Banking 3: Important Terms Video Lecture | General Knowledge (GK) for LIC AAO Exam (English) - Banking Exams

[Music]
everyone a monk puts father Ephraim hit
bull's eye dot-com and in this video
lecture I'll be talking to you about
certain important terminologies and
concepts related to banking sector in
India first let us try and understand
what variety sector lending is so the
government of India understands that
certain sectors of the economy need more
support so that is why it has fixed
certain amount of percentage that the
banks have to lend to various industries
like agriculture small-scale industries
small business service enterprises
microcredit loans education loans
housing loans so every bank in India
with some exceptions has to give about
40 percent of its total loans within
these sectors so these sectors in
combination are known as priority
sectors for banking next is another
important concept that is the basic so
this is the minimum interest rate for
reference of different banks right sir
any bank which is lending to which is
giving out loans defines the interest
rates in terms of base rate so for
example if SBI gives a loan to let us
say Reliance then it would say the
interest rate is base rate plus 1
percent or 100 basis points right so
this is the reference and it is a
minimum rate so they can not be the
banks cannot give any loans which are
below the base rate of the but so basic
system they place the base prime lending
rate system which was there up till 2010
this was replaced because banks could
give out loans below ppl are in the
earlier before 2010 however now base
rate is defined as the minimum interest
rate that the bank can give loans in so
after 2010 base rate is applicable to
all new loans and even poor loans which
now come on for renewal the different
thing is that banks are free
calculate their base rates according to
the cost at which they borrow these
funds however two conditions are applied
by the Reserve Bank of India however
this base rate is calculated RBI has to
find it to be consistent or appropriate
right secondly the calculations of basic
by different banks it has to be made
public by the bank on their website or
in their offices etcetera next re Basel
3 norms the basic walls are defined by
vis that is the Bank of International
Settlements in Basel that is the city in
Switzerland
no ABI is has its members as they all
the central banks of the world right so
they define different norms or practices
for all the banking said for the entire
banking sector of the world so that they
do not indulge in bad practices which
destabilize these banks so the goal of
the Basel norms is to ensure financial
stability and common standards of
banking regulations in the world so has
to avoid instability in the banking
sector so Basel 3 are the latest set of
norms after reason one and Basel - they
were released in 2010 but will be
implemented or adopted by all the banks
in the world by 2019
next is the ratio that is capital
adequacy ratio which is also known as
capital to risk weighted asset ratio
that is CRA R so we will not get into
the details of what these individual
terms are but it expresses the bank's
capital as a percentage of its risk
weighted credit exposures right so
basically the amount of money and the
bank has that is its capital divided by
its risk weighted assets gives the CRA
are or capital adequacy ratio it
measures the amount of risk exposure
risky exposure than the bike has next we
can understand a very important concept
that is the core banking solutions so CB
s
uses computer and network technology to
allow a bank to centralize its
record-keeping and allow access from any
location now this is very important
because all the transactions made within
a bank are centralized and you can
access the services of a bank for
example taking out money from any place
in in the country or across the world as
well right so customers are allowed to
access their bank accounts and perform
basic transactions from any branch
office in the country or in fact around
the world it includes transactions Loans
mortgage payments etc further banks make
these services available across multiple
channels like ATMs internet banking
mobile banking and branches etc but this
was a significant advancement over
earlier traditional type of banking when
all the banking transactions had to be
done manually and the cheques for
example had to be transferred physically
from one place to the other
so using mobile and Internet technology
banks can perform all these functions in
a centralized man next is the Banking
Ombudsman scheme of 2006 so it created a
body that is the Banking Ombudsman to
enable resolution of complaints with
respect to piping services so if you are
not satisfied as a customer customer of
a bank of the kind of services that you
are getting from the bank then you can
go ahead and complain it to the Banking
Ombudsman of India next is an
organization is banking codes and
standards Board of India so it is an
independent banking industry watchdog
that is it regulates or monitors whether
certain standards in banking are being
met or not it ensures adherence to
banking codes and standards so there are
various codes and standards established
by the Government of India the Reserve
Bank of India etcetera this particular
body that is B C SBI ensures that all
banks are adhering to them it is not a
department of reserve
of India and also it does not have any
judicial powers that is if the BC SBI
finds out that there are certain
mistakes or a bank is violating certain
codes and standards the body itself
cannot punish the bank it will recommend
a penalty to the Reserve Bank of India
which has the power to penalize the
banks next is a very commonly used term
in banking that is any FP or national
electronic fund transfer so it is a
nationwide system that facilitates firms
individuals and corporates to
electronically transfer funds from any
bank branch to any individual firm or
corporate having an account with any
other bank branch in the country right
so it is using the electronic platform
to transfer funds from one place to the
other so for any ft2 lakhs is the upper
limit which can be transferred within 24
hours or one day for greater amounts we
have what is called a real-time gross
settlement system or simply RTGS so it
is a continuous settlement system of
funds where transfer of money or
securities takes place from one bank to
another on a real-time and a gross basis
once processed the payments under RTGS
are final and irrevocable next term is
the direct benefit transfers II or
direct cash transfer scheme of the
Government of India so this is a ninety
party program launched by the Government
of India
on 4 January of 2013 so it aims to
transfer subsidies directly to the
people living below poverty line so
under this scheme the subsidies are not
transferred to the sellers for example
earlier we had Russian shopped Russians
shows earlier subsidies were transferred
to thee to these fair price shops or
Russian shops now what is happening is
we remove the need of such shops and we
transfer the subsidy directly to thee by
the counts of
individuals so that they can buy food
etc from any other shop of their choice
the next concept that we try to
understand this money laundering but
this is a financial transaction that
aims to hide the identity source and
destination of illegally obtained money
so money laundering is the process by
which we hide the identity or the source
of where the money is coming from this
money is usually illegally obtained for
example through drug smuggling robbery
etc right so this money is made to go
through certain processes that this
illegally obtained money is finally
pumped into the legal economy of the
country an example is of course the
havana scam as far as India is concerned
India has a specific money laundering
law that is the Prevention of Money
Laundering Act of 2002 so this is also
important for your paper next is a term
related to banking sector that you keep
on reading in the newspaper statice
non-performing assets or NPN so this is
a type of classification of asset by
financial institutions like banks and
other financial institutions that refers
to loans that are in danger of default
so this is a stage which is just before
default defaulting of the loan so any
asset is categorized as a non-performing
asset if the borrower fails to pay the
principal or the interest rate interest
payment for a period greater than 90
days right so as far as Indian a public
sector banks are concerned that is PSPs
they have very high levels of
non-performing assets to the tune of two
point one six nine lakh crores in order
to combat this the Government of India
set up a committee under a former the
chairperson of the Axis Bank that is
Vijay Naik
committee this was formed to reform the
corporate governance structure of public
sector banks in India to
bring down the levels of NPs in the
country so let us talk about the various
recommendations made by P general
Committee on banking corporate
governance so my committee understood
that because the government of India who
is the majority stakeholder of public
sector banks in India it is leading to a
lot of political interference so it
recommended that the government should
transfer its shares to another company
that is the Bank investment company with
functional autonomy right so the entire
shares of the Government of India should
be transferred to this new company that
is Bank investment company also the
committee recommended that the
government has to repeal these laws by
nationalization Act of 1970 SBI Act SP
has subsidiaries at etc however the
beach and I committee realized that in
order for the government to transfer all
its stake to the B I see it would take a
lot of time so in the temporary phase
the night committee recommends that
until the IC is born government should
set up a back woods Bureau at Mumbai to
advise on all board appointments by
chairman CMD executive directors etc so
the pigeon eye committee what it is
necessarily saying is that we need to
appoint a independent body like the back
woods Bureau which will recommend the
names of higher-level management people
of various public sector banks so that
political interference is minimized in
banking operations another important
committee is the Gopal Krishna Committee
on capacity building of public sector
parts it gave the following
recommendations first related
recruitment that there should be a
common man altitude test for different
public sector banks which is in fact
happening today as well
next with related training each bag
should have a chief Learning Officer who
would be in charge of ensure
the best skills are imparted to the bank
officers and banks should send staff
good reputation in Institute's or even
abroad to enhance their skills lastly
with respect to bank transfers the
committee recommended that bank transfer
policy needs to be revamped and needs to
be more suited suited to the interest of
the bank employees next is a very
important term which has been in the
news in the recent past related to
defaults made by dr. Vijay Mallya from
Kingfisher Airlines so baths can
categorize any borrower as a wilful
defaulter if the entity has defaulted in
meeting its payment or repayment
obligations firstly even when it has the
capacity to do so second it has not
utilized the finance from the lender for
the specific purpose for which the loan
was aways and has diverted funds so when
an entity does not spend the loan money
on the purpose for which it was taken
and diverts it to some other use
secondly it has disposed of the assets
given by him or it for the purpose of
securing a term loan without the
knowledge of the bank or the lender so
let us say if I take a road and I give
my house as a security or collateral for
the loan and if I sell my house without
informing the bank then again I can be
classified as a wilful defaulter if
somebody is classified as a wilful
defaulter an individual or even a
company then he or she finds it very
difficult to get more loans from the
market so during the course of this
video lecture I gave you a brief idea of
certain important terms related to the
Python sector in India and in general
that is all for today thank you very
much