Sunday, February 28, 2016

AHSEC - Class 11: Unit 3 Different Types of Banks

1. What are the different types of bank in a country?
Ans: In modern times banking business has attained much popularity and importance. The following are the different types of bank which are functioning in modern times:
a)      Central Bank: Central Bank is known as guardian bank which bank working in the country. Now a days, in every country there is one central bank and is controlled by the govt. The central Bank manages and control the whole monetary system and also prepares monetary policy and other policies of the govt.
b)      Commercial Bank: The commercial bank generally extent short terms loans to the business man and traders. They collect deposits from the public and advance loans to the businessman and producer commercial banks are normally owned by share holders. In India most of the joint stock banks are commercial banks.
c)       Co-operative Bank: Co-operatives banks are those banks which established in co-operative sectors. Co-operative banks offer short term and medium term loans to the agricultural sector. Farmers get various kinds of loan for purchasing various agriculture inputs from co-operative banks.
d)      Foreign exchange Banks: These are special types of banks which specialize in financing foreign trade. Their main is to make international payments through the purchase and sale of exchange bills.

e)      Agricultural Banks: Agricultural banks are those banks which are established to meet the credit requirements of agriculture. The agriculture is need two types of credit namely:
1)      Short term credit for purchasing seeds, fertilizers, ploughs and other inputs.
2)      Long-term loans to purchase land and for permanent improvement on land.
f)       Industrial banks: Industrial banks are those banks which advance long term loans to industries. For the development of industries various types of industrial banks are established. In India, various institution like Industrial and finance co-operation of India (IFCI), Industrial development bank of India, can be termed as Industrial Banks.
g)      Savings Banks: Savings banks are those banks which offer opportunities for saving to the small savers and also try to develop saving habits among the people.
h)      Development Banks: Development banks are specialized financial institutions which provide medium and long term finance to private entrepreneurs and help in economic development of the country.
i)        Investment Banks: Investment Banks are those banks which are specialized in provide medium and long term financial assistance to business and industry. They are also known as Industrial Banks as they are mainly concerned with industrial finance.
j)        Land Development Banks: The land development banks are the financial institutions that are organized for providing long term credit to the agriculturists. These banks are also known as Long Mortgage banks as they are set up to relate the burden of indebtness.
2. What do you mean by Indigenous banker? What are the various category of indigenous banker? Mention its features and defects.
Ans: An individual or a firm accepting deposits, dealing in indigenous bill and leads money is known as Indigenous banker. Indigenous banks are the unorganized, unregulated, unsupervised and segmented banking institutions that have no link with the organized sector. They have been operating in India since the Vedic age. They are confined to certain casts such as jains, banias, Seths, etc.
The features of Indigenous bank or bankers are:
a)      They are the unorganized part of the financial market. They have no links with the organized and monetary authority of the country.
b)      They are unit banks and operate at one place only.
c)       They provide loan for both productive and unproductive purpose. They operate the banking on their own funds.
d)      They are confined to certain casts such as jains, banias, Seths, etc.
The indigenous bankers suffer from the following defect:

a)      The financial resources of these bankers are insufficient of meet the demand of the borrowers.
b)      These bankers are charging much higher interest rate from their borrowers than the commercial banks.
c)       These bankers indulged in all types of malpractice and exploited their customer in many ways.
d)      They sometime issued loans for unproductive purposes.
3. What is Regional Rural Banks (RRBs)? Mention its features and functions.
Ans:  RRBs are local level banking organisation operating in different states of our country to fulfill the needs of small and marginal farmers, agricultural labours and landless workers, small businessman, etc. by providing short-term and medium-term credit.
The features or characteristics of Regional Rural Banks are:
a)      The RRBs have a particular operation area. They remained confined to a particular district.
b)      They are sponsored by the public sector bank.
c)       The authorized capital of RRBs is Rs. 5 crore at present and issued capital is at Rs. 1 crore.
d)      The RRBs are dependent on NABARD for financial support. The NABARD provides refinance to the RRBs at concessional interest rate.
The functions of RRBs are:
a)      To generate employment in the rural areas
b)      To encourage entrepreneurship in the rural areas,
c)       To provide assistance in marketing and storing of agricultural and other products, etc.
d)      To expand the organized banking services among the rural people by opening bank branches.
e)      To mobilise rural saving by accepting deposits from the rural people.
f)       To fulfill the needs of small and marginal farmers, agricultural labours and landless workers, small businessman, etc. by providing short-term and medium-term credit.
4. Write short note on IMF.
Ans: INTERNATIONAL MONETARY FUND (IMF) is an international monetary organisation established by different countries after the world-war second with an objective of providing exchange stability throughout the world and increasing liquidity, so that balance multilateral trade is promoted through the co-operation of the member nation. The IMF came into existence in December 1945 and started functioning in March, 1947.

The objectives of I.M.F are:
a)      To promote international monetary co-operation through a permanent institution.
b)      To secure stability in the rates of foreign exchanges.
c)       To secure conversion of the currency of any member into the currency of any other member.
d)      To promote the international trade by removing all obstacles.
e)      To promote investment of capital in backward and undeveloped countries.
f)       To make financial resources available to members.
The functions of IMF are:
a)      It functions as a short credit institution.
b)      It provides machinery for the orderly adjustments of exchange rates.
c)       It keeps reserves of the currencies of all member countries.
d)      It lends to the borrowing countries in the currencies which they require.
e)      It promotes the expansion of International Trade for the mutual benefits of member countries.

5. What are the features of Co-operative Bank?
Ans: The features of Co-operative Banks of India are:
a)      These banks are not profit seeking institutions.
b)      They provide both short term and long term loan.
c)       They have a particular operation area. They remained confined to a particular district.
d)      These banks are basically rural and agricultural based banks.
6. What are the functions of Co-operative Banks?
Ans: The functions of Co-operative Banks are :
a)      The co-operative bank accepts deposits and encourages savings and investment among the people.
b)      They provide both short term and long term finance to the customer to fulfill their demands.
c)       They provide assistance in the marketing and processing of the products of farmers.
d)      They also supply various inputs and equipment such as seeds, fertilizers, etc to the farmers.
e)      The also provide storing facilities to the farmers for storing their produce.
7. What are the weaknesses of Co-operative Banks in India?
Ans: The weaknesses of the Co-operative Banks in India are:
a)      They co-operative banks are financially weak due to shortage of deposits from the people.
b)      Controlled  by wealthy influential persons of the society.
c)       Lack of management qualities.
d)      Failed to meet the credit needs of the poor and weaker sections of the society.
8. What are the features or characteristics of Development Banks?
Ans: The features of Development Banks are:
a)      They are specialized for Economic and Industrial development.
b)      They do not accept deposits from the general public like Commercial Banks.
c)       They provide medium-term and long-term loans.
d)      They provide assistance to both public as well as private sector.
9. What are the functions of Development Banks?
Ans: The functions of Development Banks are:
a)      To perform banking services through extension of credit.
b)      To promote economic development through various other services.
c)       To supply medium term and long term credit to industries.
d)      To supply risk capital.
e)      To provide technical advice to industrial establishments.
10. What are the functions of Investment Banks?
Ans: the functions of Investment Banks are:
a)      To accept deposits from public as saving.
b)      To provide long term funds to business and industrial organization to meet their capital requirements.
c)       To subscribe to the shares and debentures issued by industrial concerns.
d)      To underwrite the issues of shares and debentures and help selling these securities to the investing public.
11. Distinguish between Central bank and commercial bank.
Ans: There are some fundamental differences between them:
1)      Profit making is not the objective of central banks, although, they do earn profits. But, the principle aim of a commercial bank is to make large amounts of profits.
2)      The central bank is owned any controlled by the Government. But A commercial bank is generallyowned, managed and controlled by private citizens.
3)      There is only one central bank in a country. But, There are commercial banks operating in a country on a competitive basis.
4)      The central bank is the only agency in a country entrusted with the power of issuance of notes. But, The commercial banks do not have the power of issuing notes.
5)      The central bank s the lender of the money market. But, The commercial banks are just its sub-ordinates.
12. Write a brief note on Land Development Bank.

Ans: The land development banks are the financial institutions that are organized for providing long term credit to the agriculturists. These banks are also known as Long Mortgage banks as they are set up to relate the burden of indebtness. The Land Development Banks have a large number of branches. Earlier they were both federal and unitary but now, they have been divided into two federal structures. They are State Land Development Bank (SLDBs) and Primary Land Development Bank (PLDBs). The Land Development Banks provide long term loans to the agriculturists for purchasing land, costly machinery like tractors, improvement of land cultivation method, etc. However, they grants loan up to 50% of the value of land or 30 times the revenue of land and are repayable over a period of 20-30 years.
13. Distinguish between commercial bank, development bank and co-operative banks.
Commercial Bank
Development Bank
Co-operative bank
These are generally set up as companies under the Companies Act.
These are set up under the special act passed by the government,
These are set up under the Co-operative Societies Act.
These are ordinarily financial institution.
These are specialised multi purpose institutions.
These are not profit seeking institutions.
Raising of funds
These banks accepts deposits from the public through different types of accounts.
Mains source of funds for these banks are borrowings, grant, selling of securities. They do not accept deposits from public.
These banks mainly accepts deposits from public of rural areas.
Commercial banks mainly provide short and medium term loans.
Development banks provide medium and long term loans.
Co-operative banks provides both short term and long term loans.
Credit creation
Commercial banks can create credit.
Development banks cannot create credit.
Co-operative bank can create credit.

18. What is the name of the Central Bank of India? When was established?
Ans: The Reserve Bank of India, 1935.
19. When was the State Bank of India was recognized as the commercial bank?
Ans: 1955.
20. Which is the largest commercial bank of India?        
Ans: The State Bank of India.
21. When was the first development banks set up in India?
Ans: In 1948 with the Industrial Finance Corporation of India.
22. Name some development banks of India.
Ans: Industrial Development Bank of India (IDBI), National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), State Industrial Development Corporation (SIDC), State Financial Corporation (SFC), etc.
23. Name two development banks that have been working in the north-eastern states.
Ans: North East Development Finance Corporation and Assam Financial Corporation.
24. When and where the first Investment Banks were established?
Ans: The first Investment Banks was established in Germany in the year 1850.
25. Which bank is known as the “Entrepreneur of Entrepreneurs”? Ans: Investment Bank.
26. Name some industrial banks of India.
Ans: Some of the industrial banks of India are Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India, State Financial Corporations, Industrial Investment Bank of India, etc.
27. What are Agricultural Banks? Name some agricultural banks of India.
Ans: Agricultural Banks are those banks which provide short term and long term credit to the farmers to meet their requirements. Some of the Agricultural Banks of India are NABARD, and Development Bank, Regional Rural Banks, etc.
28. What are International Banks? When did they come into existence?
Ans: International Banks are the financial institution that operates at the international level and deals with international financial matters of the world. They came into existence after the Second World War, in the Britton woods conference of the U.S.A in 1944.
29. Where was the first Land Development bank was set up?
Ans: It was established in Germany, followed by France, England etc.
30. When was the first land development banks established in India? Ans: It was established at Thang in public in 1920.
31. How many public sector banks in India? Ans: 27.
32. Give two example of Private Sector Bank in India?
Ans: The two Private Sectors Bank are AXIS Bank Limited, Yes Bank Limited, ICICI Bank Limited.
33. In which year fourteen Indian Commercial Banks were nationalized? Ans: On 19th July, 1969.
34. How many commercial banks are nationalized at present? Ans: At present there are 19 nationalized banks in India.
35. RRBs are started in which year?                                         Ans: 1975
36. What is Export-import bank? Explain briefly.
Ans: the bank which is mainly concerned with the progress and development of foreign trade is known as Export-import Bank or EXIM bank. These banks were established the Export-Import Bank of Indian Act of 1983. It acts as an apex institution relating to import and export finance.

Some of the features of EXIM Bank are:
a)      These banks are basically foreign trade banks.
b)      The authorized capital of EXIM Bank of Rs. 200/- crore which is now extended to Rs. 450/- crore.
c)       The EXIM bank is managed by a Board of Directors which consists of 16 members including one Chairman.
d)      They provide financial assistance to exports and imports.
37. What are the functions of EXIM Bank?
Ans: The functions of EXIM Bank are:
a)      To provide financial assistance to export-import sectors for the export and import of goods and services.
b)      To provide technical and administrative assistance to the foreign trade oriented parties for their promotion.
c)       To undertake merchant banking services of concerns engaged in foreign trade.
d)      To finance research and technology studies for the promotion of foreign trade.
38. What is Retail Banking and retail banking?
Ans: Retail banking is a form of commercial banking which generally deals with small consumers for meeting current requirement of consumers such as housing loan, a car loan, etc.
Wholesale banking refers to a situation where a bank deals with limited large-sized big customers. These banks have large accounts for few corporate clients with few transactions.