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Banking can be categorized on the following basis:
Retail banking refers to dealing with individuals for comparatively small amount for both deposits as well as advances. Typical retail banking products in deposlts are savings / current accounts, fixed deposits etc. In advances, retail banking products include home loans, vehicle loans, personal loans etc. Nowadays, retail banking is most popular with the banks.
WHOLE SALE BANKING
In contrast to retail banking, it refers to large scale banking with corporate, institutions etc. It covers large loans to corporate, channel financing, institutional accounts.
With the advancement of technology and computerization, the gap between retail and whole sale banking has narrowed down and same bank doing both types of banking, which is known as Universal Banking. It also means same banks doing both long term and short term financing as traditionally banks were doing only short term financing.
Whenever bad loans of a bank increase considerably, causing a threat to its stability, RBI directs that bank to restrict its investments in certain selected safe government securities only. Thus narrow banking means ‘narrow’ in the sense of engagement of funds and not in activity. The concept was introduced by S.S.Tarapore committee.
Traditionally, banks were into the business of accepting deposits and making loans. However, with the changing times, banks have taken up a variety of other functions also such as selling insurance products, mutual funds, debit / credit card business accepting variety of fees, earnest money etc. All these activities form part of para banking.
The merchant bankers are those financial intermediaries who arrange for transfer of capital funds to those borrowers who are who are looking for loans. Some common merchant banking activities are:
Management of the customers’ securities
Management of investment portfolio,
Appraisal/Management of projects
Issue management and underwriting of shares
Syndication of loans
It is banking done as per provisions of Muslim Law (Shariat). As per Shari at, paying or charging of interest is considered sin. Thus, Islamic banking prohibits payment or charging of interest. This type of banking is in practice in Arabian countries but is not allowed in India.
BANCASSURANCE (Banking + Insurance)
Bancassurance is the selling of insurance and banking products through the same channel, most commonly through bank branches. The banks cannot sell their own insurance products as they do not have the license for this. Hence, they become the corporate agent of some insurance company and sell that company’s products. It helps banks to increase the range of products to existing customers and also adds new customers. Insurance products offer very good scope for earning fee based income.
It refers to following environmental friendly practices in banking. It includes financing of environment friendly projects, financing of anti pollution plant and machinery, minimising the use of paper and electricity.