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Definition
A system of banking where banks are
Participation in Investments
Savings and Loans
Development of Private Sector
Cutting the Costs
Participation in Investments
Universal banking focuses on performance of private firms by directly
investing into such entities. By participating on the investment market,
such banks can directly exercise decision-making power in the
governance of corporations. This objective of universal banking aims to
secure the financial interests of companies that have received direct
investment and to protect the future development of such institutions.
For example, Swiss economist Georg Rich indicates that by aiming to
directly participate on the investment market, universal banks in
Switzerland want to ensure that the companies that have received
investment funds would deal with them properly and will not undertake
unreasonable financial decisions
In India Development financial institutions (DFIs) and refinancing institutions (RFIs) were
meeting specific sect oral needs and also providing long-term resources at concessional terms,
while the commercial banks in general, by and large, confined themselves to the core banking
functions of accepting deposits and providing working capital finance to industry, trade and
agriculture. Consequent to the liberalization and deregulation of financial sector, there has
been blurring of distinction between the commercial banking and investment banking.
Reserve Bank of India constituted on December 8, 1997, a Working Group under the
Chairmanship of Shri S.H. Khan to bring about greater clarity in the respective roles of banks
and financial institutions for greater harmonisation of facilities and obligations . Also report of
the Committee on Banking Sector Reforms or Narasimham Committee (NC) has major bearing
on the issues considered by the Khan Working Group.
The issue of universal banking resurfaced in Year 2000, when ICICI gave a presentation to RBI
to discuss the time frame and possible options for transforming itself into an universal bank.
Reserve Bank of India also spelt out to Parliamentary Standing Committee on Finance, its
proposed policy for universal banking, including a case-by-case approach towards allowing
domestic financial institutions to become universal banks.
Now RBI has asked FIs, which are interested to convert itself into a universal bank, to submit
their plans for transition to a universal bank for consideration and further discussions. FIs need
to formulate a road map for the transition path and strategy for smooth conversion into an
universal bank over a specified time frame. The plan should specifically provide for full
compliance with prudential norms as applicable to banks over the proposed period.
Expanded commercial banks or universal banks constitute twelve (12)
financial institutions, considered as one-stop commercial banks
performing com-banking functions and non-related banking activities.
Investment Banking
Investment banking is the division of merchant banks that handles all
mergers and acquisitions and all securities issuance. Mergers and
acquisition advice is expensive, and the consulting services merchant
banks offer businesses in these areas serves as a profit center for the
bank. Merchant banks help companies raise additional capital by issuing
new securities such as stocks or bonds.
Advantages of Universal
Banking
Economies of Scale. The main advantage of Universal Banking is that it
results in greater economic efficiency in the form of lower cost, higher output
and better products. Many Committees and reports by Reserve Bank of India
are in favour of Universal banking as it enables banks to explit economies of
scale and scope.
Profitable Diversions. By diversifying the activities, the bank can use its
existing expertise in one type of financial service in providing other types. So,
it entails less cost in performing all the functions by one entity instead of
separate bodies.
As per RBI guidelines of April 2001, FIs have an option to transform into a
bank provided they ensure compliance with the following: Reserve
requirements (CRR/SLR)
- Compliance with the cash reserve ratio and statutory liquidity ratio
requirements would be mandatory for an FI after its conversion into a
universal bank. Permissible activities
You might say that I'm greedy, but an annual salary of $1M is considered
only as middle class in New York.
Among those I've dated, the richest is $250k annual income,'n it seems
that this is my upper limit.
If
someone is going to move into high cost residential area on the west of
New York City Garden(?), $250k annual income is not enough.
Ms. Pretty
However, there's a deadly problem here, your beauty will fade, but my
money will not be gone without any good reason. The fact is, my income
might increase from year to year, but you can't be prettier year after
year.
Anyone with over $500k annual income is not a fool; we would only
date you, but will not marry you. I would advice that you forget
looking for any clues to marry a rich guy. 'n by the way, you could
make yourself to become a rich person with $500k annual income.
This has better chance than finding a rich fool.
signed,
J.P. Morgan CEO...
CASE STUDY
The intended reverse merger
of ICICI with ICICI Bank is
unique.
The top management of ICICI