BANKING THEORY LAW AND
PRACTICES
SYLLABUS
B.Com. Banking Theory Law and Practice
UNIT-I : Introduction to Banking History of Banking- Components of Indian banking -Indian Banking System-Phases of development-
Banking structure in India-Payment banks and small banks-Commercial Banking Definition-Classification of banks. Banking System -
Universal banking- Commercial Banking functions- Role of Banks in Economic Development. Central Banking-Definition –Need Principles-
Central Banking Vs Commercial banking-Functions of Central bank.
UNIT-II: RBI Establishment-objective-Legal framework-Functions-SBI-Origin and History-Establishment Indian subsidiaries-Foreign
subsidiaries-Non-Banking-Subsidiaries-Personal banking International banking-Trade Financing - Correspondent banking. Co-operative
banks-Meaning and definition-Features-Co-operative banks vs Commercial banks-Structure.-NBFC-Role of NBFCRBI Regulations-Financial
sector reforms- Sukhmoy committee 1985-Narasimham committee I and II-Prudential norms: capital adequacy norms-classification of assets
and provisioning.
UNIT-III: E-Banking Meaning-Services-e-bankingandFinancialservices-Initiatives-Opportunities-Internet bankingMeaning-
InternetbankingVsTraditionalbanking-Services-Drawbacks-Frauds in Internet banking. Mobile banking – Anywhere Banking-Any Time
Banking- Electronic Mobile Wallets. ATM Evolution -Concept-Features - Types-. Electronicmoney-Meaning-Categories-Meritsofe-
moneyElectronicFunds Transfer (EFT)system - Meaning- Steps – Benefits-Monetary policies- final sector reforms- sakmoy chakrevarthy
commmittee 1985- Narasiman Committee I & II prudential norms capital adequacy norms- classification of assets & provisionary meaning
Structure of Interest rates (short and long term)-impacts on saving and borrowings.
UNIT IV: Bank Account Opening – Types of Accounts-FDR-Steps in opening Account-Saving vs Current Account- ‘Donatio Mortis Causa’ -
Passbook-Bank Customer Relationship-Special Types of currents - KYC norms. Bank Lending – Lending Sources-Bank Lending Principles-
Forms of lending-Loan evaluation process-securities of lending-Factors influencing bank lending – Negotiable Instruments –Meaning –
Characteristics-Types. Crossing – Definition – Objectives- Crossing and negotiability-Consequences of Crossing.
UNIT-V: Endorsement Meaning-Components-Kinds of Endorsements - Cheques payable to fictitious person Endorsement by legal
representative –Negotiation bank-effect of endorsement-Rules regarding endorsement. Paying banker-Banker’s duty-Dishonoring of Cheques -
Discharge of paying banks Payments of a crossed cheque payment. Collecting bankers-Statutory protection under section 85-Refusal of
cheques Payment. Collecting Banker-Statutory protection under section 131- Collecting bankers’ duty –RBI instruction –Paying Banker Vs
Collecting Banker- Customer grievances-Grievance redressal –Banking Ombudsman.
UNIT I - BANKING AN OVERVIEW
Origin and development of banking in India
Functions of Banks
Credit creation
Techniques of Credit creation and its limitations
Commercial banks
Role in the Indian money market
Reserve bank of India
Monetary policy
Instrument of Credit control operation
Relation to cooperative banks and credit institutions.
WHAT IS A BANK?
A bank is a financial institution that provides banking
and other financial services to their customers.
A bank is generally understood as an institution which
provides fundamental banking services such as accepting
deposits and providing loans.
NEED FOR BANK
Security to savings of customers
Control supply of money and credit
To encourage public confidence in the working of the
financial system, increase savings speedily and
efficiently.
Avoid focus of financial powers in hands of few
individuals and institutions.
To set equal norms and conditions (i.e. rate of interest,
period of lending etc) to all types of customers.
CLASSIFICATION OF BANKING
INDUSTRY IN INDIA
FUNCTIONS OF BANK
RESERVE BANK OF INDIA
CENTRAL BOARD OF DIRECTORS
GOVERNOR
DEPUTY GOVERNORS
EXECUTIVE DIRECTORS
PRINCIPAL CHIEF GENERAL MANAGER
CHIEF GENERAL MANAGERS
GENERAL MANAGERS
DEPUTY GENERAL MANAGERS
ASSISTANT GENERAL MANAGERS
MANAGERS
ASSISTANT MANAGERS
SUPPORT STAFF
SUBSIDIARIES OF RBI
Deposit Insurance And Credit Guarantee Corporation
(DICGC)
National Housing Bank (NHB)
Bharatiya Reserve Bank Note Mudran Private Limited
(BRBNMPL)
National Bank For Agriculture And Rural Development
(NABARD)
FUNCTIONS OF RBI
TraditionalFunctions
Issue of Currency Notes
Banker to Other Banks
Banker to the government
Exchange Rate Management
Credit Control Function
FUNCTIONS OF RBI
Promotional Functions
Development of financial system
Development of Agriculture
Provision of Industrial Finance
Provisions of Training
Collection of Data
Publication of Reports
Promotion of Banking Habits
Promotion of export through refinance
FUNCTIONS OF RBI
Supervisory Functions
Granting license to banks
Bank Inspection
Control over NBFIs
Implementation of the Deposit Insurance Scheme
CREDIT CREATION
Bank deposits are raised through
Primary Deposits
Derivative deposits
Methods of Credit Creation
Loans and advances
Money at Call and Short Notice
Discounting of bills
Investments
LIMITATIONS OF CREDIT CREATION
Adequate cash reserve
Availability of securities
Quantity of money in circulation
Attitude of people
Policy of the central bank
Nature of business conditions
Leakages
Behaviour of other banks
Use of cheque
CREDIT CONTROL
To control the credit creation power of commercial bank
in order to control inflationary and deflationary pressures
within this economy.
METHODS OF CREDIT CONTROL
MONETARY POLICY
Cash Reserve Ratio
Every bank maintains a certain % of their total deposits with RBI in the form of Cash and Net demand & Time
liabilities. Every Bank has to pay the amount to RBI on every 15 Days.
Statutory Liquidity Ratio (SLR)
Every bank has to maintain a certain % of their total deposits in the form of (Gold + Cash + bonds + Securities)
with themselves at the end of every business days.
Bank Rate
Bank rate is also termed as ―Discount Rate‖ The rate through which RBI charges certain %
for providing money to other banks without any security for Long period of time for 90 Days
MSF (Marginal Standing Facility)
MSF is the rate through which bank can borrow funds for Short time – Overnight basis.
Repo Rate
Repo rate is the rate through which RBI lends money to commercial bank with security for
Short period of time in the event of short fall of funds.
Reverse Repo Rate
Reverse Repo rate is the rate through which Commercial Bank lends money to Central Bank
of India i.e. RBI, for Short period of time.
