Friday, December 30, 2005

JAIIB LEGAL ASPECTS NUMBER 1

LEGAL ASPECTS OF BANKING


Banks are mainly governed by
Banking regulation act 1949
And
Reserve bank of India act

Definition of banking

Section 5 b of the banking regulation act 1949
Acceptance of deposits of money from public for the purposes of lending or investment

Banks can refuse to open an account for an undesirable customer.

Opening of account is subject to verification of the identity and purpose of opening etc
]know your customer norms requires proper validation of the details by proper documents like ration card voter card id card driving license , certificate of incorporation ( for companies ) etc ,

as the bank accounts can be misused for routing illegal monies like terrorist / drug operations etc lot of verification is required before opening the account without of course any undue inconvenience to customer. Proper opening protects the banker from charges of negligence and protects payments made in due course under NI act .

proper verification will avoid money laundering thru such accounts
avoid frauds ( like encashing somebody s dividend warrants)

under 49a of the BR act the banks only can accept deposits withdraw able by cheques.
The exemptions are like post office accounts credit society or persons notified by govt

Non banking entities are governed by NBFC acceptance of public deposits RBI directions 1998

Individuals firms unincorporated enterprises who were engaged in the business of banking are now prevented from accepting public deposits. For example a money lender in a village cannot accept deposits from public . he can Accept from relatives.

License to bank and use of word bank requires RBI license under section 22 of the Banking Regulation Act 1949

Section 6 (1) of the BR act lists all the activities of the banks like deposits , loans letters of credit investments safe deposits bills etc

Banks are specifically prohibited in some business like trade / barter goods
. But it can realize security.

Categories of banks

Public sector banks

These are SBI (sbi act 1955), sbi subsidiary banks (1959 Act),
Regional Rural Banks RRB act 1976

And nationalized banks under banking companies acquisition act 1970. and 1980 under two state nationalization

Banking companies are the private sector banks under the companies act or a foreign bank ( incorporated outside India ). These banks are governed by the BR act for banking matters., and companies act for constitution

Reserve bank of India act 1934 gives details of the functions of
rbi. This was amended significantly in 1997 AND A THE INFORMATION TECH ACT 200 GAVE CERTAIN POWERS TO RBI. FOR REGULATING PAYMENT SYSTEMS OF BANKS .

MAIN FUNCTIONS OF RBI

CURRENCY MANAGEMENT PRINTING CURRENCY
BANKERS BANK
GOVTS BANK
REGULATING MONETARY POLICY FOR MAINTENANCE OF CURRENCY VALUE
REEGULATION OF BANKS

NOW LET US KNOW SOME THING ABT RBI SOME FACT SWHICH MAY BE USEFUL FOR THE EXAM

THE BANK CAN ISSUE NOTES FROM RS2/ TO RS 10000/ DENOMINATION . RIGHT NOW IT IS ISUUING ONLY UPTO RS 1000/. ONE RUPEE NOTES WHICH WERE ISSUED BY THE GOVT OF INDIA ARE NOT ISSUED NOW.

RBI REGULATES ENTRY OF BANKS THEIR BUSINESS AND INSPECTS THEIR BUSINESS , SUPERVISES BY SCRUTINY OF RETURNS PRESCRIBED UNDER BR ACT. THE BOARDS , VOTING RIGHTS ETC ARE SUBJECT TO RBI CONTROL
IT CAN GIVE DIRECTIONS AND NOTICES WARNINGS PENALTIES ETC
IT CAN AUTHOSRISE WINDING UP MORATORIUM ( TIME FOR REPAYMENT OF DEPOSIT) AMAGMATIONS ETC.

BANKS MAY UNDERTAKE CERTAIN NON BASNKING BUSINESS LIKE CAPITAL MARKET OPERATIONS / MUTUAL FUNDS ETC. THESE ACTIVITIES ARE REGULATERD BY SECURIES EXCHANGE BOARD OF INDIA (SEBI) .

BANKING SUBSIDIARY ENGAGED IN INSURANCE IS GOVERNED BY INSURANCE REGULATORY AUTHRITY OF INDIA .

LET US HAVE A QUICK QUESTION AND ANSWER SESSION


True /false

Govt of India can issue direction to rbi true /false
Answer TRUE. It can issue direction to RBI Eg budget announcements .

All kinds of business of banks is regulated only by the reserve bank

True or false

Answer false


Central Govt is the primary regulator of banks

True or false

Answer FALSE . it is RBI


Stae govt has no control over coop banks

True or false

Answer false It has control over the cop banks operating in one state the state laws apply.

If a license is cancelled for a bank there is an appeal to Central Govt

True or false

TRUE . appeal can be made.

Select the answer

Coop banks operating in different states are regd under

state cop societies act .
Multi state coop societies act
RBI Act

Answer b. Multi state coop societies act

Govt can exempt a bank from provisions of BR act >>

on the recommendation of RBI
whenever the Govt is satisfied
if requested by the bank

answer b. on the recommendation of RBI

…………….. exercises the central banking functions In India

State bank of India
Reserve bank of India
Central bank of India

Answer is b Reserve bank of India…
( pl don’t get confused with central bank which is one of the commercial banks only. Central bank of a country issues notes acts as banker to banks banker to govt and controls monetary policy and manages foreign exchange and maintains reserves ,monitors foreign exchange and external value of currency. Advises govt on economic and fiscal policies etc. regulates supervises banks and NBFCs

Company matters of a banking company are regulated by

Reserve bank
Sebi
Authotities under Companies act

Answer c authorities under companies act

Trading in shares and securities by banks is regulated by

Controller of capital issues
SEBI
Company Law Board

Answer b. SEBI

Tuesday, November 15, 2005

jaiib free coaching thru blog - try and benefit

jaiib is the exam which most of the young bankers take for career advancement. I thought I can offer thru this site free inputs for these candidates. this will be useful; for even the others in the industry. This will be useful for the Indian bankers while the subject will be of interest to others in the industry throughout the world.

Please watch this site everyday and pass on this message to your friends .

I shall try to give the coaching as briefly as possible and this will definitely be of use to the candidates having insufficient time for the preparation.

watch these posts daily and pass on the message

with love and best wishes

Thursday, November 10, 2005

Delegation and Trust

To be successful you have to delegate . You cannot do everything yourself. Hesitation to trust could be due to various reasons. Whatever may be the organizational objectives policies and procedures , the style of delegation differs from individual to individual.
Even in our homes many of our friends delegate and trust others in their family.I feel if there is any index to measure happiness it is high where there is trust and delegation whether is is family or business.
There cannot be any cosmetic delegation to show the outsiders that there is delegation and the fellows in the middleorder have failed becuase they have not exercised the delegation.
There is a small story for you. A lady lent her beatiful and a very expensive dress to her close friend to attend a function.She also carried with her a chair to ensure that the friend does not sit anywhere and make the dress dirty.Never do this mistake ( most of us do,thinking that we are the only ones who can do this better)

Please learn to appreciate your subordinates. never treat them as your slaves. their productivity is directly proportionate to their loyalty to you. Their loyalty can be assured if you treat them as humans. Dont get suspicious and delegate . This will have negative impact

Appreciate their good efforts.I used to tell them that things were done better when I was away. I told that they were perhaps more responsible when I was away. This filled them with pride and they improved their productivity beyond my imagination and achieved the goals much before the target date. The loan reviews were done 100% which was never achieved earlier.

Never be a stubling block or hinderance to the work but be a positive contributor . you will earn the respect you desrve as a leader when you also make contribution. Never think that the fellow reporting to you as your competitor. He is after all performing in your team and the credit comes to you. By your illtreatment he may turn against you give awrong feed back to your bosses.

ok . you may ask -What to do if your boss behaves in a manner you dont like. suppose he is following all the rules of delegation in a reverse manner- Wait for him to get out if you are not able to convince .I know a case where a boss created sleeplessnights for his subordinate (I hate this word )and after a year that guy became his most favourite candidate. He won his heart by his devotion to work which earned the boss all credits.

Delegation is a two way communication .Handled well this benefits all in the team.

Hope you agree . please send your comments friends.

kssmani

Tuesday, November 08, 2005

Thoughts on banking

Hey all

I created this to have an independent say on the line in which i have 35 years of experience.

let me give suggestions on certain issues in banking industry and also on so many other matters which may be of interest to you if you happen to read. be patient and i am sure you will profit by viewing this page .

The citi bank cashed the nearly zero competitor position in Indian Metros And urban centres to popularise their Credit Cards .SBI a late starter although not aggressive are slowly growing.
Citi went in the aquisition business actively again where the competitor was not anywhere nearby.
Now many banks are in this business
Are they missing something now

CARD DUES SETTLEMENT
NOW THE CARD PAYMENTS ARE SETTLED BY CHEQUE / DROP BOXES OF THE SAME BANK
SOMEWHERE
SBI FOR EXAMPLE CAN OFFER THEIR BRANCHES /ATMS DROP BOXES FOR COLLECTING THE CHEQUES OF OTHERCARDS ALSO AND EARN A COMMISSION
THEY CAN OFFER THEIR ACCOUNT HOLDERS TO SETTLE THE DUES OF ANY CARD ONLINE AND EARN ACOMMISSION FROM THE OTHER BANK

WHEN TRANSACTIONS ARE ALLOWED IN ATMS FOR OTHER BANK CARDS WHY NOT THIS SERTVICE BE ALLOWED AND SBI CAN CASH ON THEIR NETWORK.

FACILITIES CAN BE LEASED BY ONE BANK TO ANOTHER LIKE SHARING ATM SERVICES.
THE PUBLIC SECTOR BANKS SHOULD COME TOGETHER AND COSOLIDATE THEIR POSITION. ONE BRANCH CAN TAKE CARE OF THE REQUIREMENTS OF ALL THE BANKS AND EACH BRANCH IS A SERVICE UNIT AND NOT A BUSINESS UNIT. OR DEDICATE SOME BRANCHES ASSUCH

THIS BLOG THOUGHT MAY GIVE RISE TO COMMENTS I WECOME EXPERT COMMENTS