MFS Unit II

BANKING SERVICES

Banking
Banking refers to the system of financial institutions, such as banks and credit
unions, that provide various financial services to individuals, businesses, and
governments. Banking services mainly include accepting deposits, lending
money, facilitating transactions, and offering various financial products like
savings accounts, loans, and credit cards. Banking plays a crucial role in the
economy by facilitating the flow of money and enabling economic activities.

Functions of Banks
Banks in India offer a wide range of banking services, such as savings and
checking accounts, loans (personal, business, and mortgages), credit cards,
investment services, and electronic banking options like online and mobile
banking.

Some of the major functions of banks are mentioned below:

• Accepting Deposits: Banks provide a safe place for individuals and

businesses to deposit their money, which can be withdrawn when needed.

• Providing Loans: Banks lend money to individuals and businesses for

various purposes, such as home mortgages, business expansion, or personal
loans.

• Payments and Settlements: Banks enable transactions through various

payment methods, like checks, debit/credit cards, and electronic transfers.

• Currency Exchange: Many banks offer foreign exchange services, allowing

customers to buy, sell, or exchange foreign currencies.
 • Safekeeping of Valuables: Some banks offer safe deposit boxes for
customers to securely store valuable items and documents.

• Investment Services: Banks also provide investment products like mutual

funds, stocks, and bonds, helping customers grow their wealth.

• Internet Banking Services: Banks offer online and mobile banking services,
making it convenient for customers to access their accounts, pay bills, and
transfer funds.

Types of Banks in India

The Banking System in India is divided into several types, each serving specific
functions and purposes. The table below represents the different types of banks in
India and how it is further divided:

Banking Classification in India

Types of Banks Sub-types

Central Bank -

Commercial Banks a) Private Sector Banks

b) Public Sector Banks

c) Regional Rural Banks

d) Foreign Banks

Co-operative Banks a) State Co-operative Banks

b) Urban Co-operative Banks

 Payment Banks -

Small Finance Banks -

Scheduled Banks -

Non-scheduled Banks -

1) Central Bank

The Reserve Bank of India (RBI) serves as the Central Bank of India and is
responsible for regulating and controlling the monetary and banking system in the
country.

2) Commercial Banks

These are the most common types of banks and include public sector banks,
private sector banks, and foreign banks. They provide various services like
savings and current accounts, loans, and investments.

• Public Sector Banks: Owned and operated by the government, examples

include State Bank of India (SBI), Punjab National Bank (PNB), and Bank
of Baroda (BOB).

• Private Sector Banks: These are privately owned and managed banks, such
as HDFC Bank, ICICI Bank, and Axis Bank.

• Foreign Banks: These banks have branches in India and are headquartered
in foreign countries. Some examples are Citibank, Standard Chartered, and
HSBC.

• Regional Rural Banks (RRBs): These banks cater to rural and semi-urban
areas and are owned by the government, commercial banks, and state
governments.
The table below shows a few examples of Commercial Banks in India.

Commercial Banks in India

Public Sector Banks Private Sector Banks Foreign Banks

Here is a list of public sector Here is the list of private sector Here is a list of foreign banks
banks in India: banks in India: that operate in India:

• Bank of • I.C.I.C.I. Bank • Australia and New

Maharashtra Zealand Banking Group
• R.B.L. Bank
Ltd.
• Indian Bank
• I.D.F.C. Bank
• National Australia Bank
• Bank of Baroda • South Indian Bank
• Westpac Banking
• Canara Bank • IDBI Bank
Corporation
• State Bank of India • Tamilnad Mercantile
• Bank of Bahrain &
• Central Bank of Bank
Kuwait BSC
India • YES Bank
• AB Bank Ltd.
• Union Bank of India • Axis Bank
• Credit Agricole
• Indian Overseas • City Union Bank Corporate & Investment
Bank
• Karnataka Bank Bank
• UCO Bank
• Dhanlaxmi Bank • Societe Generale
• Punjab & Sind Bank
• Kotak Mahindra Bank • Deutsche Bank
• Bank of India
• D.C.B. Bank • HSBC Bank
• Punjab National
• Karur Vysya Bank • PT Bank Maybank
Bank
Indonesia TBK
• Federal Bank
• Mizuho Bank Ltd.
• Lakshmi Vilas Bank
• Sumitomo Mitsui
• H.D.F.C. Bank
Banking Corporation
• Nainital Bank • M.U.F.G. Bank, Ltd.

• IndusInd Bank • Coöperatieve Rabobank

U.A.
• Bandhan Bank
• Sonali Bank Ltd.
• Jammu and Kashmir Bank
• Bank of Nova Scotia

• Industrial &
Commercial Bank of
China Ltd.

• BNP Paribas

• Doha Bank Q.P.S.C.

• Qatar National Bank

(Q.P.S.C.)

• JSC VTB Bank

• Sberbank

• United Overseas Bank

Ltd

• FirstRand Bank Ltd

• Shinhan Bank

• Woori Bank

• Barclays Bank Plc.

• Standard Chartered
Bank

• The Royal Bank of

Scotland plc

• American Express
Banking Corporation

• Bank of America
 • Citibank

• J.P. Morgan Chase Bank

N.A

• Kookmin Bank

• S.B.M. Bank (India)

Limited

• K.E.B. Hana Bank

• Industrial Bank of Korea

• Bank of Ceylon

• D.B.S. Bank India

Limited

• Credit Suisse A.G.

• C.T.B.C. Bank Co., Ltd.

• Krung Thai Bank Public

Co. Ltd.

• Abu Dhabi Commercial

Bank Ltd.

• Mashreq Bank P.S.C.

• First Abu Dhabi Bank

P.J.S.C.

• Emirates Bank NBD

3) Cooperative Banks

A Co-operative Bank is registered under the Co-operative Societies Act of 1912

and is run by an elected managing committee. It works on a non-profit, no-loss
basis and mainly serves entrepreneurs, small businesses, self-employment, and
more in urban areas.
In rural areas, it mainly functions to finance agriculture-based activities like
farming, livestock, and hatcheries. There are mainly two types of Co-operative
Banks:

Types of Description
Cooperative
Bank

State Co-operative A State Co-operative Bank is a federation of the central Co-operative

Banks banks that will act as a custodian of the Co-operative banking structure
in the State.

Urban Co- The Urban Co-operative Bank is the primary Co-operative bank located
operative Banks in urban and semi-urban areas. The banks essentially lent to smaller
borrowers, and businesses centred around a community, locality, and
more.

4) Payment Banks

The payment banks are a relatively new banking model in the country that has
been conceptualised by the RBI. This bank is allowed to accept a restricted
deposit. This amount is limited to Rs. 1 lakh for a customer. The bank also offers
services such as ATM cards, net banking and more.

5) Small Finance Banks

These banks primarily serve the unserved and underserved sections of the
population, including small businesses and low-income individuals.

This type of bank is licensed under Section 22 of the Banking Regulation Act
1949, and it is governed by the Provisions Act of 1934.

Here are a few examples of Small Finance Banks in India:

• AU Small Finance Bank Ltd.

 • Utkarsh Small Finance Bank Ltd.

• Fincare Small Finance Bank Ltd.

• Ujjivan Small Finance Bank Ltd.

• Jana Small Finance Bank Ltd.

• ESAF Small Finance Bank Ltd.

• Suryoday Small Finance Bank Ltd.

• Equitas Small Finance Bank Ltd.

• Capital Small Finance Bank Ltd.

• North East Small Finance Bank Ltd.

6) Scheduled Banks

These banks are covered under the 2nd Schedule of RBI Act 1934, and they need
to have a paid-up capital of Rs. 5 lahks or more.

7) Non-Scheduled Banks

The non-scheduled banks are local area banks that are not listed in the 2nd
Schedule of the RBI Act 1934.

Types of Bank Accounts in India

Banks offer several types of bank accounts to cater to different financial needs.
These bank accounts vary from one another based on the purpose, transaction
frequency and location.

Given below are the common types of bank accounts in India:

• Savings Account: This is a basic account for individuals to save money. It

offers interest on deposits and allows limited withdrawals.

• Current Account: This type of account is mainly used by businesses. It has

zero or very low interest rates but offers more transaction features, making
it suitable for frequent transactions.
 • Fixed Deposit Account: In this account, you deposit a lump sum for a fixed
tenure at a higher interest rate compared to savings accounts. Funds are
locked in until maturity.

• Recurring Deposit Account: It is a savings plan where you deposit a fixed

amount every month, and at the end of a specified period, you receive the
principal and interest.

• NRI (Non-Resident Indian) Account: These are for Indians living abroad.
NRE (Non-Resident External), NRO (Non-Resident Ordinary) and FCNR
(Foreign Currency Non-Residential) accounts are major types of NRI
accounts.

• Senior Citizen Savings Account: Created for senior citizens, these accounts
offer higher interest rates and additional benefits.

• Salary Account: This account is used by an employer to credit the salary of

an employee every month. It does not have any minimum balance
requirement.

• Demat Account: This account is created primarily for holding and trading
in securities electronically, such as stocks and bonds.

• Joint Account: It is shared by two or more individuals, often used for family
or business purposes.

• Minor Account: Opened on behalf of minors by parents or guardians. The

minor gains control upon reaching a certain age.

• Corporate Account: Used by companies and corporations for their banking

needs, including payroll and transactions.

What is Investment Banking?

Investment banking is the division of a bank or financial institution that serves

governments, corporations, and institutions by providing underwriting (capital
raising) and mergers and acquisitions (M&A) advisory services. Investment
banks act as intermediaries between investors (who have money to invest)
and corporations (who require capital to grow and run their businesses). This
guide will cover what investment banking is and what investment bankers
actually do.

What Do Investment Banks Do?

There can sometimes be confusion between an investment bank and

the investment banking division (IBD) of a bank. Full-service investment banks
offer a wide range of services that include underwriting, M&A, sales and
trading, equity research, asset management, commercial banking, and retail
banking. The investment banking division of a bank provides only the
underwriting and M&A advisory services.
Full-service banks offer the following services:

• Underwriting – Capital raising and underwriting groups work between

investors and companies that want to raise money or go public via
the IPO process. This function serves the primary market or “new
capital”.

• Mergers & Acquisitions (M&A) – Advisory roles for both buyers and
sellers of businesses, managing the M&A process start to finish.

• Sales & Trading – Matching up buyers and sellers of securities in the

secondary market. Sales and trading groups in investment banking act
as agents for clients and also can trade the firm’s own capital.

• Equity Research – The equity research group research, or “coverage”,

of securities helps investors make investment decisions and supports
trading of stocks.

• Asset Management – Managing investments for a wide range of

investors including institutions and individuals, across a wide range of
investment styles.

Who are the Main Investment Banks?

The main banks, also known as the bulge bracket banks in investment banking,
are:
 • Bank of America Merrill Lynch

• Barclays Capital

• Citi

• Credit Suisse

• Deutsche Bank

• Goldman Sachs

• J.P. Morgan

• Morgan Stanley

• UBS

What Is INTERNATIONAL BANKING

International Banking is a process that involves banks dealing with money and
credit between different countries across the political boundaries. It is also
known as Foreign/Offshore Banking. In another words, International Banking
involves banking activities that cross national frontiers.

International banking is the practice of conducting banking and investment

activities across national borders. It's a vital part of the global economy,
helping to: facilitate the flow of capital between countries, encourage
international trade and investment, and provide access to global markets.

International banks offer a range of services, including:

• Letters of credit: Documents that guarantee payment for goods and services

• Export credit: Helps finance trade

• Exchange services: Allows businesses to make payments in the local currency

• Accounts in different currencies: For personal banking customers

International banking is used by most multinational companies and
individuals. Businesses with an international customer or supply base need to
understand how international banking works to minimize costs and streamline
payment processes.

International banking challenges

Fees

There’s no discussing cross-border banking without mentioning fees. Whether

it’s a dollar amount for a wire transfer, a percentage taken by a transfer service,
or an unfavorable exchange rate making money go less far, there are tons of
ways that people lose money when sending it abroad.

Complex taxes

Every country has its own tax rules, and they can sometimes be in contradiction
with the laws in other countries around the world. Any kind of international
banking requires knowledge of the tax systems of the countries you’re living
or working in, and sending money to — so consult with a knowledgeable cross-
border accountant or lawyer to ensure you and your business stay compliant
and avoid penalties.

Delays in transfers

Many countries have banks that facilitate instant transfers through apps, online
banking, or in-person visits to the bank. But those instant options tend to dry
up when there’s a border involved — many international banking options can
only make transfers that take days, or longer, to arrive in the recipient’s
account.

Marketing of Banking Services

 Bank marketing is a process that involves identifying and meeting customer
needs, promoting services, and building a brand. Some of the key objectives of
bank marketing are:

• Customer acquisition and retention: Attracting new customers and keeping

current ones loyal

• Brand building: Creating a brand that resonates with customers' values and
needs

• Product promotion: Showing off a bank's products and explaining their

benefits

• Market analysis and adaptation: Staying up to date on market trends and

customer behavior

Some strategies for bank marketing include:

• Local marketing: Optimizing local marketing efforts

• Content marketing: Creating valuable content, such as how-to videos,

customer testimonials, and product overviews

• Customer segmentation: Grouping customers based on their unique needs

• Google Ads: Publishing targeted Google Ads

• Customer surveys: Conducting customer surveys

• Partnerships: Forging partnerships with local businesses

• CRM systems: Investing in CRM systems

The marketing mix for services includes seven elements: product, price, place,
people, promotion, physical evidence, and process.

Marketing of Insurance Services

 Insurance marketing is a combination of strategies and tactics that insurance
companies and agents use to promote their services and build relationships with
clients. The goal of insurance marketing is to educate customers, establish
trust, and convert prospects into loyal customers.

Here are some strategies for insurance marketing:

• Understand the market

Understand the needs and concerns of potential clients, the competition, and
the latest consumer behavior trends.

• Use a variety of platforms

Use a mix of traditional and digital marketing methods, such as social media,
email campaigns, webinars, and networking events.

• Create a website

A well-designed website is a vital digital marketing strategy.

• Use SEO

Build an effective SEO strategy to appear in search results for relevant

keywords.

• Use social media

Create a social media presence on platforms like Instagram, Facebook,

Twitter, LinkedIn, and TikTok.

• Use email marketing

Use personalized emails to create top-of-mind awareness with potential

clients and connect with existing customers.

• Use PPC advertising

Use pay-per-click (PPC) advertising to bid on keywords and get your website
in front of more people.
• Join a business networking group

Attend group events, business meetings, club meet-ups, workshops, and

conferences to make contacts, form relationships, and identify business
opportunities.