This course is designed to give a comprehensive overview of Commercial Banking. We will follow a composite balance sheet approach to understand the functioning of a Bank. Apart from a good understanding of the balance sheet dynamics of a commercial bank, this course will provide a thorough treatment of the emerging trends in Indian Banking especially Banking Sector Reforms, Basel-II etc. We will also discuss the latest happenings in the international banking scenario and its implications for the Indian Banks.
You are welcome to this Course. On doing this course, I am sure you will feel more empowered in your understanding of the financial system and would be able to make better sense of what is happening around you.
Module-1 Building Blocks
Introduction (1 session)
ü Banking- Legal Interpretation
ü What is a Bank?
ü Functions of Banks: Traditional, Modern and Merchant banking
ü Bank based financial system vs. Market based financial system
ü Why Banks are special financial institutions?
ü What we should be studying about Banks?
Indian Banking System (2 sessions)
ü Evolution of Banking Business in India
ü Segments of Indian Banking System
ü Reforms in the Indian Banking System
Þ Committee on financial Sector Reforms(1991)
Þ Committee on Banking Sector Reforms (1998)
Þ Basel 1& II
ü Emerging challenges Indian Banking system
The Legal framework for Operation of Banks (2 Sessions)
Important provisions of
Negotiable Instrument Act 1981
Þ Features of a negotiable Instrument
Þ What is Negotiation?
Þ Different forms of negotiable instruments
Þ Difference between a cheque and a Bill of Exchange
Þ Holder in Due course
Reserve Bank of India Act 1934
Þ Returns, Inspection (on Site and off site)
Þ Amalgamation and Winding up of Banks
Banking Regulation Act 1949
Þ Licensing of Banking Companies
Þ Share holding in Banking Companies
Þ Board of Directors and control over management
Þ Regulation of Banking Business
Module 2 Liability Side of the Balance Sheet
Capital and Reserves (2 sessions)
Capital
ü What is bank capital?
ü What is the composition of bank capital?
ü Role Bank capital in the functioning of bank
ü Legal provisions relating to Capital Requirements
ü Ownership structure in Indian Banking System
ü Methods of raising capital
ü Norms for Adequacy of capital
ü Recapitalisation of Indian Banks
ü Why bank capital
ü The new thinking on Bank capital
Reserves and Surplus
ü What constitute Bank’s reserves and Surplus?
ü What role reserves and surplus play in a Bank’s functioning?
ü Legal provisions relating to reserves and Surplus.
ü Changing perceptions about bank’s reserves and surplus
Deposits (2 sessions)
ü Types of deposits: Current, Savings, Term and Hybrid
ü Legal provisions concerning Bank deposits
ü Operations in deposit accounts
ü What role deposits play in a Bank’s functioning?
ü Deposit Insurance
ü Concept of NDTL and its relevance
ü Changing pattern of deposits in the post reform period
ü Pricing of deposits
Special deposit schemes
Þ Gold Deposit Scheme
Þ Resurgent India Bonds
Þ India Millennium Deposits
Borrowings (1 session)
ü Why banks borrow
ü Composition of Borrowings and its evolution
ü Legal provisions relating to Bank Borrowings
ü Borrowings vs. Deposits as alternate source of funds
Other liabilities and provisions
ü Major components of liabilities and provisions
ü Legal provisions relating to other liabilities and provisions
Module 3: Asset Side of the Balance Sheet
Cash and Balances with Reserve Bank of India (1 session)
ü Need for Cash and Balances
ü Legal provisions governing cash and Balances
ü Behaviour of Banks with regard to cash and Balances
Balances with banks and money at call and short notice
ü Need for Balances with Banks
ü Legal provisions balances with banks and money at all and short notice
Investments (1 sessions)
ü Why Banks Invest: Rationale
ü What constitutes the investment portfolio of Banks?
ü Legal provisions relating to Banks investment
ü Risks involved with investment and
ü Market Risk Management
Advances (2 sessions)
ü Cardinal Principles of lending
ü Types of lending: Fund vs. Non fund based
Þ Priority vs. Commercial lending
Þ Working Capital vs. Term lending
ü Credit Appraisal techniques: Ratio Analysis
ü Estimation of working capital needs
Þ Operating Cycle method
Þ Projected net working Capital
Þ Projected net turnover method
ü Credit Management
ü Credit Monitoring
ü Asset Classification and NPA management
ü Credit Risk Management
Þ Securitisation
Þ Credit Derivatives
ü Legal recourses for recovery of loans
Þ SARFAESI Act 2002,
Þ DRT Act 1993,
Þ Bankers’ Book Evidence Act
ü Relative importance of Investments vs. Advances in a Bank’s Balance Sheet
ü Credit Information Bureau and CIBIL Asset Liability and Risk Management in Indian Banks (1 session)
ü Risk regulation in Banking Industry
ü Risk Profile of Banks
ü Market Risk Measure: Sensitivity, Basis Point Value, Duration and Downside Potential (VaR)
ü Managing Market Risk
ü Credit Risk: Identification, Measurement and Management
ü Operational Risk: Identification, Measurement and Management
Module 4: Bank and the Customer
This module will emphasise on case laws
Bank-Customer Relationship (2 sessions)
Different forms of Bank Customer relationship
ü Bank as Debtor
ü Bank as Creditor
ü Bank as Agent
ü Bank as Bailee
Bank’s Duties
ü Duty of secrecy
ü Duty of reasonable care
ü Garnishee or attachment order
Bank’s Rights
ü Bank’s lien
ü Right of Set off
ü Right of appropriation of accounts
ü Right to charge interest and commission
Mechanism for customer grievance
ü Banking Ombudsman Scheme: 1995
Termination of Bank Customer relationship
Module 5: Banking in the Current Scenario
Electronic Banking (1 session)
ü Automated Teller Machines
ü Mobile Banking
ü Tele Banking
ü Internet Banking
ü Electronic Funds Transfer Banking and Financial Market Crisis (1 Session)
ü East Asian Crisis: Role of Banks
ü Sub prime Mortgage Market Problems: Role of Banks and Lessons for India
ü Is Credit Boom in India a precursor to Financial Crisis? Emerging Trends in Banking: (1 session)
ü Universal Banking
ü Electronic Banking and
ü Globalisation of Banking
Clarification of Questions, Doubts and Discussions
Evaluation Pattern
Quizzes - 35% Mid term- 30% End term - 35%
References:
a) Financial Institutions and Markets- Mishkin and Eakins (5th edition)
b) Principles of Money, Banking and Financial Markets: Ritter and Silber, (9th edition), Basic Books, USA
c) Report on Trend and Progress of Banking in India (various Issues)
d) Annual Report, Reserve Bank of India (Various Issues)
e) Commercial Bank Management Paul and Suresh, Pearson
f) Principles of Banking, Macmillan India
g) Legal Aspects of Banking Operations - Macmillan India
h) Report on Currency and Finance- Reserve Bank of India (Various Issues)