money and banking ajahar husai ndim
TRANSCRIPT
04/12/2023MONEY & BANKING
1
MONEY AND
BANKING
04/12/2023MONEY & BANKING
2
AJAHAR 187 AMRITA 219JAYATI 214ABHISHEK 182SUSHEEL 178HITESH 213
• PRESENTED BY -
04/12/2023MONEY & BANKING
3
CONTENTS
• DEFINITION OF MONEY• FUNCTION OF MONEY• KIND OF MONEY• MEASUREMENT OF MONEY• USE OF MONEY• CHARACTERISTICS OF MONEY• KEY TERMS OF BANKING• HISTORY OF BANK• ROLE OF BANK• TYPES OF BANK• BANKING STRUCTURE IN INDIA• IMPORTANTS BANKS IN INDIA• CURRENT ASSETS • CURRENT SHARE HOLDER EQUITY
04/12/2023MONEY & BANKING
4
“Money is whatever is generally accepted in exchange for goods and services — accepted not as an object to be consumed but as an object that represents a temporary abode of purchasing power to be used for buying still other goods and services.”
— Milton Friedman (1992)
DEFINITION OF MONEY
04/12/2023MONEY & BANKING
5
• anything commonly accepted
in exchange for goods/services• many objects throughout history
04/12/2023MONEY & BANKING
6
examples
• livestock• metals• cigarettes• grain• shells
04/12/2023MONEY & BANKING
7
money, income, & wealth
• money– what is accepted as payment
• income – earnings during time period (year)
• wealth– accumulated assets at pt. in time
04/12/2023MONEY & BANKING
8
examples
• I own $2 million in diamonds. – I am wealthy– I have no money
04/12/2023MONEY & BANKING
9
• I win $25 million in lottery• I quit my job
– I am wealthy– I have a lot of money– my income is zero
04/12/2023MONEY & BANKING
10
• software engineer• earnings $100,000/yr
– high income– no wealth
04/12/2023MONEY & BANKING
11
How does money serve the needs of our society?
• Money provides means for comparing values of goods and services.
• Money also serves as a store of value.• Without money, we wouldn’t be able to get the
things that we need and want.
04/12/2023MONEY & BANKING
12
• A medium of exchange: an asset used to buy and sell goods and services
• A store of value: an asset that allows people to transfer purchasing power from one period to another
• A unit of account: a unit of measurement used by people to post prices and keep track of revenues and costs
• Money as a standard of deferred payment
FUNCTION OF MONEY
04/12/2023MONEY & BANKING
13
Kinds of Money
Metallic coins1. Full bodied money coins2. Token coins
Paper money3. Representative paper money4. Convertible paper money5. Inconvertible paper money
04/12/2023MONEY & BANKING
14
• commodity money:
It has its own value as a good
-- gold & silver coins
04/12/2023MONEY & BANKING
15
• Fiat money:
No value other than fact that it’s accepted in exchange for goods and services
04/12/2023MONEY & BANKING
16
• United States money today is fiat money, which has value because a government has decreed that it is an acceptable means to pay debts.– Citizens have confidence that the money will be
accepted.– Because the Federal Reserve controls the supply, it
remains in limited supply, which makes it valuable.
04/12/2023MONEY & BANKING
17
U.S. money is fiat money!
• NOT backed by gold since 1934• coins do not contain silver
04/12/2023MONEY & BANKING
18
Debit or Credit cards?
• NOT money• payment mechanisms that access money
04/12/2023MONEY & BANKING
19
Measurement of Money
R.B.I. presented four measures in 1977. These are defined below in decreasing order of their liquidity.
The following measures of money supply are used by the R.B.I.
04/12/2023MONEY & BANKING
20
M1
= currency in circulation
+ demand deposits
+ checkable deposits
+ traveler’s checks
$1.4 trillion
04/12/2023MONEY & BANKING
21
M2
= M1
+ savings deposits
+ small time deposits
+ retail money market deposits
$7.3 trillion
04/12/2023MONEY & BANKING
22
M3
= currency with the public+ Demand Deposits with banks+ time Deposits with banks+ other Deposits with the R.B.I.
04/12/2023MONEY & BANKING
23
Components of M1
1%
23%
28%
48%
currency
traveler's checks
demand deposits
other checkable
04/12/2023MONEY & BANKING
24
Components of M2M1
22%
small CDs20%savings
39%
money market19%
04/12/2023MONEY & BANKING
25
Money Growth and Inflation
04/12/2023MONEY & BANKING
26
Three Uses of Money
• Money is anything that serves as a:– Medium of exchange– A unit of account– A store of value
04/12/2023MONEY & BANKING
27
The Characteristics of Money
• Durability• Portability• Divisibility• Uniformity• Limited supply• Acceptability
04/12/2023MONEY & BANKING
28
Durability and Portability
• Durability• Money must be able to withstand
the physical wear and tear that comes with being used over and over again.
• Portability• Money must be easily carried by
people. Paper money and coins work because they are small and light.
04/12/2023MONEY & BANKING
29
Divisibility and Uniformity
• Divisibility • Money must be easily divided into smaller
denominations.
• Uniformity • People must be able to count and measure money
accurately.
04/12/2023MONEY & BANKING
30
What Makes Money Valuable?
• There are actually several possible sources of money’s value depending on whether it is commodity money, representative money, or fiat money.
04/12/2023MONEY & BANKING
31
BANKING HISTORY
04/12/2023MONEY & BANKING
32
The First Bank of the United States
• Federalists won the first debate and in 1791, Congress established the Bank of the United States. Yet, disagreements over the Bank continued.– Antifederalists argued that the Bank was unconstitutional
and that it did not benefit ordinary people, only the wealthy.
• The Bank functioned until 1811, when its charter ran out.– State banks then took over for the Bank of the United
States, which created a great deal of chaos and confusion.
04/12/2023MONEY & BANKING
33
The Second Bank of the United States• To eliminate the chaos, Congress charted the Second
Bank of the United States in 1816.• Stability was restored but many were still wary of the
Bank’s powers.– In 1832, when
Congress tried to renew the Bank’s charter, President Andrew Jackson vetoed the renewal.
04/12/2023MONEY & BANKING
34
DEFINATION• bank: an institution for receiving, keeping,
and lending money • national bank: a bank chartered by the federal
government• bank run: a widespread panic in which many
people try to redeem their paper money at the same time
• greenback: a paper currency issued during the Civil War
04/12/2023MONEY & BANKING
35
• gold standard: a monetary system in which paper money and coins had the value of certain amounts of gold
• central bank: a bank that can lend to other banks in times of need
• member bank: a bank that belongs to the Federal Reserve System
• foreclosure: the seizure of property from lenders who are unable to pay back their loans
04/12/2023MONEY & BANKING
36
ROLE OF BANKSPayment systemPay deposits on demandPayment through chequesFacilitate movement of moneyCirculatory system of the economyFinancial services providerProducts of mutual funds &insurance companiesCollection of utility bills
04/12/2023MONEY & BANKING
37
• The banking industry includes:• commercial banks, • savings and loans, and,• credit unions.
The Business of Banking
• Banks are profit-seeking institutions:• Banks accept deposits and use part of
them to extend loans and make investments. Income from these activities is their major source of revenue.
04/12/2023MONEY & BANKING
38
How Banks Create Moneyby Extending Loans
• The lower the percentage of the reserve requirement, the greater the potential expansion in the money supply resulting from the creation of new reserves.
• The fractional reserve requirement places a ceiling on potential money creation from new reserves.
• The actual deposit multiplier will be less than the potential because: • some persons will hold currency rather than
bank deposits, and, • some banks may not use all their excess
reserves to extend loans.
04/12/2023MONEY & BANKING
39
TYPES OF BANKS
Commercial bank Government bankPrivate bankSaving bankCooperative bankInvestment bankSpecialized bankRetail bank
04/12/2023MONEY & BANKING
40
COMMERCIAL BANK It helps to mobilize the saving of the communityTo make them available to the entrepreneursTo ensure safety with liquidityBank assures all the funds can be drawn back in case of
need
04/12/2023MONEY & BANKING
41
Functions of Commercial Banking
• Banks provide services and pay interest to attract checking, savings, and time deposits (liabilities).
• Most of these deposits are invested and loaned out, providing interest income for the bank.
• Banks hold a portion of their assets as reserves (either as cash or deposits with the Fed) to meet their daily obligations toward their depositors.
04/12/2023MONEY & BANKING
42
Commercial bank in india1950- 645 banks and 4,800 branch office
1969- 14 major commercial bank is nationalized
1993- 2 more bank merged
At present- 19 nationalized bank in india
04/12/2023MONEY & BANKING
43
DRAWBACK OF COMMERCIAL BANK
Growth is less Regional imbalanceQuality service is poorNo proper experts to improve public sectors banks
04/12/2023MONEY & BANKING
44
Government bank
government has a major stake usually need to emphasize on social objectives than on profitability.
Central bank , RBI
Private bank owned, managed and controlled by private promoters free to operate as per market forces .
City union , bank of rajasthan
04/12/2023MONEY & BANKING
45
Financial institution that assists individuals, corporations and governments example - M&T bank
Investment banking
Governed by the provisions of State Cooperative Societies Act i.e., agricultural financing bank in India.
Cooperative bank
04/12/2023MONEY & BANKING
46
CENTRAL BANKOther banks are largely profit seeking institutions ,the
Central bank is notIt acts as the organ of the stateOther bank have largely public dealing ,the central bank’s
dealing are with governments, central & state banks & other financial institutions
04/12/2023MONEY & BANKING
47
BANKING STRUCTURE IN INDIA
The state bank of india & its associated banksOthers nationalized banksRegional rural banksPrivate sectors commercial banksForeign banks
04/12/2023MONEY & BANKING
48
FUNCTION OF RBIIssue of currencyBankers to the governmentBankers bankCustodian of foreign exchange reserveController of creditPromotional function Collection & publication of data
04/12/2023MONEY & BANKING
49
State BANKS assets
Switzerland USB 1533 billion
United state Citi group 1484 Billion
Japan UFJ 1296 Billion
United kingdom HSBC 1277 Billion
France Credit Agricola group
1243 Billion
Current assets of top 5 bank in world
04/12/2023MONEY & BANKING
50
Country Company Share holder equity
United state Citi group 112537 $million
United state JPMorgan chase 107211 $million
United state Bank of America 101224 $million
United kingdom HSBC 98226 $million
Japan UFG 83281 $million
Top 5 banking group in the world by shareholder equity
04/12/2023MONEY & BANKING
51
THA
NK
YO
U