rbi gs questions

8/10/2019 RBI GS Questions

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Banking BasicsRBI: The Reserve Bank of India wasestablished on April 1, 1935 in accordancewith the provisions of the RBI Act, 1934.

RBI was nationalized in 1949 and it is fullyowned by the Government of India.

RBI was established on the recommendation of theHilton Young Commission.

RBIs FUNCTIONS:

1. Issue of currency notes2. Controlling the monetary policy3. Regulator and supervisor of the financialsystem4. Banker to other banks5. Banker to the government6. Granting licenses to banks7. Control over NBFIs (Non BankingFinancial Institutions)8. Manager of Foreign Exchange of India(also known as FOREX)

RBI & Monetary Policy:

Monetary policy refers to the use ofinstruments under the control of thecentral bank to regulate the availability,cost and use of money and credit.

The main objectives of monetary policy in India are:

Maintaining price stabilityEnsuring adequate flow of credit to theproductive sectors of the economy to

support economic growthFinancial stabilityThere are several direct and indirectinstruments that are used in theformulation and implementation ofmonetary policy.Direct instruments:Cash Reserve Ratio (CRR): The share of netdemand and time liabilities that banksmust maintain as cash balance with theReserve Bank.Statutory Liquidity Ratio (SLR): The share ofnet demand and time liabilities that banks

must maintain in safe and liquid assets,such as government securities, cash andgold.Refinance facilities: Sector-specificrefinance facilities (e.g., against lending toexport sector) provided to banks.Indirect instrumentsLiquidity Adjustment Facility (LAF): Consistsof daily infusion or absorption of liquidityon a repurchase basis, through repo


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(liquidity injection) and reverse repo(liquidity absorption) auction operations,using government securities as collateral.Open Market Operations (OMO): Outrightsales/purchases of government securities,in addition to LAF, as a tool to determinethe level of liquidity over the medium term.Market Stabilisation Scheme (MSS): Thisinstrument for monetary management wasintroduced in 2004. Liquidity of a moreenduring nature arising from large capitalflows is absorbed through sale of short-dated government securities and treasurybills. The mobilised cash is held in aseparate government account with theReserve Bank.Repo/reverse repo rate: These rates underthe Liquidity Adjustment Facility (LAF)determine the corridor for short-termmoney market interest rates. In turn, this isexpected to trigger movement in othersegments of the financial market and thereal economy.Bank rate: It is the rate at which the

Reserve Bank is ready to buy or rediscountbills of exchange or other commercialpapers. It also signals the medium-termstance of monetary policy.Key financial termsAPR: It stands for Annual Percentage Rate.APR is a percentage that is calculated onthe basis of the amount financed, thefinance charges, and the term of the loan.ABS: Asset-Backed Securities. It means atype of security that is backed by a pool ofbank loans, leases, and other assets.EPS: Earnings Per Share means the amount

of annual earnings available to commonstockholders as stated on a per sharebasis.CHAPS: Clearing House AutomatedPayment System. Its a type of electronicbank-to-bank payment system thatguarantees same-day payment.IPO: Initial Public Offerings is defined asthe event where the company sells itsshares to the public for the first time. (orthe first sale of stock by a private companyto the public.)FPO: Follow on Public Offerings: An issuing

of shares to investors by a public companythat is already listed on an exchange. AnFPO is essentially a stock issue ofsupplementary shares made by a companythat is already publicly listed and has gonethrough the IPO process.Difference: IPO is for the companies whichhave not been listed on an exchange andFPO is for the companies which havealready been listed on an exchange but


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want to raise funds by issuing some moreequity shares.RTGS: Real Time Gross Settlement systemsis a funds transfer system where transfer ofmoney or securities takes place from onebank to another on a real time. (Realtimemeans within a fraction of seconds.)The minimum amount to be transferredthrough RTGS is Rs 2 lakh. Processingcharges/Service charges for RTGStransactions vary from bank to bank.NEFT: National Electronic Fund Transfer.This is a method used for transferringfunds across banks in a secure manner. Itusually takes 1-2 working days for thetransfer to happen. NEFT is an electronicfund transfer system that operates on aDeferred Net Settlement (DNS) basis whichsettles transactions in batches. (Note:RTGS is much faster than NEFT.)CAR: Capital Adequacy Ratio. Its ameasure of a banks capital. Also known asCapital to Risk Weighted Assets Ratio(CRAR), this ratio is used to protect

depositors and promote the stability andefficiency of financial systems around theworld. It is decided by the RBI.NPA: Non-Performing Asset. It meansonce the borrower has failed to makeinterest or principal payments for 90 days,the loan is considered to be a non-performing asset. Presently it is 2.39%.IMPS: Inter-bank Mobile Payment Service.It is an instant interbank electronic fundtransfer service through mobile phones.Both the customers must have MMID(Mobile Money Identifier Number). For this

service, we dont need any GPS-enabledcell phones.BCBS: Basel Committee on BankingSupervision is an institution created by theCentral Bank governors of the Group of Tennations.RSI: Relative Strength Index.IFSC code: Indian Financial System Code.The code consists of 11 characters foridentifying the bank and branch where theaccount in actually held. The IFSC code isused both by the RTGS and NEFT transfersystems.

MSME and SME: Micro Small and MediumEnterprises (MSME), and SME stands forSmall and Medium Enterprises. This is aninitiative of the government to drive andencourage small manufacturers to enjoyfacilities from banks at concessional rates.LIBOR: London InterBank Offered Rate. Aninterest rate at which banks can borrowfunds, in marketable size, from other banksin the London interbank market.


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LIBID: London Interbank Bid Rate. Theaverage interest rate at which majorLondon banks borrow Eurocurrencydeposits from other banks.ECGC: Export Credit Guarantee Corporationof India. This organisation provides risk aswell as insurance cover to the Indianexporters.SWIFT: Society for Worldwide InterbankFinancial Telecommunication. It operates aworldwide financial messaging networkwhich exchanges messages betweenbanks and other financial institutions.STRIPS: Separate Trading for RegisteredInterest & Principal Securities.CIBIL: Credit Information Bureau of IndiaLimited. CIBIL is Indias first creditinformation bureau. Whenever a personapplies for new loans or credit card(s) to afinancial institution, they generate theCIBIL report of the said person or concernto judge the credit worthiness of theperson and also to verify their existingtrack record. CIBIL actually maintains the

borrowers history.CRISIL: Credit Rating Information Servicesof India Limited. Crisil is a global analyticalcompany providing ratings, research, andrisk and policy advisory services.AMFI: Association of Mutual Funds ofIndia. AMFI is an apex body of all AssetManagement Companies (AMCs) whichhave been registered with SEBI. (Note:AMFI is not a mutual funds regulator)FCCB: Foreign Currency Convertible Bond.A type of convertible bond issued in acurrency different from the issuers

domestic currency.CAC: Capital Account Convertibility. It isthe freedom to convert local financialassets into foreign financial assets andvice versa. This means that capital accountconvertibility allows anyone to freely movefrom local currency into foreign currencyand back, or in other words, transfer ofmoney from current account to capitalaccount.BANCASSURANCE: Is the term used todescribe the partnership or relationshipbetween a bank and an insurance

company whereby the insurance companyuses the bank sales channel in order tosell insurance products.Balloon payment: Is a specific type ofmortgage payment, and is named balloonpaymentbecause of the structure of thepayment schedule. For balloon payments,the first several years of payments aresmaller and are used to reduce the totaldebt remaining in the loan. Once the small


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payment term has passed (which can vary,but is commonly 5 years), the remainder ofthe debt is due - this final payment is theone known as the balloonpayment,because it is larger than all of the previouspayments.CPSS: Committee on Payment andSettlement SystemsFCNR Accounts: Foreign Currency Non-Resident accounts are the ones that aremaintained by NRIs in foreign currencieslike USD, DM, and GBP.M3 in banking: Its a measure of moneysupply. It is the total amount of moneyavailable in an economy at a particularpoint in time.OMO: Open Market Operations. The buyingand selling of government securities in theopen market in order to expand or contractthe amount of money in the bankingsystem. Open market operations are theprincipal tools of monetary policy. RBI usesthis tool in order to regulate the liquidity ineconomy.

Umbrella Fund: A type of collectiveinvestment scheme. A collective fundcontaining several sub-funds, each ofwhich invests in a different market orcountry.ECS: Electronic Clearing Facility is a type ofdirect debit.Tobin tax: Suggested by Nobel Laureateeconomist James Tobin, was originallydefined as a tax on all spot conversions ofone currency into another.Z score is a term widely used in thebanking field.

POS: Point Of Sale, also known as Point OfPurchase, a place where sales are madeand also sales and payment informationare collected electronically, including theamount of the sale, the date and place ofthe transaction, and the consumersaccount number.LGD: Loss Given Default. Institutions suchas banks will determine their credit lossesthrough an analysis of the actual loandefaults.Junk Bonds: Junk bonds are issuedgenerally by smaller or relatively less well-

known firms to finance their operations, orby large and well-known firms to fundleveraged buyouts. These bonds arefrequently unsecured or partially secured,and they pay higher interest rates: 3 to 4percentage points higher than the interestrate on blue chip corporate bonds ofcomparable maturity period.ARM: Adjustable Rate Mortgage isbasically a type of loan where the rate of


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index is calculated on the basis of thepreviously selected index rate.ABO: Accumulated Benefit Obligation, ABOis a measure of liability of pension plan ofan organisation and is calculated when thepension plan is terminated.Absorption: A term related to real estate, itis a process of renting a real estateproperty which is newly built or recentlyapproved.AAA: A type of grade that is used to rate aparticular bond. It is the highest ratedbond that gives maximum returns at thetime of maturity.DSCR: Debt Service Coverage Ratio, DSCRis a financial ratio that measures thecompanys ability to pay their debts.FSDC: Financial Stability and DevelopmentCouncil, Indias apex body of the financialsector.ITPO: India Trade Promotion Organisationis the nodal agency of the Government ofIndia for promoting the countrys externaltrade.

FLCC: Financial Literacy and CounselingCentres.ANBC: Adjusted Net Bank Credit is NetBank Credit added to investments made bybanks in non-SLR bonds.Priority sector lending: Some areas or fieldsin a country depending on its economiccondition or government interest areprioritised and are called priority sectorsi.e. industry, agriculture.M0, M1, M2 AND M3: These terms arenothing but money supply in banking field.BIFR: Bureau of Industrial and Financial

Reconstruction.FRBM Act 2003: Fiscal Responsibility andBudget Management act was enacted bythe Parliament of India to institutionalisefinancial discipline, reduce Indias fiscaldeficit, improve macroeconomicmanagement and the overall managementof the public funds by moving towards abalanced budget.The main objectives of FRBM Act are:-1. To reduce fiscal deficit.2. To adopt prudent debt management.3. To generate revenue surplus.

Gold Standard: A monetary system in whicha countrys government allows its currencyunit to be freely converted into fixedamounts of gold and vice versa.Fiat Money: Fiat money is a legal tender forsettling debts. It is a paper money that isnot convertible and is declared bygovernment to be legal tender for thesettlement of all debts.BCSBI: The Banking Codes and Standards


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Board of India is a society registered underthe Societies Registration Act, 1860 andfunctions as an autonomous body, tomonitor and assess the compliance withcodes and minimum standards of serviceto individual customers to which the banksagree to.OLTAS: On-Line Tax Accounting System.EASIEST: Electronic Accounting System inExcise and Service Tax.SOFA: Status of Forces Agreement, SOFA isan agreement between a host country anda foreign nation stationing forces in thatcountry.CALL MONEY: Money loaned by a bankthat must be repaid on demand. Unlike aterm loan, which has a set maturity andpayment schedule, call money does nothave to follow a fixed schedule. Brokeragesuse call money as a short-term source offunding to cover margin accounts or thepurchase of securities. The funds can beobtained quickly.Scheduled bank: Scheduled Banks in India

constitute those banks which have beenincluded in the Second Schedule of RBIAct, 1934 as well as their marketcapitalisation is more than Rs 5 lakh. RBIin turn includes only those banks in thisschedule which satisfy the criteria laiddown vide section 42 (6) (a) of the Act.FEDAI: Foreign Exchange DealersAssociation of India. An association ofbanks specialising in the foreign exchangeactivities in India.PPF: Public Provident Fund. The PublicProvident Fund Scheme is a statutory

scheme of the Central Government of India.The scheme is for 15 years. The minimumdeposit is Rs 500 and maximum is Rs70,000 in a financial year.SEPA: Single Euro Payment Area.GAAP: Generally Accepted AccountingPrinciples. The common set of accountingprinciples, standards and procedures thatcompanies use to compile their financialstatements.Indian Depository Receipt: Foreigncompanies issue their shares and in returnthey get the depository receipt from the

National Security Depository in return ofinvesting in India.Hot Money: Money that is moved by itsowner quickly from one form of investmentto another, as to take advantage ofchanging international exchange rates orgain high short-term returns oninvestments.NMCEX: National Multi-CommodityExchange.


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PE RATIO: Price to Earnings Ratio, ameasure of how much investors are willingto pay for each dollar of a companysreported profits.CASA: Current Account, Savings Account.CAMELS: CAMELS is a type of Bank RatingSystem. (C) stands for Capital Adequacy,(A) for Asset Quality, (M) for Management ,(E) for Earnings, (L) for Liquidity and (S) forSensitivity to Market Risk.OSMOS: Off-site Monitoring andSurveillance System.Free market: A market economy based onsupply and demand with little or nogovernment control.Retail banking: It is mass-market bankingin which individual customers use localbranches of larger commercial banks.Eurobond: A bond issued in a currencyother than the currency of the country ormarket in which it is issued.PPP: Purchasing Power Parity is aneconomic technique used when attemptingto determine the relative values of two

currencies.FEMA Act: Foreign Exchange ManagementAct, it is useful in controlling HAWALA.Hawala transaction: Its a process in whichlarge amount of black money is convertedinto white.Teaser Loans: Its a type of home loans inwhich the interest rate is initially low andthen grows higher. Teaser loans are alsocalled terraced loans.ECB: External Commercial Borrowings,taking a loan from another country. Limit ofECB is $500 million, and this is the

maximum limit a company can get.CBS: Core Banking Solution. All the banksare connected through internet, meaningwe can have transactions from any bankand anywhere. (e.g. deposit cash in PNB,Delhi branch and withdraw cash from PNB,Gujarat)CRAR: For RRBs it is more than 9% (fundsallotted 500 cr) and for commercial banksit is greater than 8% (6000 cr reliefpackage).NBFCs: NBFC is a company which isregistered under Companies Act, 1956 and

whose main function is to provide loans.NBFC cannot accept deposit or issuedemand draft like other commercial banks.NBFCs registered with RBI have beenclassified as AssetFinance Company (AFC),Investment Company (IC) and LoanCompany (LC).IIFCL: India Infrastructure FinanceCompany Limited. It gives guarantee toinfra bonds.


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IFPRI: International Food Policy ResearchInstitute. It identifies and analyses policiesfor meeting the food needs of thedeveloping world.Currency swap: It is a foreign-exchangeagreement between two parties toexchange aspects (namely the principaland/or interest payments) of a loan in onecurrency for equivalent aspects of an equalin net present value loan in anothercurrency. Currency swap is an instrumentto manage cash flows in different currency.WPI: Wholesale Price Index is an index ofthe prices paid by retail stores for theproducts they ultimately resell toconsumers. New series is 2004 2005. (Thenew series has been prepared by shiftingthe base year from 1993-94 to 2004-05).Inflation in India is measured on WPIindex.MAT: Minimum Alternate Tax is theminimum tax to be paid by a companyeven though the company is not makingany profit.

Future trading: Its a future contract/agreement between the buyers and sellersto buy and sell the underlying assets inthe future at a predetermined price.Reverse mortgage: Its a scheme for seniorcitizens.Basel 2nd norms: BCBS has kept somerestrictions on bank for the maintenance ofminimum capital with them to ensure levelplaying field. Basel II has got three pillars:Pillar 1 - Minimum capital requirementbased on the risk profile of bank.Pillar 2 - Supervisory review of banks by

RBI if they go for internal ranking.Pillar 3 - Market discipline.Microfinance institutions: Those institutionsthat provide financial services to low-income clients. Microfinance is a broadcategory of services, which includesmicrocredit. Microcredit is provision ofcredit services to poor clients.NPCI: National Payments Corporation ofIndia.DWBIS: Data Warehousing and BusinessIntelligence System, a type of systemwhich is launched by SEBI. The primary

objective of DWBIS is to enhance thecapability of the investigation andsurveillance functions of SEBI.TRIPS: Trade Related Intellectual PropertyRights is an international agreementadministered by the World TradeOrganisation (WTO) that sets downminimum standards for many forms ofintellectual property (IP) regulation asapplied to nationals of other WTO


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Members.TRIMs: Trade Related InvestmentMeasures. A type of agreement in WTO.SDR: Special Drawing Rights, SDR is a typeof monetary reserve currency, created bythe International Monetary Fund. SDR canbe defined as a basket of nationalcurrencies. These national currencies areEuro, US dollar, British pound andJapanese yen. Special Drawing Rights canbe used to settle trade balances betweencountries and to repay the IMF. Americandollar gets highest weightage.LTD: Loan-To-Deposit Ratio. A ratio usedfor assessing a banks liquidity by dividingthe banks total loans by its total deposits.If the ratio is too high, it means that banksmight not have enough liquidity to coverany fund requirements, and if the ratio istoo low, banks may not be earning asmuch as they could be.CAD: Current Account Deficit. It meanswhen a countrys total imports of goods,services and transfers is greater than the

countrys total export of goods, servicesand transfers.LERMS: Liberalized Exchange RateManagement System.FRP: Fair and Remunerative Price, a termrelated to sugarcane. FRP is the minimumprice that a sugarcane farmer is legallyguaranteed. However sugar Mills Companygives more than FRP price.STCI: Securities Trading Corporation ofIndia Limited was promoted by the ReserveBank of India (RBI) in 1994 along withPublic Sector Banks and All India Financial

Institutions with the objective ofdeveloping an active, deep and vibrantsecondary debt market.IRR: Internal Rate of Return. It is a rate ofreturn used in capital budgeting tomeasure and compare the profitability ofinvestments.CMIE: Centre for Monitoring IndianEconomy. It is Indias premier economicresearch organisation. It providesinformation solutions in the form ofdatabases and research reports. CMIE hasbuilt the largest database on the Indian

economy and companies.TIEA: Tax Information ExchangeAgreement. TIEA allows countries to checktax evasion and money laundering.Recently India has signed TIEA withCayman Islands.Contingency Fund: Its a fund foremergencies or unexpected outflows,mainly economic crises. A type of reservefund which is used to handle unexpected


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debts that are outside the range of theusual operating budget.FII: Foreign Institutional Investment. Theterm is used most commonly in India torefer to outside companies investing in thefinancial markets of India. Internationalinstitutional investors must register withthe Securities and Exchange Board of Indiato participate in the market.P-NOTES: Pmeans participatory notes.MSF: Marginal Standing Facility. Under thisscheme, banks will be able to borrow upto1% of their respective net demand and timeliabilities. The rate of interest on theamount accessed from this facility will be100 basis points (i.e. 1%) above the reporate. This scheme is likely to reducevolatility in the overnight rates andimprove monetary transmission.FIU: Financial Intelligence Unit set by theGovernment of India on 18 November 2004as the central national agency responsiblefor receiving, processing, analysing anddisseminating information relating to

suspect financial transactions.SEBI: Securities and Exchange Board ofIndia. SEBI is the primary governing/regulatory body for the securities market inIndia. All transactions in the securitiesmarket in India are governed and regulatedby SEBI. Its main functions are:1. New issues (Initial Public Offering orIPO)2. Listing agreement of companies withstock exchanges3. Trading mechanisms 4. Investorprotection

5. Corporate disclosure by listedcompanies etc.Note: SEBI is also known as capitalregulator or mutual funds regulator ormarket regulator. SEBI also createdinvestors protection fund and SEBI is theonly organization which regulates thecredit rating agencies in India. (CRISIL andCIBIL).FINANCIAL REGULATORS IN INDIA: RBI,SEBI, FMCI (Forward Market Commission ofIndia), IRDA etc.ASBA: Application Supported by Blocked

Amount. It is a process developed by theSEBI for applying to IPO. In ASBA, an IPOapplicants account doesnt get debiteduntil shares are allotted to him.DEPB Scheme: Duty Entitlement Pass Book.It is a scheme which is offered by theIndian government to encourage exportsfrom the country. DEPB means DutyEntitlement Pass Book to neutralise theincidence of basic and special customs


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duty on import content of export product.LLP: Limited Liability Partnership, is apartnership in which some or all partners(depending on the jurisdiction) havelimited liability.Balance sheet: A financial statement thatsummarises a companys assets, liabilitiesand shareholdersequity at a specific pointin time.TAN: Tax Account Number, is a unique 10-digit alphanumeric code allotted by theIncome Tax Department to all thosepersons who are required to deduct tax atthe source of income.PAN: Permanent Account Number, as persection 139A of the Act obtaining PAN is amust for the following persons:-1. Any person whose total income or thetotal income of any other person in respectof which he is assessable under the Actexceeds the maximum amount which isnot chargeable to tax.2. Any person who is carrying on anybusiness or profession whose total sales,

turnover or gross receipts are or are likelyto exceed Rs. 5 lakh in any previous year.3. Any person who is required to furnisha return of income under section 139(4) ofthe Act.JLG: Joint Liability Group, when two ormore persons are both responsible for adebt, claim or judgment.REER: Real Effective Exchange Rate.NEER: Nominal Effective Exchange Rate.Contingent Liability: A liability that acompany may have to pay, but only if acertain future event occurs.

IRR: Internal Rate of Return, is a rate ofreturn used in capital budgeting tomeasure and compare the profitability ofinvestments.MICR: Magnetic Ink Character Recognition.A 9-digit code which actually showswhether the cheque is real or fake.UTR Number: Unique TransactionReference number. A unique number whichis generated for every transaction in RTGSsystem. UTR is a 16-digit alphanumericcode. The first 4 digits are a bank code inalphabets, the 5th one is the message

code, the 6th and 7th mention the year, the8th to 10th mentions the date and the last6 digits mention the days serial number ofthe message.RRBs: Regional Rural Banks. As its namesignifies, RRBs are specially meant forrural areas, capital share being 50% by thecentral government, 15% by the stategovernment and 35% by the scheduledbank.


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MFI: Micro Finance Institutions. MicroFinance means providing credit/loan(micro credit) to the weaker sections of thesociety. A microfinance institution (MFI) isan organisation that provides financialservices to the poor.PRIME LENDING RATE: PLR is the rate atwhich commercial banks give loans to itsprime customers (most creditworthycustomers).BASE RATE: A minimum rate that a bank isallowed to charge from the customer. Baserate differs from bank to bank. It is actuallya minimum rate below which the bankcannot give loan to any customer. Earlierbase rate was known as BPLR (Base PrimeLending Rate).EMI: Equated Monthly Installment. It isnothing but a repayment of the loan taken.A loan could be a home loan, car loan orpersonal loan. The monthly payment is inthe form of post dated cheques drawn infavour of the lender. EMI is directlyproportional to the loan taken and

inversely proportional to time period. Thatis, if the loan amount increases the EMIamount also increases and if the timeperiod increases the EMI amountdecreases.Basis points (bps): A basis point is a unitequal to 1/100th of a percentage point. i.e.1 bps = 0.01%. Basis points are often usedto measure changes in or differencesbetween yields on fixed income securities,since these often change by very smallamounts.Liquidity: It refers to how quickly and

cheaply an asset can be converted intocash. Money (in the form of cash) is themost liquid asset.Certificate of Deposit (CD) is a negotiablemoney market instrument and issued indematerialised form for funds deposited ata bank or other eligible financial institutionfor a specified time period.Commercial Paper (CP) is an unsecuredmoney market instrument issued in theform of a promissory note. It wasintroduced in India in 1990. Corporates andthe All-India Financial Institutions are

eligible to issue CP.Indian Banking StructureTypes of banks in IndiaCentral Bank (RBI)Specialised banksCommercial banksDevelopment banksCo-operative banksCentral Bank:As its name signifies, a bank which


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manages and regulates the banking systemof a particular country. It providesguidance to other banks whenever theyface any problem (that is why the CentralBank is also known as a bankers bank)and maintains the deposit accounts of allother banks. Central Banks of differentcountries: Reserve Bank of India (INDIA),Federal Reserve System (USA), SwissNational Bank (SWITZERLAND), ReserveBank of Australia (AUSTRALIA), State Bankof Pakistan (PAKISTAN).SpecialisedbBanks:Those banks which are meant for specialpurposes. For examples: NABARD, EXIMbank, SIDBI, IDBI.NABARD: National Bank for Agriculture andRural Development. This bank is meant forfinancing the agriculture as well as ruralsector. It actually promotes research inagriculture and rural development.EXIM bank: Export Import Bank of India.This bank gives loans to exporters andimporters and also provides valuable

information about the international market.If you want to set up a business forexporting products abroad or importingproducts from foreign countries for sale inour country, EXIM bank can provide youthe required support and assistance.SIDBI: Small Industries Development Bankof India. This bank provides loans to setup the small-scale business unit /industry. SIDBI also finances, promotesand develops small-scale industries.Whereas IDBI (Industrial Development Bankof India) gives loans to big industries.

Commercial banks:Normal banks are known as commercialbanks, their main function is to acceptdeposits from the customer and on thebasis of that they grant loans. (Loanscould be short-term, medium-term andlong-term loans.) Commercial banks arefurther classified into three types.(a) Public sector banks(b) Private sector banks(c) Foreign banks(a) Public Sector Banks (PSB): Governmentbanks are known as PSB. Since the

majority of their stakes are held by theGovernment of India. (For example:Allahabad Bank, Andhra Bank, Bank ofBaroda, Bank of India, Bank of Maharastra,Canara Bank, Central Bank of India etc).(b) Private Sector Banks: In these banks,the majority of stakes are held by theindividual or group of persons. (Forexample: Bank of Punjab, Bank ofRajasthan, Catholic Syrian Bank, Centurion


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Bank etc).(c) Foreign Banks: These banks have theirheadquarters in a foreign country but theyoperate their branches in India. For e.g.HSBC, Standard Chartered Bank, ABN AmroBank.Development banks:Such banks are specially meant for givingloans to the business sector for thepurchase of latest machinery andequipments. Examples: SFCs (StateFinancial Corporation of India) and IFCI(Indian Finance Corporation of India).Co-operative banks:These banks are nothing but anassociation of members who grouptogether for self-help and mutual-help.Their way of working is the same ascommercial banks. But they are quitedifferent. Co operative banks in India areregistered under the Co-operative SocietiesAct, 1965. The cooperative bank isregulated by the RBI.Note: Co-operative banks cannot open

their branches in foreign countries whilecommercial banks can do this.Types of bank accountsSavings bank accountCurrent accountFixed Deposit account1. Saving Bank Account: These accountsare maintained by individuals/ salariedpeoples. Such account offers interest oncustomer deposit. The interest on theseaccounts is regulated by Reserve Bank ofIndia. No Overdraft is allowed on suchaccounts.

2. Current Account: These accounts areused mainly by businessmen and are notgenerally used for the purpose ofinvestment. These deposits are the mostliquid deposits and there are no limits fornumber of transactions or the amount oftransactions in a day. No interest is paidby banks on these accounts. One of theprominent advantage of such account isthat Overdraft is allowed.3. Fixed Deposit Account: also known asterm deposit account. All Banks offer fixeddeposits schemes with a wide range of

tenures for periods from 7 days to 10years. The term fixedin Fixed Deposits(FD) denotes the period of maturity ortenor.

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