Sources of income

1. Loans. Difference between interest paid and gained is spread or margin
2. Fee based incomes such as commissions(such as dealings of a bank and forex), Exchange, Brokerage(Sale of investments)

Characteristics

1. Transactions
2. Vaults
3. Interest on Accounts
4. Lending
5. Profit Basis

Functions

1. Banking can be defined as a business activity of accepting and safeguarding money owned by other individuals and entities and then lending out this money in order to earn a profit
2. Banks have savers and borrowers.

Primary functions

Accepting deposits

1. Savings deposits
2. Fixed deposits
3. Current deposits
4. Recurring deposits

Grants

1. Cash Credit
2. Bank Overdraft
3. Loans
4. Discounting bills

Secondary Functions

Agency Functions

1. Funds Transfers
2. Cheque collection
3. Periodic Payment/Collection
4. Portfolio Management
5. Other Functions

Utility Functions

1. Issue of drafts, letter of credits, etc.
2. Locker facility
3. Underwriting of shares
4. Dealing of foreign exchange
5. Project Reports
6. Social Welfare programs

Types of accounts

1. Savings accounts
2. Current accounts
3. Fixed Deposits Accounts. Can have loans against 80-90% of FDs
4. Recurring Deposit account

Advanced

1. Savings Accounts. No checks. Low interests
2. Basic Checking Accounts. Most prevalent. No interest. Checks Available.
3. Interest-Bearing Checking Accounts. Added services and added interest. Higher cost of maintenance. Similar to basic checking accounts
4. Money Market Deposit Accounts. Higher minimum available balance(MAB). Limited number of checks.
5. Certificates of Deposit. relatively long term investments. Range 3-6 years.

Types of Loans

1. Secured. Assets pledged.
2. Unsecured. No Assets pledged. Interests are higher as more risk for the bank.
3. Term loans. Larger and longer repayment periods. Can be secured or unsecured.
4. Revolving credit. Can be secured or unsecured.

Types of cards

1. Debit
2. Credit
3. Prepaid, Travel, Prepaid Forex, Forex

Payments

1. Wholesale payments(large sum)
2. Treasury Payments
3. Retail Payments

Pic of a paper cheque to use as a legal proof(USA, made by RPA and RPRF).

Clearing types

1. Clearing of the cheques, make use of the clearing house to make a transfer between the payee account and the beneficiary or payer account. Core banking system is now responsible for cheque clearance. Cheques used are MICR cheques. NPCI(National Payments Corporation of India) governs this, with guidance and support from RBI(Reserve bank of India) and IBA(Indian Bank Association). For USA it is FED(nickname for Central Bank of USA). It takes 2-5 days in USA.
2. National Electronic Funds Transfer(NEFT). Runs in batches. 12 settlement batches 8am to 7pm on weekdays and 6 settlement batches from 8am to 1pm on Saturdays. No min cap, max cap of 10,00,000. Needs Name, Account number, bank name and IFSC
3. Real Time Gross Settlement(RTGS). Bank time. Same details required.
4. Immediate Payment Service(IMPS). No need to wait for banking hours. Reciever details required, a 7 digit number issued by the bank called MMID and a mobile number.

Clearing body is NACH(National Automated Clearing House). NACHA is present in USA as well, does the clearance 3 times per day. SEPA(Single Euro Payments Area) in Europe. Has SEPA Credit transfer and SEPA Direct Debit. This is done for making it convenient to transfer money between state sized countries. It makes use of International Bank Account Number(IBAN) and Business Identifier Code(BIC).

We also have SWIFT(Soceity for Worldwide Interbank Financial Telecommunications). This is for international transfers. 1973 established. www.swift.com

USA has the concept of allowing pics being allowed as a proof of cheque.

Retail and Corporate Banking

1. Banking with individuals is Retail Banking(B2C).
2. Banking with organisations is Corporate banking(B2B).
3. Incidental charges, AFD accounts, asset products(trade finance, cash credit(clean, pledge and hypothecation)), term loans. Letter of credit(letter isssued to imported in favour of exporter). Underwriting(Assurance by financial institution, to purchase stocks, in case of non-sale). Purchase and Sale of securities. Project preparation. Advisory Services. Counselling. Portfolio Mangement. Salary products.

Customer segments

1. Minor, Guardians and Others
2. Non-Individuals : Partnerships, Trusts, Limited Liability Companies, Association of persons
3. Joint holdings and Nominees

NBFCs(Non-banking Financial Corporations)

Digital Bankings

Fintech, NBFCs, Cyber-crimes combating, Customer Experience, 80% data is unstructured.

Mobile Banking

This is the fastest growing banking channel for retail banking. mFoundry.

Automated Teller Machine(ATM)

Uses EMV chips as a global standard. Cash dispenser producer. Network security in place for ATMs.

Risks in Banking

1. Maturity mismatch
2. Banking book and Trading book is used. Banking book contains core banking details. Trading books are the higher liability activities that a bank undertakes. Sources of risk are : a. Corporate finance b. Trading and Sales c. Retail Banking d. Private Banking e. Commercial Banking f. Payment and Settlements g. Agency Services h. Asset Management i. Retail brokerage
3. banking book is normally held till maturity(date on which a transaction or financial instrument ends). Accrual(the accumulation or increase of something over time, especially payments or benefits) system of accounting. the risks this is exposed to are : a. Liquidity risk b. Interest rate risk c. Defaulter credit risk d. Operational Risk
4. trading book is held for short periods and are traded in market before maturity. MArked to market and difference accounted to profit and loss. Risks exposed to are : a. Market Risk b. Liquidation risk or market liquidity risk c. Default or credit risk d. operational risk
5. Off balance sheet exposure is contingent in nature, and does not involve immediate funding but becomes fund based obligations subject to certain contingencies. Examples : Guarantees, Committed or back up credit lines, unutilized fund based limits, lines of credits, derivatives like swaps, futures, forward contracts. Exposed to : a. Liquidity risks b. Interest rate risk c. Market risk d. Credit Risk e. Operational Risk
6. Major risks in banking are : a. Credit risk b. market risk c. Operational risk d. Interest rate risk e. Liquidity risk

Combating system in place is Anti-Money Laundering. Securities and Exchanges Board of India(SEBI). Smurfing, breaking values into smaller values for transfer. Money laundering follows the following steps :

1. Placement. Dirty money, Smurfing used here.
2. Layering. Accounts transfer for confusing money trails.
3. Integration. Used to buy legal assets.

Finastra, Axis Bank, CNBC, Intellect made a product for banks.

Ideas

1. Risk analysis through digital twinning for a massive distributed network of associated banking entities.

UK finance systems : Financial Policy Committee, Prudential Regulation Authority, Financial Conduct Authority, Competition and Markets Authority.