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in the economy.
(2) Banks to the Government:
The RBI is the Banker's agent and adviser to the government. It accepts deposits and make
payments on behalf of the Government. Issue of loans, management of public debt, sale of
treasury bills are undertaken by the bank. It helps the government in ensuring better coordination of monetary and fiscal policies. It provides short term loans namely "ways and means
advances" to the Central Government and State Government. These loans have to be rapid
within a period of 3 months.
It represents the government in various international organizations like IMF, World Bank etc. It
sends its official as representative of the government for international seminars and
conferences. All important policy decision are taken by the government in consultation with the
RBI. It advises the government on important matters like agricultural credit, devaluation of
rupee, credit policy for the industrial and export sectors etc.
(3) Banker's Bank:
RBI acts as a banker for all the commercial banks. All scheduled banks come under the direct
control of RBI. All commercial as well as schedule bank has to keep a minimum reserve with the
RBI. They have to submit weekly reports to RBI about their transactions. By performing 3
functions, the RBI helps the member banks significantly. They are given below such as:
(a) It acts as the lender of the last resort.
(b) It is the custodian of cash reserves of commercial banks.
(c) It clears, transfers the transaction. It acts as the central clearing house.
(4) Management of foreign exchange reserves:
RBI is the custodian of the foreign exchange reserves of the country. It is the responsibility of
the RBI to stabilize external value of rupee and carry out transactions in foreign currencies. The
Foreign Exchange Regulation Act (FERA) passed by the government empowered RBI to have
full control over management of foreign exchange.
5) Use of following monetary instruments to bring stability in the Indian economy:
- CRR
- SLR
- Bank Rate
- Open Market Operations
- Repo & Reserve Repo Rate
Schedule banks are those which are included in the Second Schedule of Banking Regulation
act 1965; others are non schedule banks.
To be included in the Second Schedule, a bank (a) must have paid up capital and reserves of not
less than Rs. 5 lakhs (b) it must also satisfy the RBI that its affairs are not conducted in a
manner detrimental to the interests of its depositors.
Schedule banks are required to maintain a certain amount of reserves with the RBI; they in
return, enjoy the facility of financial accomodation and remittance facilities at concessional rates
from RBI.
The difference between schedule and non schedule is immaterial as the number of non schedule
bank is almost nil.
Example of Non-Schedule Bank: Jammu & Kashmir Bank is the only non-schedule bank which
is not working under the provisions of RBI but the provisions of article 370 of Indian
Constitution.
other bank account with maximum 2 hours. In this system there is a limit that you have to
transfer money only above Rs 1 lakh and for money below Rs 1 Lakh transactions, banks are
instructed to offer the NEFT facility to their customers. This is because; RTGS is mainly used for
high value clearing. As of now, customers can use the RTGS facility only up to 3 pm and interbank transactions are possible up to 5 pm.
Electronic Clearing Service (ECS)
This system is used mainly for credit and debits of low value transactions which are in large or
frequent transactions. ECS can be divided into two types: ECS Debit, which involves a transfer
of funds from your account and ECS Credit which takes place when money comes into your
account. If you opt for monthly interest paying fixed deposit scheme then your monthly interest
are getting credited to your account by ECS Credit instruction. Other transactions are dividend
received on your investments, your monthly salary credit, refunds from an IPO subscription, etc.
Similarly, an ECS Debit involves making utility bill payments directly from your bank account,
EMI payments on loans, undertaking investments, etc.
Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks,
while repo signifies the rate at which liquidity is injected.
Bank Rate
This is the rate at which RBI lends money to other banks (or financial institutions .
The bank rate signals the central banks long-term outlook on interest rates. If the bank rate
moves up, long-term interest rates also tend to move up, and vice-versa.
Banks make a profit by borrowing at a lower rate and lending the same funds at a higher rate of
interest. If the RBI hikes the bank rate (this is currently 6 per cent), the interest that a bank pays
for borrowing money (banks borrow money either from each other or from the RBI) increases.
It, in turn, hikes its own lending rates to ensure it continues to make a profit.
Call Rate
Call rate is the interest rate paid by the banks for lending and borrowing for daily fund
requirement. Since banks need funds on a daily basis, they lend to and borrow from other banks
according to their daily or short-term requirements on a regular basis.
CRR
Also called the cash reserve ratio, refers to a portion of deposits (as cash) which banks have to
keep/maintain with the RBI. This serves two purposes. It ensures that a portion of bank
deposits is totally risk-free and secondly it enables that RBI control liquidity in the system, and
thereby, inflation by tying their hands in lending money
SLR
Besides the CRR, banks are required to invest a portion of their deposits in government
securities as a part of their statutory liquidity ratio (SLR) requirements. What SLR does is again
restrict the banks leverage in pumping more money into the economy.
PLR
Prime lending rate is the rate that the bank will lend to its best customers.
CAR
Capital Adequacy Ratio (CAR), also called Capital to Risk (Weighted) Assets
Ratio (CRAR)] is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to
ensure that it can absorb a reasonable amount of loss and complies with statutory Capital
requirements.
Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed
as a percentage of its risk-weighted asset.
Capital adequacy ratio is defined as:
What is LAF?
MSF
1 cr.
2% of its NDTL.
What is ECB?
These are ATMs which are not owned by banks but by private ATM service providers.
Customers from any bank can deposit or withdraw money from such ATM,s. Your banks pay a
service fee for the usage.
Such ATMs will help take banking services to remote places, official sources said.
Besides, it will help sponsored banks to set-up ATMs without incurring capital expenses for
owning money dispensing machine.
The Finance Ministry has given its view to the Reserve Bank in this regard, adding that the lead
bank or sponsored bank of a district would be given the responsibility of filling cash and meeting
other operational requirement.
Thus, the bank will be saved from making investment for setting up ATMs, and even other
expenses like technical infrastructure and security would be borne by non-bank entities.
State-owned IDBI Bank is considering to create a separate venture with private ATM service
providers for running white-label ATMs, so called because they are not owned by any bank.
Such entities should have a minimum net worth of Rs. 100 crore at the time of making the
application and on a continuing basis after issue of the requisite authorization. Other guidelines
for applying to the apex bank for authorisation under the PSS Act are available at the RBI
official website.
Currently, only banks are being permitted to set up Automated Teller Machines (ATMs) in
India. Banks have played a major role in encouraging ATM adoption and modifying behavioral
strategies in the domain of personal banking. The banking space has seen considerable growth
through the ATMs, which currently stands 87000 nos. and has been restricted principally to the
urban/metro areas.
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Brown label ATMs:
The ATM is named under the brand of the sponsor bank but the ATM machine is not owned by
the bank.
At present, banks allow customers of other banks five free-of-charge cash withdrawals at their
ATMs every month but end up paying around Rs 3,000 crore a year to settle inter-bank
transaction costs.
In such cases, the hardware as well as lease is under the ownership of the service provider, while
connectivity and cash handling and management is the responsibility of the sponsor bank.
Character Recognition (MICR) data are captured at the collecting bank branch and transmitted
electronically.
Truncation means, stopping the flow of the physical cheques issued by a drawer to the drawee
branch. The physical instrument is truncated at some point en route to the drawee branch and
an electronic image of the cheque is sent to the drawee branch along with the relevant
information like the MICR fields, date of presentation, presenting banks etc.
Cheque truncation, would eliminate the need to move the physical instruments across branches,
except in exceptional circumstances. This would result in effective reduction in the time
required for payment of cheques, the associated cost of transit and delays in processing, etc.,
thus speeding up the process of collection or realization of cheques.
It was approved by The Union Finance Minister, Shri. P. Chidambaram on September 21, 2012.
i. Anybody who has not invested in equities before and has a gross total annual income of Rs12
lakh or less.Which means, you have not opened a demat account in the past. You have not made
any transactions in equity and derivatives in the past (until November 23, 2012.)
ii. However, if you do have a demat account but have not done equity or futures and options
transaction in the past (until November 23, 2012), you can invest in RGESS. If you are a joint
demat account holder (2nd or 3rd account holder), you can open a new demat account as the 1st
holder and invest in RGESS.
2. How to invest?
i. To invest in RGESS, you will need to open a demat account. You will also have to fill in
declaration Form A to the Depositary Participant (DP).
i. Fixed Lock-in: The first one year from the date of investment is a fixed lock-in. During this
period, you cannot sell any securities or pledge them to get loans.
ii. Flexible Lock-in: The flexible lock-in period is for next two years from the date of the end of
the fixed lock-in period. During this period, you are permitted to buy and sell eligible securities,
provided that for a cumulative period of 270 days each year, you are maintaining the value of
your initial investment. In short, the value of the investment portfolio should be equal to or
more than the amount youve claimed as investments for the purpose of deduction under
Section 80 CCG.
4. Expiry of period?
Once the period of holding expires, the demat account will be converted automatically into an
ordinary demat account.
5. Tax benefits?
i. To avail of tax deduction, an investor has to open a new RGESS designated demat account or
designate for this purpose his existing demat account, where no trading has taken place before
23 November.
ii. As per the Indian Income tax, a deduction is up to 50 percent of the amount invested in such
equity shares to the extent such deduction does not exceed Rs 25,000. So, if you are in the
lowest tax bracket of 10 percent your tax benefit will be Rs 2,500. And, if you are in the 20
percent tax bracket, your tax benefit will be Rs 5,000.
ii. The investor who has opened a demat account as first holder before the notification date but
has not bought any shares or traded in the futures and options segment will also be considered
as a first-time investor.
Publishing of Newspaper and periodicals dealing with news and current affairs
- 26%. Publication of Indian editions of foreign magazines dealing with news and current
affairs- 26% .
FDI in Broadcasting Sector:
FDI limit in Headend-In-The-Sky (HITS) Broadcasting Service 74% (total direct and
indirect foreign investment including portfolio and FDI) Automatic upto 49% Government
route beyond 49% and up to 74%.
Setting up hardware facilities such as up-linking, HUB etc. 49%