Indian Banking Structure

EMI: Equated Monthly Installment. It is nothing but a repayment of the loan taken. A loan could be a home loan, car loan or personal loan. The monthly payment is in the form of post dated cheques drawn in favour of the lender. EMI is directly proportional to the loan taken and inversely proportional to time period. That is, if the loan amount increases the EMI amount also increases and if the time period increases the EMI amount decreases.

Basis points (bps): A basis point is a unit equal to 1/100th of a percentage point. i.e. 1 bps = 0.01%. Basis points are often used to measure changes in or differences between yields on fixed income securities, since these often change by very small amounts.

Liquidity: It refers to how quickly and cheaply an asset can be converted into cash. Money (in the form of cash) is the most liquid asset.

Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialised form for funds deposited at a bank or other eligible financial institution for a specified time period.

Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. It was introduced in India in 1990. Corporates and the All- India Financial Institutions are eligible to issue CP.

Types of banks in India

• Central Bank (RBI)
• Specialised banks
• Commercial banks
• Development banks
• Co-operative banks

Central Bank:

As its name signifies, a bank which manages and regulates the banking system of a particular country. It provides guidance to other banks whenever they face any problem (that is why the Central Bank is also known as a banker’s bank) and maintains the deposit accounts of all other banks. Central Banks of different

countries: Reserve Bank of India (INDIA), Federal Reserve System (USA), Swiss National Bank (SWITZERLAND), Reserve Bank of Australia (AUSTRALIA), State Bank of Pakistan (PAKISTAN).

Specialised Banks:

Those banks which are meant for special purposes. For examples: NABARD, EXIM bank, SIDBI, IDBI.

NABARD: National Bank for Agriculture and Rural Development. This bank is meant for financing the agriculture as well as rural sector. It actually promotes research in agriculture and rural development.

EXIM bank: Export Import Bank of India. This bank gives loans to exporters and importers and also provides valuable information about the international market. If you want to set up a business for exporting products abroad or importing products from foreign countries for sale in our country, EXIM bank can provide you the

required support and assistance.

SIDBI: Small Industries Development Bank of India. This bank provides loans to set up the small-scale business unit / industry. SIDBI also finances, promotes and develops small-scale industries. Whereas IDBI (Industrial Development Bank of India) gives loans to big industries.