1. An Overview of Banks and Financial Services Sectors

2. What is a Bank? Expert’s Opinions
“A dealer in debts – his own & of other people” Geoffrey Crowther
“A bank as an institution whose debts (bank deposits) are widely accepted in settlement of other people’s debts to each other”.
R.S. Sayers
“No person or body, corporate or otherwise, can be a banker who does not (i) take deposit accounts, (ii) take current accounts, (iii) issue & pay cheques, & (iv) collect cheques, crossed & uncrossed, for his customers”.
Sir John Paget

3. Definition of Bank (continued)
A bank can be defined in terms of –
The Economic Function it serves,
The Services it offers its customers, or
The Legal basis for its existence.
In terms of economic functions, banks can be defined as
“Bank is a financial intermediary, working as a middle
man by accepting deposits and providing loans.” They are
involved in transferring funds from savers to borrowers
(financial intermediation) and in paying for the goods and
services.

4. Economic Function –Flow Of Funds
Borrows
Deposits
Deficit Units/
Borrowers/
Users
Surplus Units/
Depositors/
Savers
Bank
Receives Interest
Pays Interest
Bank’s Margin = Interest received from borrower – Interest paid to the depositors

5. Definition of Bank (continued)
Based on services-
Bank have been recognized for the great range of financial
services they offer- from checking accounts and savings
plans to loan for business, consumers, and governments.
Bank service menus are expanding rapidly today to include
security trading and underwriting, insurance protection,
financial planning, the management of pension plans,
advice for merging companies, and numerous other
innovative services.
Banks no longer limit their service offerings to traditional
banking services but have increasingly become general
financial providers.

6. Definition of Bank (continued)
Legal Existence:
During 1970, in USA there were lot of banks and non
bank financial institutions. So people became confused
as name seemed most of those were bank.
To solve this confusion, the Government settled on the
definition:
A bank is any business offering deposit subject to
withdrawal on demand (such as by writing a check or
making an electronic transfer of funds) and making loans
of a commercial or business nature (such as granting
credit to private business seeking to expand the inventory
of goods or to purchase new equipment).

7. Definition of Bank (continued)
In 1980s the Congress in US, passed a bill, to clarify the
definition of banks. That one gives another definition of
banks in terms of legal existence.
According to Congress:
‘Any organization can indentify itself as a commercial
bank if it has one certificate issued by the central bank.’
FDIC – Federal Deposit Insurance Corporation
BDIS – Bank Deposit Insurance Scheme.

8. Financial System and Competitors of Bank
Savings and Loan Associations
Savings Banks
Credit Unions
Money market funds
Mutual funds (investment companies)
Hedge funds
Security brokers and dealers
Finance companies
Financial holding companies or conglomerates
Life and Property/casualty insurance companies

9. The Services Banks Offer Public
Banks, like their closest competitors, are creates and
play a number of important roles in the economy-
The intermediation role
The payment role
The guarantor role
The risk management role
The savings/investment advisor role
The safekeeping/certification of value role
The agency role
The policy role

10. The Services Banks Offer Public----Cont..
Services Banks Have Offered Throughout History:
Carrying out currency exchange.
Discounting commercial notes & making business loans.
Offering savings deposits.
Safekeeping of valuables & certification of value.
Supporting government activities with credit.
Offering checking accounts (Demand deposits).
Offering trust services (managing financial affairs/property, trustee for wills)

11. The Services Banks Offer Public----Cont..
Services Banks have Developed More Recently:
Granting Consumer Loans.
Financial Advising.
Cash Management.
Offering Equipment Leasing.
Making Venture Capital Loans.
Selling Insurance.
Selling Retirement Plans
Security Brokerage.
Offering Mutual Funds & Annuities.
Offering Merchant Banking Services.

12. Key trends affecting Banks
Recent Trends Affecting All Banks:
Service Proliferation.
Rising Competition.
Government Deregulation.
Rising Funding Costs.
An Increasingly Interest-Sensitive mix of funds.
Technological change.
Consolidation & Geographical Expansion.
Convergence
Globalization of banking.
Increased Risk of poor performance and failure.

13. Considerations While Choosing a Bank
Features
Services
Fees
ATMs

14. Considerations While Choosing a Bank…Contd.
Features
Interest Rate (Annual percentage yield)
Convenience
FDIC membership
Size
Minimum deposit
Limitations
Availability of Funds

15. Considerations While Choosing a Bank…Contd.
Services
direct deposit
ATMs
banking by telephone (what can you do over the phone, and when?)
online banking
credit cards
debit cards
overdraft protection
canceled checks (included with monthly statements?)
loans and mortgages
stock and mutual fund trading
retirement planning services
small business services
access to international money markets
copies of previous monthly statements
deposit slips and other slips
phone support
talking to a teller in person
debit card fees
traveler's checks
loan application processing
safe deposit box rental
stop payment
wire transfer
money order

16. Considerations While Choosing a Bank…Contd.
Fees
Maintenance fees
Low-balance penalty
ATM surcharges, "Foreign" ATM fees
Returned check
Bounced check
Overdraft Protection
Check printing
Per-check charges
Cancelled check return fees
Closed account

17. Considerations While Choosing a Bank…Contd.
ATMs
Once you have an account, balance your checkbook on a regular basis, to make sure that the bank hasn't made any errors and so that you know how much you have in your account. Also understand every fee you are charged, and complain about any that you don't agree with. Take a look at any inserts that accompany your monthly statement, because banks are required to disclose any fee changes, and that's where you'll find out about them.

18. Are Banks Dying?
Weaken the central bank’s ability to control the growth of the money supply & achieve the nation’s economic goals.
Damage those customers, mainly small businesses & families, who rely most heavily on banks for loans & other financial services.
Make banking services less conveniently available to customers as bank offices are consolidated & closed.