What is banking and what is the role of banking in an economy? (Rajesh Goyal, 2014) Banking can be termed as the business activity of accepting and safeguarding money owned by other people and entities, and then lending out this money in order to yield a profit. However, as time elapse, the actions covered by banking business have grown and now a range of other services are also offered by banks. Banking industry has always been beneficial for the whole economy. In other words, banking activity encourages investments by accepting money from their clients and lending it to borrowers.
The importance of the matter in terms of the concept, its introduction in Indian banking industry, the impact on profitability and image of the banks imposed a need to take an urgent step to switch over to international norms such as Basel II norms. The definition of NPAs has changed over time its defined as an loan where payment of interest or repayment of instalment (in case of term loans) or both remains unpaid for a certain period. According to the Narasimham Committee Report (1991), those assets (advances, bills discounted, overdrafts, cash credit etc.) on which the interest remains unpaid for a period of four quarters (180 days) to be considered as NPAs. Subsequently, this period was reduced to 90 days from 180 days from March 1995.
In the absence of a credit bureau, banks generally depend on customer documents like bank statements, business verification, audited financials etc. These in turn depend on market conditions, seasonality of business cycle etc. Further to this, banks depend on skills of its staff that underwrite or source these applications. Since, it is mostly customer and staff oriented, banks tighten their lending policies especially since this is a more dynamic segment as compared to the salaried segment where monthly incomes (depending on the employer) are quite
• Banking bottom line and yield can be improved with retail banking. All other business division of the bank improves with retail banking. • Retail banking can be a good source for fund deployment. • NPA perception and consumer loans are presumed to be of lower risk. • Affordable credit line from retail banking has helped in improving the lifestyle of the people and has helped in fulfilling the aspirations.
CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF STUDY The banking sector is still the primary form of financial intermediation in the Asian and Pacific region. It is the largest conduit for the recruitment of domestic savings. Hence, it becomes the main source of external capital to firms and the key player in the payment system. Apart from their financial intermediation role, banks have been shown the contribution to the general economic stability. This was prevalent during the Asian financial crisis when economy was adversely affected by the then-weak banking sector.
Investment banking: The main role of the investment bank is to help companies and governments raise capital on capital markets, either through the issue of securities (otherwise known as shares) or debt. Their main business involves the issuance of new debt as well as providing business consulting services on mergers and acquisitions and other types restructuring of enterprises (Casu, Girardone, and Molyneux,
Furthermore, on 29 December 2003, Kofi Annan (the former UN General) stated that most people around the world are not exposed enough to financial services be it savings, insurance or credit and the real challenge here is how to make them participate in this sector. According to him, inclusive financial sectors must be built to help people improve their lives (Patil, 2011). Today, it can be seen that banks have many branches even in rural areas to reach
I would frame the banking as an industry that is built on trust. Trust that is reaffirmed by the governments, and regulators. Banks have an imperative role in our economic growth, and development. Correspondingly, without the bank industry, there is no industry to replace them as the conduit for social and economic policy. Equally important, there is no industry to replace them as the key performer in creating our economies multiplier effect.