BE THOROUGH WITH THE FOLLOWING!!!

1.  FINANCIAL INCLUSION

The Reserve Bank of India has set up a commission (Khan Commission) in 2004 to look into financial inclusion and the recommendations of the commission were incorporated into the mid-term review of the policy (2005–06). In the report RBI exhorted the banks with a view of achieving greater financial inclusion to make available a basic "no-frills" banking account. In India, Financial Inclusion first featured in 2005, when it was introduced, that, too, from a pilot project in UT of Pondicherry, by K C Chakraborthy, the chairman of Indian Bank. Mangalam Village became the first village in India where all households were provided banking facilities. In addition to this KYC (Know your Customer) norms were relaxed for people intending to open accounts with annual deposits of less than Rs. 50,000. General Credit Cards (GCC) were issued to the poor and the disadvantaged with a view to help them access easy credit. In January 2006, the Reserve Bank permitted commercial banks to make use of the services of non-governmental organizations (NGOs/SHGs), micro-finance institutions and other civil society organizations as intermediaries for providing financial and banking services. These intermediaries could be used as business facilitators (BF) or business correspondents (BC) by commercial banks. The bank asked the commercial banks in different regions to start a 100% financial inclusion campaign on a pilot basis. As a result of the campaign states or U.T.s like Pondicherry, Himachal Pradesh and Kerala have announced 100% financial inclusion in all their districts.

2.  Business Facilitator Model: Eligible Entities and Scope of Activities
Under the ';Business Facilitator'; model, banks may use intermediaries, such as, NGOs/ Farmers' Clubs, cooperatives, community based organisations, IT enabled rural outlets of corporate entities, Post Offices, insurance agents, well functioning Panchayats, Village Knowledge Centres, Agri Clinics/ Agri Business Centers, Krishi Vigyan Kendras and KVIC/ KVIB units, depending on the comfort level of the bank, for providing facilitation services. Such services may include (i) identification of borrowers and fitment of activities; (ii) collection and preliminary processing of loan applications including verification of primary information/data;  (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling;  (iv) processing and submission of applications to banks;  (v) promotion and nurturing Self Help Groups/ Joint Liability Groups; (vi) post-sanction monitoring;  (vii) monitoring and handholding of Self Help Groups/ Joint Liability Groups/ Credit Groups/ others; and (viii) follow-up for recovery.
As these services are not intended to involve the conduct of banking business by Business Facilitators, no approval is required from RBI for using the above intermediaries for facilitation of the services indicated above.
3.  Business Correspondent Model:  Eligible Entities and Scope of Activities
Under the 'Business Correspondent' Model, NGOs/ MFIs set up under Societies/ Trust Acts, Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States, section 25 companies, registered NBFCs not accepting public deposits and Post Offices may act as Business Correspondents. Banks may conduct thorough due diligence on such entities keeping in view the indicative parameters given in Annex 3.2 of the Report of the Internal Group appointed by Reserve Bank of India (available on RBI website: www.rbi.org.in) to examine issues relating to Rural Credit and Micro-Finance (July 2005). In engaging such intermediaries as Business Correspondents, banks should ensure that they are well established, enjoying good reputation and having the confidence of the local people. Banks may give wide publicity in the locality about the intermediary engaged by them as Business Correspondent and take measures to avoid being misrepresented.
In addition to activities listed under the Business Facilitator Model, the scope of activities to be undertaken by the Business Correspondents will include (i) disbursal of small value credit,  (ii) recovery of principal / collection of interest  (iii) collection of small value deposits (iv) sale of micro insurance/ mutual fund products/ pension products/ other third party products and  (v) receipt and delivery of small value remittances/ other payment instruments.
The activities to be undertaken by the Business Correspondents would be within the normal course of the bank's banking business, but conducted through the entities indicated above at places other than the bank premises. Accordingly, in furtherance of the objective of increasing the outreach of the banks for micro-finance, in public interest, the Reserve Bank hereby permits banks to formulate a scheme for using the entities indicated above.

4.  How is repo rate different from bank rate?

Both are basically the same. The Bank rate is the rate at which commercial banks, which are temporarily short of cash, can borrow from the Central Bank.The repo rate enables holders of Securities, principally commercial banks, to acquire funds from the Central Bank by selling the securities and at the same time agreeing to repurchase them at a later date at a predetermined price.
Increases in these rates indicate a desire for a contraction in credit while decreases reflect a relaxation of interest rate policy.

5.  Following RBI’s Deregulation 5 Indian Banks raised Interest Rates on NRE Deposits

Reserve Bank of India deregulated non-resident external (NRE) deposits on 16 December 2011 allowing banks  to offer higher interest rates to dollar-denominated accounts. Reserve Bank freed the rates on non-resident external accounts, offering interest as high as 9.6% per annum.
Following RBI’s deregulation five Indian banks, including HDFC Bank and Yes Bank on 23 December 2011 raised their interest rates on such deposits in order to lure foreign money.
The Reserve Bank of India's move to deregulate interest rates on non-resident external (NRE) rupee deposits and ordinary non-resident accounts encouraged banks to attract dollars.
Private lender Yes Bank increased the interest rates on fixed deposits held by non-resident Indians (NRIs) to 9.6 per cent from 3.82 per cent. The new rate is being offered on term deposits of 15 months 15 days to 16 months. The bank also raised savings bank rate by 200 basis points to 6 per cent.
Lakshmi Vilas Bank revised the rate of interest for NRE term deposits with effect from December 22. Deposits under the maturity slab of one year to below two years will in fact attract 10 per cent from 3.82 per cent previously. Deposits of 2 years to below three years will fetch 8 per cent against 3.51 per cent and three years and above 7 per cent against 3.64 per cent.
IndusInd Bank increased the interest rates on NRE deposits to 9.25 per cent from 3.82 per cent.
Similar steps were also taken by banks like Federal Bank, HDFC Bank, State Bank of Travancore (SBT).
The new rates are effective from 24 December for fresh deposits as well as those being renewed on maturity.

6.  Small Accounts

'Small account' means a savings account in a banking company where-

(i) the aggregate of all credits in a financial year does not exceed rupees one lakh;

(ii) the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand; and

(iii) the balance at any point of time does not exceed rupees fifty thousand

REQUIREMENTS:

1.  Self declaration of address

2.  Photograph of the person

RBI has also expanded the definition of 'officially valid document' as contained in clause (d) of Rule 2(1)of the PML Rules to include job card issued by NREGA duly signed by an officer of the State Government or the letters issued by the Unique Identification Authority of India containing details of name, address and Aadhaar number.

7.  IMPACT OF BASEL III ON INDIAN BANKS

Q.  How will these norms impact Indian banks?
According to RBI governor D Subbarao, Indian banks are not likely to be impacted by the new capital rules. At the end of June 30, 2010, the aggregate capital to risk-weighted assets ratio of the Indian banking system stood at 13.4%, of which Tier-I capital constituted 9.3%. As such, RBI does not expect our banking system to be significantly stretched in meeting the proposed new capital rules, both in terms of the overall capital requirement and the quality of capital. There may be some negative impact arising from shifting some deductions from Tier-I and Tier-II capital to common equity.
8.  What are Basel I and Basel II norms?
While Basel I framework was confined to the prescription of only minimum capital requirements for banks, the Basel II framework expands this approach not only to capture certain additional risks in the minimum capital ratio but also includes two additional areas, viz. Supervisory Review Process and Market Discipline through increased disclosure requirements for banks. Thus, Basel II framework rests on the following three mutually- reinforcing pillars:
Pillar 1: Minimum Capital Requirements — prescribes a risk-sensitive calculation of capital requirements that, for the first time, explicitly includes operational risk along with market and credit risk.
Pillar 2: Supervisory Review Process (SRP) — envisages the establishment of suitable risk management systems in banks and their review by the supervisory authority.
Pillar 3: Market Discipline — seeks to achieve increased transparency through expanded disclosure requirements tor banks.
9.   RETAIL BANKING
Retail banking is banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and transactional accounts, mortgages, personal loans, debit cards, credit cards, and so forth
Retail banking is a key component of the banking industry. Retail banks only work with consumers, not businesses. Retail banks allow consumers to purchase homes, cars and consumer products by providing mortgages and loans. In this way, they provide needed liquidity to keep the economy growing.

10.  Virtual banking

Internet based financial institution that offers deposit and withdrawal facilities, and other banking services, through automated teller machines or other devices, without having a physical (brick and mortar) walk-in premises.

11.  SHADOW BANKING

The shadow banking system is the infrastructure and practices which support financial transactions that occur beyond the reach of existing state sanctioned monitoring and regulation. It includes entities such as hedge funds, money market funds and structured investment vehicles. Investment banks may conduct much of their business in the shadow banking system (SBS), but they are not SBS institutions themselves. The core activities of investment banks are subject to regulation and monitoring by central banks and other government institutions - but it has been common practice for investment banks to conduct many of their transactions in ways that don't show up on their conventional balance sheet accounting and so are not visible to regulators or unsophisticated investors.^[1] For example, prior to the financial crisis, investment banks financed mortgages through off-balance sheet securitizations and hedged risk through off-balance sheet credit default swaps.