23-03-2012, 12:46 PM
UNIVERSAL BANKING IN BANK OF INDIA A BANK TO BANK UPON
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INTRODUCTION
WHAT IS BANK
A financial institution that is licensed to deal with money and its substitutes by accepting time and demand deposits, making loans, and investing in securities. The bank generates profits from the difference in the interest rates charged and paid.
Bank: An organization, usually a corporation, chartered by a state or federal government, which does most or all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays interest on them; discounts notes, makes loans, and invests in securities; collects checks, drafts, and notes; certifies depositor's checks; and issues drafts and cashier's checks.
WHAT IS UNIVERSAL BANKING
It is a multipurpose and multi-functional financial supermarket providing both 'Banking and Financial Services' through a single window. As per the World Bank," In Universal Banking, large banks operate extensive network of branches, provide many different services, hold several claims on firms (including equity and debt) and participate directly in the Corporate Governance of firms that rely on the banks for funding or as insurance underwriters."
In a nutshell, a Universal Banking is a superstore for financial products, under one roof. Corporate can get loans and avail of other handy services, while individuals can bank and borrow. It includes not only services related to savings and loans but also investment. However in practice the term 'Universal Banking' refers to those banks that offer wide range of financial services beyond the commercial banking functions like Mutual Funds, Merchant Banking, Factoring, Insurance, Credit Cards, Retail loans, Housing Finance, Auto Loans, etc.
Empirical Background of Universal Banking:
The entry of banks into the realm of financial services was followed very soon after Liberalization in the economy. Since the early 1990s, structural changes of profound magnitude came to be witnessed in global banking systems. Large scale mergers, amalgamations and acquisitions among the banks and financial institutions resulted in the growth in size and competitive strengths of the merged entities. There thus emerged new financial conglomerates that could maximize Economies of Scale and Scope by building the production of financial services organization called Universal Banking.
By the mid 1990s, all the restrictions on Project Financing were removed and banks were allowed to undertake several activities in house. Reforms in the insurance sector in the late 1990s, and opening up of this field to private and foreign players also resulted in permitting banks to undertake sale of Insurance products. At present, only an 'arms length' relationship between a bank and insurance entity has been allowed by the regulatory authority, i.e.-IRDA (Insurance Regulatory & Development Authority).
Company Background
The Bank of India (BOI) was set up in 1906 and was nationalized in 1969 along with 13 other banks. BOI began operations with one office in Mumbai, and currently it has approximately 2,628 branches in India. BOI came out with an IPO in 1997. BOI provides a wide range of banking products and financial services to corporate and retail customers. The bank provides specialized services for businesses (dealing in foreign exchange), NRIs, merchant banking, etc. A part from this, it also has specialized branches that deal in asset recovery, hi-tech agricultural finance, lease finance and treasury, and small scale industries. Recently, the bank has diversified into offering products (and services) such as mutual funds, venture capital, depository services, bullion trading and credit cards. BOI is a leading player in retail banking and it was the first nationalized bank to establish a fully computerized branch and an ATM facility in India. It has a strong network of approximately 270 branches that provide export credit. BOI is among the top banks in India that provide export credit to industries such as diamond export. The bank is among those that have been offering banker services to the Bombay Stock Exchange and are managing the latter’s clearing house since 1921.