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Showing posts with label Banking. Show all posts
Showing posts with label Banking. Show all posts

October 8, 2013

SIDBI NOTES Objectives and Functions

Small Industries Development Bank of India 

(SIDBI) - Objectives and Functions
The Small Industries Development Bank of India (SIDBI in short) was established in the year 1990 (Date : 2nd April 1990) under the Small Industries Development Bank of India Act 1989 as a subsidiary of Industrial Development Bank of India.It is the principal financial institution for promotion, financing and development of small, tiny and cottage sector. Originally, it was a refinancing organization. But today, it finances on its own. At present it has grown into a multifaceted organization offering a seamless chain of financial services.

Capital :
The authorized capital of SIDBI is Rs. 250 crores which would be enhanced upto Rs. 1000 Crore. It also took over the outstanding portfolio of IDBI relating to small scale sector held under Small Industries Development Fund as on 31st March 1990 worth over Rs. 4000 crore.

Objectives :
Technological Up-gradation : Initiating steps for technological up-gradation and modernization of existing units.

Market Expansion : Expanding the channels for marketing the products of the small scale sector.
Employment Oriented Industries : Promotion of employment oriented industries, especially in semi-urban areas to create more employment opportunities and thereby checking migration of population to urban areas.
Co-ordination of Activities : To co-ordinate the functions of institutions engaged in similar activities.

Functions / Schemes :Following are the major functions of SIDBI
Refinance : It refinances loans and advances provided by the existing lending institutions to the small scale units.

Discounting Bills : It discounts and re-discounts bills arising from sale of machinery to and manufactured by small scale industrial units.

Seed Capital / Soft Loan : It extends seed capital / soft loan assistance under National Equity Fund, Mahila Udyam Nidhi and Mahila Vikas Nidhi and seed capital schemes.

Refinance for Exports : It grants direct assistance and refinance loans extended by primary lending institutions for financing exports of products manufactured by small scale units.

Factoring Services : It provide services like factoring, leasing, etc, to small units.
Financial Support to SSICs : It extends financial support to State Small Industries Corporation for providing scare raw materials to and marketing the products of the small scale units.

Assistance to NSIC : It provides financial support to National Small Industries Corporation for providing, leasing, hire-purchase and marketing help to the small scale units.
Co-promotes State Level Venture Funds : SIDBI Co-Promotes state level venture funds in association with respective state government.

Setting Up of Incubation Centers : SIDBI takes initiative for setting up of incubation centers under its National Programme for Innovation and Incubation for Small Industries with a view to harnessing the entrepreneurial talents.

Financing Projects Relating to Transport Health : SIDBI finances projects relating to transport, health care and tourism sectors and also to the professional and self-employed persons setting up small-sized professional ventures.

Promotional Role of SIDBI :SIDBI plays a key role in implementation of government policies and initiatives for the sector. It facilitates creation of an environment for self-sustaining and growing SSI units. Some of the institutions SIDBI that promoted includes :
  • SIDBI Venture Capital Ltd.
  • Credit Guarantee Fund Trust for Small Industries.
  • Technology Bureau for Small Enterprises.
  • SIDBI Foundation for Micro Credit.
Performance and Progress :
  • SIDBI retained its position in the top 30 Development Banks of the World in the latest ranking of The Banker, London (25th Rank).
  • The cumulative sanctions and disbursements of SIDBI since its inception stood at Rs. 75,255 Crore and Rs. 52,312 crore respectively during financial year 2002.
  • The aggregate sanctions of SIDBI during financial year 2002 amounted to Rs. 9.025 crore as against Rs. 10,821 crore in financial year 2001.
  • As regards financial performance, the profit before tax in financial year 2002 stood at Rs. 405 crore as against Rs. 477 crore in the previous year.
  • Disbursements were also lower at Rs. 5,919 crore as against Rs. 6,441 crore in previous year. 
  • SIDBI has been permitted to raise finances upto Rs. 2,730 crore the year 2013 onward by the Reserve Bank of India.
The coming years would be crucial for SIDBI. The major challenges includes,
  • The accelerated pace of deregulation of financial sector.
  • Softer interest rate.
  • Expected decline in availment of refinance by banks which, hitherto formed major chunk of the bank's business.
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September 22, 2013

How Banks Make Money from Credt Cards

Banks love borrowers who spend on credit cards. This is because they charge anywhere
between 3 to 4% per month on the outstanding amount if you fail to pay the ‘total amount due’ in your credit card statement. This is the most expensive way of borrowing. 

Below are 5 facts on Credit Cards
1. Borrowers are cautious and are revolving less money than before. Over the past one year, 53% of outstanding balances are revolved. When borrowers revolve credit, banks earn a higher interest income. This was over 60% a year ago and over 80% in 2009. Total credit card outstanding as of July 2013 was Rs 23,100 crore, according to RBI data.

2. Banks primarily earn interest income on the money they lend. Of the total interest income, credit cards account for less than 1% for most banks. Jefferies observes that HDFC Bank generates 4% interest income from credit cards, the highest among all banks. This means more customers of HDFC Bank are revolving credit and paying a higher interest rate.

3. Ten banks account for 88% of credit cards issued in India.

4. The four private banks (HDFC Bank, ICICI Bank, Axis Bank and IndusInd Bank) put together now constitute roughly 66% of the total credit card outstanding balances in the banking system.

5. When you opt for a 0% equated monthly instalment or EMI option, banks charge a nominal transaction fee. Point of sale terminals, as banks call these mode of payment, have surged 50% over past one year. HDFC Bank, ICICI Bank, Axis Bank and IndusInd Bank have an 80% share in this segment, according to Jefferies.
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July 13, 2013

How to Identify Bogus Banking Emails

Some phishing attempts are so crude, they're laughably obvious -- but too often, otherwise savvy consumers are getting duped by fake email messages that convincingly emulate real correspondence from financial institutions. There are some steps you can take to vet a message before getting into trouble, though. First and foremost, treat all suspicious emails as guilty until proven innocent.

I've recently written about ways to stop spam, but what do you do about bogus email -- that is, email that appears legitimate but isn't?

Fake emails are sent by criminals in order to get your money, or to take advantage of your computer's processing power and Internet connection to launch Web-clogging Denial of Service attacks on other networks.

This practice, aka "phishing," works by embedding dummy Trojan software on your PC, or by getting you to visit fake websites to enter personal details, or by capturing personal details directly from your computer.

The emails are often hard to spot and can look like they come from common financial institutions and social networks. Here's how to identify those emails -- and what to do if you suspect you've received one.

Step 1: Notice the Red Flags

Red flags include
  • requests for personal information such as banking details and password changes;
  • prompts to click on links or download attachments; and
  • requests from institutions you don't already have a relationship with.
Treat any red flag emails with caution and proceed to the next steps.
Warning: Don't click on a link within an email if you have any doubt as to the legitimacy of the message.

Step 2: Don't Panic

Be wary of alert-style text within emails that suggests your security has been compromised and that the embedded link you are being urged to click on will fix the problem.
This is a pressure technique that instills a sense of urgency. Just as you would in entering a common purchasing transaction, take time to evaluate.
Look for language that implies something onerous will happen if you don't click on the link within the email message -- for example, that your account will be closed.
Tip: Look for bad grammar, strange capitalization or spelling mistakes. Legitimate companies usually put effort into catching mistakes before releasing an email. Peculiar text can be used to circumvent spam software.

Step 3: Look Closely at Links

Place your mouse over the common language link in the email -- again, without clicking on the link -- to see if the link's Web address is repeated within the status bar on the browser or email client.
A legitimate link will echo the text in the message. For example, the link in a message from the XYZ Bank will read, or similar, rather than or similar, or a series of numbers, called an "IP address," like, or similar.
The secure designation "https," rather than the generic "http," will precede a legitimate transactional website. The "s" means it's secure.
Tip: Look for marginally changed link addresses, for example XYX Bank, rather than the legitimate XYZ Bank. Again, don't click on the link.

Step 4: Check the Header

Check the sender's actual address in the message header against the From address. The displayed From name is easier to fake than the sending mail address. The actual addresses should match, or the sending mail address should clearly be originating from a legitimate institution sending a message.
Look for a lack of personalization within the message. Generally, but not always, a classic phishing email will not include personalization. Banks try to differentiate themselves from phishers by using personalization. A "Dear XYZ Bank Member" is an example of bogus message, whereas "Dear Mr. Smith" is likely legitimate.
Warning: Legitimate institutions will not send downloadable email attachments unless you have already entered into a dialog with them about it -- for example instrument copies. Never download attachments with a ".exe" extension.

Step 5: Take the High Road

Browse to the sender's website directly. Do this by manually entering the Web address root in a Web browser address bar. Then use the website's navigation to find the information referred to in the email message.
If the email message was legitimate, the contents will be available at the website too.
Tip: When browsing, check the browser's address bar for the correct institution's address -- for example, XYZ Bank. Even if the Web address has the bank's name in it, it may not be the bank's website. For example,, is not the same as XYZ
Warning: Never enter bank login details after following an emailed link. Always log in to the bank directly from a fresh tab in a Web browser. Never enter details in pop-up windows.

Step 6: Good Riddance

Delete the bogus email message.

Tip: You can report bogus emails. Many email clients have ways to mark messages as scams. Look for "Mark as phishing scam," or similar, adjacent to the message.
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July 4, 2013

Banking System Basics | History and Study of RBI |

What is Banking

A bank is financial institution that provides banking and other financial services to their customers such as accepting deposits and providing loans. A banking system is referred to as system provided by the bank which offers cash management services for customers, reporting the transactions of their accounts and portfolios, throughout the day.
The bank safeguards the money and valuables and provide loans, credit, and payment services, such as checking accounts, money orders and cashier’s cheques. The banks also offer investment and insurance products.
Need of the Banks
    1. 1. To provide security to the savings of customers.
      2. To control the supply of money and credit.
      3. To encourage public confidence in the working of the financial system, increase saving speedily and efficiently.
      4. To avoid focus of financial powers in the hands of a few individuals and institutions.
      5. To set equal norms and conditions to all types of customers.

    History of Banking System in India

    The first Bank in India, called The General Bank of India was established in the year 1786. The East India Company established The Bank of Bengal/Calcutta(1809), Bank of Bombay(1840) and Bank of Madras(1843). These three banks units are also known as Presidency Banks. The next bank was Bank of Hindustan which was established in 1870. The Allahabad Bank was established in 1865, was the first bank completely run by Indians. Punjab National Bank Ltd. was set up in 1894, with its headquarters at Lahore.
    Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore was set up. The Imperial Bank came into existence on the 27th January, 1921 by the Imperial Bank of India Act of 1920, where all Presidency Banks amalgamated. The Imperial Bank was the biggest bank until 1935. On 1 April 1935, the Reserve Bank of India was established under the reserve bank of India act.

    Reserve Bank of India

    RBI is the central bank of India. Its head quarters is in Mumbai. It was originally constituted as a shareholder’s bank with a capital of Rs.5 crores. The entire share capital was contributed private shareholders with the exception of the nominal value of Rs 2.2 lakh subscribed by the central bank. It was set up on the recommendations of the Hilton Young Commission. Initially it was located in Kolkata. It moved to Mumbai in 1937. After independence, the reserve bank of India was nationalized.

    Functions of the reserve bank

    1. Note issue – Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank notes of all denominations.
    2. Banker to government – The second important function of the reserve bank of India is to act as government banker, agent and adviser. RBI carries out banking operations (e.g. to receive and make payments, carry cash reserves) for all governments except J&K—acts as advisor to govt on all monetary and banking matters.
    3. Custodian of foreign exchange reserve – Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian of India’s reserve of international currencies.
    4. Banker’s bank and Lender of last resort – The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get financial accommodation in times of need or stringency. Banks have been asked to keep cash reserves equal to 3 percent of their aggregate deposit liabilities.
    5. Controller of credit – The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of credit created by banks in India. It can do so through changing the Bank rate or through open market operations.
    6. Bank of settlement and clearance – As the reserve bank keeps the cash balance of all commercial banks it is easy for the bank to act as settlement bank or clearing house for other banks.
    7. Information and research functions – The reserve bank undertakes collection and dissemination of information and conducts research in this field. The bank issues several periodical publications, which attempt to explain and assess the significance of economic developments in the country.

    Some Important Milestones

    1. 1. 1935- The Reserve Bank of India is established on April 1, and starts functioning.
      2. 1947- The Reserve Bank of India goes national, as India gains independence.
      3. 1949- The Reserve Bank of India is nationalized.
      4. 2004- RBI puts in a modern payment and settlement system, strives to further strengthen the financial sector.
  • Structure of RBI

    Some Important Terms used by RBI

    1. Bank Rate: Rate of rediscount at which the RBI discounts the first class bills of exchange brought by the banks.
      Repo Rate: Injection of liquidity by the RBI is termed as ” Repo Rate” . This was introduced in Dec. 1992 and Reverse Repo Rate in Nov. 1996. RBI buys Govt. Securities for a short period usually a fortnight, with an agreement to sell it later. Thus repo rate is a short-term money market instrument to stabilize short term liquidity in the economy.
      Reverse Repo Rate: Repo Rate is the rate at which the RBI lends to commercial banks where as the Reverse Repo Rate is the rate at which the RBI borrows from the commercial banks against securities for a very short period. Repo and Reverse Repo rates are used as policy instruments for day-to-day liquidity management under the liquidity adjustment facility.
      Cash Reserve Ratio (CRR): It refers to the percentage of net demand and time deposits which the scheduled commercial banks have to keep with RBI at zero interest Rate as per RBI act 1934.
      Statutory Liquidity Ratio (SLR): It refers to the percentage of net demand and time deposits which the scheduled commercial banks have to keep with themselves. i.e. by purchasing Govt. Securities or in the form of cash or gold as per Banking Regulation Act 1949, Sec 24. SLR is a mechanism used by Commercial Banks for providing credit to the Govt.
      Public Debt: When the government is unable to meet its public expenditure through public revenue, its resort to public debt, public debt can be raised with in the country or out side the country.
      Public Revenue: It is the income of government through various sources like taxes, fees, profits of the state enterprise and grants.
      Public Expenditure: It is the expenditure of the public authority on various socio-economic and political activities. Expenditure may be spending on administration of law and order development of industries etc.
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    July 1, 2013

    Know any Bank Information - IFSC Code,Address,MICR Code

    Check IFSC Code, MICR Code, Address, Contact Number  of any Bank...

    Click here to Explore

    Example Results...

    IFSC Code:SBIN0003489
    MICR Code:212002012
    Branch Code:Last Six Characters Of IFSC Code Represent
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