Stages in STAGES IN HISTORY

history of OF BANKING IN
banking in INDIA
History of Banking has been
india divided into
●Pre-independence stage
●Post Independence stage
●Nationalisation of Banks
●Introduction of Financial Sector Reforms
●IT revolution in Banks
 The banking sector development can be
Banking divided into three phases:

development Phase I: The Early Phase which lasted

from 1770 to 1969

phases Phase II: The Nationalisation Phase

which lasted from 1969 to 1991

Phase III: The Liberalisation or the

Banking Sector Reforms Phase which
began in 1991 and continues to flourish
till date
 The first bank of India was the “Bank of
Hindustan”, established in 1770 and
located in the then Indian capital, Calcutta.
However, this bank failed to work and
Pre ceased operations in 1832. During the Pre
Independence period over 600 banks had
Independence been registered in the country, but only a
Period (1786- few managed to survive.

1947) Following Bank of Hindustan, various other

banks were established in India. They were:
●The General Bank of India (1786-1791)
●Oudh Commercial Bank(1958)
●Bank of Bengal (1809)
●Bank of Bombay (1840)
●Bank of Madras (1843)
 ● The East India Company had
established three banks: Bank of
Bengal, Bank of Bombay and Bank
Imperial of Madras and called them the
Presidential Bank
Bank ● These three banks were later
merged into one single bank in
of india 1921, which was called the
“Imperial Bank of India.”
● The Imperial Bank of India was later
nationalised in 1955 and was
named The State Bank of India,
which is currently the largest Public
sector Bank.
 ● Indian account holders
had become fraud-prone
Failure of ● Lack of machines and
technology
banks in
● Human errors & time-
pre- consuming
independan ● Fewer facilities
ce period ● Lack of proper
management skills
 ●At the time when India got independence, all
the major banks of the country were led
Post privately which was a cause of concern as the
people belonging to rural areas were still
Independence dependent on money lenders for financial
assistance.
Period (1947- ●With an aim to solve this problem, the then
1991) Government decided to nationalise the Banks
● The banks were nationalised under the
Banking Regulation Act, 1949. Whereas, the
Reserve Bank of India was nationalised in
1949.
●Following it was the formation of State Bank
of India in 1955 and the other 14 banks were
nationalised between the time duration of
1969 to 1991. These were the banks whose
national deposits were more than 50 crores.
 1969

●Allahabad Bank Bank of India

14 Banks
nationalised in ●Bank of Baroda
●Central Bank of India
Bank of Maharashtra
Canara Bank

1969 and ●Dena Bank

●Indian Bana
Indian Overseas Bank
Punjab National Bank
1980 ●Syndicate Bank Union Bank of India
●United Bank UCO Bank

1980

●Andhra Bank
●Corporation Bank
●New Bank of India
●Oriental Bank of Comm.
●Punjab & Sind Bank
●Vijaya Bank
 ● State Bank of Patiala
subsidiaries ● State Bank of Hyderabad
● State Bank of Bikaner & Jaipur
of SBI ● State Bank of Mysore
nationalised ● State Bank of Travancore
in 1959 ● State Bank of Saurashtra
● State Bank of Indore
All these banks were later merged
with the State Bank of India in
2017, except for the State Bank
of Saurashtra, which merged in
2008 and State Bank of Indore,
which merged in 2010.
 There were various reasons why the
Impact of Government chose to nationalise the banks

Nationalisation ●This lead to an increase in funds and

thereby increasing the economic condition
of the country
●Increased efficiency
●Helped in boosting the rural and
agricultural sector of the country
●It opened up a major employment
opportunity for the people
●The Government used profit gained by
Banks for the betterment of the people
●The competition decreased, which
resulted in increased work efficiency
 Liberalisation Period (1991-Till
Date)
regular monitoring and regulations need to be
followed to continue the profits provided by the
banking sector
LIBERALISATIO
To provide stability and profitability to the
N OF BANKS Nationalised Public sector Banks, the
Government decided to set up a committee
under the leadership of Shri. M Narasimham to
manage the various reforms in the Indian
banking industry.

The biggest development was the introduction

of Private sector banks in India. RBI gave
license to 10 Private sector banks to establish
themselves in the country
 ● Global Trust Bank , ICICI Bank
● HDFC Bank , Axis Bank
● Bank of Punjab, IndusInd Bank
● Centurion Bank , IDBI Bank
10 PRIVATE ● Times Bank , Development Credit Bank.

BANKS AND Measures

OTHER ● Setting up of branches of the various Foreign Banks in

MEASURES FOR ●
India
No more nationalisation of Banks could be done
●
STABILITY
The committee announced that RBI and Government
would treat both public and private sector banks
equally
● Any Foreign Bank could start joint ventures with Indian
Banks
● Payments banks were introduced with the development
in the field of banking and technology
● Small Finance Banks were allowed to set their branches
across India
● A major part of Indian banking moved online with
internet banking and apps available for fund transfer
 The services that are provided to a person by
the various Financial Institutions including
banks, insurance companies, pensions, funds,
etc

Financial sector features of the Indian Financial

system:
forms
●It plays a vital role in the economic
development of the country as it encourages
both savings and investment
●It helps in mobilising and allocating one’s
savings
●It facilitates the expansion of financial
institutions and markets
●Plays a key role in capital formation
●It helps form a link between the investor and
the one saving
●It is also concerned with the Provision of funds
 Digital revolution in the Indian
banking sector
Banks in India have witnessed a radical
change from 'conventional banking to
IT REVELOUTION convenience banking'. Today, they are
poised for 'digital banking' at a rapid
IN INDIAN BANKS pace
●need for computerization was felt in
the Indian banking sector in late 1980s
●1988, Reserve Bank of India set up a
Committee on computerization in banks
headed by Dr. C. Rangarajan.
●Banks began using Information
Technology initially with the introduction
of standalone PCs and migrated to Local
Area Network (LAN) connectivity
 Core Banking platform
Core Banking Solution (CBS) enabled
banks to increase the comfort
feature to the customers as a
promising step towards enhancing
Core customer convenience through
Anywhere and Anytime Banking
banking
The process of Computerization
gained pace with the opening of the
economy in 1991-92. A major driver
for this change was propelled by
rising competition from private and
foreign banks
 Current status in the Digital Space
Indian Government is aggressively promoting
digital transactions. The launch of United
Payments Interface (UPI) and Bharat Interface
for Money (BHIM) by National Payments
DIGITAL Corporation of India (NPCI) are significant steps
for innovation in the Payment Systems domain.
BANKING UPI is a mobile interface where people can
make instant funds transfer between accounts
in different banks on the basis of virtual
address without mentioning the bank account.
Today banks aim to provide fast, accurate and
quality banking experience to their customers.
Today, the topmost agenda for all the banks in
India is digitization.
FUNCTION OF BANK
1. ACCEPTING DEPOSITS
Banks attract the idle savings of people in the form of deposits.
 2. DEMAND DEPOSITS,
ALSO KNOWN AS CURRENT
ACCOUNTS:
These are repayable on demand without any notice. Usually no
interest is paid on them, because the bank cannot utilize short-
term deposits, and must, therefore, keep almost cent per cent
reserve against them.
On the other hand, a little commission is charged for the services
rendered. Occasionally, however, a small interest is paid to people
who keep large balances.
3. FIXED DEPOSITS OR
TIME DEPOSITS
These deposits can be withdrawn only after the expiry of the
period for which these deposits have been made. Higher
interest is paid on them—the rate rising with the length of
the period and the amount of deposit. The usual rate in India
today varies between 6 per cent and 110 per cent,
depending upon the time-period for which deposits are
made.
4. SAVINGS BANK
DEPOSITS:
These deposits stand midway between current and fixed
accounts. These deposits are not as freely withdraw-able as
current accounts. One or two withdrawals up to a limit of
one-fourth of the deposit but not more than Rs. 1,000 are
generally allowed in a week. The rate of interest is less than
that on the Fixed Deposits.
5. GIVING LOANS:
But receiving of deposits is not the whole story about a bank’s functions.
If that were so, how could a bank pay interest? Hence, after collecting
money by way of deposits, a bank invests it or lends it out. Money is lent
to businessmen and traders usually for short periods only. This is so
because the bank must keep itself ready to meet the demands of the
depositors, who have deposited money for short periods.
6 . ISSUES OF NOTES /
DRAFT
A bank is also responsible for issuing notes and creating
other inexpensive modes of exchange in the form of drafts or
cheques. In india the RBI Is responsible for issuing notes
and coins
TYPES OF
BANK
ACCOUNTS
Types of Bank
Accounts
► Current Account or Demand Deposit Account
► Savings Account
► Recurring Deposit Account
► Demat Account
► NRI Account
 Savings
Account
► In types of bank accounts in India, first, we can see about the savings
account. Any individual person or Joint persons can open a savings bank
account.
► The rate of interest for a savings bank account lies between 4 to 6%
► The bank will provide passbook, ATM card, and cheque books for the
savings account holders.
► There is no limit on money deposits. But there may be limits in
withdrawals from the savings bank account.
 Current
►
Account
A current account holder can deposit money any number of times. Also,
he can withdraw money multiple times.
► So it is suitable for businessmen who normally make huge transactions in
a frequent time.
► A current account will not fetch interest for the customers. ►
Overdraft facility is available.
► A charge is applicable for not maintaining a minimum balance.
► Internet banking facility also available
 Recurring Deposit
Account
► The period of the deposit will vary from 7 days to 10 years.
► Minimum Amount to Deposit: Varies for Bank to Bank.
► Rate of Interest: Varies for Bank to Bank
► Cash deposited in the FD (Fixed Deposit) account should remain within the
account for a certain period. This is not transferable.
► If the account holder wants to withdraw money before the expiry of the
fixed period, he can withdraw the same after paying the penalty to the
bank. Longer the period of deposit higher is the rate of interest.
 Demat Account
► Demat refers to a dematerialized account. A Demat account is just like a
bank account where actual money is replaced by shares.
► Just as a bank account is required if we want to save money or make
cheque payments, we need to open a demat account in order to buy or
sell shares.
 NRI Account

► THREE TYPES OF NRI ACCOUNTS

1. Ordinary Non-Resident Rupee Accounts (NRO Accounts) 2. Non-Resident
(External) Rupee Accounts (NRE Accounts) 3.

Foreign Currency (Non

–Resident) Accounts (Banks) (FCNR (B) Accounts)
Accounts (NRO Accounts)

► The NRO account is used to manage your earnings in India.

► Rupee-denominated non-repatriable accounts and can be in the form of
savings, current recurring or fixed deposits.
► It can be opened jointly with residents in India.
► Interest income, from NRO accounts, is taxable. Interest income, net of
taxes is reportable.
 Accounts (NRE
Accounts)
► The NRE account is used to transfer your foreign earnings to India.
► These are rupee-denominated accounts and can be in the form of savings, current,
recurring or fixed deposit accounts.
► Joint operation with other NRIs/PIOs is permitted.
► Power of attorney can be granted to residents for an operation of accounts.
► NRIs, PIOs, OCBs are eligible to open NRE Accounts.
Accounts (Banks) (FCNR (B) Accounts)

► These accounts may be opened only in the form of term deposit in foreign
currencies for any of the following
► maturity periods:
► i. 1 year and above but less than 2 years
► ii. 2 years and above but less than 3 years
► iii. 3 years and above but less than 4 years
► iv. 4 years and above but less than 5 years
Loans and Loan Types
Loans are used for many reasons
● Feed, seed and fertilizer purchases
● Machinery,livestock,and equipment purchases
● Land ,building,and home purchases
● Business start up expenses like attorney fees,incorporation fees,
and product development costs
● Emergencies
Short term loans
● Less than 1 year
● Used to buy items like feed, seed, fertilizer, and other
consumables
● Referred to as an operating note
● Can be financed by merchants, banks and private
individuals
● Interest generally calculated using simple interest
method.
● Used to even out highs and low in income and expenses
Intermediate term notes

● 1 to 10 years in duration
● Used to buy depreciable assets like machinery, equipment
, breeding livestock, and vehicles
● Banks, Individuals, Ford credit, GMAC
● Interest calculated several ways including remaining
balance and add on
Long term loan

● Used to purchase land, buildings, homes

● Longer than 10 years in duration
● Usually a mortgage with equal payments
● Provided by commercial banks, Farm credit system,
individuals, insurance companies, and mortgage
companies
Mortgages
● Mortgages are long term loans that are generally used to finance the purchase of homes.
● Mortgages are generally offered in 15 and 30 year lengths with many options to choose from.
Types of
Mortgages
Mortgage
Types of Mortgages
FOREIGN BANKS
IN INDIA
CONTENT

1. INTRODUCTION
2. MAJOR FOREIGN BANKS
3. ROLE OF FOREIGN BAKS
4. ADVANTAGES
5. DISADVANTAGES
[Link]
● Foreign banks are defined as banks from a foreign country
working in India through branches.
● Foreign bank is a bank with a head office outside the
country in which it is located.
● It is obligated to follow the regulations of both the home
and host country. Because the foreign branch bank’s loan
limits based on the parent’s bank
 capital, they can provide more loans
than subsidiary banks.
●E.g. If ICICI bank opens it’s branch in

America, the branch would be legally

obligated to follow both Indian and
American banking regulations.
 [Link] OF FOREIGN BANKS
● Enhance competition in banking sector.
● Technology and skill transfer.
● Both foreign and local banks have been investing on
financial innovation.
● Modern banking services are expanded.
● Enhance customer satisfaction.
● Increase in provision of foreign currency.
● Foreign banks participation in foreign
exchange and money market
contribute for deepening of financial
system.
[Link]

● Foreign banks are more efficient because of their global

presence and experience.
● They can bring new innovative product.
● Foreign banks bring more competition which is always
good for growing economy.
● Low cost of funds.
[Link]

● Domestic player may not be able to

compete and in the process might
become obsolete.
● Currency may become volatile if not
managed properly.
● Foreign banks mostly open their
branches or subsidiaries in the financial
hubs of the host country, hence they
do not serve majority in the financial
inclusion process of local country.
 FUND
TRANSACTION
 FUND TRANSACTION
A Funds Transfer is a sequence of events
that results in the movement of funds
from the remitter to the beneficiary. It is
also defined as the remittance of funds
from one party to itself or to another
party through the banking system.
Electronic fund transfer :It is the transfer
of fund from one bank account to another
through electronic [Link] Electronic
fund transfer, fund can be transferred
without visiting the bank branch.
It includes intra-bank transfers (Transfer
between the accounts of one bank) and
interbank transfers (Transfer between the
accounts of different banks)
•

•
National Electronic Fund

Transfer(NEFT
) • Introduced in November 2005
• NEFT is an electronic fund transfer system that operates on
a Deferred Net Settlement (DNS) basis

• It settles transactions in batches

• No minimum or maximum limit of transfer

• Settlement in half hourly basis. 48 settlement in week days

(NEFT is now 24 hours w.e.f. Dec 2019)

• Online NEFT is free with effect from January 2020. However,

NEFT through bank branches are subject to a small fee.
 Real Time Gross Settlement
System(RTGS )
RTGS is the fund transfer mechanism which enables to transfer
money on real time (individually on gross basis)

•Fastest possible money transfer system

•Transactions are settled as soon as they are processed

•Minimum value of transfer is 2 lakhs.

•Maximum limit is 10 lakhs for individuals. No limit for corporates.

•RTGS is now available 24 hours & 7 days (with effect from Dec 2020)

•Online RTGS is free with effect from January 2020. However, RTGS
through bank branches are subject to transaction fee
I
•It is an instant real-time inter bank electronic
fund transfer system in India.

•The IMPS system of fund transfer works on

internet banking, mobile banking and USSD
services.

•IMPS also allow customers to transfer fund by

using their registered mobile number and MMID
(Mobile Money Identifier). Fund can also be
transferred by using the account number and
IFSC.

•MMID is a 7 digit number allotted by the Bank

for receiving funds
through IMPS.

•IMPS is available on a round-the-clock basis

Unified Payment Interface (UPI)
• It is a payment system which
facilitates funds transfer between
two bank accounts by using a
mobile application (UPI app).

● .It allows immediate money

transfer through a mobile app
secured by two factor
authentication.

● .️It an open banking systems that

allow access in bank accounts to
private parties.

• A single UPI app can be used for

any bank account.
Unified Payment
Interface
(UPI) .....
Continuing....
•It
is a USSD based mobile banking service used to perform
banking transactions without internet.

•It enables customers to access their bank accounts and performs

fund transfer by using text messages over GSM mobile network.

•Smart phone and internet not needed. It can be done with a

feature phone.

•Available at 24 Hours x 7 days.

NUUP services can be availed by dialling *99# from the bank

registered mobile number.

•Telecom service provider may charge a small amount (50 paisa -

1.50) for each NUUP transaction.
.
•Maximum limit of fund transfer is ₹5000 per transaction
It is a system developed by NPCI which enables people to
carryout financial transactions with Aadhar number and finger
print recognition.

•In AEPS, financial transactions such as deposit, withdrawal,

Aadhar to Aadhar fund transfer, Balance enquiry, mini
statement etc., can be done in a micro ATM (operated by a
banking correspondent).

•Micro ATMs are small bio-

metric machines like card
swiping
machines.

•To avail AEPS services, customer need to enter their Aadhar

number and the transaction is to be authenticated by using
finger print.

•The main purposes of AEPS are to bring financial services at

remote villages where banking facilities are not available and
to bring banking services at the door step of the customers.
PRINCIPLES OF
INSURANCE
Insurance
● Insurance is a contract in which the individual or an entity gets the financial protection, in other
words, reimbursement from the insurance company for the damage (big or small) caused to
their property.
● In simple words, insurance is a contract, a legal agreement between two parties, i.e., the
individual named insured and the insurance company called insurer. In this agreement, the
insurer promises to help with the losses of the insured on the happening contingency.
● The contract of insurance between an insurer and insured is based on certain principles
PRINCIPLES OF INSURANCE
● 7 Principles of insurance are :
● Utmost Good Faith
● Indemnity
● Proximate Cause
● Contribution
● Subrogation
● Insurable Interest
● Loss Minimization
1. Utmost good faith
● The fundamental principle is that both the parties in an insurance contract should act in good
faith towards each other, i.e. they must provide clear and concise information related to the
terms and conditions of the contract.
● The Insured should provide all the information related to the subject matter, and the insurer
must give precise details regarding the contract.
● Example – Jacob took a health insurance policy. At the time of taking insurance, he was
a smoker and failed to disclose this fact. Later, he got cancer. In such a situation, the Insurance
company will not be liable to bear the financial burden as Jacob concealed important facts.
[Link] Cause
● This is also called the principle of ‘Causa Proxima’ or the nearest cause.
● This principle applies when the loss is the result of two or more causes. The insurance company
will find the nearest cause of loss to the property.
● If the proximate cause is the one in which the property is insured, then the company must pay
compensation. If it is not a cause the property is insured against, then no payment will be
made by the insured.
● Example – Due to fire, a wall of a building was damaged, and the municipal authority ordered
it to be demolished. While demolition the adjoining building was damaged. The owner of the
adjoining building claimed the loss under the fire policy. The court held that fire is the nearest
cause of loss to the adjoining building, and the claim is payable as the falling of the wall is an
inevitable result of the fire.
[Link] Interest
● This principle says that the individual (insured) must have an insurable interest in the subject
matter.
● Insurable interest means that the subject matter for which the individual enters the insurance
contract must provide some financial gain to the insured and also lead to a financial loss if
there is any damage, destruction or loss.
● Example – the owner of a vegetable cart has an insurable interest in the cart because he is
earning money from it. However, if he sells the cart, he will no longer have an insurable
interest in it.
[Link]
● This principle says that insurance is done only for the coverage of the loss; hence insured
should not make any profit from the insurance contract. In other words, the insured should be
compensated the amount equal to the actual loss and not the amount exceeding the loss.
● The purpose of the indemnity principle is to set back the insured at the same financial position
as he was before the loss occurred.
● Principle of indemnity is observed strictly for property insurance and not applicable for the life
insurance contract.
● Example – The owner of a commercial building enters an insurance contract to recover the
costs for any loss or damage in future. If the building sustains structural damages from fire,
then the insurer will indemnify the owner for the costs to repair the building by way of
reimbursing the owner for the exact amount spent on repair or by reconstructing the damaged
areas using its own authorized contractors.
[Link]
● Subrogation means one party stands in for another.
● As per this principle, after the insured, i.e. the individual has been compensated for the
incurred loss to him on the subject matter that was insured, the rights of the ownership of that
property goes to the insurer, i.e. the company.
● Subrogation gives the right to the insurance company to claim the amount of loss from the
third-party responsible for the same.
● Example – If Mr A gets injured in a road accident, due to reckless driving of a third party, the
company with which Mr A took the accidental insurance will compensate the loss occurred to
Mr A and will also sue the third party to recover the money paid as claim.
[Link]
● Contribution principle applies when the insured takes more than one insurance policy for the
same subject matter.
● It states the same thing as in the principle of indemnity, i.e. the insured cannot make a profit
by claiming the loss of one subject matter from different policies or companies.
● Example – A property worth Rs. 5 Lakhs is insured with Company A for Rs. 3 lakhs and with
company B for Rs.1 lakhs. The owner in case of damage to the property for 3 lakhs can claim
the full amount from Company A but then he cannot claim any amount from Company B. Now,
Company A can claim the proportional amount reimbursed value from Company B.
7. Loss Minimization
● This principle says that as an owner, it is obligatory on the part of the insurer to take necessary
steps to minimise the loss to the insured property.
● The principle does not allow the owner to be irresponsible or negligent just because the subject
matter is insured.
● Example – If a fire breaks out in your factory, you should take reasonable steps to put out the
fire. You cannot just stand back and allow the fire to burn down the factory because you know
that the insurance company will compensate for it.
DEBIT AND
CREDIT
 What is Debit and Credit in banking
or real life?
◦ When your bank account is debited, money is of the account.
opposite of a debit is a credit, in which case The your
◦ money is account.
Debit is an entry that records an amount that is recorded on
the
side of the accounts.
◦ Credit is an entry that records an amount that is recorded on
the
side of the accounts
 Debit
card
◦A debit card is a payment card that deducts money directly
from a consumer's checking account when it is used. Also
called
they can be used to buy goods or services; or to get cash from
an automated teller machine or a merchant who'll let you add
an extra amount onto a purchase.
 Advantages of debit
card
•Convenient. The introduction of debit has eased the
mode of transactions.
•Rewards. Most banks offer rewards for using their debit
card. ...
•Protection. Debit cards come with a default PIN
( Personalised Identification Number), which you can
change.
•EMI
•24/7 access to funds via ATMs
 Disadvantages of debit
card
•Some ATMs will charge withdrawal
fees
•No credit allowed
•Debit card fraud
 Credit
card
•A credit card is a financial instrument issued by banks with a
pre-set credit limit, helping you make cashless transactions.
The card issuer determines the credit limit based on your
credit score, credit history and your income.
 Advantages of Credit
card
•Buy on credit, Potential to overspend
•Unlimited reward points
•Insurance coverage
•Putting a hold on a rental car or hotel
room.
•Record of expenses
 Disadvantages of Credit
card
•Paying high rates of interest. If you carry a balance from
month-to- month, you'll pay interest charges
•Easy to overuse.
•Credit card fraud, which is not common but can happen
 What is
• accounting
The ? and summarizing business and
system of recording
financial transactions and analyzing, verifying, and
reporting the results.
Accounting is :
•Easy
•Simple
•Comparable
All transactions should be recorded in a business’s point of
view
 T-
accounts
• The left side of the Account
is always the debit side and
the right side is always the
credit side, no matter what
the account is. For different
accounts, debits and credits
can mean either an increase
or a decrease, but in a T
Account,
 Accounts in debit and
credit
◦ the accounts are organized in the chart of accounts as follows:
• Assets
• Liabilities
• Income or Revenue
• Expenses

NOTE:
All expenses are not expenses as they are classified as assets and all income
or revenue is not classified as income or revenue as they are defined
as liabilities
 Rule of debit and credit in
accounting
• According to the Double Entry System of bookkeeping, each
business transaction or exchange has two angles. One of them
is the
aspect known as the , and the other is the
known as the
• Debit all expenses and credit all incomes and gains.
◦ When Expenses and assets increases they should be debited ,if
decreased then credited
◦ When liabilities and income increases they should be credited , if
decreased then debited
MUTUAL FUNDS
 DEFINITION

• A mutual fund is a financial vehicle that pools assets

from shareholders to invest in securities like stocks,
bonds, money market instruments, and other assets.
Mutual funds are operated by professional money
managers, who allocate the fund's assets and attempt
to produce capital gains or income for the fund's
investors.
MEACHANISM OF MUTUAL FUND
OPERATIONS

It collects funds from different investors to form a

common pool of investible funds. This corpus is then
invested in a wide variety of investment opportunities.
Professional managers handle the corpus and take
different decisions from time to time. The investment may
be diversified to spread risk and to ensure a good return,
i.e., in dividend and capital terms, to the investors. The
investors have to bear a small cost for availing such
services.
WORKING OF MUTUAL FUNDS
ADVANTAGES

• Liquidity
The biggest advantage of investing in a mutual fund scheme is that
you can redeem your units anytime you want. Unlike FDs , mutual
funds offer very flexible and convenient withdrawals.

• Diversification
It lowers the risks involved in building an investment portfolio and
hence reduces the risk for the investors. Because mutual funds
contain multiple securities, investors' gains are safeguarded even
if there is a drop in some of the securities in their portfolios.

• Expert Management
Beginner investors may not have the knowledge of where and how to
invest. Such people can invest in mutual funds because they are
managed by experienced professionals.
• Flexibility
Mutual funds offer the flexibility to invest in smaller amounts. That
means you don't need a lot of money to invest in mutual funds. You
can invest according to your income and cash flow.

• Accessibility
Mutual funds are very easy to buy/sell. They are easily accessible and
you can buy them from anywhere.

• Safety and Transparency

All the mutual fund products have been labeled after the strict SEBI
guidelines. This means, all the mutual fund schemes now come with
color coding. This color scheme allows investors to determine the
level of risk involved in the investment, making the entire
investment process safe and transparent.
DISADVANTAGES

• Entry or Exit Load

Some mutual funds may charge either entry or exit load or both.
They levy this charge primarily to maintain their operations and
pay staff salaries. Sometimes, the charge may go up to a high 3%
of the net investment amount. However, it mostly remains
around 1%.

• Diversification Might Cause Lower Profits

While diversification might significantly reduce your risks, it may also
reduce your profit margin. This may become more prominent if
you invest in balanced or hybrid mutual funds

• Difficult Phases
Although long-term investors seldom endure losses, you may have
to suffer a capital loss if you accidentally invest before a bad
phase. Mutual fund returns are never guaranteed. Hence, it is
wise to know a little about the economy and the fund
performance before investing.
The different types of mutual funds available can be classified
broadly based on structure, asset class, and investment goals.

1. Structure of Mutual Funds

Based on the ease of investment, mutual funds can be:

• Open-ended funds:
These funds do not limit when or how many units can be
purchased. Investors can enter or exit throughout the year at the
current net asset value. Open-ended funds are ideal for investors
seeking liquidity.
• Close-ended funds:
Close-ended funds have a pre-decided unit capital amount and also
allow purchase only during a specified period. Here, redemption is
bound by the maturity date. However, to facilitate liquidity,
schemes trade on stock exchanges.
• Interval funds:
A cross between open-ended and close-ended funds, interval mutual
funds permit transactions at specific periods. Investors can choose to
purchase or redeem their units when the trading window opens up.

2. Mutual Fund Asset Class

Depending on the assets they invest in, mutual funds are categorized
under:
• Equity funds:
Equity funds invest money in company shares, and their returns
depend on how the stock market performs. Though these funds can
give high returns, they are also considered risky.
• Debt funds:
Debt funds invest money into fixed-income securities such as corporate
bonds, government securities, and treasury bills. Debt funds can offer
stability and a regular income with relatively minimum risk.
• Hybrid funds:
Hybrid funds invest in both debt and equity instruments so as to balance
out debt and equity. The ratio of investment can be fixed or varied,
depending on the fund house.
• Solution-oriented funds:
These mutual fund schemes are for specific goals like building funds for
children’s education or marriage, or for your own retirement. They come
with a lock-in period of at least five years.
• Other funds:
Index funds invest based on certain stock indices and fund of funds are
categorized under this head.
3. Mutual Funds based on Investment Goals

You can also choose a fund based on your financial objective:

• Growth funds:
Funds that invest primarily in high-performing stocks with the aim of
capital appreciation are considered growth funds. These funds can be an
attractive option for investors seeking high returns over a long period.
• Liquidity-based funds:
Some funds can be categorized based on how liquid the investments are.
Ultra-short-term and liquid funds, are ideal for short-term goals, while
schemes like retirement funds have longer lock-in periods.
• Capital protection funds:
These funds invest partially in fixed income instruments and the rest
into equities. This could ensure capital protection, i.e., minimal loss, if
any. However, returns are taxable.
• Pension Funds:
Pension funds invest with the idea of providing regular returns after a
long period of investment. They are usually hybrid funds that give low
but have potential to provide steady returns in future.
 BANKING
OMBUDSMAN
Introduction

 The banking ombudsman scheme is like a fast track and inexpensive

forum from the customers of the bank for resolution of their
complaints regarding the services rendered by the banks in india.
The banking ombudsman creates an onus through section 35A of the
banking regulation act,1949 tom appoint a banking ombudsman, who
is a senior official not below the rank of chief general manager
appointed by the reserve bank of india. the scheme came into effect
from the year 1995 and presently the current operational scheme is
banking ombudsman scheme(amended up to july1,2017) . The main
aim of the scheme is to have a resolution scheme related to the
services rendered by the banks in case the customer is not satisfied
with the same and in case where there is no solution provided by the
banks for settlement of such complaints and disputes. The banking
ombudsman scheme extends to the whole country and cover the
business of banking industry in the country that mean all scheduled
commercial banks, rural banks, cooperative banks will come under
the purview of the scheme.
GROUNDS ON WHICH COMPLAINTS CAN BE FIELD
Some of the grounds on which these complaints can be field by the aggrieved customers are-
[Link] or non-payment of cheques , drafts , bills etc.
[Link] acceptance of any notes or coins of the indian currency without giving any sufficient cause.
[Link] some amount of commission of any service mentioned in the above point which the bank does
not have the authority of,
[Link]-payment or delay in payment of the inward remittances,
[Link] adherence in regards to the working hours of the banks,
[Link] of failure to provide a banking facility, earlier promised by the officials or the agents of the bank,
[Link] to open deposit accounts without any valid reason,
[Link] or non-remittance of money or any other bank related matters regarding the non-residant indians,
[Link] of any other additional charge without any previous intimation to the customers,
[Link]-adhernce to the instructions and guidelines given by the reserve bank in relation to use of ATM or
debit cards , like-account debited but cash not dispensed by the ATMs, less cash dispensed by the ATM
machine , stolen cards , Account debited twice for one transaction done on the abovementioned factors,
[Link]-adherence to the guidelines given by the reserve bank in relation to the credit card facilities
provided by the banks , like-wrong billings on the card, charging of excess annual fees against the pre-
stated fee, unsolicated calls for add on cards etc.
[Link] approach by the recovery agents on behalf of the banks or not following the guidelines
are given by the reserve bank in regards to the functioning of the recovery agents.
[Link] other guidelines started by the reserve bank .
Procedure to register a complaint  Who can file the complaint?
The complaint may , himself or through an
authorised representative make a complaint
Filling of the complaint
to the banking ombudsman within the
jurisdiction the bank is located.
The procedure to register a complaint It should be noted that in cases of credit card
regarding any of the banks by the customers complaints the complaint will be filled with
starts from the process of identifying the the banking ombudsman within whose
sort of deficiency of service from the list territorial jurisdiction the billing address of
above mentioned. the complaint or the customer is allocated.
Details to be provided in the
complaint
The complaint shall be made in writing or in electronic mode (in the case the
print out of such complaint shall be taken as a record by the ombudsman) and
shall be dully signed by the complainant or his representative in a specified
from which shall state the name and address of the complainant, name and
address of the bank or office of the bank against which the complaint has to be
field, the facts of the complainant and the relief which is sought from the
ombudsman through the complaint. The complainant is required the file copies
of the document if there are any, to support his claim of the complaint and for
the complaint to be maintainable under subclause(3) of the abovementioned
clause.
Duties of the banking ombudsman
while dealing with a complaint
 The award given should accompany  Banking ombudsman shall not have
the reasons on which the award the power to pass an award directing
was given and also should contain payment of an amount towards
the directions , if any, to the bank compensation which is more than
to the complainant as a the actual loss suffered by the
compensation for the loss suffered complainant as a direct
by him due deficiency in service by consequence of the act of omission
the bank. or commission of the bank , or two

million rupees whichever is lower.
The banking ombudsman has to take
into account the prevalent laws and  The banking ombudsman may also
directions, guidelines and award compensation in addition to
instructions given by the reserve the above but not exceeding rupees
bank from time to time. 0.1 million to the complainant ,
taking into account the loss of the
complainant’s time, expenses
incurred by the complainant,
harassment and mental agony
suffered by the complainant.
Appeal
THE PARTY OF THE COMPLAINANT
AGGRIEVED BY THE AWARD GIVEN BY
THE OMBUDSMAN OR BY THE REJECTION
OF THE COMPLAINT MAY WITHIN THIRTY
DAYS OF THE DATE OF RECEIPT OF
COMMUNICATION OF THE AWARD , MAY
APPEAL BEFORE THE APPELLATE
AUTHORITY.
 CONCLUSION

The banking ombudsman scheme is a tool in the hands of the

customers of the banking industry that can be used by them
whenever there is a deficiency in service on the part of the bank or
when the customers are not satisfied with the services provided by
the banking industry. The scheme has been a major benefit to the
customers as it has given them the power to keep the banks in a
check for the services they are providing.
CONTENTS

•INTRODUCTION
•DEFINITION
•CAUSES OF INFLATION
•EFFECTS OF INFLATION
•TYPES OF INFLATION
•CONTROLLING INFLATION
MEANING OF INFLATION

Inflation is a rise in the general level of

price of goods and services in an
economy over a period of time. When
the general price level rises, each unit of
currency buys fewer goods and services
DEFINITIONS

•Sustained increase in general price

level
•During the period of inflation circulation
of money increases and value of money
decreases
CAUSES OF INFLATION

•High growth rate of population

•Increase in public expenditure
•Increase in money supply
•Growth of black money
•Tax reduction
•Exports
•Trade union
EFFECTS OF INFLATION

•Investment
•Interest rates
•Exchange rates
•Unemployment
•Stock
•Decrease in the purchasing power
•Change the allocation of income
TYPES OF INFLATION

•DEMAND PULL INFLATION : Demand-pull inflation is

asserted to arise when aggregate demand in an
economy is more than aggregate supply.

•COST PULL INFLATION : Cost-push inflation is a

purported type of inflation caused by increases in the
cost of important goods or services where no suitable
alternative is available.

•OPEN INFLATION : Open inflation happens in a

completely free market where there is no form of
control on prices, factors of production, consumption,
import or export.
•REPRESSED INFLATION : A condition in which
direct economic controls (as price and wage
controls and rationing) are utilized to prevent
inflation without removing the underlying
inflationary pressures.

•HYPER INFLATION : Hyperinflation is a very

high and typically accelerating inflation. It
quickly erodes the real value of the local
currency, as the prices of all goods increase.
CONTROLLING INFLATION

There are broadly two ways of controlling

inflation in an economy :
1. Monetary Measure
2. Fiscal Measure

MONETARY MEASURE
The most important and commonly used method
to control inflation is monetary policy of the
Central Bank. Most central banks use high
interest rates as the traditional way to fight or
prevent inflation.

Monetary measures used to control inflation

include:
1. Bank rate policy
FISCAL MEASURES

Fiscal measures to control inflation

include taxation, government
expenditure and public borrowings.

Fiscal measures used to control inflation

include:
•Increase in Taxes
•Increase in savings
•Surplus budgets