The complete banking awareness for bank exams
Here are the complete banking awareness notes for all bank exams.
What is banking?
Banking is an activity. The activity involves the following:
Accept deposits from the public: The bank accepts money from us, the public. Many people deposit their money with banks. When you deposit your money with the bank, you are the depositor. You deposit money means you lend money to the bank. The bank pays you interest for this loan.
Give loans: Banks give loans to the public. When you accept loans from the bank, you become a borrower. You have to pay interest to the bank. Bank will give loan to the depositor from the borrower’s money.
The bank will charge more rate of interest from the borrower than what it pays to the depositor (or lender). The surplus money will remain with the bank. It is how banks earn. The bank will now use the surplus money to pay its employees, build infrastructure, etc.
Issue cards and provide services: Banks issue debit cards and credit cards and ATM services.
Locker facility: Banks also have locker facilities to keep valuables safe.
Fund transfer: Banks allow people to transfer money across the world.
History of banking in India
The first to set up banks in India were the British. The British East India Company and the Government of England brought the concept of banks in India. In its early days, only the rich Indians and business owners would take interest in banking.
Why were they called Presidency banks?
The three presidencies of British India were the three nodes of administration. The three banks were
set up in the three presidencies. Royal charters would govern the Presidency banks. They would issue
currency notes.
Imperial Bank of India:
Before the RBI came into existence, the Imperial Bank of India performed three major functions:
Banker to the governmentCentral bank
Commercial bank
All these banks were private banks when they were set up. But, now they are owned and operated by the Government of India.
Different types of banking
Para Banking
The bank or its subsidiaries can lease, hire, and purchase. They can also issue credit cards.
The bank can also enter into insurance or share and debenture markets. There are buy-back facilities. It means the bank can buy back shares from the original shareholders at predetermined prices irrespective of market prices.
Narrow banking
It means the bank will only invest in government securities. It is a kind of safe banking. Government securities are the most secure investments. The bank will not lend money so there will be no fear of non-performing assets.
Offshore banking
The offshore banks are located in Special Economic Zones (SEZ) in India. They act as intermediaries
between non-resident borrowers and lenders. They do not undertake retail banking but prefer
wholesale banking (explained below).
Green banking
The bank prefers paperless activities. It also invests in eco-friendly initiatives.
Retail banking
Retail banking has a direct link with the customers. It can set up call centers, bank branches, give loans to individual customers, issue debit/credit cards, etc.
Wholesale/ Corporate banking
The bank deals with larger corporations, government agencies, and other banks.
Universal banking
Every banking activity takes place like retail banking, card issue, shopping, etc.
Merchant banking
The bank provides both banking and consultancy services to corporate houses.
Islamic banking
The bank carries out the banking activity according to Sharia law. It does not allow banks to charge
interests when it loans money.
History of RBI
When RBI first started, it also acted as the central bank of Myanmar (Burma) and Pakistan. But, by 1948, it stopped these activities.
The organization of RBI
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