Introduction - Financial sector overview
Indian Financial Sector is a well diversified arena experiencing high growth and development. The financial sector of India is comprised of commercial banks, insurance companies, non-banking cooperations, pension and mutual fund houses and lot more other financial institutions serving the Indian Economy. However, the financial sector is a major ly dominated by the Bankin Sector where the commercial banks comprise of 60 percent of total assets held by the financial system followed by Insurance Sector. Apart from the Banks and Insurance Companies, financial sector also comprise of Non-Banking Finance Companies also known as NBFC which in operate in specialized segments of micro finance, infrastructural finance although few of them also have licence to accept deposits. (Secreteriat)
India's central bank position (role and regulation):
The regulation of Indian banking system is performed by Reseve Bank of India. Being known as lender of last resort, RBI keeps supervision on functioning of commercial banks and performs the following function:
Printing Currency
Banker to The Government
Supervisory powers over Commercial banks
Taking monetray steps both quantitative and qualitative to ensure economic stability
Printing Currency:
RBI has the sole authority to print currency notes and introduce them to the moentary system of the country. No other government agency has the right to print the currency and thus, RBI enjoys monopoly but in the interest of the nation.
Banker to the Government:
RBI acts as a banker both to State and Central Government. Just like the relatonship which commercial banks carries with general public, RBI performs same banking function for the government b...
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...ial crisis, Arab Spring, Euro zone crisis).
After the global financial crisis, it is now the Euro Zone Crisis and the Arab Spring(also known as Arab Awakening) is the new threat to Indian Economy. Where the US financial crisis, saw a record rise in customer’s default on sub-prime mortgage defaults and forcelosures which resulted in decline in securities backed by mortgages but now the euro zone crisis has threaten the Indian Economy in the following ways:
Capital Inflows from the Foreign Institutional Invetsors(FII) is marked with high volatility
Exports to Euro natiions which are India’s favourite trade destination after USA, has seen a sharp decline.
Fall in FII investments can anytime lead to inflationary pressures and building of asset bubble just as in US during 2007. (Sriram)
Secondly, the Arab Swing is likely to have deep impact on Indian Economy
Diamond and Rajan (2009) found that investment misallocation is the proximate cause of the credit crisis. In response to the crisis, corporations, governments, and households reduced on investment and decreased consumption. Federal Reserve provides an adaptable monetary policy to guarantee that the world did not suffer in deep recession. The low interest rates increase a large of demand of housing. House pricing become more value for sale and rent in many countries. Credit crisis is initially occurred in U.S because the financial invocation of U.S. Hence, there is more marginal-credit-quality buyer into the market.
The Federal Reserve System is the central banking authority of the United States. It acts as a fiscal agent for the United States government and is custodian of the reserve accounts of commercial banks, makes loans to commercial banks, and is authorized to issue Federal Reserve notes that constitute the entire supply of paper currency of the country. Created by the Federal Reserve Act of 1913, it is comprised of 12 Federal Reserve banks, the Federal Open Market Committee, and the Federal Advisory Council, and since 1976, a Consumer Advisory Council which includes several thousand member banks. The board of Governors of the Federal Reserve System determines the reserve requirements of the member banks within statutory limits, reviews and determines the discount rates established pursuant to the Federal Reserve Act to serve the public interest; it is governed by a board of nine directors, six of whom are elected by the member banks and three of whom are appointed by the Board of Governors of the Federal Reserve System. The Federal Reserve banks are located in Boston, New York, Philadelphia, Chicago, San Francisco, Cleveland, Richmond, Atlanta, Saint Louis, Minneapolis, Kansas City and Dallas.
The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.
The Federal Reserve System is a central banking of the US Government, most commonly known as the Fed. A central bank serves as the banker to both the banking community and the government. It issues the national currency, conducts monetary policy, and plays a major role in the supervision and regulation of banks and bank holding companies. Congress created the Fed in 1913. It was designed to ensure political independence and sensitivity to the many different economic concerns. The chairman and the six other members of the Board of Governors who oversea the Fed are nominated by the President of the United States and confirmed by the Senate. There are twelve District Reserve Banks, subsequently located in Boston, New York, Philadelphia, in Richmond, VA. In Atlanta, GA., Cleveland, OH. St. Louis and Kansas City, MO., Chicago, Minneapolis MI., Dallas, TX. And San Francisco. Each bank is responsible to a 9 member Board of Directors, which is set in a three-class system. The three classes are defined as A, B, and member banks elect C. Class A and the Board of Governors appoints B Directors and Class C. The Board of Directors is responsible for the administration of its banks and the appointment of the banks president and vice-president. This process is set from the base...
The federal reserve is federal banking in the United States that performs functions of a central bank. It is made up of three major functions which are monetary policy, banking supervision, and financial services. These three aspects help keep the federal reserve safer, flexible, and have a more stable financial system for its consumers. That way the federal reserve can continue its business without facing any
The Reserve Bank’s monetary policy actions are directed towards influencing the level of interest rates in the financial system on order to achieve its economic objectives (Viney, 2005).
It’s mandatory for all the banks to deposit a certain determined percentage of their assets with the central bank to make sure that the banks’ customer deposits are safe. These percentages are what the central bank adjusts to reduce or increase the banking lending ...
Monetary policy / monetary management is regarded as an important tool of economic management in India. RBI controls the supply of money and bank credit. The Central bank has the duty to see that legitimate credit requirements are met and at the same credit is not used for unproductive and speculative purposes. RBI rightly calls its credit policy as one of controlled expansion.
The central bank of any country is the main driving force for the implementation and development of the national payment system. The Indian payments systems have undergone a volumetric and qualitative change after globalization. At present the payments in India can be made through paper based instrument ,electronic instrument and other instrument ,with the introduction of card-based payments on POS, ATMS and Kiosks, Electronic Funds Transfers (NEFT and RTGS), Electronic Clearing Service, Mobile and Internet
Ministry of Corporate Affairs (MCA 21): Mission Mode Project (MCA21) is the e-governance initiative from the Ministry of Corporate Affairs, Government of India. It is one of the 27 Mission Mode Projects of the National e-Governance
5. Presence of central bank: The Reserve Bank of India has been vested with wide powers of control over different institutions in the money market. The indigenous banking has, however, remained outside the sphere of RBI’s direct control. The rates of interest in the unorganized sector are, therefore, substantially higher than those in the organized sector. The Central Bank controls money supply of the country as per needs of the economy. The other member banks can borrow from The Central Bank during emergency. Thus, a powerful Central Bank controls, regulates and guides the money
Central Bank is the main important institution that playing roles as the center of the financial system which have functions to control a financial stability and monetary stability in the country. Whether the financial system is running well or there might be happened a trouble while organize the financial system, all of that and all the activities related to financials are fully a responsible of Central Bank in each country.
It is a known fact that the banking industry plays a huge role in today’s society, the industry has grown rapidly of many decades and still growing. The banking sector is that sector of the society that is actually responsible for the handling of financial assets for other sector of the economy, they do this by investing the financial assets in order to create more wealth in the society while regulating all the activities involved in the process. (What is the banking Sector 2015)
Banks sector is playing an important role in economies. The banking industry, as the classic and the most influential of financial intermediaries, facilitates economic operations. Financial sector in the worldwide country has been changes over these years by looking the changes of financial structure environment and economic conditions. Thus, banks are a very important point to financial system and play an important role as control and contribute growth to the economic sector.
SBI is the largest commercial bank in India in terms of assets, deposits ,profits, branches, and employees. The State Bank Group, consisting of the bank and its Associate Banks ,has an overwhelming presence in the Indian financial sector. The group, through its various non banking subsidiaries, provides a range of financial services including Life insurance, general insurance,investment banking, mutual funds,credit card,factoring, security trading and primary dealership in the money market. The origins of State Bank of India date back to 1806 when the Bank of Calcutta ( later called the Bank of Bengal ) was established. In 1921 the Bank of Bengal was