- List of Financial Institutions in India
- NABARD ( National Bank for Agriculture and Rural Development )
- Financial Institutions in India
- Top 8 Financial Institutions of India
- Top 10 Financial Institutions of India 2018 - NABARD Grade A - RBI Grade A - SSC
- Financial institutions in india pdf files
- SIDBI ( Small Industries Development Bank of India )
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This article throws light upon the eight important financial institutions that operate in India. The financial institutions are: 1. Reserve Bank of India 2. Commercial Banks 3. Universal Banks 4. Unit Trust of India 7. Mutual Funds 8. Investment Companies.
List of Financial Institutions in India
The Reserve Bank of India is the nerve centre of the monetary system of the country. The position of the bank is that it is a State-owned institution. The Reserve Bank of India is empowered to control, regulate, guide and supervise the financial system of the country through its monetary and credit policies.
This authority was derived from the various acts. The Reserve Bank of India has several functions to perform. It is also a banker to the commercial banks, State co-operative banks and financial institutions of the country. It is the only bank engaged in the issue of legal tender currency.
NABARD ( National Bank for Agriculture and Rural Development )
RBI also performs development functions and controls the monetary policy of the country. Amongst the development or promotional roles it has improved the banking business by integrating the organized and unorganized sector of the money market. It also tried to bring appropriate geographical diversification of bank branches.
To give adequate security to banks and their customers, it created the Deposit Insurance Corporation in It provides agricultural credit through State Co-operative Banks to Co-operative Banks for short-term purposes for marketing of crops. In the institutional financial structure, the RBI played an important development role.
Financial Institutions in India
All the other financial institutions and development banks have been provided technical consultancy, financial help and guarantees at the times of formation and growth. The RBI has under its command the entire economic situation in the country. By using these systems, the RBI charges differential interest rates from different banks to raise the cost of refinance on the basis of the level of liquid assets maintained by different banks without changing the level of bank rate to maintain stability in the government securities market.
RBI also operates a Credit Authorization Scheme since to regulate the volume and distribution of bank credit. The RBI also uses selective credit controls on sensitive commodities like food grains, cotton and oilseeds and since it has resorted to a reserve ratio technique for controlling the monetary policy which is the cash ratio maintained by banks. Let us now give a brief description of the commercial banks in India.
Since , the RBI has carried out many reforms and promotional measures to strengthen the banking and financing system in India. It has focused on efficiency and profitability of banks and has streamlined measures to bring about the discipline in protection of depositors. The RBI has issued guidelines on asset classification, income recognition and capital adequacy of commercial banks.
Top 8 Financial Institutions of India
The RBI has announced the entry of new private sector banks since Jan. It has also allowed the entry of foreign banks and joint sector banks. The RBI has also in pursuance of Narsimhan Committee report gradually reduced the cash reserve ration and statutory liquidity ratio of banks. It has tried to reduce control and allowed financial institutions and banks to mobilize their resources according to capital market related arrangements.
It has deregulated the interest rates as a measure of liberalization since There are many kinds of banks. These are categorized under scheduled and non-scheduled.
Commercial banks can be both scheduled and non-scheduled and in the public and private sector. Further, they can be Indian or foreign banks. Scheduled banks are required to maintain a certain amount of reserves with the RBI in return for which they have the facility of financial accommodation and remittance facilities at concession rates from the RBI.
Banks in India have been traditional in providing credit to industry. They have given short-term credit for financing working capital requirements.
They have provided finance through loans, cash credits, and overdrafts, demand loans, purchasing and discounting commercial bills, installment and hire purchase credit. Bank credit in India has often been used for holding excessive inventories for earning speculative profits which have been responsible for inflationary pressures in the country.
Top 10 Financial Institutions of India 2018 - NABARD Grade A - RBI Grade A - SSC
Banks in India have also given credit for long-term purposes since They provide demand loans for short-term and term loans for long-term. In , the Tandon Committee bifurcated the demand loans into demand credits and variable credits.
The demand credit is to have a minimum level of borrowing which the borrower is expected to use throughout the year.
Financial institutions in india pdf files
The borrower is supposed to pay interest on the entire amount of demand loan and on the utilized part alone only on the Variable Cash Credit. The Tandon Committee suggested that the rate of interest on demand loan should be lower by one per cent than the rate on variable cash credit. Term loans for long-term are advanced for purchasing fixed assets. Commercial banks have the facility of refinancing themselves from the IDBI but very few banks used this facility till Term lending by banks has increased quantitatively since Apart from term lending and demand lending, the commercial banks are engaged in other functions.
A commercial bank helps new issues in more than one way. As a banker to the issue, it supplies application forms and earns a brokerage.
It also makes underwriting commitments with those companies which are backed by strong ownership and management groups. Banks, however, have little interest in holding these securities for long. Banks provide funds to people in the course of travel through traveller cheques for purposes of security and ease. Credit cards can be used instead of giving cash at a particular place. These credit cards system is a form of giving credit to the customers and the ability to move with confidence without having to carry cash.
This activity provides technical consultancy, financial help, and promotion of new issues and revival of sick units.
SIDBI ( Small Industries Development Bank of India )
Since banks have become active participants both in the capital market as providers of finance as well as promoter of industries on turnkey basis. They are promoting industry by advising sick units on the methodology of revival as well as by giving development loans at a rebate.
Another important development is that commercial banks in India have also started mutual funds. State Bank was the first to go into the capital market and showed direction to the other commercial banks. Canara Bank and later on Indian Bank also started mutual funds.
Commercial banks have entered into the financial service of factoring. This is a service whereby banks undertake to collect the debts of their clients by financing them on their credit sales or accounts receivables. Banks take a service charge by taking a discount from the bills. Banks have begun to offer credit to consumers for their purchases.
Cars and personal loans as well as loans for purchasing household goods are being offered by banks. In fact, the retail banking has gone to the extent that banks make frequent calls to people to offer loans.
A notification was issued by government that customers could opt for do not disturb registry after which banks would not be permitted to call customers. In fact, they would have to pay a penalty. Plastic money or the use of credit and debit cards has become an important feature of banks. Customers can purchase goods through these cards. Money can be withdrawn through ATMs with the use of the cards. In a debit card, money will be debited directly to the customers account but in a credit card a customer is sent a statement and he pays for the credit taken by him after a gap of 30 days.
The Narsimhan Committee was set up in to improve and strengthen bank services in a deregulated environment in India. It analysed the banking system and recommended certain reforms to make it internationally competitive. In , RBI issued guidelines for capital adequacy norms, income recognition and classification of assets. These changes were expected to bring about international acceptance and professionally managed structure of the banking system.
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Certain changes were also brought about in order to simplify the lending rates of banks. Multiple interest rates were reduced and simplified and market determined rate was to be preferred. Taking into consideration the new economic policy, the cash reserve ratio and statutory liquidity ratio were reduced to bring about macroeconomic stability. Repayment of loans and interest payments attached to them were also streamlined.
Through the introduction of a special recovery tribunal, the loan recovery process was activated and expedited. As a step toward improvement, new banks have been open in the private sector and no further nationalization of banks would take place. Banks could open new branches without the approval of the RBI and make improvements to their existing working operations.
The entry of foreign banks is permitted in India subject to RBI guidelines and controls. Joint ventures between India and Foreign are also allowed and such banks take interest in the financial services like merchant banking and leasing operations.
With the implementation of these changes, the focus of banks has changes from target oriented credit distribution to improving their profitability. To bring about quality of service to customers, computerization has been introduced and services have been upgraded.
A board of financial supervision has been set up under Reserve Bank of India to supervise the functioning of banks and financial institutions. To improve profitability, banks have been permitted to increase their share in private placements of debentures and shares of blue chip companies from 1. To sum up, the diversification of banking function can be said to be a natural corollary to the changing concepts of lending and the need to industrialization through advance lending concepts.
Basel I is already been implemented and Basel II norms have to be implemented by the banks in for bringing about capital adequacy and income asset recognition. However, with the losses in subprime loans in the USA the effects are spreading in different countries.