Recent trends in Banking RK super final

RECENT TRENDS IN BANKING Dr.Karuppasamy Ramanathan M.Com.,MBA.,M.Phil.,Ph.D., Professor & Educational Consultant.

I. PRIMARY FUNCTIONS OF A BANK A. ACCEPTING DEPOSITS i. Demand Deposits (CASA) - Savings Bank A/C o A/C for Salary Group o Kids savings A/C o Mahila A/C for women (KVB Sakthi) 0 Senior Citizen A/C o Jan Dhan A/C o NRI/NRO A/C o Army Personnel A/C - Savings Bank Interest set free by RBI (Generally @4% p.a) - Per half yearly only 90 transactions are allowed generally..

- Current A/C 0 For Business people – Firms, Companies, Corporate o For Individuals 0 For Trust/Society o For Non Trading Organization - For Current A/C no interest is paid - Mainly for day to day operations. ii. Time Deposits - Accepted for fixed period ranging from 7 days to 10 years. - Interest rate set free by RBI – At the discretion of respective bank. - Different types – FD, Cumulative, Tax Savings, Flexi Deposits, Bulk Deposits, Auto Sweep/Sweep-in-Sweep-out, Non Callable Deposits (No PreCls allowed) INTEREST PAID ON DEPOSITS IS AN EXPENSE TO THE BANK.

B. GIVING LOANS AND ADVANCES i. Advances – Any bank credit for a period upto 1 year – Cash Credit Advance, Over Draft Facility, Bill Discounting. i. Loans – Any bank credit beyond 1 year and for a maximum period of 30 years. - Demand loan for 3 years / 5 years - Term Loan (Short/Medium/Long Term) – 1 to 3 yrs/Above 3 to 7 yrs/Above 7 yrs up to 30 yrs (eg: Machinary TL for 1 to 3 yrs,Educational TL for 7 yrs, Housing TL for 20-30 yrs) INTEREST RECEIVED ON LOANS AND ADVANCES IS AN INCOME TO THE BANK NII (Net Interest Income) – difference between Interest Expense and Interest Income NIM (Net Interest Margin) – NII / Loans & Advances X 100 - Percentage representation of NII – Financial Indicator of the Bank (Indian Standard = 3% and above).

• Another Classification of Loans and Advances * Fund Based Limits: - For Agriculturalist – ACC, AGL, KCC, ATL - For SSI / MSME / Corporate Customers – CC, OD in Current A/C, Bill/Cheque discounting, LAP/LAMP - For Exporters – EPC/FBN, FCPC/EBR - For Importers – CC/TL, Buyer’s Credit / Suppliers Credit - For Retail Customers – Vehicle Loan, ETL, HTL, Personal Loan, Consumer Loan, OD in Current Account - For Pensioners/Senior Citizens – Pension Loan, Medical Loan, Reverse Mortgage * Non Fund Based Limits: - Issue of Letters of Credit (Commission as Income) - Issue of Financial Guarantee (Guarantee fee as Income) - Derivatives (Fee as Income).

II. AGENCY FUNCTIONS • Bank act as an agent for its customers while offering the above mentioned services • And commission is the income. A.Differnet Agency Services: # Collection of Cheques and Bills – For Cheque Clearance, Banks now follow CTS 2010 Technology # Government Business – For Central and State Government # Forex Business (Exchange Profit as Income).

III. ANCILLARY FUNCTIONS OF A BANK @ Remittances – Issue of MT/TT/DD/BC (Traditional Methods) @ Issue of NEFT/RTGS/ECS – Electronic Payment Methods of NPCL (Exchange is the income since the service offered is transfer of funds) @ Safe Deposit Lockers @ Safe Custody of Articles @ Portfolio Management Services (PMS) @ Wealth Management Services (WMS)-e.g. SBI Exclusif Branch @ Credit Counseling and Advisory Services – SIP/SWP/STP/MIP/FMP COMMISSION/ EXCHANGE / FEE are income for offering above services.

IV. UNIVERSAL BANKING SERVICES • Other wise called as Cross Selling of Products • Offering all services under one roof Different Services: # Bancassurance – Selling of Insurance policies – Life / Non Life as Corporate Agents (Insurance Broking Model is offing) # Sale of Mutual Fund Products of various mutual funds # Opening and Maintenance of Demat Accounts on Account of NSDL/CSDL # Sale of Gold Coins –India Gold Coins (IGC) minted by MMTC #Portfolio Management Services (PMS) # Wealth Management Services (e.g. SBI EXCLUSIF) # Financial Literacy and Credit Counseling/Advisory services (FLCC).

V. LATEST TRENDS IN BANKING E – Services OR DIGITAL BANKING • E Services are also called Digital Transformation of Banks (Digital Banking) • Providing Alternate Delivery Channels apart from present Brick and Mortar Branch Model • Computerization of Banks and Branches - LAN from 1995 - WAN from 2005 – Any where / Any time Banking • ATM - Onsite/Offsite ATM - Stand Alone / Networked ATM (All ATMs of All banks are linked to NFS of NPCIL of Hyderabad) - Online / Offline ATM - WLA (White Label ATM of NBFCs) - Micro ATM (POS handled by BCs) - Mobile ATM (IOB).

• Plastic Money 1. Debit Card 2. Credit Card 3. Kisan Credit Card 4. Smart Card 5. EMV – Chip based Cards • E – Corner/E – Lounge/E - service Centers (ATMs, CDMs, Recyclers, Passbook Printer, Enquiry Terminals, Cheque collection Machines are installed – Fully automated) • Internet Banking 1. Login through respective bank web site. 2. Use of Password/PIN/OTP • Mobile banking / SMS banking • Tele banking / IVRS – Interactive Voice Response System.

• Digital Branches (Self Service Branches) 1. POCKETS of ICICI bank 2. SBI inTouch branches • E – Wallets 1. Buddy of SBI 2. Ypay of KVB • Paperless Banking – Green Channel Counter • Door Step Banking – BC (Business Correspondent) Model –also called Bank Mitra with POS Machines (Micro ATMs) • (continued in next slide/screen).

VI. FINANCIAL INCLUSION • Opening of No Frill Accounts (zero balance accounts) • Service through Business Correspondents (BC) and POS machines (Micro ATMs) • Opening of PMJDY ( Prime Minister Jan Dhan Yojana A/Cs) 1. Issue of RuPay Cards of NPCIL, Hyderabad 2. Life Insurance Cover for Rs.30,000/- 3. Accident Insurance Cover for Rs.1,00,000/- • Direct Benefit Transfer (DBT) credits to these A/C • Rs.5,000/- Clean OD in these A/C after 6 months of satisfactory operation and maintenance. • PM Suraksha Bhima Yojana – Accident Cover for Rs.2,00,000/- @ premium of Rs.12/- p.a • PM Jeevan Jothi Bhima Yojana – Life Cover for Rs.2,00,000/- @ premium of Rs.330/- p.a • APY – Atal Pension Yojana – Pension scheme for laborers in unorganized sector.

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