarding
money the rural people tend to deposit their savings in the cooperative or other
banking institutions.
V. Improvement in Farming Methods:
Cooperative societies have also greatly helped in the introduction of better
agricultural methods. Cooperative credit is available for purchasing improved
seeds, chemical fertilizers, modern implements, etc. The marketing and
processing societies have helped the members to purchase their inputs cheaply
and sell their produce at good prices.
VI. Role of Cooperative Banks before 1969:
Till the nationalisation of major commercial banks in 1969, cooperative
societies were practically the only institutional sources of rural credit.
Commercial banks and other financial institutions hardly provided any credit for
agricultural and other rural activities. Cooperative credit to the agriculturists as a
percentage of total agricultural credit increased from 3.1 per cent in 1951-52 to
15.5 per cent in 1961-62 and further to 22.7 per cent in 1970-71.
On the other hand, the agricultural credit provided by the commercial banks as a
percentage of total agricultural credit remained almost negligible and fell from
0.9 percent in 1951-52 to 0.6 percent in 1961-62 and then rose to 4 per cent in
1970-71.

VII. Role of Cooperative Banks after 1969:

After the nationalisation of commercial banks in 1969, the government has
adopted a multi-agency approach. Under this approach, both cooperative banks
and commercial banks (including regional rural banks) are being developed to
finance the rural sector.
But, this new approach also recognised the prime role to be played by the
cooperative credit institutions in financing rural areas because of the
following reasons:
(a) Co-operative credit societies are best suited to the socio-economic conditions
of the Indian villages.
(b) A vast network of the cooperative credit societies has been built over the years
throughout the length and breadth of the country. This network can neither be
duplicated nor be surpassed easily.
(c) The cooperative institutions have developed intimate knowledge of the local
conditions and problems of rural areas.

VIII. Suitable Federal Structure of Cooperative Banking System:

Cooperative banking system has a federal structure with- (a) primary
agricultural credit societies at the village level, (b) higher financing agencies in
the form of central cooperative and state cooperative banks, (c) land development
banks for providing long- term credit for agriculture. Such a banking structure is
essential and particularly suited for effectively meeting the financial requirements
of the vast rural areas of the country.
Considering the great importance of cooperative banks, particularly in the rural
areas, it is not surprising that every committee or commission, that has examined
the working of the cooperative banking system in India, has expressed the
common view that “cooperation remains the best hope of rural India.”
Weaknesses of Cooperative Banking:
Various committees, commissions and individual studies that have
reviewed the working of the cooperative banking system in India have pointed
out a number of weaknesses of the system and have made suggestions to improve
the system.

Major weaknesses are given below:

I. General Weaknesses of Primary Credit Societies:
Organisational and financial limitations of the primary credit societies
considerably reduce their ability to provide adequate credit to the rural
population.
The All India Rural Credit Review Committee pointed out the following
weaknesses of the primary credit societies:
(a) Cooperative credit still constitutes a small proportion of the total borrowings
of the farmers,
(b) Needs of tenants and small farmers are not fully met.
(c) More primary credit societies are financially weak and are unable to meet the
production-oriented credit needs,
(d) Overdues are increasing alarmingly at all levels,
(e) Primary credit societies have not been able to provide adequate and timely
credit to the borrowing farmers.
II. Inadequate Coverage:
Despite the fact that the cooperatives have now covered almost all the rural
areas of the country, its rural household membership is only about 45 per cent.
Thus, 55 per cent of rural households are still not covered under the cooperative
credit system.
In fact, the borrowing membership of the primary credit societies is
significantly low and is restricted to a few states like Maharashtra, Gujrat, Punjab,
Haryana, Tamil Nadu and to relatively rich land owners.
Criteria of determining borrowing membership include:
(a) Borrowing members as a proportion of rural households,
(b) The average amount of loan issued per borrowing member, and
(c) The proportion of loans going to weaker sections.
The banking Commission 1972 has brought out the following reasons for the
low borrowing membership cooperative societies:
(a) Inability of the people to provide the prescribed security;
(b) Lack of up-to-date land records;
(c) Ineligibility of certain purposes for loans;
(d) Inadequacy of prescribed credit limits;
(e) Onerous conditions prescribed for loans such as share capital contribution at
10 or 20 per cent of loans outstanding and compulsory saving deposits; and
(f) Default of members to repay loans.
III. Inefficient Societies:
In spite of the fact that the primary agricultural credit societies in most of
the states have been reorganised into viable units, their loaning business has not
improved. As the Seventh Plan has observed that out of 94089 primary
agricultural credit societies in the country in 1982-83, only 66000 societies had
full time paid secretaries. About 34000 societies were running at loss.

IV. Problems of Over dues:

A serious problem of the cooperative credit is the overdue loans of the
cooperative institutions which have been continuously increasing over the years.
In 1991-92, percentage of over dues to demand at the level of land development
banks was 57, at the level of central cooperative banks were 41 and at the level
of primary agricultural credit societies were 39.
The over dues in the short-term credit structure are most alarming in North-
Eastern States. In the long-term loaning sector, the problem of overdues has
almost crippled the land development banks in 9 states, viz., Maharashtra,
Gujarat, Madhya Pradesh, Bihar, Karnataka, Assam, West Bengal, Orissa and
Tamil Nadu.
Large amounts of overdues restrict the recycling of the funds and adversely
affect the lending and borrowing capacity of the cooperative societies.
The Banking Commission 1972 pointed out the following reasons for the
overdue loans:
(a) Indifferent management or mismanagement of primary societies;
(b) Unsound lending policies resulting in over-lending or lending unrelated to
actual needs, diversions of loans for other purposes;
(c) Vested interests and group politics in societies and willful defaulters;
(d) Inadequate supervision over the use of loans and poor recovery efforts;
(e) Lack of adequate control of central cooperative banks over primary societies;
(f) Lack of proper links between credit and marketing institutions;
(g) Failure to take quick action against willful defaulters; and
(h) Uncertain agricultural prices.
V. Regional Disparities:
There have been large regional disparities in the distribution of cooperative credit.
According to the Seventh Plan, the eight states of Andhra Pradesh, Gujarat,
Haryana, Kerala, Madhya Pradesh, Maharashtra, Punjab and Rajasthan account
for about 80 per cent of the total credit disbursed. The per hectare short-term
credit disbursed varied from Rs. 4 in Assam to Rs. 718 in Kerala.

VI. Benefits to Big Land Owners:

Most of the benefits from the cooperatives have been covered by the big
land owners because of their strong socio-economic position. For instance, in
1984-85 the farmers having holdings less than two hectares got only 38.8 per cent
of the total loans granted by the primary agricultural credit societies, whereas the
land owners with holdings of more than 2 hectare received 55 per cent. The share
of the poorest rural population (i.e. tenants, share croppers and landless labours)
was only 6.2 per cent.
VII. Lack of Other Facilities:
 Besides the provision of adequate and timely credit, the small and marginal
farmers also need other facilities in the form of supply of inputs (i.e., better seeds,
fertilisers, pesticides, etc), extension and marketing services.
These facilities will enable them to utilise the borrowed credit in a proper way.
Therefore, the credit societies should be reorganised into multi-purposes
cooperatives.
Reserve Bank and Cooperative Banking:
Strengthening the cooperative credit movement has been the Reserve Bank
of India’s special responsibility ever since its establishment in 1935.

The following are the various measures undertaken by the Reserve

Bank to develop cooperative banking system and to promote cooperative
finance in the country:

1. Agricultural Credit Department:

The Reserve Bank has a separate Agricultural Credit Department
whose functions are:
(i) To maintain an expert staff to study all questions of agricultural credit and be
available for consolation by the central and state governments, state cooperative
banks and other banking organisations; and
(ii) To coordinate the operations of the Reserve Bank in connection with
agricultural credit and relations with the state cooperative banks and other
institutions engaged in the business of agricultural credit.
2. All-India Rural Credit Survey:
The Reserve Bank’s real role in the cooperative credit movement started
with the appointment of All-India Rural Credit Survey Committee in 1951. The
objective of this Committee was to study the problems of rural credit and explore
possibilities of expanding agricultural credit through cooperative credit system.
The committee submitted its report in December 1954 which highlighted
the vital importance of cooperative rural credit.
The Committee found that while private credit agencies, i.e., money
lenders and traders supply 70 per cent of the rural credit, the cooperative societies
provided only 3 per cent of the total borrowed amount.
The Committee observed that the rural credit in India fell short of the right
quantity, was not of right type, did not serve the right purpose, and often fail to
go to the right people. Regarding the future of cooperative credit movement the
committee said, “cooperation had failed, but cooperation must succeed.”
3. Integrated Scheme of Rural Credit:
 For the success of cooperative credit movement, the Survey Committee
suggested an integrated scheme of rural credit based on the following
fundamental principles- (a) state partnership in cooperative credit institutions; (b)
full coordination between credit and other agricultural activities, particularly,
marketing and processing; and (c) administration through adequately trained and
efficient personnel, responsive to the needs of the rural population.
4. Provision of Finance:
In pursuance of the recommendations of the Survey Committee and the
later committees like the Committee on Cooperative Credit (1960), the Reserve
Bank has activity helped the cooperative system to expand rural credit. The
Reserve Bank does not provide finance directly to the agriculturists, but only
through cooperative sector.
The Reserve Bank provides financial assistance for meeting short-term,
medium-term and long-term rural needs.

Strengthening of Cooperative Banking Structure:

With a view to strengthen cooperative banking structure and promote

cooperative credit, the Reserve Bank undertakes the following measures:
(i) It pays special attention towards rehabilitating and revitalising the weaker
cooperative units.
(ii) It makes arrangements for maintaining the flow of cooperative credit by
involving commercial banks to finance the primary agricultural societies.
(iii) It makes efforts in improving the lending policies and operational efficiency
of cooperative credit institutions.
(iv) It provides financial accommodation to cooperative credit institutions.
(v) It conducts special training courses at the Cooperative Bankers’ Training
Colleges for the personnel of state, central and urban banks.

SYLLABUS SUCESSFULLY COMPLETED

 BANKING THEORY

One Word Questions:

1. The banking system in India is

a) Unit banking (b) Branch banking (c) Personal banking (d) Corporate
banking

2. Overdraft facility is available for the holders of

(a) S.B a/c (b) R.D a/c (c) F.D a/c (d) Current a/c

3. Cautious investors prefer investment in

(a) Shares (b) Debentures c) Units d) Stock

4. Modern technology enables

(a) e-Banking (b) Traditonal banking ( c) Personal banking (d) Mass banking

5.A function of RBI is to control

(a) Credit (b) Govt. c) World bank (d) Investors

[Link] financial system is regulated by

(a) SBI b) TMB (c) ICICI (d) RBI

[Link] bill is an is an instrument under this market

(a) Capital (b) Money (c) Daily (d) Black

[Link] money markets are considered to be developed in

(a) British and American (b) India and Pak (c) OPEC (d) UAE

[Link] term funds for industrial development are provided by

(a) Commercial bank (b) Rural bank (c) [Link]. bank (d) Development banks

10. Which one of the following is development bank

(a) IOB (b) SBI (c) IDBI (d) UTI

11. A unit bank has

(a) No branches (b) A few branches in a limited area (c) Both (a) & (b)
(d) None of these

12. The presidency Bank of Bengal was started in the year

(a) 1809 (b) 1810 (c) 1808 (d) 1811

13. The business of banking has been defined under section of the
Banking Regulation Act 1949

(a) 4(b) (b) 5(b) (c) 6(a) (d) 3(a)

14. A person who deposits of money or cheque in his account with his bank is
called

(a) Primary deposits (b) Recurring deposits (c) Both (a) & (b) (d) None of
these

15. 14 major commercial banks were nationalized

(a) On 25th July 1970 (b) On 19th June 1969 (c) On 19th July 1969 (d) On 25th
June 1970

16. The card is a “pay now product”.

(a) Credit (b) Debit (c) Smart (d) Business

17. Merchant banks deal with funds raised through & .

(a) Primary market and Secondary market (b) Discount market and
Acceptance market (c) Money market and Capital market (d) None of these

18. The best suited fund to the business people is

(a) Income fund (b) Balanced fund (c) Growth fund (d) Taxation fund

19. The Central Bank is

(a) The lender of last resort (b) A banker’s bank (c) The custodian of foreign
exchange reserves (d) All of these

20. Moral suasion means

(a) The purchase and sale of securities in the money market

(b) A minimum cash balance as reserve (c) Regulation of volume of credit

(d) Persuasion of commercial banks to follow monetary policy of RBI

21. Rationing of credit aims (a) At regulating the total volume of bank credit

(b) To limit the total amount of loans and advances

(c) At controlling credit (d) None of these

[Link] credit control is

(a) An indirect control (b) A direct control (c) To control flow of credit (d)
To regulate consumer credit

23. Money market is the market for

(a) Long term funds (b) Medium term funds (c) Short term funds (d) None of
these

24. Short term bills are known as

(a) Promissory notes (b) Government papers (c) Trade bills (d) Near-money

[Link] term securities are called

(a) Corporate securities (b) The stock exchange securities (c) Tax saving
securities (d) All of these
26. Acceptance market and collateral loan market, in the New York money
market, are called

(a) Sub-markets (b) Commodity market (c) Stock market (d) Capital market

27. The State Bank of India was formed on

(a) 1st July 1955 (b) 1st June 1955 (c) 1st December 1955 (d) 1st April 1955

28.A merchant banking division was set up by the State Bank of India in

(a) 1975 (b) 1973 (c) 1972 (d) 1971

29. State Co-operatives Banks obtain loans from

(a) RBI (b) NABARD (c) Both (a) & (b) (d) None of these

[Link] Regional Rural Banks Act 1976 was passed in

(a) January 1976 b) February 1976 (c) March 1976 (d) April 1976

[Link] created by banks are called

(a) Primary deposits (b) Subsidiary deposits c) Derivative deposits

(d) Cash deposits

[Link] merchant banking service is mainly concerned with

(a) Factoring b) Issue management (c) Mutual management (d) Credit card

[Link] instrument used to control the volume of credit is

(a) Bank rate (b) Open market operation (c) Direct action (d) (a) & (b)
together

34. The most liquid market in a money market is

(a) Call market (b) Bill market (c) Treasury bill market (d) (a) & (c)
together

35. The State Bank of India is a pioneering bank in the field of

advances

(a) Agricultural (b) Weaker section (c) Small scale industries (d) All of the
above

36. The ICICI bank is an example for private banking.

37. The instrument that enables a person to buy good on credit is Consumer

38 . Non-banking companies dominate in the unorganised part of the money

market. (True/False)

39. Factoring service is very useful for meeting the working capital
requirements of an organization. (True/False)

40. One Rupee currency note is issued by the Reserve Bank of

India.(True/False)

41. Who is considered to be the oldest authority on Banking

(a) Sir John Paget (b) James Allcot (c) Adam Smith (d) Nathan Hussain

[Link] definition of the word “Customer” is contained in

(a) Reserve Bank of India Act 1934 (b) Bills of Exchange Act 1882

(c) Customers Act 1932 (d) None of the Above

43. The Reserve Bank of India Act 1934 was enacted on the recommendation of

(a) The James Raj Committee (b) The Nayak Committee (c) The Hilton
Young Committee (d) The Callton Young Committee

44. ICICI was set up in the year

(a) 1955 (b) 1965 (c) 1985 (d) 1945

45. Banker acts as

(a) Agent (b) Trustee (c) Debtor (d) All of these

46. Which one of the following countries is home of unit banking system

(a) Japan (b) England (c) Australia (d) America

47. The Regional Rural Bank is a

(a) Public Sector Bank (b) Private Sector Bank (c) Co-operative Bank
(d) Financial Institution

48. State Bank of India was set up in the year

(a) June 1955 (b) July 1955 (c) August 1956 (d) July 1956
49. The India Rupee is a

(a) Credit Paper (b) Token Paper (c) Standard-token coin d) Gold coin

50. The Central Bank of India is

(a) United Bank of India (b) Central Bank of India (c) Indian Bank
(d) Reserve Bank of India

[Link] system of banking is followed in India is

(a) Unit banking (b) Development banking (c) Branch banking (d) Mixed
banking

52. If the loans granted by banks do not come back to the banking system, it is
called

(a) Credit contraction (b) Credit Leakage c) Credit Expansion (d) Credit
control

53. In India, 14 major banks were nationalized in the year

(a) 1969 (b) 1972 (c) 1968 (d) 1981

54. 24 Hours banking service is made possible through

(a) Computerization of branch (b) A.T.M (c) Universal banking

(d) Debit card

55. The balance sheet of a bank should be prepared according to the format
prescribed by the

(a) Reserve Bank of India Act (b) Banking Regulations Act (c) State Bank of
India Act (d) SEBI Act

56. Commercial Banks have to maintain a specified cash reserve ratio with the

(a) Government of India (b) Ministry of Finance (c) State Bank of India
(d) RBI

57. Money lenders come under the

(a) Unorganized Sector b) Organized Sector (c) Priority Sector

(d) Small Scale Sector

58. The leader of Indian Money Market is

(a) Government of India (b) SEBI (c) Ministry of Finance (d) None of these

59. Cooperative bank extend finance to agriculture for

(a) Short term only (b) Long term only (c) Medium term only (d) All of the
above

60. Pandiyan Grama Bank is a

(a) Commercial Bank (b) Local Area Bank(c) Regional Rural Bank
(d) Private Bank

61. Safe custody service is a Agency function of a commercial bank.

62. UTI is the best example for Mutual fund.

63. Direct action is a Qualitative credit control weapon.

64. In London money market Developed are popular.

65. The agricultural credit card issued by the State Bank of India is called
card.

66. Primary deposits create derivative deposits. (True/False)

67. Mutual Fund Service is mostly related money market instrument.

(True/False)

68. Bank rate controls the flow of credit. (True/False)

69. Certificate of deposit is a money market instrument. (True /False)

70. The State Bank of India is a pioneering bank in agricultural finance.

(True/False)

1. In which country the unit banking system is popular?

(a) U.K. (b) Germany (c) [Link]. (d) Japan
2. X opens a deposit account in a bank with Rs. 100. This deposit is called.
(a) Primary deposit (b) Derivative deposit (c) Created deposit d) Induced
Deposit
3. The modern service of a banker to promote industrial development is
 (a) Credit card service (b) Mutual fund service (c) Factoring service d) All
of the above
4. The bank which renders issue management service is called.
(a) Commercial bank (b) Investment bank (c) Development bank(d)
Merchant bank
5. The weapon available to control the flow of credit is
(a) Moral suasion (b) Bank rate
(c) Open market operation (d) Variable cash reserve ratio

6. Which department of RBI undertake the note issue function?

(a) Banking b) Issue (c) Both banking and issue department (d) Public debt
7. Which of the following is a money market instrument?
(a) Certificate of deposit b) Debentures (c) Government bond (d) Share
8. The leader of the Indian money market is
(a) Government of India (b) Indian Parliament (c) Central Bank of India
(d) Reserve Bank of India
9. The State Bank of India was established by nationalizing
(a) The Presidency Banks (b) Imperial Bank of India
(c) Bharat Overseas Bank (d) None of the above

10. The bank established mainly to provide credit to agriculture is

(a) Regional Rural Bank (b) State Bank of India
(c) Reserve Bank of India (d) Co-operative Bank

1. The RBI was established in

(a) 1930 (b) 1935 (c) 1949
2. Certain special institutions are necessary to handle the problems of long-term
financing of industries, such institutions are known as
(a) Joint stock companies (b) Development banks (c) Branch banking
3. The major disadvantages of Unit Banking System is that it has
 (a) Long-term finance (b) Limited Finance Service (c) Area
Development
4. The money-lenders are dealers in
(a) Other money (b) Own funds (c) Funds borrowed from RBI
5. SEBI is
(a) A commercial bank (b) Central bank (c) None of the above
6. The type of chain banking system is possible only in the case of
(a) Indigenous banking (b) Unit banking c) Mixed banking
6.a. In the year 1969, major commercial banks were nationalised in
India? a) 14 (b) 12 (c) 10
7. Currency notes are issued by
(a) Government of India (b) RBI (c) Commercial Banks
8. Chit funds belongs to Sector of the money market.
(a) Organised sector (b) Un-organised Sector (c) None of the above
9. The government is the biggest borrower in the
(a) Sub-market (b) Money-market (c) Capital / Stock – market

[Link] DEGREE EXAMINATION, APRIL 2008

1. Deposit created out of liquid cash are called

(a) Recurring Deposits (b) Derivative deposits
(c) Primary Deposits (d) Temporary deposits

2. How may schedules are in Balance sheet of a commercial bank?

(a) 12 (b) 13 (c) 16 (d) 11
3. The document which enables a customer to buy goods on credit is called
(a) Credit Card (b) Debit card (c) Letter of credit (d) All of the
above
4. The service provided by the UTI is mainly concerned with
 (a) Merchant banking (b) Factoring (c) Leasing (d) Mutual fund
5. Bank Rate controls
(a) Volume of credit (b) Direction of credit (c) Both volume and direction
of credit (d) Quality of credit
6. The document that is dealt in a money market is
(a) Debenture (b) Bond (c) Share Certificate (d) Certificate of deposit

7. The bank established mainly to provide agricultural finance is

(a) Regional Rural Bank (b) Co-operative Bank (c) State Bank of India
(d) Reserve Bank of India.
Fill in the blanks with suitable word/words.

8. Branch banking system is followed in India.

9. Marchland bankers deal mainly with issue management.
10. Loans granted to the Government by the Reserve Bank of India are called

11. The leader of the Indian money market is

[Link] computerisation facilities banking.
13.24 hour banking is made possible with the help of ATM
[Link] banks are not permitted to open any branches at all.
15.A factor generally provides only 80% of finance on the invoice of his client.
[Link] market value of a mutual fund unit is called Net Asset Value.
[Link] main participant in call money market is L.I.C.
18.e-banking offers quicker services than conventional banking.
[Link] action controls the volume of credit.
[Link] State Bank of India was established by nationalising the Imperial Bank
of India.

[Link] DEGREE EXAMINATION, NOVEMBER 2004:

1. Which is very often called as “Plastic Money”?
(a) BID Bonds (b) Bill of Exchange (c)Credit Cards (d)
Cheques
2. Central Bank of our country is
(a) United Bank of India (b) Central Bank of India
(c) Indian Bank (d) Reserve Bank of India

3. “A banking company is a company which transacts the business of banking

India”. Defined by
(a) Dr. HL Hart (b) H.P. Sheldon (c) RBI (d) Banking Regulation Act
1949
4. The RBI was Nationalished on
(a) 1st January 1949 (b) 1st January 1950 (c) 1st January 1948 (d) 1st
October 1949
5. 24 hours banking service is
(a) Debit Card (b) ATM (c) Universal Banking(d) Computerisation of
Branch
6. The Banking Regulation Act was passed in the year
(a) 1947 (b) 1948 (c)1949 (d) 1950
7. Banker is an an/a
(a) Agent (b) Trustee (c) Debtor (d) All the above
8. Nationalisation of major banks in
(a) July 1969 (b) July 1959 (c) July 1949 (d) July 1939
9. The Regional Rural Bank Act was passed during year
(a) 1975 (b) 1976 (c) 1977 (d) 1978
10. The head of the Indian money market is
(a) Central Bank (b) Reserve Bank of India
(c) Indian Bank (d) State Bank of India

Fill up the blanks with suitable word/words

11. The U.S.A. is the Unit for unit banking system.
12. The Regional Rural Bank is one of banking.
13. The definition of the term banker can be found in Banking Regulation Act
1949
14. IRDP was introduced during the Five Year Plan.
[Link] Bank of a country has the power to issue currency
notes.