1.What are urban cooperatives and rural cooperatives?
2.Define the terms :
• LAB
• RRB
3.Write the functions of RRB.
4.Write about BANDHAN BANK AND IDFC BANK.
5.what is mobile banking?
6.Write the difference between banks and NBFCs.
7.What are the categories of NBFCs.
■ STRUCTURE OF COOPERATIVE BANKING IN INDIA:The structure of cooperative network in India can be divided into two broad segments:
- Urban cooperative banks
- Rural cooperative
■ URBAN COOPERATIVES:
Co-operative credit societies established in urban areas are referred to as urban co-operative banks. In most states, however, no clear-cut definition of an urban co-operative bank is statutorily followed. Urban Co-operative bank can be further divided into scheduled and non scheduled both the categories are further divided into multiple states and single state majority of these banks fall in the non scheduled and single state category banking activity of urban cooperative banks are monitored by the Reserve Bank of India registration and management activities are managed by the register of cooperative societies these RCS operate in single state and Central RCS operate in multiple state.The RCS exercises powers under the respective Co-operative Societies Act of the States with regard to incorporation, registration, management, amalgamation, reconstruction or liquidation. Such powers in case of UCBs, that have multi-state presence, are exercised by the CRCS.
■ RURAL COOPERATIVES:
The rural cooperative are further divided into short term and long term structures the short term Cooperative Bank are three tiered operating in different states these are as follows: - State Cooperative Bank:
They operate at the apex level in the states. - District Central Cooperative Bank;
They operate at the district level. - Primary agricultural credit societies,:
They operate at the village for Grass root level.
As the long-term structures are further divided into two types: - State Cooperative Agriculture and Rural Development Bank:
These operate at state level. - Primary Cooperative Agriculture and Rural Development Banks:
They operate at district block level.
LOCAL AREA BANK:
The Local Area Banks (LABs) are small private banks, conceived as low cost structures which would provide efficient and competitive financial intermediation services in a limited area of operation, i.e., primarily in rural and semi-urban areas, comprising three contiguous districts.local area banks were set up to enable the mobilization of rural savings by local institutions and, at the same time, to make them available for investments in the local areas.
The establishment of local banks in the private sector was allowed on 1996.
These banks were expected to bridge the gaps in credit availability on enhance the institutional credit Framework in the rural and semi urban areas and provide efficient and competitive financial intermediation services in their area of operation.
Under the Banking Regulation Act 1949 5 local area Bank were licensed by 2002.
That is Krishna bhima samrudhi local area Bank.
The minimum startup capital of a a local area Bank was fixed at rupees 5 crore.
The promoters of the bank may comprise of private individuals, corporate entities, trusts and societies with a minimum capital contribution of Rs. 2 crore.
It was also decided that a family among the promoter group could hold equity not exceeding 40 percent of the capital.
The area of operation of LAB is limited to a maximum of three geographically contiguous districts and are allowed to open branches only in its area of operation. The activities of an local area Bank were to be focused on local customers predominantly in the rural and semi urban areas as to bridge the credit gap in These areas.Since LABs are being set up in district towns, their activities are focused on the local customers with lending primarily to agriculture and allied activities, small scale industries, agro-industrial activities, trading activities and the non-farm sector. LABs are also required to observe the priority sector lending targets at 40 percent of net bank credit as applicable to other domestic banks.
Local area banks are required to finance agriculture and allied activities ,SSI Agro industrial activities, trading activities and non farm sector. this lending to priority sector is to be at last at least 40 percent of the net bank credit.
Around 5 LABs were licensed by 2002 under Section 22 of the Banking Regulation Act 1949 from amongst hundreds of applicants. Presently, four LABs are functioning satisfactorily.
In 2014, Reserve bank of India permitted Local area bank to be converted into small finance banks subject to them meeting the prescribed eligibility criteria.
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■ REGIONAL RURAL BANK:
Regional Rural Banks are Indian Scheduled Commercial Banks operating at regional level in different States of India. They have been created with a view of serving primarily the rural areas of India with basic banking and financial services.
Regional rural bank came into existence on 2 October 1975 on the recommendations of the narasimham working group.
According to the act 1976, the rural banks had the legislative backing of the regional rural banks.
This act allowed the government to set up banks from time to time as whenever it is considered necessary.
Regional rural bank may have branches set up for urban operations and their area of operation may include urban areas too.
The RRB are required to function within a limit area for which they are established the functional area of each RRB is confined to a few district of the state in which they are set up.
The objective is to provide the credit to small marginal farmers agricultural labourers are patients and small enterpreneurs so as to develop productive activities in the rural areas that combine the features of the both corporate and commercial banks.RRBs may have branches set up for urban operations and their area of operation may include urban areas too.
☆ FUNCTIONS OF RRB:
RRBs also perform a variety of different functions. RRBs perform various functions in following heads:
- Providing banking facilities to rural and semi-urban areas.
Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc. - Granting of loans and advances small and marginal farmers and agricultural labourers, whether individually or in Groups, and to cooperative societies , Agricultural Processing societies, Cooperative farming societies, primarily for agriculture purpose for agriculture operation and other related purpose.
3.Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking,UPI etc.
- Granting of loans and advances to artisans, small entrepreneurs and persons of small means engaged in trade commerce and industry or other productive activities within its area of cooperation.
5.Small financial banks.
- Accepting the deposits.
■ PAYMENT BANKS:
Payments banks is an Indian new model of banks conceptualised by the Reserve Bank of India . These banks can accept a restricted deposit, which is currently limited to ₹100,000 per customer and may be increased further.
In August 2015 the Reserve Bank of India is granted in principle approval for payment Bank to eleven entities.
These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue ATM cards or debit cards and provide online or mobile banking. They are Aditya Birla nuvo Limited; Airtel M commerce Services Limited; Chola Mandalam distribution Services Limited ;department of post ;Fino paytech Limited ;National securities depository Limited ;Reliance Industries Limited ;Dilip Shantilal Sanghvi ;Vijay Shekhar Sharma; Tech Mahindra and Vodafone M pesa.
Payment banks are newly stripped-down types of bank, which are expected to reach customer mainly through their mobile phones rather than the traditional Bank branches.
☆ Objectives:
The primary objective of setting up of payment bank is to further financial inclusion by providing small savings account and payments service to migrant labour workforce low-income households small business other than an organised sector entities and other users.
☆ Activities:
1.issuance of ATM or debit cards.
2.acceptance of demand deposits .
- internet banking.
4.payments and remittance services. - Functioning as a business correspondent of another.
■ BANDHAN BANK:
Bandhan bank is the largest microfinance company in India from August 2015 begin operation as a full fledged Bank. it is an Indian banking and financial services company headquartered in Kolkata, West Bengal.it offer complete retail financial solution including a variety of Savings and loan products. it is the first instance in India of a microfinance entity transforming into a universal bank.
Recently Bandhan Bank offers seven type of saving accounts including an account for the different abled. unlike measure private and state-run banks there is no charge for non maintenance of the minimum average balance.On June 17, 2015, the Reserve Bank of India granted the universal banking licence to Bandhan Bank.The bank has mobilised deposits over Rs.60,610 crore and its total advances stand at Rs. 74,331 crore, as on June 30, 2020.
■ IDFC BANK:
IDFC bank is an Indian banking company with headquarters in Mumbai that forms part of IDFC, an integrated infrastructure finance company.
In October 2015 IDFC bank went live with a soft launch at 23 location becoming the 91st scheduled commercial bank in the country.
The bank which is aiming to be a ‘hatkr bank ‘ Vikas press on technology has started operation in corporate and wholesale banking Rural banking and treasury verticals as part of the launch. The personal and business banking unit of the bank focusing on retail ,small and medium enterprises and self employed professionals, started operation in January 2016.
■ POST BANK OF INDIA:
India’s Postal department has started to work as a payment bank called the India post payment Bank it was launched on 30 January 2017 in Ranchi and Raipur with the network of over 1.5 Lakh post offices,
as access points and 3 lakh postal postmen and Grameen Dak Sewaks to provide house to house banking services.The first phase of the bank with 650 branches and 3,250 post offices as access points was inaugurated on 1 September 2018.
The department already provides various financial services which includes a post office savings bank postal Life Insurance pension payments and money transfer services.IPPB would be like any other bank but it will operate at a smaller scale without involving any credit risks and can’t issue advance loans or issue credit cards.
It has been incorporated as a public sector bank under the development of post with 100% Government of India equity.
IPPB is a offering savings account upto a balance of rupees 1 lakh along with the digitally enabled payment and remittance services of all kids between individuals,
The three main features of Central to IPPB’s operating philosophy are as follows:
- Convenience at your fingertips:
It promises that to make the banking as simple as affordable and convenient experience for Indians across all over the nation.
2.Pioneer in inclusive banking:
The IPPB encourages smart saving and investment habits with its easily accessible banking services. its aims is to extend banking facility to the remostest corner of the Nations. it services Transcend geographical borders .that shows its aim to simplify banking and bring prosperity to every door step.
3.Efficiency of banking networks:
IPPB provides the most effective ,accessible and readily available banking network across all over the nation. IPPB will soon offer banking services through the digital channels, like mobiles, UPI, debit cards, and many more which can be used to automate teller machines ,POS and mobile POS. - ■ SMALL BANKS:
- Small finance banks are a type of niche banks in India. Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending.
In July 2014 the Reserve Bank of India paved the way for niche banking by issuing drft guidelines for setting up payments banks and small banks like niche in the private sector.
All Small Finance Banks deal with basic lending and deposit activities, like loans and deposits. However, what makes these products stand out is that SFBs are required to focus their products more towards the priority sector, which includes facilitating funds to poor people for housing, lending for agriculture and allied activities, funding to micro and small industries, and weaker sections of the society. Resident individuals professionals with 10 years of experience in Banking and Finance, Companies and societies are eligible are promoters to set up small banks. some existing non Banking Finance Company microfinance Institution and local area banks can also opt for conversion into small banks after complying with All legal and regulatory requirements from various authorities if they confirm to these guidelines.
Under the Companies Act 2013 the small banks are being registered as a public limited company. It has been licensed under the Banking Regulation Act 1949 and governed by the provision of the Banking Regulation Act 1949 ,Reserve Bank of India Act 1934, foreign exchange management Act 1999 ,payment and settlement systems act 2007 ,credit information Companies Act 2005 ,and other relevant statues.
Small banks has been allowed taken into account the small local banks can play an important role in the supply of credits to micro and small Enterprises ,agriculture and banking services in unbanked and under banked region in the country .the minimum paid up voting equity capital for small bank is hundred crores.
The setting of the objectives upto small bank will be for furthering financial inclusion by provision of saving vehicles to undeserved and unserved sections of the population and supplier of the credit to small business units, is small farmers, micro and small industries, and other unorganised sector entities, in their Limited area of operation, through high Technology low cost operations.
In starting 5 years the small Bank shall further the objectives for which it is set up. the small Bank shall primary undertake basic banking activities of the farmers, small business ,micro and small industries and unorganised sector entities. it cannot set up subsidiary to undertake non banking Financial Service activities.
■ MOBILE BANKING:
Mobile banking is a service provided by a bank or other financial institution that allow its customer to conduct a range of financial transaction easy motor Li using a mobile device such as a mobile phone or tablet and using software usually called an app provided by the financial institution for the purpose.
Mobile banking is usually available on a 24-hour basis. Some financial institutions have restrictions on which accounts may be accessed through mobile banking, as well as a limit on the amount that can be transacted. Mobile banking is dependent on the availability of an internet or data connection to the mobile device.
The service provided by the bank is free of charge there is no limit for number of times you can access your account various banking services provided include account. balance inquiry, credit alerts, bill payment alerts, transaction history ,fund transfer facility, is minimum balance alerts, and many more.that can be accessed from mobile.
Transactions through mobile banking depend on the features of the mobile banking app provided and typically includes obtaining account balances and lists of latest transactions, electronic bill payments, remote check deposits, and funds transfers between a customer’s or another’s accounts.
The app comes with an advanced encryption technology is making it safe and Secure as internet banking.
As to make maximum benefit of mobile banking one should have a smartphone as phishing exist for internet banking uses there is smishing for mobile banking users.
Mobile banking differs from mobile payments, which involves the use of a mobile device to pay for goods or services either at the point of sale or remotely as to the use of a debit or credit card to effect payments.
■ MICRO ATMS
Micro ATMs are biometric authentication enabled handheld device.,Micro ATM meant to be a device that is used by a million Business Correspondents to deliver basic banking services. The platform will enable Business Correspondents .who could be a local kirana shop owner and will act as ‘micro ATM to conduct instant transactions. In order to make the ATM viable at ruler or semi urban centres low cost micro ATMs would be deployed at each of the bank with your location.
This device will be based on a mobile phone connection and would be made available to every Bank business correspondent. Customers would have to get their identity authenticated and withdraw put money into their bank accounts.The basic transaction types, to be supported by micro ATM, are Deposit, Withdrawal, Fund transfer and Balance enquiry. Micro ATMs would have various options of authentication like biometric pin based and many more. in addition ,to it would also be used as a mobile ATMs tenable transactions near the door step of the customers .the micro ATMs offer an online interoperable ,low-cost payments platform to everyone and all over the country.
■ HYBRID CARDS:
Hybrid cards are also known as smart cards and also be utilised as a technique for last Mile payments. It contains more than one card technology.
They can be used with idioms as well as with the point of terminals this assist the rural people to conveniently upgrade to normal banking services when they moved to the urban areas resultantly the banks get the chance to retain these customers even in the extremely competitive markets.
A good example of a hybrid smart card is a card that contains an embedded microprocessor smart card chip in addition to a contactless RFID proximity chip.Unlike Hybrid Cards, smart cards that use a single chip technology to communicate via both a contact and contactless interface are called Dual Interface Smart Cards.
■ MOBILES VANS:
Mobile refraction vans that take vision care into hard- to-reach communities was one of the first inclusive programs Essilor pioneered in India. Banks can also look up for utilising mobile vans to reinforce their brands in rural areas. The fans could be fitted with a personal computer and very small aperture terminal connectivity to the core server. That is attached to a base of branch. Please mobile vans are good option as they can effectively act as mini mobile bank branches might also proved to be of great help in implementing the banks marketing promotional and cooperative social responsibility strategies.
■ WHITE LABEL ATMs.
Automated Teller Machines set up, owned and operated by non-bank entities are called “White Label ATMs” .
Non-bank entities incorporated in India under the Companies Act 1956 are allowed to operate WLAs.
To hafton financial inclusion across the country the RBI means the Reserve Bank of India declared to allow all non banking and entities setup and operate their own ATMs in year 2011. These own atoms were known as White label ATMs white label ATMs are those ATMs data being set up by a non bank and entities However any non bank and it intending to set up wlas should have a minimum net worth of hundred crore rupees. The main objective is extending the financial inclusion principle even to the tier 3 to6 cities.
According to the white label ATM scenario,, logo on ATM machine and the logo displayed in ATM premises pertain to wla operator instead of a bank. The WLC Mein of many services to the bank customers, such as account information; Mini / short statement; pin change and request for cheque book. the extended reach of ATMs will allow the beneficiaries of the Pradhan Mantri Jan Dhan Yojana to avail a wide variety of banking services like assessing their accounts for dispensing cash and non financial services without the need for actually visiting their bank branch.
But, cash deposit is not permitted, regular bills or not regular bills payment is not permitted, and purchase of reload voucher for mobiles is also not permitted at WLAs.
■ NON BANKING FINANCIAL COMPANY:
A non banking financial company is a company registered under the Companies Act 1956 engaged in the business of loans and advances acquisitions of shares stocks bonds debentures securities issued by the government of or local authority or other marketable security incidents business.
marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods or providing any services and sale,purchase,construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company .
NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
NBFC cannot accept demand deposits NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself; deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
NBFCs may get itself rated by any of the six rating agencies namely,CRISIL,CARE,ICRA,FITCH, ratings India Private Limited brickwork rating India Private Limited and SMERA.208 NBFs were registered with the Reserve Bank of India in 2015.
☆ Difference between banks and NBFCs.
NBFCs land to make investment and hence their activities are akin to that of banks however there are few differences As given below:
• NBFC cannot accept demand deposits;
• NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself
• NBFC cannot issue Demand Drafts like banks
• Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
• While banks are incorporated under banking companies act, NBFC is incorporated under company act of 1956.
☆ different types of NBFCs.
Hence, there are ten different types of NBFCs companies that are discussed below :
- Asset Finance Company:
An asset Finance Company is a company which is a financial institution carrying on as its principal business the financing of physical asserts supporting productive economic activity such as automobiles Tractors Lat machines generator sets earthmoving and material handling equipments moving on own power and general purpose industrial machines.
It is a financial institution that facilitates the service of financing the various assets for individuals and the businesses which include machinery, heavy industrial equipment, production and farming equipment and large power generators.
The income arising from there from should not less be than the 60% of its total assets. - Investment Company:
An investment company means any company which is a financial institution carrying on as its principal business the acquisition of securities.
these companies take money from the public which invested in various securities and financial products.
The company deducts its operational cost from the earned profit and later distribute to shareholders. Bajaj Alliance General Insurance Company, IDFC, HDFC mutual fund are examples of some Investment company. - Loan Company:
Loan company means and a company which is a financial institution carrying on as its principal business the providing a finance whether by making loans and advances or otherwise for any other activity than its own but does not include an asset Finance Company.
LIC finance ltd, PNB Housing Finance Firm, HDFC are some examples of the Loan companies. - Infrastructure Finance Company:
Interest structure Finance Company is a Non- Banking Finance Company
That deploys three- fourth of its total assets in infrastructure loans
It has a minimum Net Owned Fund of 300crores.
That has minimum ‘A’ credit rating or equivalent.
Few examples are GMR infrastructure ltd, Hindustan Construction Company.
- Systematically Important Core Investment Company:
Systemically important core investment company is an non Banking Finance Company carrying on the business of acquisition shares and securities.
That deploys 90% of its total assets in the form of investment in shares, stocks, debt or loan group company.
Out of 90%, 60% should be invested in equity shares or those which compulsorily converted later in equity shares.
Does not carry any activity referred in section of RBI act 1934. That accepts public funds. - Infrastructure Debt Fund:
Infrastructure debt fund is a company registered as nbfc to facilitate the flow of long term that into infrastructure products the IDFs raise resources through bonds for long-term infrastructure projects. The bonds are issued in multiple currencies to ensure that have they had a five –year maturity for investors.
- Non banking financial company – Microfinance Company;
People in the urban or semi-urban or rural area of India need financial help to start their business and fulfill other needy requirements but they are hesitant to seek the help from banks because of the formalities which need to fulfill to get the required money.
Now, here the microfinance company come out, they provide financial help to these underprivileged people. Bandhan Financial Service Ltd, Ujjivan Financial service are some few examples.
- Non banking financial company factors:
These types of non banking financial banking company in India are low. These companies usually buy loans at a much discounted rate from lenders and after that, they adjust repayment table of the debtor to ensure facile settlement adding small profit.
- Mortgage guarantee Company:
It is a financial institution where –
At least 90% of the business turnover is of mortgage guarantee or
At least 90% of the gross income is from mortgage guarantee business or
Net owned Fund is 100 crores. - Non- operative Financial Holding Company:
It is a separate category of NBFCs which is wholly owned Non-operative financial holding company permitted to set up or hold the bank as well as another financial service with the permission of RBI under applicable regulatory prescription
