Key Concepts, Latest Trends & Data (FY 2023-24)

 Banking products – Liabilities 

• Savings account 

      Bank account at a retail bank. Common features limited withdrawals, inability  

      to overdraw, safe place to keep cash and short term funds.Funds attract   

      interest on the month end balance. 

• Current account

      Also called Checking accounts. Related to business transactions and does  

      not attract any interest on the money. Transaction account for businesses.  

      Can be overdrawn in case of emergent needs.  

• Fixed deposits

    Money is kept for a fixed term and attracts interest at higher rates. Each transaction is a separate contract. Fixed deposit can be opened on monthly interest payable or at maturity.   

• Recurring Deposits 

     It is akin to fixed deposit but with a difference that every month certain amount can be deposited in the account. Rate is higher.  

• Multi Option Scheme accounts 

    These are hybrid accounts of savings and fixed deposit. Whereby amount over and above the mandated amount in savings account is moved to another account offering higher rate of Fixed deposit. The amounts are freely moveable to and fro. 

Remittance Modes  

• RTGS (Real-Time Gross Settlement):
  • For high-value transactions; minimum ₹2 lakh, no upper limit.
  • Operates 24x7.
  • FY24 Data: Handled transactions worth ₹2,500 lakh crore.
• NEFT (National Electronic Funds Transfer):
  • No minimum limit; settlement in half-hourly batches.
  • Used for smaller transactions.
  • FY24 Data: ₹850 lakh crore processed.
• IMPS (Immediate Payment system) 
  • Realtime Transfer of funds electronically.
  • Minimum charge or no charge 
  • Day limit is Rs 5 lac 
  • Operated through Internet banking, mobile interface, ATM, Via SMS also 
• AePS (Adhaar enabled Payment System) 

UPI (Unified Payments Interface)

• Key Points:
  • Instant fund transfer, multiple payment modes (QR codes, mobile numbers).
  • Major initiative under "Digital India."
• FY24 Highlights:
  • Monthly transactions crossed ₹16 lakh crore (Oct 2024).
  • International adoption: Integrated with UAE, Singapore payment systems.

Credit Cards, Debit Cards, and App-Based Banking

• Credit Cards:
  • 8.5 crore cards in circulation.
  • FY24 spending: ₹14 lakh crore.
• Debit Cards:
  • Declining usage as UPI dominates; still essential for cash withdrawal.
• App-Based Banking:
  • Over 65% of users prefer mobile apps for banking.
  • Leading apps: YONO (SBI), iMobile (ICICI).

Locker Services and Other Bank Offerings

• Locker Services:
  • RBI-mandated transparent agreements. 
• Additional Services (also called PARA services):
  • Wealth management, mutual funds, forex exchange, and government schemes like PMJDY.
  • Agency services 

Banking Status, Trends, and Progress

• Banking Sector Growth:
  • Total banking assets exceed ₹330 lakh crore.
  • GNPA ratio reduced to 2.8% (lowest in 12 years).
• Digital Banking Trends:
  • Expansion of Digital Banking Units (DBUs).

Risk Management, CRAR, and Basel Norms

Bank business is fraught with risk which can cause losses. Major risks are

a.  Credit Risk - Risk of default 

b. Operational Risk – Risk because of faltered operations and processes 

c.  Market Risk – External risk because of market upheavals.   

• CRAR (Capital to Risk-Weighted Assets Ratio):

Banks to maintain minimum capital in proportion to Risk Weighted assets which is called CRAR. 

• • Indian banks maintain 16%, above the 9% Basel III CRAR requirement.
• Basel Norms: Risk controlling through Basel norms implementation. 
  • Basel 1 : introduced in 1988
  • Basel 2 : Introduced in 2004
  • Basel 3 : Introduced in 2010

Latest Developments in Banking

• Co-Lending: Partnerships between banks and NBFCs for MSME and rural financing.
• Fintech: Digital lending market projected to touch ₹3.5 lakh crore by 2025.
• ULI (Unified Logistics Interface): Streamlines supply chain financing.

Climate Finance and COP29

• Climate Finance:
  • ₹30,000 crore green finance initiatives in FY24.
  • Green bonds issued to fund renewable energy projects.
• COP29:
  • India committed to achieving Net Zero emissions by 2070.
  • Expansion of renewable energy; installed capacity at 175 GW (target: 500 GW by 2030).