Economia

Banking I. By Monica Farias Fernandez / March 2012 / All Rights Reserved ®
Banking: Process of Accepting deposits from surplus units (lenders) lending this funds to deficit units (borrowers) in the economic system

* Depository Institutions: Commercial Banks, Saving & Loan Associations, Credit Unions
* Non Depository Institutions: Finance Companies, Mutual Funds, SecurityFirms, Pension, Insurance.
* Central Banking: National Supervisory Framework for regulation of banking and controlling money supply in the economy.
* Commercial Banking: Banking Services to the individuals and business in the economy

BankingCommercial Banking Unit Banking & Branch Banking

Unit banking involves provision of banking services by a bank in a limited local area
Unitbanking gave way to branch banking system due to the following reasons:
* Economic interdependence among various states
* Infrastructure development
* Growth of big business firms
* Mobility of population
* Increasing emphasis on convenience

Branch banking the bank has a head office which controls and directs the branches located in multiple locations. The branches may belocated in the same city, same state, across states, or even across countries. The head office as well as the branches is under the control of the same board.

Advantages of Branch Banking
* Facilitates the allocation of savings to their most efficient use across the nation irrespective of their origin i.e. savings
* Diversifies of risk as risks are spread over an entire range ofcommercial assets
* Leads to uniform structure of interest rates
* Facilitates the penetration of best banking services to the far flung areas of the nation

Trends in Banking Services
* Proliferation of new services and innovation of new customer friendly products
* Rising competition
* Deregulation of banking and financial markets
* Raising operational costs
*Invasion of information technology – electronic funds transfer – data transfers
* Consolidation of banking industry – mergers and acquisitions
* Globalization of financial services
* Transparency in banking operations
* Capital adequacy to withstand credit and operational risks.

The Basel Norms categorized Lines of Business (LOB) of a commercial bank:
* CorporateFinance
* Trading and Sale
* Retail Banking
* Commercial Banking
* Payment and Settlement
* Agency Services
* Asset Management
* Retail Brokerage

BankingRetail Banking Biggest Shock Absorber in the Banking System
Deposit accounts are of classified into two broad types:
* Demand Deposits
* Term Deposits

Retail Banking Deposit Accounts Demand Deposits* Savings Account :Savings account is the most popular type of demand deposit. Savings Account provides deposit services to individuals. Banks pay a nominal interest rate (3-4% pa) on this account
* NOW Account: The Negotiable Order of Withdrawal(NOW) is a deposit account that pays interest on which cheques may be written and is a product unique to the US
* Super NOWs (SNOW) :Thesedeposits offer flexible money market interest rates but accessible via cheque or preauthorized draft to pay for the goods and services.
* A money market account (MMA) is a deposit account offered by a bank, which has a relatively high rate of interest and typically requires a higher minimum balance to earn interest or avoid monthly fees
* Current Account: This can be opened in a way similar tothe savings account. There is no restriction on the number of withdrawals from this account but the bank also does not pay any interest on the balance maintained in this account.

Retail Banking Deposit Accounts Term Deposits Certificate of Deposits
* In US the Term Deposits are known as Certificate of Deposits (CD).In other geographies the Certificate of Deposit have a totally different...