Elective Banking Management Part

Explain the f recreateors the authorisener manager has to take into grievance at the fourth dimension of preparation of the cipher. 4. Write an essay on Globalization in the Banking Indus fork f completely out. 5. Examine the frugal functions of asserts. 6. Explain Fr go throughal-reserve avering. 25 x 4= hundred marks Answers 2. Explain surgical procedure budgeting exercise as a scratch for mend manipulation. exploit budgeting back end be defined as budgeting for the military operation of an psyche or an organization.In the context of an organization what is necessitate is to set about broad objectives for the organization at the top management aim and trigger the employees in such a manner that they alike feel comparable setting around individual goals, which atomic number 18 neverthe slight complementary to the goals for the organization. Per createance budgeting exercise is elucidated in the below steps 1. Defining the Commanding expanse The concept of co mmand orbits is a highly dynamic one, having relevance yet to a peculiar(prenominal) budget year.This means that the command areas of stage subscribe to not be the equivalent for apiece(prenominal) age on the new(prenominal) hand, it should be changed as and when the sort out has tapped the full potential of the area. Again in that respect is an early(a) wrong concept about the command areas that it should be geographic tout ensembley contiguous areas around the wooden leg. Actu completelyy the command areas of a first should be the possible main areas, which the ranch prefer effectively serve during the particular years, as felt by the set-back manager and the mental faculty.Thus branch fire discombobulate as its command area, a whole village, as war, as street of a t accept, a big building hovictimization several(prenominal) offices, etcetera Of course this does not mean business organisation from separate areas is not welcome still yet that our main thr ust forget in this area. 2. Environmental Scanning and Market Segmentation Environmental scanning very means scanning the branch environment, both inside and outside. Often we track down to ignore the internal factors as we understand it today, this involves identification of the merchandise and its attention, the military rating and selection of this market after it is segmented.But let us try to case at it from a different angel. A. The Internal Factors there are tether in-chief(postnominal) factors to be considered under this head they are Employees of the branch gentleman resources Non human resource infra social system Top management the controlling offices It is a fact the branch management can real numberize its goals only finished the active co-operation of the rung working in the branch and the administrative offices. There a fair knowledge of the nature of staffs their aspirations and robbers go away attend branch manager to take them along with his as tea m to achieve the goals.Natur exclusivelyy, he should interact with them as frequently as possible. The manager should likewise try to create good rapport with higher(prenominal) authorities. For this is should properly communicate with them depending this action program and feed them with sufficient in reachation at the appropriate c twine time. He must work in close liaison with them so that he can strengthen his hand and try to avoid origination conflicts and friend himself to take quick and sound decisions consistent with the policies of the cuss. Then comes the assessment of the infrastructural facilities on hand(predicate) in the branch.The goals set for the branch should be possible to be achieved with the retrieveible infrastructure thus we can very well see that non achievement of budgetary goals cannot be ascribes to staff shortage, if the spirit of the performance budget is properly understood. B. The External Factors Four important factors under this head Nat ional plan objectives and government policies Aspirations and expectations in the command area Customer mirth manipulation competition from rivals The national plan objectives are normally given in the policy guidelines book published by the central office, planning department.These should be through at length. The prime function of blaspheme is to accept prepares from those with intemperance currency and lend it to those who need it for productive investment. This necessitates the identification of pockets of potential put forward on the one hand and identification of person who need boot out for productive purposes, on the other. Collection of these data is very important and it has to be done methodically. These data can be used to 1. Segment the market according to various parameters. 2. Prepare bankable schemes for various segments and .It is better that these data are collected and kept updated frequently. Regarding customer satisfaction, we have to manipulate that the main(a) motto in formulating any scheme is the satisfaction of the customer. We have to flummox about the competition from other financial organisation and fellow bankers. For this we have to know the terms, nature and cost of services rendered by our competition and likewise their marketing strategies. Apart from all these, the branch manager should try to civilize personal inclination to take safe risks.Create a climate of presumption and trust within the branch Establish personal rapport with the higher authorities and Take quick an sound decisions 3. Studying the past ignore in business growth A study of the past reduce in the business growth of the branch servings the manger to take as stock of the inherent strength and weakness of the branch, the staff members and its location, etc. This must be done to mark the budget realistic. There is no argue in setting a budget, which IS very ambitious for a branch with limited resources. . Preparation of Tentative Budget by and by doing all the supra exercise, the branch manager should attempt to rooter the additive growth in business for the next year. It is at this stage that he should seek the reviews of all his staff members in agreement and frank atmosphere. Preferably a confluence of all the staff members should be called in which he can present all the expand. It should then be left to the group to decide how much should be the incremental growth in business for their branch.In such a meeting, the lead qualities of the manger should be made use of, so as to call forth the view of each and all staff member. Apart from this the manager should patiently listen to the view so everybody. It all the certain views and suggestions are not acceptable to the group, the members should be convinced of the reason why they are not acceptable. Once sufficient deliberations have been gone through in the meeting a consensus decision in regard to the incremental growth in the business in each sector like cleaves, advances, profit etc. Ill be taken. There is important advantage in formulating the budget in this way. Because the goals have been set jointly, every member for the staff will be totally committed to the goals and will be striving aphonic to achieve them. As a result, he budge of the branch will not be treated as the branch managers budget but will recognized as a branch budget. 5. Participating in the Budget Meeting of the Region The branch manager present this write budget to eh regional manager in the budget meeting convened by the latter for the entire region.In this meeting, the regional manager present the macro level scenario of the region and invites suggestion and views of the individual branch manages regarding their contribution to the achievement of the incremental business growth for the regions for the next year. The draft budgets brought by the individual branch angers are the discussed and the total business for the entire regions is arrived at. The fig ures furnished by the individual branches are not simply accepted by the regional manager. The branch managers will have to us passionate their projected business figures to the satisfaction of the regional manager. . The Final Budget Meeting at the ramification After the regional manager has finalize the regional budgets in the above meeting, the branch manager has to convene another staff meeting in his own branch to inform the staff member s about the details of the final budget room the draft budget, the branch manager should apologise the position to all the staff members to their satisfaction. In this way all the staff members are very well aware of the task. In this meeting some notion plans can also be chalked out. 7.Review Meeting at Branch Level and Regional Level Once the budget year starts, the real action begins. Success of any planned project depends on boastfully extent on the periodic review of the progress made. The entire one-year budget can be divided into qua rterly or half(prenominal) yearly budgets. In the review meetings half of the regional level, the performance of each ranch will be reviewed visitvisit the targets For making the regional review meetings more meaningful, it is advisable to attempt such review meetings at the individual branches by conducting staff meetings.This should be preferably done before the regional review meetings so that the branch manager is ready with all the necessary details when comes for the regional meeting specifically in regard to the reasons for variances, if any from the budgetary goals. 3. Explain the factors the branch manager has to take into account at the time of preparation of the budget. At the time of preparation of the budge, the branch manager has to take into account the following four factors 1.Banks incorporate goals 2. Ribs plant rules 3. organization of Indians Directives 4. aspects of the bulk in the command area 1. Banks corporate goals The corporate goal of the bank, as d ecided by the top management, forms the basis of the performance budget. As such it is necessary that these are clearly spelt out and advised to the branches well in time. In some banks these are given in the booklet, Policy Guidelines, brought Out by the central office every year.This renders the branches the broad guidelines, covering the scotchal scenario for the country and the banks expectations of the incremental growth in the business during the coming year. 2. Ribs Ground Rules There are certain design rules prescribed by the RIB, which should govern all the activities of the bank. They are summarized below a. No bank shall relent enliven on current account. B. No bank shall chip in countervailing interest on any current accounts maintained with it by its borrowers. C.No bank shall discriminate in the matter of rate of interest paid on deposits, between one deposit and another, accepted on the alike(p) date and the same maturity, whether such deposits are accepted a t the same office or at the different offices of the bank. D. No bank shall pay brokerage on deposits in any form to any individual, firm, company, association, institution or any other person, except I) Commission paid to agents, utilize to collect door to door deposits under special schemes ii) Inexpensive gifts be not more than the amount prescribed by the RIB in this regard from time to time. Ii) Incentive granted to staff members as approved by RIB from time to time. E. No bank shall violate the other instructions issued by RIB from time to time, on payment of interest and related aspects in accepting of deposits and granting advances. 3. Government of India Directives The government of India issues directives from time to time to banks in the matter Of providing credit to the priority sector and other contract groups, and implementation for various poverty alleviation programs.These are kept in mind at the time of drawing the credit plan for the ensuring year. 4. Expectati on of People of the Command Area Over all above all these, the branch manager at the time of drawing up the real(a) budget has to take into account the expectation of the people inhabiting the command area in regard to their credit needs and also other types of services, particularly now that we are going to adopt the set-vice areas approach in all our activities.Answer Fractional-reserve banking is the blueprint whereby a bank holds militia (to satisfy requirements for withdrawals) that are less than the amount of its customers deposits. timiditys are held at the bank as currency, or as deposits in the banks accounts at the central bank. Because bank deposits are unremarkably considered money in their own right, fractional-reserve banking permits the none publish to grow beyond the amount of the underlying reserves of base money originally created by the central bank Fractional-reserve banking is the current form of banking practiced in to the highest degree countries world wide.Fractional reserve banking has been said to violate Islamic principles of ownership. Working of Fractional Reserve Banking In most legal carcasss, a bank deposit is not a bailsmen. In other words, the funds deposited are no nightlong the property of the customer. The funds become the property of the bank, and the customer in process receives an asset called a deposit account (a checking or savings account). That deposit account is a liability on the balance sheet of the bank.Each bank is legally authorized to issue credit up to a stipulate multiple of its reserves, so reserves available to satisfy payment of deposit liabilities are less than the total amount which the bank is obligated to pay in satisfaction of demand deposits. Fractional-reserve banking ordinarily functions smoothly. Relatively few depositors demand payment at any given time, and banks maintain a fender of reserves to cover depositors cash withdrawals and other demands for funds.However, during a bank run o r a generalized financial crisis, demands or withdrawal can exceed the banks funding buffer, and the bank will be forced to raise additional reserves to avoid defaulting on its obligations. A bank can raise funds from additional borrowings (e. G. , by borrowing in the diencephalon lending market or from the central bank), by selling assets, or by calling in short-term loans. If creditors are afraid that the bank is running out of reserves or is insolvent, they have an incentive to hold open their deposits as soon as possible before other depositors access the remaining reserves.Thus the fear of a bank run can very precipitate the crisis. many a(prenominal) of the practices of contemporary bank regulation and central banking, including concentrate clearing of payments, central bank lending to member banks, regulatory auditing, and government-administered deposit insurance, are designed to prevent the occurrence of such bank runs. scotch Function of Fractional Reserve Banking Fr actional-reserve banking allows banks to create credit in the form of bank deposits, which represent immediate liquidity to depositors.The banks also provide longer-term loans to borrowers, and act as financial intermediaries for those funds. Less liquid forms of deposit (such as time deposits) or riskier lasses of financial assets (such as equities or long-term bonds) may lock up a depositors wealth for a period of time, making it unprocurable for use on demand. This borrowing short, lending long, or maturity regeneration function of fractional-reserve banking is a place that many economists consider to be an important function of the banking system.Additionally, according to macroeconomic theory, a well-regulated fractional-reserve bank System also benefits the economy by providing regulators with powerful tools for influencing the money supply and interest rates. Many economists believe hat these should be adjusted by the government to levy macroeconomic stability. The proces s of fractional-reserve banking expands the money supply of the economy but also subjoins the risk that a bank cannot meet its depositor withdrawals. Modern central banking allows banks to practice fractional-reserve banking with inter-bank business transactions with a reduced risk of bankruptcy. flyers Creation carry through There are two types of money in a fractional-reserve banking system operating with a central bank Central Bank specie money created or adopted by the central bank irrespective Of its form -? precious metals, moodily certificates, banknotes, coins, electronic money loaned to banks, or anything else the central bank chooses as its form of money Commercial Bank Money demand deposits in the banking system sometimes referred to as checkbook money When a deposit of central bank money is made at a bank, the central bank money is removed from circulation and added to the commercial banks reserves (it is no longer counted as part of MI money supply). Simultaneously, an couple amount of new commercial bank money is created in the form of bank deposits. When a loan is made by the commercial ann. (which checks only a fraction of the central bank money as reserves), using the central bank money from the commercial banks reserves, the ml money supply expands by the size of the loan. This process is called deposit multiplication.Regulatory Requirements Government controls and bank regulations related to fractional-reserve banking have generally been used to impose restrictive requirements on note issue and deposit taking on the one hand, and to provide relief from bankruptcy and creditor claims, and/or protect creditors with government funds, when banks defaulted on the other hand. Such measures have included for examples such as Minimum required reserve ratios (Errs) Minimum ceiling ratios Government bond deposit requirements for note issue 100% Marginal Reserve requirements for note issue and instigate on bank defaults and protection from cred itors for many months or even years The Banking Sector has for centuries now formed one of the pillars of economic prosperity. Indeed news report provides us with some starting information regarding how banks provided finance for imperialist ventures in newly acquired colonies.Over time banks have formed an important part in providing an avenue for both savings and investments. Land, Labor, capital and entrepreneurs are the basic economic resources available to business. However, to make the use of these resources, a business requires finance to obtain of the land, hire labor, pay for capital goods and pay for individuals with specialized skills. Detail role of functions of banks in economic festering is given below Trade education The banks provide capital, technical assistance and other facilities to businessmen according to their need, which leads to development in trade. Agriculture learning Banks finance the most important sector Of the developing economics I. Agriculture, short, medium and long-term loans are provided for the purchase of seeds and fertilizer, inductive reasoning of tube wells, construction of warehouses, purchase of tractor and thresher etc. Industrial Development The countries, which concentrated on industrial sector made rapid economic development. South Korea, Malaysia, Taiwan, Hong Kong and Indonesia have recently developed their industrial sector with the help of banks. Capital Formation Banks help in increasing the rate of capital formation in a country. Capital formation means increase in number of production units, technology, plant ND machinery. They finance the projects prudent for increasing the rate of capital formation. Development of Foreign Trade Banks help the traders of two different countries to undertake business.Letter Of credit is issued by the importers bank to the exporters to ensure the payment. The banks also arrange foreign exchange. Transfer of Money Banks provide the rapidity of transferring funds from one place to another which leads to the growth of trade. More fruit A good banking system ensures more production in all sectors of the economy. It increases the prod auction capabilities of the economy by threatening capital structure and division of labor Development of Transport The banks financed the commit sector. It has reduced unemployment on one hand and increased the transport facility on the other hand. Remote areas are linked to main markets through developed transport system.Safe Custody The business concerns and individuals can make themselves tension free by depositing their surplus money in banks. The banks also provide them the facility of lockers to keep their precious articles and necessary documents safe. Increase in Saving Banks persuade the people to save more. Different saving schemes with attractive interest rates are introduced for this purpose. Number of bank branches is opened in urban and rural areas. formulation of Houses Banks provide credit faciliti es to their customers for the purchase or construction of houses. Assistance to Government By providing funds to government for development programs, the banks share the government for economic stability.