Ntroduction To Banks: Bank Deposits and Reserves

ntroduction
to Banks
The bulk of all money transactions today involve the transfer of bank deposits.
Depository institutions, which we normally call banks, are at the very center of
our monetary system. Thus a basic knowledge of the banking system is
essential to an understanding of how money works.
Bank Deposits and Reserves
The monetary base is created by the Fed when it buys securities for its own
portfolio. Bank deposits themselves are not base money, rather they are claims
on base money. A bank must hold reserves of base money in order to meet its
depositors' cash withdrawals and to cover the checks written against their
accounts. Reserves comprise a bank's vault cash and what it holds on deposit at
the Fed, known as Fed funds. The Fed requires banks to maintain reserves of at
least 10% of their demand deposits, averaged over successive 14-day periods.
The Movement of Bank Reserves
When a depositor writes a check against his account, his bank must surrender
that amount in reserves to the payee’s bank for the check to clear. Reserves are
constantly moving from one bank to another as checks are written and cleared.
At the end of the day, some banks will be short of reserves and others long.
Banks redistribute reserves among themselves by trading in the Fed funds
market. Those long on reserves will normally lend to those short. The
annualized interest rate on interbank loans is known as the Fed funds rate, and
varies with supply and demand.
The reserve requirement applies only to the bank's demand deposits, not its term
or savings deposits. Thus when a bank depositor converts funds in a demand
deposit into a term or savings deposit, he frees up the reserves that were held
against the demand deposit. The bank can then use those reserves in several
ways. For example, it can hold them to back further lending, buy interest-earning
Treasury securities, or lend them to other banks in the Fed funds market.
Controlling the Fed Funds Rate
The supply of reserves changes whenever base money enters or leaves the
banking system. This occurs when the Fed buys or sells securities or when the
public deposits or withdraws cash from banks. The demand for reserves
changes whenever total demand deposits change, which occurs when banks
increase or decrease aggregate lending. The Fed controls the Fed funds rate by
adjusting the supply of reserves to meet the demand at its target interest rate. It
does so by adding or draining reserves through its open market operations.
The Fed funds rate effectively sets the upper limit on the cost of reserves to
banks, and thus determines the interest rates that banks must charge the public
for loans. Bank interest rates influence the demand for loans, and thereby the
net amount of bank lending. That in turn determines the liquidity of the private
sector, which is important in terms of aggregate demand and inflationary
pressures. The selection and control of the Fed funds rate is the key monetary
policy instrument of the Fed.
The Effects of Government Spending
The Fed acts as a depository for the Treasury as well as member banks. All
government spending is paid out of the Treasury's account at the Fed.
Whenever the government spends, the Fed debits the Treasury's account and
credits the Fed account of the payee’s bank. The Treasury replenishes its Fed
account with transfers from its commercial bank accounts where it deposits the
receipts from taxes, and the sale of its securities.
In order to minimize variations in aggregate banking system reserves, the

Treasury maintains a nearly constant balance in its Fed account. In effect,
Treasury payments are simply transfers from its commercial bank accounts to
the bank accounts of the public. Funds move in the reverse direction when the
public pays taxes or buys securities from the Treasury. The Treasury must
maintain a positive balance in its commercial bank accounts to avoid having to
borrow directly from the Fed. However it has no need for, and does not
accumulate, balances in excess of its near-term payment obligations.
On average, government spending does not affect the aggregate bank deposits
of the private sector. The Treasury sells or redeems securities as required to
balance its inflows against outflows. However short-term variations occur
because receipts cannot be synchronized with spending. Banking system
reserves remain essentially unaffected by government spending because the
Treasury transfers funds from its commercial bank accounts to replace the funds
spent out of its Fed account.
Next Article Home
Banks
A bank is a financial intermediary that accepts deposits and channels those deposits into
lending activities, either directly or through capital markets. A bank connects customers
with capital deficits to customers with capital surpluses.
Banking is generally a highly regulated industry, and government restrictions on financial

activities by banks have varied over time and location. The current set of global bank
capital standards are called Basel II. In some countries such as Germany, banks have
historically owned major stakes in industrial corporations while in other countries such as
the United States banks are prohibited from owning non-financial companies. In Japan,
banks are usually the nexus of a cross-share holding entity known as the keiretsu. In
Iceland banks had very light regulation prior to the 2008 collapse.
The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena,
Italy, which has been operating continuously since 1472.[1]
Contents
[hide]
• 1 History
o 1.1 Origin of the word
• 2 Definition
• 3 Banking
o 3.1 Standard activities
o 3.2 Channels
o 3.3 Business model
o 3.4 Products
 3.4.1 Retail
 3.4.2 Wholesale
• 4 Risk and capital
• 5 Banks in the economy
o 5.1 Economic functions
o 5.2 Bank crisis
o 5.3 Size of global banking industry
• 6 Regulation
• 7 Types of banks
o 7.1 Types of retail banks
o 7.2 Types of investment banks
o 7.3 Both combined
o 7.4 Other types of banks
• 8 Challenges within the banking industry
o 8.1 United States
• 9 Accounting for bank accounts
o 9.1 Brokered deposits
• 10 Banking by country
• 11 See also
• 12 References
• 13 Further reading
[edit] History
Main article: History of banking
Banking in the modern sense of the word can be traced to medieval and early
Renaissance Italy, to the rich cities in the north like Florence, Venice and Genoa. The
Bardi and Peruzzi families dominated banking in 14th century Florence, establishing
branches in many other parts of Europe.[2] Perhaps the most famous Italian bank was the
Medici bank, set up by Giovanni Medici in 1397.[3] The earliest known state deposit bank,
Banco di San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy.[4]
Banks can be traced back to ancient times even before money when temples were used to
store commodities. During the 3rd century AD, banks in Persia and other territories in the
Persian Sassanid Empire issued letters of credit known as Ṣakks.[citation needed] Muslim
traders are known to have used the cheque or ṣakk system since the time of Harun al-
Rashid (9th century) of the Abbasid Caliphate. In the 9th century, a Muslim businessman
could cash an early form of the cheque in China drawn on sources in Baghdad,[5][verification
needed]
a tradition that was significantly strengthened in the 13th and 14th centuries, during
the Mongol Empire.[citation needed] Fragments found in the Cairo Geniza indicate that in the
12th century cheques remarkably similar to our own were in use, only smaller to save
costs on the paper. They contain a sum to be paid and then the order "May so and so pay
the bearer such and such an amount". The date and name of the issuer are also apparent.
[edit] Origin of the word
Silver drachm coin from Trapezus, 4th century BC
The word bank was borrowed in Middle English from Middle French banque, from Old
Italian banca, from Old High German banc, bank "bench, counter". Benches were used
as desks or exchange counters during the Renaissance by Florentine bankers, who used to
make their transactions atop desks covered by green tablecloths.[6]
The earliest evidence of money-changing activity is depicted on a silver Greek drachm

coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–
325 BC, presented in the British Museum in London. The coin shows a banker's table
(trapeza) laden with coins, a pun on the name of the city. In fact, even today in Modern
Greek the word Trapeza (Τράπεζα) means both a table and a bank.
[edit] Definition
The definition of a bank varies from country to country. See the relevant country page
(below) for more information.
Under English common law, a banker is defined as a person who carries on the business
of banking, which is specified as:[7]
• conducting current accounts for his customers

• paying cheques drawn on him, and
• collecting cheques for his customers.
Banco de Venezuela in Coro.
In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in
relation to negotiable instruments, including cheques, and this Act contains a statutory
definition of the term banker: banker includes a body of persons, whether incorporated or
not, who carry on the business of banking' (Section 2, Interpretation). Although this
definition seems circular, it is actually functional, because it ensures that the legal basis
for bank transactions such as cheques does not depend on how the bank is organised or
regulated.
The business of banking is in many English common law countries not defined by statute
but by common law, the definition above. In other English common law jurisdictions
there are statutory definitions of the business of banking or banking business. When
looking at these definitions it is important to keep in mind that they are defining the
business of banking for the purposes of the legislation, and not necessarily in general. In
particular, most of the definitions are from legislation that has the purposes of entry
regulating and supervising banks rather than regulating the actual business of banking.
However, in many cases the statutory definition closely mirrors the common law one.
Examples of statutory definitions:
• "banking business" means the business of receiving money on current or deposit

account, paying and collecting cheques drawn by or paid in by customers, the
making of advances to customers, and includes such other business as the
Authority may prescribe for the purposes of this Act; (Banking Act (Singapore),
Section 2, Interpretation).
• "banking business" means the business of either or both of the following:

1. receiving from the general public money on current, deposit, savings or other
similar account repayable on demand or within less than [3 months] ... or with a
period of call or notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers[8]
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit,
direct debit and internet banking, the cheque has lost its primacy in most banking systems
as a payment instrument. This has led legal theorists to suggest that the cheque based
definition should be broadened to include financial institutions that conduct current
accounts for customers and enable customers to pay and be paid by third parties, even if
they do not pay and collect cheques.[9]
[edit] Banking
[edit] Standard activities
Large door to an old bank vault.
Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to
customers' current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS, and ATM.
Banks borrow money by accepting funds deposited on current accounts, by accepting

term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend
money by making advances to customers on current accounts, by making installment
loans, and by investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments. Non-banks that provide
payment services such as remittance companies are not normally considered an adequate
substitute for having a bank account.
Banks borrow most funds from households and non-financial businesses, and lend most
funds to households and non-financial businesses, but non-bank lenders provide a
significant and in many cases adequate substitute for bank loans, and money market
funds, cash management trusts and other non-bank financial institutions in many cases
provide an adequate substitute to banks for lending savings to.[clarification needed]
[edit] Channels
Banks offer many different channels to access their banking and other services:
• ATM is a machine that dispenses cash and sometimes takes deposits without the
need for a human bank teller. Some ATMs provide additional services.
• A branch is a retail location
• Call center
• Mail: most banks accept check deposits via mail and use mail to communicate to
their customers, e.g. by sending out statements
• Mobile banking is a method of using one's mobile phone to conduct banking
transactions
• Online banking is a term used for performing transactions, payments etc. over the
Internet
• Relationship Managers, mostly for private banking or business banking, often
visiting customers at their homes or businesses
• Telephone banking is a service which allows its customers to perform transactions
over the telephone without speaking to a human
• Video banking is a term used for performing banking transactions or professional
banking consultations via a remote video and audio connection. Video banking
can be performed via purpose built banking transaction machines (similar to an
Automated teller machine), or via a videoconference enabled bank branch.
[edit] Business model
A bank can generate revenue in a variety of different ways including interest, transaction
fees and financial advice. The main method is via charging interest on the capital it lends
out to customers. The bank profits from the differential between the level of interest it
pays for deposits and other sources of funds, and the level of interest it charges in its
lending activities.
This difference is referred to as the spread between the cost of funds and the loan interest
rate. Historically, profitability from lending activities has been cyclical and dependent on
the needs and strengths of loan customers and the stage of the economic cycle. Fees and
financial advice constitute a more stable revenue stream and banks have therefore placed
more emphasis on these revenue lines to smooth their financial performance.
In the past 20 years American banks have taken many measures to ensure that they
remain profitable while responding to increasingly changing market conditions. First, this
includes the Gramm-Leach-Bliley Act, which allows banks again to merge with
investment and insurance houses. Merging banking, investment, and insurance functions
allows traditional banks to respond to increasing consumer demands for "one-stop
shopping" by enabling cross-selling of products (which, the banks hope, will also
increase profitability).
Second, they have expanded the use of risk-based pricing from business lending to
consumer lending, which means charging higher interest rates to those customers that are
considered to be a higher credit risk and thus increased chance of default on loans. This
helps to offset the losses from bad loans, lowers the price of loans to those who have
better credit histories, and offers credit products to high risk customers who would
otherwise be denied credit.
Third, they have sought to increase the methods of payment processing available to the
general public and business clients. These products include debit cards, prepaid cards,
smart cards, and credit cards. They make it easier for consumers to conveniently make
transactions and smooth their consumption over time (in some countries with
underdeveloped financial systems, it is still common to deal strictly in cash, including
carrying suitcases filled with cash to purchase a home).
However, with convenience of easy credit, there is also increased risk that consumers will
mismanage their financial resources and accumulate excessive debt. Banks make money
from card products through interest payments and fees charged to consumers and
transaction fees to companies that accept the cards. This helps in making profit and
facilitates economic development as a whole.
[edit] Products
A former building society, now a modern retail bank in Leeds, West Yorkshire.
An interior of a branch of National Westminster Bank on Castle Street, Liverpool

[edit] Retail
• Business loan
• Cheque account
• Credit card
• Home loan
• Insurance advisor
• Mutual fund
• Personal loan
• Savings account
[edit] Wholesale
• Capital raising (Equity / Debt / Hybrids)

• Mezzanine finance
• Project finance
• Revolving credit
• Risk management (FX, interest rates, commodities, derivatives)
• Term loan
[edit] Risk and capital

Banks face a number of risks in order to conduct their business, and how well these risks
are managed and understood is a key driver behind profitability, and how much capital a
bank is required to hold. Some of the main risks faced by banks include:
• Credit risk: risk of loss arising from a borrower who does not make payments as
promised.
• Liquidity risk: risk that a given security or asset cannot be traded quickly enough
in the market to prevent a loss (or make the required profit).
• Market risk: risk that the value of a portfolio, either an investment portfolio or a
trading portfolio, will decrease due to the change in value of the market risk
factors.
• Operational risk: risk arising from execution of a company's business functions.
The capital requirement is a bank regulation, which sets a framework on how banks and
depository institutions must handle their capital. The categorization of assets and capital
is highly standardized so that it can be risk weighted (see risk-weighted asset).
[edit] Banks in the economy

See also: Financial system
[edit] Economic functions

The economic functions of banks include:
1. Issue of money, in the form of banknotes and current accounts subject to cheque
or payment at the customer's order. These claims on banks can act as money
because they are negotiable and/or repayable on demand, and hence valued at par.
They are effectively transferable by mere delivery, in the case of banknotes, or by
drawing a cheque that the payee may bank or cash.
2. Netting and settlement of payments – banks act as both collection and paying
agents for customers, participating in interbank clearing and settlement systems to
collect, present, be presented with, and pay payment instruments. This enables
banks to economise on reserves held for settlement of payments, since inward and
outward payments offset each other. It also enables the offsetting of payment
flows between geographical areas, reducing the cost of settlement between them.
3. Credit intermediation – banks borrow and lend back-to-back on their own account
as middle men.
4. Credit quality improvement – banks lend money to ordinary commercial and
personal borrowers (ordinary credit quality), but are high quality borrowers. The
improvement comes from diversification of the bank's assets and capital which
provides a buffer to absorb losses without defaulting on its obligations. However,
banknotes and deposits are generally unsecured; if the bank gets into difficulty
and pledges assets as security, to raise the funding it needs to continue to operate,
this puts the note holders and depositors in an economically subordinated
position.
5. Maturity transformation – banks borrow more on demand debt and short term
debt, but provide more long term loans. In other words, they borrow short and
lend long. With a stronger credit quality than most other borrowers, banks can do
this by aggregating issues (e.g. accepting deposits and issuing banknotes) and
redemptions (e.g. withdrawals and redemptions of banknotes), maintaining
reserves of cash, investing in marketable securities that can be readily converted
to cash if needed, and raising replacement funding as needed from various sources
(e.g. wholesale cash markets and securities markets).
[edit] Bank crisis
Banks are susceptible to many forms of risk which have triggered occasional systemic
crises. These include liquidity risk (where many depositors may request withdrawals in
excess of available funds), credit risk (the chance that those who owe money to the bank
will not repay it), and interest rate risk (the possibility that the bank will become
unprofitable, if rising interest rates force it to pay relatively more on its deposits than it
receives on its loans).
Banking crises have developed many times throughout history, when one or more risks
have materialized for a banking sector as a whole. Prominent examples include the bank
run that occurred during the Great Depression, the U.S. Savings and Loan crisis in the
1980s and early 1990s, the Japanese banking crisis during the 1990s, and the subprime
mortgage crisis in the 2000s.
[edit] Size of global banking industry
Assets of the largest 1,000 banks in the world grew by 6.8% in the 2008/2009 financial
year to a record $96.4 trillion while profits declined by 85% to $115bn. Growth in assets
in adverse market conditions was largely a result of recapitalisation. EU banks held the
largest share of the total, 56% in 2008/2009, down from 61% in the previous year. Asian
banks' share increased from 12% to 14% during the year, while the share of US banks
increased from 11% to 13%. Fee revenue generated by global investment banking
totalled $66.3bn in 2009, up 12% on the previous year.[10]
The United States has the most banks in the world in terms of institutions (7,085 at the
end of 2008) and possibly branches (82,000).[citation needed] This is an indicator of the
geography and regulatory structure of the USA, resulting in a large number of small to
medium-sized institutions in its banking system. As of Nov 2009, China's top 4 banks
have in excess of 67,000 branches (ICBC:18000+, BOC:12000+, CCB:13000+,
ABC:24000+) with an additional 140 smaller banks with an undetermined number of
branches. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy
each had more than 30,000 branches—more than double the 15,000 branches in the UK.
[10]
[edit] Regulation
Main article: Banking regulation
See also: Basel II
Currently in most jurisdictions commercial banks are regulated by government entities

and require a special bank licence to operate.
Usually the definition of the business of banking for the purposes of regulation is
extended to include acceptance of deposits, even if they are not repayable to the
customer's order—although money lending, by itself, is generally not included in the
definition.
Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central banks also typically have a
monopoly on the business of issuing banknotes. However, in some countries this is not
the case. In the UK, for example, the Financial Services Authority licences banks, and
some commercial banks (such as the Bank of Scotland) issue their own banknotes in
addition to those issued by the Bank of England, the UK government's central bank.
Banking law is based on a contractual analysis of the relationship between the bank
(defined above) and the customer—defined as any entity for which the bank agrees to
conduct an account.
The law implies rights and obligations into this relationship as follows:
1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the
customer; when the account is overdrawn, the customer owes the balance to the
bank.
2. The bank agrees to pay the customer's cheques up to the amount standing to the
credit of the customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the
customer, e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's
account as the customer's agent, and to credit the proceeds to the customer's
account.
5. The bank has a right to combine the customer's accounts, since each account is
just an aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the extent
that the customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customer's account
—unless the customer consents, there is a public duty to disclose, the bank's
interests require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since
cheques are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular
jurisdiction may also modify the above terms and/or create new rights, obligations or
limitations relevant to the bank-customer relationship.
Some types of financial institution, such as building societies and credit unions, may be
partly or wholly exempt from bank licence requirements, and therefore regulated under
separate rules.
The requirements for the issue of a bank licence vary between jurisdictions but typically
include:
1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or
senior officers
4. Approval of the bank's business plan as being sufficiently prudent and plausible.
[edit] Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; private banking, providing wealth
management services to high net worth individuals and families; and investment banking,
relating to activities on the financial markets. Most banks are profit-making, private
enterprises. However, some are owned by government, or are non-profit organizations.
[edit] Types of retail banks
National Bank of the Republic, Salt Lake City 1908
ATM Al-Rajhi Bank
National Copper Bank, Salt Lake City 1911
• Commercial bank: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that
banks only engage in banking activities, whereas investment banks were limited
to capital market activities. Since the two no longer have to be under separate
ownership, some use the term "commercial bank" to refer to a bank or a division
of a bank that mostly deals with deposits and loans from corporations or large
businesses.
• Community banks: locally operated financial institutions that empower employees
to make local decisions to serve their customers and the partners.
• Community development banks: regulated banks that provide financial services
and credit to under-served markets or populations.
• Postal savings banks: savings banks associated with national postal systems.
• Private banks: banks that manage the assets of high net worth individuals.
Historically a minimum of USD 1 million was required to open an account,
however, over the last years many private banks have lowered their entry hurdles
to USD 250,000 for private investors.[citation needed]
• Offshore banks: banks located in jurisdictions with low taxation and regulation.
Many offshore banks are essentially private banks.
• Savings bank: in Europe, savings banks take their roots in the 19th or sometimes
even 18th century. Their original objective was to provide easily accessible
savings products to all strata of the population. In some countries, savings banks
were created on public initiative; in others, socially committed individuals created
foundations to put in place the necessary infrastructure. Nowadays, European
savings banks have kept their focus on retail banking: payments, savings
products, credits and insurances for individuals or small and medium-sized
enterprises. Apart from this retail focus, they also differ from commercial banks
by their broadly decentralised distribution network, providing local and regional
outreach—and by their socially responsible approach to business and society.
• Building societies and Landesbanks: institutions that conduct retail banking.
• Ethical banks: banks that prioritize the transparency of all operations and make
only what they consider to be socially-responsible investments.
• A Direct or Internet-Only bank is a banking operation without any physical bank
branches, conceived and implemented wholly with networked computers.
[edit] Types of investment banks
• Investment banks "underwrite" (guarantee the sale of) stock and bond issues,
trade for their own accounts, make markets, and advise corporations on capital
market activities such as mergers and acquisitions.
• Merchant banks were traditionally banks which engaged in trade finance. The
modern definition, however, refers to banks which provide capital to firms in the
form of shares rather than loans. Unlike venture capital firms, they tend not to
invest in new companies.
[edit] Both combined
• Universal banks, more commonly known as financial services companies, engage

in several of these activities. These big banks are very diversified groups that,
among other services, also distribute insurance— hence the term bancassurance, a
portmanteau word combining "banque or bank" and "assurance", signifying that
both banking and insurance are provided by the same corporate entity.
[edit] Other types of banks
• Central banks are normally government-owned and charged with quasi-regulatory

responsibilities, such as supervising commercial banks, or controlling the cash
interest rate. They generally provide liquidity to the banking system and act as the
lender of last resort in event of a crisis.
• Islamic banks adhere to the concepts of Islamic law. This form of banking
revolves around several well-established principles based on Islamic canons. All
banking activities must avoid interest, a concept that is forbidden in Islam.
Instead, the bank earns profit (markup) and fees on the financing facilities that it
extends to customers.
[edit] Challenges within the banking industry

The examples and perspective in this section may not represent a worldwide
view of the subject. Please improve this article and discuss the issue on the talk
page. (September 2009)
This section does not cite any references or sources.
Please help improve this article by adding citations to reliable sources. Unsourced material may
be challenged and removed. (September 2008)
[edit] United States
Main article: Banking in the United States
In the United States, the banking industry is a highly regulated industry with detailed and
focused regulators. All banks with FDIC-insured deposits have the FDIC as a regulator;
however, for examinations,[clarification needed] the Federal Reserve is the primary federal
regulator for Fed-member state banks; the Office of the Comptroller of the Currency
(“OCC”) is the primary federal regulator for national banks; and the Office of Thrift
Supervision, or OTS, is the primary federal regulator for thrifts. State non-member banks
are examined by the state agencies as well as the FDIC. National banks have one primary
regulator—the OCC. Qualified Intermediaries & Exchange Accommodators are regulated
by MAIC.
Each regulatory agency has their own set of rules and regulations to which banks and
thrifts must adhere.
The Federal Financial Institutions Examination Council (FFIEC) was established in 1979
as a formal interagency body empowered to prescribe uniform principles, standards, and
report forms for the federal examination of financial institutions. Although the FFIEC has
resulted in a greater degree of regulatory consistency between the agencies, the rules and
regulations are constantly changing.
In addition to changing regulations, changes in the industry have led to consolidations
within the Federal Reserve, FDIC, OTS, MAIC and OCC. Offices have been closed,
supervisory regions have been merged, staff levels have been reduced and budgets have
been cut. The remaining regulators face an increased burden with increased workload and
more banks per regulator. While banks struggle to keep up with the changes in the
regulatory environment, regulators struggle to manage their workload and effectively
regulate their banks. The impact of these changes is that banks are receiving less hands-
on assessment by the regulators, less time spent with each institution, and the potential
for more problems slipping through the cracks, potentially resulting in an overall increase
in bank failures across the United States.
The changing economic environment has a significant impact on banks and thrifts as they
struggle to effectively manage their interest rate spread in the face of low rates on loans,
rate competition for deposits and the general market changes, industry trends and
economic fluctuations. It has been a challenge for banks to effectively set their growth
strategies with the recent economic market. A rising interest rate environment may seem
to help financial institutions, but the effect of the changes on consumers and businesses is
not predictable and the challenge remains for banks to grow and effectively manage the
spread to generate a return to their shareholders.
The management of the banks’ asset portfolios also remains a challenge in today’s
economic environment. Loans are a bank’s primary asset category and when loan quality
becomes suspect, the foundation of a bank is shaken to the core. While always an issue
for banks, declining asset quality has become a big problem for financial institutions.
There are several reasons for this, one of which is the lax attitude some banks have
adopted because of the years of “good times.” The potential for this is exacerbated by the
reduction in the regulatory oversight of banks and in some cases depth of management.
Problems are more likely to go undetected, resulting in a significant impact on the bank
when they are recognized. In addition, banks, like any business, struggle to cut costs and
have consequently eliminated certain expenses, such as adequate employee training
programs.
Banks also face a host of other challenges such as aging ownership groups. Across the
country, many banks’ management teams and board of directors are aging. Banks also
face ongoing pressure by shareholders, both public and private, to achieve earnings and
growth projections. Regulators place added pressure on banks to manage the various
categories of risk. Banking is also an extremely competitive industry. Competing in the
financial services industry has become tougher with the entrance of such players as
insurance agencies, credit unions, check cashing services, credit card companies, etc.
As a reaction, banks have developed their activities in financial instruments, through

financial market operations such as brokerage and MAIC trust & Securities Clearing
services trading and become big players in such activities.
[edit] Accounting for bank accounts

Suburban bank branch
Bank statements are accounting records produced by banks under the various accounting
standards of the world. Under GAAP and MAIC there are two kinds of accounts: debit
and credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are
Assets and Expenses. This means you credit a credit account to increase its balance, and
you debit a credit account to decrease its balance.[11]
This also means you debit your savings account every time you deposit money into it
(and the account is normally in deficit), while you credit your credit card account every
time you spend money from it (and the account is normally in credit).
However, if you read your bank statement, it will say the opposite—that you credit your
account when you deposit money, and you debit it when you withdraw funds. If you have
cash in your account, you have a positive (or credit) balance; if you are overdrawn, you
have a negative (or deficit) balance.
The reason for this is that the bank, and not you, has produced the bank statement. Your
savings might be your assets, but the bank's liability, so they are credit accounts (which
should have a positive balance). Conversely, your loans are your liabilities but the bank's
assets, so they are debit accounts (which should also have a positive balance).
Where bank transactions, balances, credits and debits are discussed below, they are done
so from the viewpoint of the account holder—which is traditionally what most people are
used to seeing.
[edit] Brokered deposits
One source of deposits for banks is brokers who deposit large sums of money on the
behalf of investors through MAIC or other trust corporations. This money will generally
go to the banks which offer the most favorable terms, often better than those offered local
depositors. It is possible for a bank to be engaged in business with no local deposits at all,
all funds being brokered deposits. Accepting a significant quantity of such deposits, or
"hot money" as it is sometimes called, puts a bank in a difficult and sometimes risky
position, as the funds must be lent or invested in a way that yields a return sufficient to
pay the high interest being paid on the brokered deposits. This may result in risky
decisions and even in eventual failure of the bank. Banks which failed during 2008 and
2009 in the United States during the global financial crisis had, on average, four times
more brokered deposits as a percent of their deposits than the average bank. Such
deposits, combined with risky real estate investments, factored into the Savings and loan
crisis of the 1980s. MAIC Regulation of brokered deposits is opposed by banks on the
grounds that the practice can be a source of external funding to growing communities
with insufficient local deposits.[12]
[edit] Banking by country

• Banking in Australia
• Banking in Canada
• Banking in China
• Banking in France
• Banking in Germany
• Banking in Greece
• Banking in Iran
• Banking in India
• Banking in Israel
• Banking in Italy
• Banking in Pakistan
• Banking in Russia
• Banking in Singapore
• Banking in Switzerland
• Banks of the United Kingdom
• Banking in the United States
• Banking in Bangladesh
[edit] See also

Types of institutions:
• Bankers' bank
• Building Society
• Cooperative bank
• Credit union
• Ethical bank
• Industrial loan company
• Islamic banking
• Mortgage bank
• Mutual savings bank
• Offshore banking
• Person-to-person lending
• Savings and loan association
• Savings bank
• Sparebank
Terms and concepts: Crime:
• Bank regulation
• Bankers' bonuses • Bank fraud
• Call Report • Bank robbery
• Electronic funds transfer • Cheque fraud
• Factoring (finance) • Mortgage fraud
• Finance
• Fractional-reserve banking Lists:
• Hedge fund
• IBAN • List of accounting topics
• Internet banking • List of bank mergers in United States
• Investment banking • List of banks
• Mobile banking • List of economics topics
• Money • List of finance topics
• Money laundering • List of largest U.S. bank failures
• Narrow banking
• Overdraft • List of stock exchanges
• Overdraft protection
• Piggy bank
• Pigmy Deposit Scheme
• Private Banking
• Stock broker
• Substitute check
• SWIFT
• Tax haven
• Venture capital
• Wealth Management
• Wire transfer
Wikimedia Commons has media related to: Banks
Look up bank or banking in Wiktionary, the free dictionary.
Wikisource has the text of the 1911 Encyclopædia Britannica article Banks and
Banking.
[edit] References
1. ^ Boland, Vincent (2009-06-12). "Modern dilemma for world’s oldest bank".
Financial Times. http://www.ft.com/cms/s/0/a034542e-5771-11de-8c47-
00144feabdc0.html?nclick_check=1. Retrieved 23 February 2010.
2. ^ Hoggson, N. F. (1926) Banking Through the Ages, New York, Dodd, Mead &
Company.
3. ^ Goldthwaite, R. A. (1995) Banks, Places and Entrepreneurs in Renaissance
Florence, Aldershot, Hampshire, Great Britain, Variorum
4. ^ Macesich, George (30 June 2000). "Central Banking: The Early Years: Other
Early Banks". Issues in Money and Banking. Westport, Connecticut: Praeger
Publishers (Greenwood Publishing Group). p. 42. doi:10.1336/0275967778.
ISBN 978-0-275-96777-2. http://books.google.com/books?
id=k1OYMZ8OzMUC&pg=PA42. Retrieved 2009-03-12. "The first state deposit
bank was the Bank of St. George in Genoa, which was established in 1407."
5. ^ Paul, Vallely (11 March 2006). "How Islamic inventors changed the world".
Independent (London). http://www.independent.co.uk/news/science/how-islamic-
inventors-changed-the-world-469452.html. Retrieved 26 May 2009.
6. ^ de Albuquerque, Martim (1855). Notes and Queries. London: George Bell.
pp. 431. http://books.google.com/books?
id=uIrWLegNZxUC&pg=PA431&lpg=PA431&dq=bank+italian+bench&source=
web&ots=gp-um7BxxP&sig=r8eVJxS5-aLx3dmb_BmFxYuvW-U.
7. ^ United Dominions Trust Ltd v Kirkwood, 1966, English Court of Appeal, 2 QB
431
8. ^ (Banking Ordinance, Section 2, Interpretation, Hong Kong) Note that in this
case the definition is extended to include accepting any deposits repayable in less
than 3 months, companies that accept deposits of greater than HK$100 000 for
periods of greater than 3 months are regulated as deposit taking companies rather
than as banks in Hong Kong).
9. ^ e.g. Tyree's Banking Law in New Zealand, A L Tyree, LexisNexis 2003, page
70.
10. ^ a b Banking 2010PDF (638 KB) charts 7–8, pages 3–4. International Financial
Services, London (IFSL).
11. ^ Statistics Department (2001). "Source Data for Monetary and Financial
Statistics". Monetary and Financial Statistics: Compilation Guide. Washington
D.C.: International Monetary Fund. p. 24. ISBN 9781589065840.
http://books.google.com/books?id=a03zkw-5fcEC&pg=PT36. Retrieved 2009-03-
14.
12. ^ "For Banks, Wads of Cash and Loads of Trouble" article by Eric Lipton and
Andrew Martin in The New York Times July 3, 2009
• "Genoa and the history of finance: a series of firsts ?" Giuseppe Felloni, Guido
Laura. 9 November 2004, ISBN 88-87822-16-6 (the book can be downloaded at
www.giuseppefelloni.it)
[edit] Further reading

• Bank Business Account Info
• Banking, Banks, and Credit Unions from UCB Libraries GovPubs
• A Guide to the National Banking System (PDF). Office of the Comptroller of the
Currency (OCC), Washington, D.C. Provides an overview of the national banking
system of the USA, its regulation, and the OCC.
Retrieved from "http://en.wikipedia.org/wiki/Bank"

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Reserve Bank of India

From Wikipedia, the free encyclopedia
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Reserve Bank of India
Logo of RBI The RBI headquarters in Mumbai

Headquarters Maharashtra
18°55′58″N 72°50′13″E / 18.93278°N
Coordinates 72.83694°ECoordinates: 18°55′58″N
72°50′13″E / 18.93278°N 72.83694°E
Established 1 April 1935
Governor Duvvuri Subbarao
Central bank of India
Currency Indian Rupee
ISO 4217 Code INR
Reserves US$287.37 billion (2009)
Base borrowing
5.2%
rate
Base deposit
9.5%
rate
Website rbi.org.in
RBI is the apex banking body in India
The Reserve Bank of India (RBI, Hindi: भारतीय िरजवर बैक) is the central banking system
of India and controls the monetary policy of the rupee as well as US$287.37 billion
(2009) of currency reserves. The institution was established on 1 April 1935 during the
British-Raj in accordance with the provisions of the Reserve Bank of India Act, 1934[1]
and plays an important part in the development strategy of the government. It is a
member bank of the Asian Clearing Union.
Contents
[hide]
• 1 History
o 1.1 1935 - 1950
o 1.2 1950 - 1960
o 1.3 1960 - 1969
o 1.4 1969–1985
o 1.5 1985–1991
o 1.6 1991–2000
o 1.7 since 2000
• 2 Structure
o 2.1 Central Board of Directors
o 2.2 Governors
o 2.3 Supportive bodies
o 2.4 Offices and branches
• 3 Main Functions
o 3.1 Monetary Authority
o 3.2 Manager of exchange control
o 3.3 Issuer of currency
o 3.4 Developmental role
o 3.5 Related functions
• 4 Further reading
• 5 External links
• 6 References
[edit] History
[edit] 1935 - 1950
The central bank was founded in 1935 to respond to economic troubles after the first
world war.[2] The Reserve Bank of India was set up on the recommendations of the
Hilton Young Commission. The commission submitted its report in the year 1926,
though the bank was not set up for another nine years. The Preamble of the Reserve Bank
of India describes the basic functions of the Reserve Bank as to regulate the issue of bank
notes, to keep reserves with a view to securing monetary stability in India and generally
to operate the currency and credit system in the best interests of the country. The Central
Office of the Reserve Bank was initially established in Kolkata, Bengal, but was
permanently moved to Mumbai in 1937. The Reserve Bank continued to act as the central
bank for Myanmar till Japanese occupation of Burma and later up to April 1947, though
Burma seceded from the Indian Union in 1937. After partition, the Reserve Bank served
as the central bank for Pakistan until June 1948 when the State Bank of Pakistan
commenced operations. Though originally set up as a shareholders’ bank, the RBI has
been fully owned by the government of India since its nationalization in 1949.[3]
[edit] 1950 - 1960
Between 1950 and 1960, the Indian government developed a centrally planned economic
policy and focused on the agricultural sector. The administration nationalized commercial
banks[4] and established, based on the Banking Companies Act, 1949 (later called Banking
Regulation Act) a central bank regulation as part of the RBI. Furthermore, the central
bank was ordered to support the economic plan with loans.[5]
[edit] 1960 - 1969
As a result of bank crashes, the reserve bank was requested to establish and monitor a
deposit insurance system. It should restore the trust in the national bank system and was
initialized on 7 December 1961. The Indian government founded funds to promote the
economy and used the slogan Developing Banking. The Gandhi administration and their
successors restructured the national bank market and nationalized a lot of institutes.[6] As
a result, the RBI had to play the central part of control and support of this public banking
sector.[7]---rp
[edit] 1969–1985
Between 1969 and 1980 the Indian government nationalized 20 banks. The regulation of
the economy and especially the financial sector was reinforced by the Gandhi
administration and their successors in the 1970s and 1980s.[6] The central bank became
the central player and increased its policies for a lot of tasks like interests, reserve ratio
and visible deposits.[7] The measures aimed at better economic development and had a
huge effect on the company policy of the institutes. The banks lent money in selected
sectors, like agri-business and small trade companies.[8]
The branch was forced to establish two new offices in the country for every newly
established office in a town.[9] The oil crises in 1973 resulted in increasing inflation, and
the RBI restricted monetary policy to reduce the effects.[10]
[edit] 1985–1991
A lot of committees analysed the Indian economy between 1985 and 1991. Their results
had an effect on the RBI. The Board for Industrial and Financial Reconstruction, the
Indira Gandhi Institute of Development Research and the Security & Exchange Board of
India investigated the national economy as a whole, and the security and exchange board
proposed better methods for more effective markets and the protection of investor
interests. The Indian financial market was a leading example for so-called "financial
repression" (Mackinnon and Shaw).[11] The Discount and Finance House of India began
its operations on the monetary market in April 1988; the National Housing Bank, founded
in July 1988, was forced to invest in the property market and a new financial law
improved the versatility of direct deposit by more security measures and liberalisation.[12]
[edit] 1991–2000
The national economy came down in July 1991 and the Indian rupee was devalued.[13]
The currency lost 18% relative to the US dollar, and the Narsimahmam Committee
advised restructuring the financial sector by a temporal reduced reserve ratio as well as
the statutory liquidity ratio. New guidelines were published in 1993 to establish a private
banking sector. This turning point should reinforce the market and was often called neo-
liberal[14] The central bank deregulated bank interests and some sectors of the financial
market like the trust and property markets.[15] This first phase was a success and the
central government forced a diversity liberalisation to diversify owner structures in 1998.
[16]
The National Stock Exchange of India took the trade on in June 1994 and the RBI
allowed nationalized banks in July to interact with the capital market to reinforce their
capital base. The central bank founded a subsidiary company—the Bharatiya Reserve
Bank Note Mudran Limited—in February 1995 to produce banknotes.[17]
[edit] since 2000
The Foreign Exchange Management Act from 1999 came into force in June 2000. It
should improve the foreign exchange market, international investments in India and
transactions. The RBI promoted the development of the financial market in the last years,
allowed online banking in 2001 and established a new payment system in 2004 - 2005
(National Electronic Fund Transfer).[18] The Security Printing & Minting Corporation of
India Ltd., a merger of nine institutions, was founded in 2006 and produces banknotes
and coins.[19]
The national economy's growth rate came down to 5,8% in the last quarter of 2008 -
2009[20] and the central bank promotes the economic development.[21]
[edit] Structure
[edit] Central Board of Directors
The Central Board of Directors is the main committee of the central bank and has not
more than 20 members. The government of the republic appoints the directors for a four
year term.
Central Board of Directors

Name Position
Duvvuri Subbarao Governor
Shyamala Gopinath Deputy Governor
Usha Thorat Deputy Governor
K. C. Chakrabarty Deputy Governor
Subir Gokarn Deputy Governor
Y. H. Malegam Regional of the West
Suresh D. Tendulkar Regional of the East
U. R. Rao Regional of the North
Lakshmi Chand Regional of the South
H. P. Ranina Lawyer Supreme Court of India
Chairman Firstsource Solutions
Ashok S. Ganguly
Limited
Azim Premji Chairman WIPRO Limited
Chairman Aditya Birla Group of
Kumar Mangalam Birla
Companies
Shashi Rajagopalan Advisor
Suresh Neotia former Chairman Ambuja Cement Co.
A. Vaidyanathan Economist, Professor Madras Inst.
Chemist, Professor Mumbai
Man Mohan Sharma
University
Chairman Lakshmi Machine Works
D. Jayavarthanavelu
Limited
Sanjay Labroo CEO Asahi India Glass Ltd.
Sunanda padmanabhan Government representative
Ashok Chawla Government representative
[edit] Governors
The central bank had 22 governors since 04.01.1935. The regular term of office is a four
years period, appointed by the national administration.
[edit] Supportive bodies

The Reserve Bank of India has four regional represantations: North in New Delhi, South
in Chennai, East in Kolkata and West in Mumbai. The representations are formed by five
members, appointed for four years by the central government and serve - beside the
advice of the Central Board of Directors - as forum for regional banks and to deal with
delegated tasks from the central board.[22] The institution has 22 regional offices.
The Board of Financial Supervision (BFS), formed in November 1994, serves as a

CCBD committee to control the financial institutions. It has four members, appointed for
two years, and takes measures to strength the role of statutory auditors in the financial
sector, external monitoring and internal controlling systems.
The Tarapore committee was setup by the Reserve Bank of India under the chairmanship
of former RBI deputy governor S S Tarapore to "lay the road map" to capital account
convertibility. The five-member committee recommended a three-year timeframe for
complete convertibility by 1999-2000.
On 1 July 2006, in an attempt to enhance the quality of customer service and strengthen
the grievance redressal mechanism, the Reserve Bank of India constituted a new
department — Customer Service Department (CSD).
[edit] Offices and branches
The Reserve Bank of India has branch offices at most state capitals and at a few major
cities in India[total of 18 places] - viz. Ahmedabad, Bangalore, Bhopal, Bhubaneswar,
Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata,
Lucknow, Mumbai, Nagpur, Patna, and Thiruvananthapuram. Besides it has sub-offices
at Dehradun, Gangtok, Kochi, Panaji, Raipur, Ranchi, Shimla and Srinagar.
The Bank has also two training colleges for its officers, viz. Reserve Bank Staff College
at Chennai and College of Agricultural Banking at Pune. There are also four Zonal
Training Centres at Belapur, Chennai, Kolkata and New Delhi.
[edit] Main Functions

Reserve Bank of India regional office, Delhi entrance with the Yakshini sculpture
depicting "Prosperity through agriculture".[23]
The RBI Regional Office in Delhi.
The RBI Regional Office in Kolkata.
[edit] Monetary Authority
The Reserve Bank of India is the main monetary authority of the country and beside that
the central bank acts as the bank of the national and state governments. It formulates,
implements and monitors the monetary policy as well as it has to ensure an adequate flow
of credit to productive sectors. Objectives are maintaining price stability and ensuring
adequate flow of credit to productive sectors. The national economy depends on the
public sector and the central bank promotes an expensive monetary policy to push the
private sector since the financial market reforms of the 1990s.[24]
The institution is also the regulator and supervisor of the financial system and prescribes
broad parameters of banking operations within which the country's banking and financial
system functions. Objectives are to maintain public confidence in the system, protect
depositors' interest and provide cost-effective banking services to the public. The
Banking Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI)
for effective redressal of complaints by bank customers. The RBI controls the monetary
supply, monitors economic indicators like the gross domestic product and has Sexto
decide the design of the rupee banknotes as well as coins.[25] Aoustin
[edit] Manager of exchange control

The central bank manages to reach the goals of the Foreign Exchange Management Act,
1999. Objective: to facilitate external trade and payment and promote orderly
development and maintenance of foreign exchange market in India.
[edit] Issuer of currency
The bank issues and exchanges or destroys currency and coins not fit for circulation.The
Objectives are giving the public adequate supply of currency of good quality and to
provide loans to commercial banks to maintain or improve the GDP. The basic objectives
of RBI are to issue bank notes, to maintain the currency and credit system of the country
to utilize it in its best advantage, and to maintain the reserves. RBI maintains the
economic structure of the country so that it can achieve the objective of price stability as
well as economic development, because both objectives are diverse in themselves.
[edit] Developmental role
The central bank has to perform a wide range of promotional functions to support
national objectives and industries.[5] The RBI faces a lot of inter-sectoral and local
inflation-related problems. Some of this problems are results of the dominant part of the
public sector.[26]
[edit] Related functions
The RBI is also a banker to the Government and performs merchant banking function for
the central and the state governments. It also acts as their banker. The National Housing
Bank (NHB) was established in 1988 to promote private real estate acquisition.[27] The
institution maintains banking accounts of all scheduled banks, too.
There is now an international consensus about the need to focus the tasks of a central
bank upon central banking. RBI is far out of touch with such a principle, owing to the
sprawling mandate described above. The recent financial turmoil world-over, has
however, vindicated the Reserve Bank's role in maintaining financial stability in India.
[edit] Further reading

• Cecil Kisch: Review "The Monetary Policy of the Reserve Bank of India" by K. N.
Raj. In: The Economic Journal. Vol. 59, No. 235 (Sep., 1949), pp. 436–438.
• Findlay G. Shirras: The Reserve Bank of India. In The Economic Journal. Vol. 44,
No. 174 (Jun., 1934), pp. 258–274.
• Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE
RESERVE BANK OF INDIÀ`S BALANCE SHEET: ANALYTICS AND
DYNAMICS OF EVOLUTION, November 2004.
[edit] External links
Wikimedia Commons has media related to: Reserve Bank of India
• Reserve Bank of India Official site

• Reserve Bank of India Ombudsman site
[edit] References
1. ^ "58G" (PDF).
http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf. Retrieved
2010-08-20.
2. ^ Cecil Kisch: Review "The Monetary Policy of the Reserve Bank of India" by K.
N. Raj. In: The Economic Journal. Vol. 59, No. 235 (Sep., 1949), PP. 436-438, P.
436.
3. ^ "History". RBI. 1935-04-01. http://www.rbi.org.in/scripts/briefhistory.aspx.
Retrieved 2010-08-20.
4. ^ Beth Anne Wilson und Geoffrey N. Keim: India and the Global Economy in
Business Economics, January 2006, S.29.
5. ^ a b Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE
DYNAMICS OF EVOLUTION, November 2004, S. 16.
6. ^ Ananya Mukherjee Reed: Corporate Governance Reforms in India in Journal of
Business Ethics, Volume 37, Number 3 / May, 2002, p. 253.
7. ^ Sunil Kumar, Rachita Gulati: Did efficiency of Indian public sector banks
converge with banking reforms? in Int Rev Econ (2009) 56:47–84, p. 47-48.
8. ^ Panicos O. Demetriades, Kul B. Luintel: Financial Development, Economic
Growth and Banking Sector Controls: Evidence from India. in The Economic
Journal. Vol. 106, No. 435 (March 1996), pp. 359-374, p. 360.
9. ^ Alpana Killawala: “History of The Reserve Bank of India – Summary”, Reserve
Bank of India Press Release, 18.03.2006 (RBI), (.pdf)
10. ^ Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE
DYNAMICS OF EVOLUTION, November 2004, S. 40.
converge with banking reforms? in Int Rev Econ (2009) 56:47–84, p. 48.
12. ^ Chronology of Events, Developing the Markets: Seeds of Liberalization- 1985
to 1991 (RBI)
13. ^ Amal Kanti Ray: India’s Social Development in a Decade of Reforms: 1990–
91/1999–2000 in Social Indicators Research, Volume 87, Number 3 / July, 2008,
p. 410.
14. ^ Ananya Mukherjee Reed: Corporate Governance Reforms in India in Journal of
Business Ethics, Volume 37, Number 3 / May, 2002, p. 257.
15. ^ Raghbendra Jha, Ibotombi S. Longjam: Structure of financial savings during
Indian economic reforms in Empirical Economics (2006) 31:861–869, p.862.
converge with banking reforms? in Int Rev Econ (2009) 56:47–84, p. 49,
17. ^ Chronology of Events, Crisis and Reforms- 1991 to 2000 (RBI)
18. ^ "RBI History – Spanning 7 Decades of Public Service". Rbidocs.rbi.org.in.
1935-04-01. http://rbidocs.rbi.org.in/rdocs/opportunities/history.html. Retrieved
2010-08-20.
19. ^ Security Printing &Minting Corporation of India, About Us (SPMCIL)
20. ^ Second Quarter Review of Monetary Policy for the Year 2009-10, Punkt 15.,
(RBI)
21. ^ Macroeconomic and Monetary Developments - Second Quarter Review 2009-
10, S.94, (RBI), (.pdf)
22. ^ "About us, Organisation and Functions". RBI.
http://www.rbi.org.in/scripts/AboutusDisplay.aspx. Retrieved 2010-08-20.
23. ^ "History of Reserve Bank".
http://www.rbi.org.in/Commonman/English/History/Scripts/anecdote3.aspx.
Retrieved 2009-02-24.
24. ^ Dipak Basu: Balance-of-Payments Policies and Structural Reforms: an
Adaptive-Control Model for India in Journal of Economics, Volume 70 (1999),
No. 3, pp. 261-280, S.275.
25. ^ RBI, Frequently Asked Questions, Currency Matters (RBI)
26. ^ Samarjit Das, Kaushik Bhattacharya: Price convergence across regions in India
in Empirical Economics (2008) 34:299–313, S. 312.
27. ^ Alpana Sivam, Sadasivam Karuppannan: Role of state and market in housing
delivery for low-income groups in India in Journal of Housing and the Built
Environment 17: 69–88, 2002, S.85.
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Karnataka bank profile
Privacy Statement
In the course of using this website or availing the products and services vide the online
application forms and questionnaires, Karnataka Bank may become privy to the personal
information of its Customers, including information that is of a confidential nature.
Karnataka Bank is strongly committed to protecting the privacy of its Customers and has
taken all reasonable measures to protect the confidentiality of the Customer information
and its transmission through the world wide web and it shall not be held liable in any
manner for disclosure of the confidential information in accordance with this Privacy
Commitment or in terms of the agreements, if any, with the Customers or by reasons
beyond its control.
Karnataka Bank endeavours to safeguard and ensure the security of the information
provided by the Customer. Karnataka Bank uses 128-bit encryption, for the transmission
of the information, which is currently the permitted maximum level of encryption in
India. The Customer would be required to cooperate with the Karnataka Bank in order to
ensure the security of the information, and it is recommended that the Customers use
128-Bit encryption and must necessarily choose their passwords carefully such that no
unauthorized access is made by a third party. To make the password complex and
difficult for other to guess, the Customers should use a combination of alphabets,
numbers and special characters like !, @, #, $ etc. The Customers should not disclose
their password(s) to anyone or keep any written or other record of the password(s) such
that a third party could access it.
Karnataka Bank undertakes not to disclose the information provided by the Customers to
any person, unless such action is necessary to: -
a) Conform to legal requirements or comply with legal process:
b) Protect and defend Karnataka Bank’s rights, interests or property;
c) Enforce the terms and conditions of the products or services; or
d) Act to protect the interests of Karnataka Bank, or its members, or of other

persons.
e) The Customer authorizes Karnataka Bank to exchange, share, part with all
information related to the details and transaction history of the Customers to
banks / financial institutions / credit bureaus / agencies / participation in any
telecommunication or electronic clearing network as may be required by law,
customary practice, credit reporting, statistical analysis and credit scoring,
verification or risk management and shall not hold Karnataka Bank liable for use
or disclosure of this information.
The Customers shall not disclose to any other person, in any manner whatsoever, any
information relating to Karnataka Bank of a confidential nature obtained in the course of
availing the services through the website. Failure to comply with this obligation shall be
deemed a serious breach of the terms herein and shall entitle Karnataka Bank to terminate
the services, without prejudice to recover any damages, to which the Customer may be
liable.
Karnataka Bank will limit the collection and use of Customer information only on a need-
to-know basis to deliver better service to the Customers. Karnataka Bank may use and
share the information provided by the Customers and third parties for providing services,
and notifying or contacting the Customers regarding any problem with, or the expiration
of, such services.
Karnataka Bank
Find a company
This is the limited version of the Karnataka Bank company profile: Join LinkedIn or Sign
In to see more information.
Karnataka Bank, Ltd. provides personal and business banking services in India. Its
deposit products include savings and current account deposits, demand deposits, time
deposits, non resident deposits, cumulative deposits, cash certificates, insurance linked
savings bank deposits, resident foreign currency accounts, and senior citizens deposit
schemes. The bank’s loan products... more
HeadquartersBangalore Area, India IndustryBanking TypePrivately Held

StatusOperating Company Size 4,456 employees 2007 Revenue 4,241 mil [INR] (9%)
Founded1924 Websitehttp://www.karnatakabank....
Loans
Base Rate linked Interest Rates on Schematic Loans:
Current Base Rate: 8.75% p.a.
SL Scheme Rate of
No. interest w.e.f.
16.08.2010.
1. KBL-Agri Gold
i. Gold One (12 Months) 9.00
ii. Others (24 Months) 9.00
2. KBL- Apna Ghar including NRIs
i. Up to Rs 20.00 lakhs (priority 8.75
sector)
ii. Above Rs 20.00 lakhs and up to Rs 9.50
50.00 lakhs.
iii. Above Rs 50.00 lakhs and up to Rs. 10.50
100 lakhs
3. KBL- Car Finance
i. New vehicles upto Rs. 50.00 lakhs 10.50
ii. Old vehicles upto Rs. 20.00 lakhs 13.00
4. KBL Contractor 12.00
5. KBL -Easy Ride 10.50
6. KBL-Ghar Niveshan 12.50
7. KBL- Insta Cash 12.75
8. KBL-Instant Agri Credit 1.50% above
deposit rate
9. KBL- Krishik Bhandar
i. Up to Rs 3.00 lakhs. 8.75
ii. Above Rs 3.00 lakhs and up to Rs 9.00
50.00 lakhs.
iii. Above Rs 50.00 lakhs and up to Rs 10.00
100.00 lakhs.
10. KBL-Krishik Sarathi 10.25
11. KBL-Krishik Sinchana 10.25
12. KBL-Lease N Cash 13.00
13. KBL- Mahila Udyog 10.00
14. KBL-Mortgage 13.50
15. KBL-MSE 12.50
A. Activities not covered under
CGTMSE.
i. Old Vehicles 13.50
ii. Traders 12.00
ii. Others 12.50
B. Activities covered under
CGTMSE
i. Manufacturing
i.a. Upto Rs. 5.00 lakhs 10.50
i.b. Above Rs. 5.00 lakhs and up to 11.50
Rs. 25.00 lakhs
i.c. Above Rs. 25.00 lakhs and up to 12.50
Rs. 50.00 lakhs
ii. Services-New Vehicles
ii.a. Up to Rs. 5.00 lakhs 10.50
ii.b. Above Rs. 5.00 lakhs and up to 11.50
Rs. 25.00 lakhs
ii.c. Above Rs. 25.00 lakhs and up to 12.50
Rs. 100.00 lakhs
iii. Service -Old Vehicles 13.50
iv. Service- PSE & Others
iv.a. Upto Rs. 5.00 lakhs 10.50
iv.b. Above Rs. 5.00 lakhs and up to 11.50
Rs. 25.00 lakhs
iv.c. Above Rs. 25.00 lakhs and up to 12.50
Rs. 100.00 lakhs
16. KBL-Pushpankur 10.25
17. KBL-Ravikiran 12.50
18. KBL-Salaried Persons Loan 13.75
19. KBL Vidyanidhi.
i. General Up to Rs. 4 lakh
i.a. Normal 12.25
i.b. Meritorious 11.75
i.c. Girl Student 11.75
i.d. Girl Meritorious 11.25
ii. General above Rs. 4 lakh
ii.a. Normal 13.25
ii.b. Meritorious 12.75
ii.c. Girl Student 12.75
ii.d.Girl Meritorious 12.25
Karnataka Bank
From Wikipedia, the free encyclopedia
Jump to: navigation, search
Karnataka Bank
Private
Type
BSE & NSE:Karnataka Bank,
Industry Banking
Founded 1924 (as The Karnataka Bank Limited)
Karnataka Bank Ltd.,
Mahaveera Circle,
Headquarters
Kankanady,
Mangalore, India
Loans, Credit Cards, Savings, Investment
Products
vehicles
Revenue ▲ USD
Total assets Rs.
Karnataka Bank Limited (Kannada: ಕನರಟಕ ಬಯಂಕ ಲಮಟಡ) is a private sector

banking institution based in the town of Mangalore in Karnataka, India. The Reserve
Bank of India has designated Karnataka Bank as an A-class scheduled commercial bank.
The bank now has a national presence with a network of some 463 branches across 19
states and 2 Union Territories. It has over 4,800 employees and 3.5 million customers,
including farmers and artisans in villages and small towns throughout the country. Its
shares are entirely privately-owned by some 68,942 shareholders.[1][2][3]
Contents
[hide]
• 1 Current position
• 2 History
• 3 Services
• 4 See also
• 5 Notes
• 6 References
• 7 External links
[edit] Current position
For the quarter that ended on December 12, 2008, the total interest earned was Rs. 508.4
crores.[1] The total income for the bank was Rs. 607.17 crores and the expenditure, Rs.
468.86 crores, thereby yielding a profit of Rs. 138.31 crores.[1]
The Karnataka Bank has been striving to keep pace with advances in banking technology
by adopting Core banking and Internet banking, and establishing its MoneyPlant
Automated Teller Machine system.
In August 2008, Karnataka Bank received the Sun and NDTV Green IT Award. Sun
Microsystems and NDTV gave the award to Karnataka Bank in recognition of the bank's
"green policies" and use of earth-friendly technology such as solar power.[4][5][6][7][8][9]
[edit] History
The Karnataka Bank was incorporated on February 18, 1924, as The Karnataka Bank
Limited and commenced business on May 23, 1924. Its founders established it at
Mangalore, a coastal town in the Dakshina Kannada district of Madras Presidency.[10]
Among the founders, who created the bank to serve the South Kanara region, was B. R.
Vysaray Achar.[10] Another important personality associated with the bank was K. S. N.
Adiga, who served as Chairman from 1958 to 1979.[10]
• 1960: Karnataka Bank acquired the Sringeri Sharada Bank, which had been
established in 1942 and which had four branches.
• 1964: Karnataka Bank took over the assets and liabilities of the Chitradurga
Bank (also known as Chitladurg Bank), which had been established in 1868 in
Mysore State and was the oldest bank in Mysore.
• 1966: Karnataka Bank took over the assets and liabilities of the Bank of
Karnataka, in Hubli. Bank of Karnataka had been established in 1946 and had
opened one branch in Belgaum in 1947. At the time of the acquisition, Bank of
Karnataka had 13 branches.
In the year 2000, Karnataka Bank signed a memorandum of understanding with Infosys
Technologies to develop a core-banking solution called FINACLE.[11] Over 221 branches
were networked up to March 31, 2004.[12] The main motto of this programme is
"Anytime/Anywhere banking". [12] In 2002, the bank concluded a pact with Corporation
Bank for sharing its ATMs.[11] A year later, the bank introduced the Moneyplant card that
allows customers to withdraw money from any of their Karnataka bank accounts.[11][13]
In September 2003, the bank shifted its head office from Kodialbail to Kankanady.[10][11]
[edit] Services
In August 2008, the Karnataka Bank introduced Quick Remit, a facility to make money
transfer easy for Non-Resident Indians living in Canada, USA and the UK.[14][15] The bank
also runs a 24-hour internet banking service called Moneyclick.[16]
Karnataka Bank also offers multi-branch banking, deposit schemes as Abhyudaya cash
certificate, fixed deposits, ready money deposit, Soulabhya deposit, cumulative deposit,
Platinum lakhpathi, insurance linked savings bank deposit, K-Flexi deposit, resident
foreign currency (domestic) account, NRI services, Senior Citizens Deposit Scheme and
loan schemes as Vidyanidhi education loan scheme, Apna ghar home loans, car finance
scheme, Varthak loans, Easy ride, Scheme for salaried persons, Udyog mithra, Niveshan
loans, Krishi card, K-Power, Lease ‘n’ Encash, Suvarna Nidhi, InstaCash and
VahanaMitra.[13]
[edit] See also

• Indian banking
[edit] Notes
1. ^ a b c "Current financial statement-for the Quarter that ended Dec. 2008".
Karnataka Bank Ltd..
http://www.karnatakabank.com/ktk/CurrFinancialStmt_Dec2008.htm.
2. ^ "Key offices". Karnataka Bank Ltd..
http://karnatakabank.com/ktk/KeyOffices.jsp.
3. ^ SEBI profile, pg. 38
4. ^ Karnataka Bank, Ltd. (August 27, 2008). "Karnataka Bank Wins Sun and
NDTV Green IT Award". Press release.
http://www.karnatakabank.com/ktk/archive/news/2008/08/27/award.html.
5. ^ "Karnataka Bank bags Green Prize". Deccan Chronicle. August 26, 2008.
http://www.dc-
epaper.com/dc/dcb/2008/08/26/ArticleHtmls/26_08_2008_006_002.shtml.
6. ^ "Sun Technovate '08". Sun Microsystems.
http://www.sercononline.com/technovate08/edm/ndtv_technovate_.htm.
7. ^ "Mangalore: Karnataka Bank Wins Sun and NDTV Green IT Award".
Daijiworld. August 25, 2008. http://www.daijiworld.com/news/news_disp.asp?
n_id=50244&n_tit=Mangalore
%3A+Karnataka+Bank+Wins+Sun+and+NDTV+Green+IT+Award.
8. ^ "Karnataka Bank wins Sun and NDTV Green IT Award". Karmayog.
http://www.karmayog.org/csr1to500/csr1to500_20561.htm.
9. ^ "Bank wins Green IT award". Deccan Herald. August 25, 2008.
http://www.deccanherald.com/CONTENT/Aug272008/district2008082686778.as
p.
10. ^ a b c d SEBI profile, pg. 34
11. ^ a b c d SEBI profile, pg. 35
12. ^ a b SEBI profile, pg. 56
13. ^ a b SEBI profile, pg. 40
14. ^ "Quick Remit Money Transfer Service". Karnataka Bank Ltd..
https://remit.karnatakabank.com/.
15. ^ "Karnataka Bank launches new facility". The Hindu. September 30, 2008.
http://www.hindu.com/2008/08/30/stories/2008083055070500.htm.
16. ^ "Internet banking". Karnataka Bank Ltd..
http://karnatakabank.com/ktk/InternetBanking.jsp.
[edit] References
• "SEBI Profile:Karnataka Bank". Securities and Exchange Board of India.
http://www.sebi.gov.in/dp/karbank1.pdf.
[edit] External links

• Official website
[hide]
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Retrieved from "http://en.wikipedia.org/wiki/Karnataka_Bank"
Categories: Banks of India | Economy of Karnataka | Private banks | Banks established in
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Karnataka Bank Limited, a leading 'A' Class Scheduled Commercial Bank in India,
was incorporated on February 18th, 1924 at Mangalore, a coastal town of Dakshina
Kannada district in Karnataka State. The bank took shape in the aftermath of patriotic
zeal that engulfed the nation during the freedom movement of 20th Century India. Over
the years the Bank grew with the merger of Sringeri Sharada Bank Ltd., Chitradurga
Bank Ltd. and Bank of Karnataka.
With over 85 years experience at the forefront of providing professional banking services
and quality customer service, we now have a national presence with a network of 464
branches spread across 20 states and 2 Union Territories.
Managed by a dedicated & professional management team, we have over 4,900

employees, 71,822 shareholders and over 3.7 million customers.
Today, we have emerged as a leading financial service institution in India.
History of Karnataka Bank Ltd.
YEAR EVENTS 1924 - The Bank was incorporated on the 18th day of February at Mangalore.
The Bank was promoted in 1924 by Late Shri B. R. Vyasarayachar & other leading members of
South Kanara Region. The Comp. is engaged in banking business.
1952 - 25,000 No. of equity shares issued at par.
1958 - The Bank was included in the second schedule with effect from 11th January & upgraded
from `D' class to `C' class.
1963 - Rs 5 per share was called-up on the 25,000 shares issued in 1952.
1964 - The Bank took over the assets & liabilities of Chitaldurg Bank Ltd.
- 50,000 No. of equity shares issued at par.
1966 - The Bank took over the assets & liabilities of Bank of Karnataka Ltd., Hubli & consequently
opened 14 new branches in places where the Bank of Karnataka Ltd., was formerly functioning.
1970 - Rs 5 per shares called-up during the year making the shares fully called-up.
1978 - Arrears Rs 13,805/-.
1981 - Arrears Rs 3,075/-.
1982 - Arrears Rs 2,900/-.
1983 - Arrears Rs 775/-.
1984 - Arrears Rs 500/-.
1985 - 1,50,000 rights shares issued at par.
1989 - The Comp. opened a merchant banking division during the year.
- 2,50,000 rights shares issued at par.

1990 - Shares sub-divided & 30,000 shares issued at par.
1996 - Authorised capital increased. Difference shares issued through a Rights & Public issue.
2000 - Karnataka Bank, a Mangalore-based private sector bank, has initiated a strategic
technology tie-up with the Infosys Technology Limited.
- Karnataka Bank, which has entered into a`strategic technological tie-up' with Infosys
Technologies Ltd to implement a `Centralised core banking solution' called `Finacle', hopes to be
able to provide all the facilities linked with this by end of current year.
2002
-Launches multi-branch banking system in 5 cities, allowing customers to bank anywhere within
the network.
-Launches a relief package after a continous downslide in the prices of different agricultural
commodities.
-Donates 3 computers to Kannada Sahitya Parishad President Mr Harikrishna punaroor.
-Slashes down the interest rate by 1 to 3 percent on all schematic loans & advances.
-Mr A Krishna Kumar Kodgi ceases to be the Director on the Board of Bank.
-Board approves for issue of bonus shares in the ratio of 1 equity share for every 1 share held on
a record date to be fixed later & to offer 1 equity share of Rs.10 each at the price of Rs.25 per
share including the share premium.
-Ties up with Metlife India for distribution of insurance products as a corporate agent.
-Conducts a 2 day seminar for bank inspecting officials.
-Allots bonus shares in the ratio of 1:1, 13462372 shares of Rs.10 each have been alloted
keeping in abeyance the bonus entitlements of 23850 shares.
-Revises the term deposit rates - 5% on domestic term deposits for a period of 7-14 days
[deposits of Rs 15 lakhs], 5% for 15 to 45 days, 6% for 46 to 90 days, 6.5% for 91 to 179 days,
7% for 180 days to less than one year, 7.5% for one to three years & 7.25% for deposits above
three years.
2003
-Reduces its Prime Lending Rates by 0.50 percent, & now the PLR will be 12%.
-Offers rights issue of shares in the ratio of one share for every two shares of post-bonus share
capital at a premium of Rs. 15 pershare at Rs.10 face value.
-Pubic Relations Society of India confers 'The PR person of year 2002' award on the Chairman &
CEO of Bank, Mr. AnanthaKrishna.
-Introduces a new ' resident foreign currency account' in the wake of RBI permission to maintain
foreign currency accounts.
-Mr Ananthakrishna term as the Chairman of bank is extended for a period of 3 years.
-Passes resolution on the declaration of dividend of 22% on the entire paid up capital , &
appointment of Mr Bheema Bhat as the Director of bank.
-Announces 1% interest rebate for prompt repayment of loans taken by farmers with a view of
increasing its farm credit portfolio.
-Revises the interest rate for domestic term deposits. it would pay 4.5% on domestic term deposit
for 7 - 14 days [deposits of 15 lakh and aboves], 4.5% for 15 - 45 days, 5% for 46 - 90 days 5.5%
for 91 - 179 days, 6% for 180 - < 1 year, 6.5% for 1 - 3 years, 6.25% for above 3 years.
-Change in its Registered Office to PB No. 599, Mahaveera Circle, Kankanady, Mangalore -
575002. PH No:0824-2228222 Fax: 0824- 2225588 Email : info@ktkbank.com.
-Ties up with Melife India & launches K-Life a term product designed for SB/current Acc. holders
of bank.
-Launches a credit product 'KBL Insta Cash' for consumption purposes, & 'KBL Vahana Mitra' for
purchase of new vehicles.
-Bank along with Western Union Financial Services ties up with Bharat Overseas Bank to provide
inbound money transfer services.
-Allotted 6950 bonus shares as fully paid up equity shares of Rs. 10 each on release of bonus
entitlement kept in abeyence in the Bonus Issue 2002.
-The Delhi region of Karnataka Bank has bagged the golden trophy for Best Region & Ludhiana
branch bagged the silver trophy for Best Branch, instituted by Karnataka Bank Employees'
Association. The relationship between the management & the union should be based on mutual
trust & a sense of responsibility.
-Karnataka Bank enters into MOU with Bajaj Allianz
2004
-Karnataka Bank deploys finacle solution in Mangalore branch
-The Karnataka Bank Limited has informed that Shri. K. N. Ramasubramanian ceased to be the
Director on the Board of Bank w.e.f. January 19, 2004 on completion of term of 8 years in
accordance with Section 10-A of Banking Regulation Act, 1949.
- Bank forms ad-hoc committee for undertaking procedures & performance audit on public
services rendered to its customers. The committee comprises the Deputy General Managers, Mr
K. Venkataramana Tunga, Mr N. Upendra Prabhu, Mr K.H. Shivaswamy Aithal, & Mr P. Jairama
Hande. Mr M.S. Mahabaleshwar Bhat, Assistant General Manager, is the convenor & nodal
officer to serve as contact point with the RBI committee.
-Karnataka Bank Limited launched 'Gold Card Scheme' for exporters

-Delist from the Bangalore Stock Exchange Ltd with effect from November 24, 2004.
-Karnataka Bank ties up with India Switch Company
-Karnataka Bank sets up 16th branch in Mumbai
2005
-Karnataka Bank opens branch in Delhi
-Karnataka Bank launches Money Quick under real time gross settlement [RTGSs] system
-Karnataka Bank sets up 46th ATM at Udupi
-Karnataka Bank inks agreement with National Financial Switch for ATM connectivity
-Karnataka Bank sets up new ATM at Davangere
-Karnataka Bank launches `no frills' accounts
2006
-Karnataka Bank launched CDSL-DP services at select branches.
-Karnataka Bank sets up 396th branch at Vazira Naka
-Karnataka Bank Ltd has entered into an agreement with the Indian Railway Catering & Tourism
Corporation Ltd.
2007
-Karnataka Bank Ltd has informed that the Board of Directors of Bank at its meeting held on
January 05, 2007 has appointed Shri. T S Vishwanath, Senior Partner, Vishwanath Singh and
Associates, Chartered Accountants, New Delhi as Additional Director of Bank u/s 260 of
Companies Act, 1956.
-Karnataka Bank Ltd has appointed Shri. M Sitarama Murty [Retired Managing Director of State
Bank of Mysores], Secunderabad as an additional Director of Bank with effect from November 30,
2007.
2009
- Karnataka Bank has joined hands with HMT Ltd for financing purchase of tractors & the finance
will be extended under bank 'KBL - HMT Sarathi' scheme.
Company Profile of Karnataka Bank Ltd.

Snapshot
No records found
Chief Executive Name Mr. Ananthakrishna
Secretary Name Not Available
Face Value 10
Market Lot 1
Business Group Name Not Applicable
Incorporation Date 18/02/1924
Indústry Name Finance - Banks - Private Sector
Registrar of Company ALPHA SYSTEMS PRIVATE LIMITED
NO. 30/1, 3RD FLOOR LEEMAN'S COMPLEX CUNNINGHAM ROAD
Bangalore , Karnataka , 560052
Listed on National Stock Exchange of India limited
The Stock Exchange, Mumbai
Board of Directors
Name Designation
Mr. S V Manjunath Director
Mr. S R Hegde Director
Mr. T S Vishwanath Director
Mr. M Sitarama Murty Director
Mr. U R Bhat Director
Mr. D Harshendra Kumar Director
Mr. M Bheema Bhat Director
Mr. R V Shastri Director
Mr. Ananthakrishna Chairman and CEO
Dr. H Rama Mohan Director
Key Executives
Name Designation
Mr. G K Bhat General Manager
Mr. N S Chakkera General Manager
Mr. K H Shivaswamy Aithal General Manager
Mr. P Jayarama Bhat Chief General Manager
Mr. N Upendra Prabhu Dy. General Manager
Yearly High Lows
Year High Low
2002 156.65 52.00
2003 128.80 52.00
2004 243.80 72.00
2005 237.35 62.55
2006 162.00 74.10
2007 251.00 137.20
2008 286.00
About Karnataka Bank
The head office of Karnataka Bank Limited is located in the town of Mangalore in
Karnataka, India. This is a premier private sector bank with a tailor-made range of
products and services to cater to diverse types of markets, trades and personal and
corporate needs of the customers. To ensure an easy and smooth banking experience for
customers, it offers excellent deposits and borrowing facilities. It extends useful help in
the area of overseas transactions as well as provides maximum returns on surplus funds.
In order to build a lasting relationship with the clients, Karnataka Bank has
also incorporated latest information technology in its system to offer them products and
services on time.
Background of Karnataka Bank

Karnataka Bank Limited was assigned the status of a Scheduled Commercial Bank in
1924. Having matured for more than 85 years in the banking industry of India, the bank
has won the confidence of its customers, which in turn has helped it develop a network of
458 branches in 20 states and 2 Union Territories of India.
Today, the bank has an employee strength of more than 4,900. It has 3.7 million
customers across India and 71,822 shareholders.
Products and Services of Karnataka Bank

The well devised range of products and services of the Karnataka Bank include: Personal
Banking
• Savings Bank Accounts

• Current Accounts
• Moneyplant ATMs
• Deposit Products
• Loans
o Vidyanidhi Education loan scheme
o Car finance scheme
o Apna Ghar home loans
o Varthak loans
o Scheme for salaried persons
o Easy ride
o Udyog mithra
o Krishi card
o K-Power
o Niveshan loans
• VISA Debit Card
Business Banking
• Working Capital Finance

• Term Loans
• Infrastructure Finance
• Fund based and non-fund based Business Finance Products
Insurance Services
• Life insurance products of MetLife India Insurance Co. Pvt. Ltd.

• General Insurance products of Universal Sompo General Insurance Co. Ltd.
Internet Banking
• Retail Customers - balance enquiry, recording stop-payment instructions, balance

transfer instructions, requests for Cheque books, account opening, payment of
BSNL Mobile, Water bills, Electricity
• Corporate Clients - Import/ Export Credit facilities, Inland Trade, Requests for
Forward Contracts, corporate account, Bank Guarantee
• Cyberkids (special facility for 12-18 years old kids)
Money Transfer
• Real Time Gross Settlement (RTGS)

• Western Union Money Transfer (WUMT)
• NEFT-Customers Facilitation Centres
NRI Banking
• Forex Facilities for Residents (Individuals) and Non Resident Indians (NRIs)
Corporate and Regional Offices of Karnataka Bank

Karnataka Bank Limited,
Mahaveera Circle, Kankanady,

Mangalore-575 002
Karnataka State
Ph: 0824-2228222
Fax: 0824-2228284
Bangalore
105, Mohan Mansion, P.B.No. 5171,

II Floor, Kasturba Road,
Bangalore-560 001
Karnataka State
Chennai
324, Thambu Chetty Street,

P.B.No. 1878, Ist Floor, G.P.O,
Chennai-600 001
Tamilnadu State
Delhi
M-13(A), Punj House,

1st Floor, Connaught Circus,
New Delhi-110 001
Hubli
P.B.No. 499, CTS. 122/108,

2nd Floor, Neeligin Road,
New Cotton Market, Hubli-580 029
Karnataka State
Mangalore
P.B.No. 746, Kodialbail,

Mangalore-575 003
Karnataka State
Mumbai
2nd Floor, 'E' Block,

'The Metropolitan',
Bandra-Kurla Complex,
Bandra(E), Mumbai-400 051
Maharashtra State
Mysore
New Kantharaje Urs Road,

Kuvempunagar, P.B.No. 15
Mysore-570 023
Karnataka State
Shimoga
Karnataka Bank Building, P.B.No. 132,

Savalanga Road, Shimoga-577 201
Karnataka State
1900-2010
 Mar 12, 1906 - Founded on March 12, 1906, in the Temple Town of Udupi,
190 Karnataka state, Corporation Bank is the oldest banking institution in the then
undivided “ Dakshina Kannda” and one of the oldest banks in India. The bank
was founded with an initial capital of Rs.
Show more
From Some important information about Corporation Bank recruitment 2010 -

Related web pages
www.southasiablog.com/2010/03/some-important ...

1924 Feb 18, 1924 - Karnataka Bank Limited, a leading 'A' Class Scheduled
Commercial Bank in India, was incorporated on February 18th, 1924 at
Mangalore, a coastal town of Dakshina Kannada district in Karnataka State. The
bank took shape in the aftermath of patriotic zeal ...
Show more
From Karnataka Bank - History - Related web pages

www.karnatakabank.com/ktk/History.jsp

1931 Oct 23, 1931 - Vijaya Bank was founded on 23rd October 1931 by the late Shri
ABShetty and other enterprising farmers in Mangalore, Karnataka. ... Karnataka
Bank Ltd. ... State Bank of Mysore is one of the nationalised bank in India. ... ,
For other uses, see Udupi ...
Show more
From StateMaster - Encyclopedia: Karnataka - Related web pages

www.statemaster.com/encyclopedia/Karnataka

2004 May 2004 - Mangalore-based private sector bank Karnataka Bank has surpassed
its business turnover target of Rs 17000 crore for the financial year 2004-05,
Ananthakrishna , chairman of the bank told the members at the bank's head office
here on Friday .
From My-Kannada.com: Karnataka News April 2005 - Related web pages
www.my-kannada.com/n/a/arc3-2005.shtml

2005 Sep 1, 2005 - Mangalore-based leading private sector bank Karnataka Bank Ltd
has announced an upward revision of domestic term deposit rates with effect
from September 1, 2005 on fresh deposits and renewals of maturing deposits of
three years and above.
From Karnataka Bank revises rates - Related web pages
www.business-standard.com/common/storypage.php ...

2006 Jan 28, 2006 - Shri. RV Shastri serves as Independent Director of Karnataka
Bank Ltd. He is former Chairman and Managing Director of Canara Bank and
Indian Overseas Bank, joined the Board of the Bank on 28.01.2006. He has over
36 years Banking experience.
From Stock Quote News - Stock Market Quotes, Online Stock Quotes, India -
Related web pages
in.reuters.com/finance/stocks/companyOfficers ...

2007 Mar 31, 2007 - Allahabad Bank announced that its Board has declared dividend
of 30% on equity shares of INR10 each for the year ended on March 31, 2007.
Allahabad Bank Announces Joint Venture with Indian Overseas Bank,
Karnataka Bank Ltd, Dabur and Sompo Japan ...
Show more
From Allahabad Bank (ALBK.BO) Key Developments | Reuters.com

www.reuters.com/finance/stocks/keyDevelopments ...

2008 Jul 23, 2008 - Done at a cost of a little over Rs 25 lakh, the SVC Bank started its
direct forex services on July 23, 2008. Though it's only been a little over a month,
implementing TurboSwift is already yielding multiple benefits for SVC Bank.
Now, the bank's customers ...
Show more
From SVC Bank connects to SWIFT - Related web pages

www.expresscomputeronline.com/20081006 ...

2009 Mar 31, 2009 - As on March 31, 2009, the Karnataka Bank's total advances
stood at Rs 11800 crore. Of this, 14 per cent is towards SME sector, 7 per cent
real estate, 15 per cent textiles, 40 per cent priority sector and the balance
towards corporate sectors.
Show more
From Karnataka Bank to restructure Rs 350 cr loans - Related web pages
www.business-standard.com/india/news/karnataka ...

2010 Jan 3, 2010 - Karnataka (DLN): Karnataka Bank has announced the final result
for recruitment of officers. Karnataka Bank interview results are available on its
official website. The written exam was held on 3rd Jan 2010.
From Its-official | Bollywood Latest News - Part 3 - Related web pages
www.bollywoodlatest.info/tag/its-official/page/3
Rates of Interest on Domestic Term Deposits w.e.f 27thSeptember, 2010

Interest rates for deposits General Public (*)
Interest Rate (% p.a) for Deposits upto & Interest Rate (% p.a) for Deposits of
Maturity Pattern
inclusive of Rs.5 Crore above Rs. 5 Crore
7 days to 45 days 3.50 3.50
46 days to 90 days 4.25 4.25
91 days to 180 days 5.50 5.50
181 days to 299 days 6.50 6.50
300 days 7.25 7.25
301 days to 364 days 6.50 6.50
1 year to 399 days 7.50 7.50
400 days 7.75 7.75
401 days to less than 2
7.50 7.50
years
2 year & above, but less
7.75 7.75
than 3 years
3 years & above, 8.00 -
Interest rate for Senior Citizens:(FD & ACC Only)
 0.50% extra over the general rate across all maturity slabs for deposits upto and
incusive of Rs.1 crore for resident Senior Citizens only.w.e.f 27-09-2010
Interest Rate(% p.a) for Interest Rate(% p.a) for Deposits Interest Rate(% p.a) for
Maturity Pattern Deposits upto & inclusive of above Rs.1 crore upto & Deposits of above Rs. 5
of Rs.1 Crore inclusive of Rs.5 crore Crore
7 days to 45 days 4.00 3.50 3.50
46 days to 90 days 4.75 4.25 4.25
91 days to 180
6.00 5.50 5.50
days
181 days to 299
7.00 6.50 6.50
days
300 days 7.75 7.25 7.25
301 days to 364
7.00 6.50 6.50
days
1 year to 399 days 8.00 7.50 7.50
400 days 8.25 7.75 7.75
401 days to less
8.00 7.50 7.50
than 2 years
2 year & above,
but less than 3 8.25 7.75 7.75
years
3 years & above, 8.50 8.00 -
Premature Closure of both Domestic & NRE Deposits: For Regular deposit schemes:
The penalty clause for premature closure of deposits on fresh deposits and renewals made
is as follows:
 Penalty of 1% shall be levied for premature withdrawal of term deposit. While

prematurely closing a deposit, interest on the deposit shall be paid at the rate applicable to
the period for which the deposit remained with the bank after levying penal rate of 1%,
and not at the contracted rate.
 However, if the deposit is prematurely closed for reinvestment, interest shall be paid
at the rate applicable to the period for which the deposit remained with the bank without
penalty for the amount reinvested provided the reinvested deposit remains with the bank
for a period longer than the remaining period of original deposit.
Interest rates on Special Deposit Schemes w.e.f 11stAugust, 2010

 The following interest rates shall be applicable for the new deposit schemes
irrespective of quantum of deposit
Rate of Interest
Scheme Remarks
(% p.a)
For For
- General Senior -
Public Citizens
Period of deposit is fixed for 5 years
only, for deposits not exceeding Rs. 1
KBL - Tax Planner 8.00 8.50
lakh in a year. Premature closure
under this scheme is not allowed.
Interest Rates on NRE Term Deposits w.e.f. October 1st, 2010
1 year to less than 2 years 2.53
2 years to less than 3 years 2.35
3 years and upto 5 years 2.61
Interest Rates on FCNR (B) Deposits w.e.f. October 1st, 2010
Period Interest Rates per Annum
Currency (% P.A.)
USD GBP EUR CAD AUD JPY
1 year only 1.78 2.47 2.42 2.92 6.61 1.66
Above 1 year but less than 2 years 1.78 2.47 2.42 2.92 6.61 1.66
2 years and above but less than 3 years 1.60 2.27 2.47 2.53 6.22 1.40
5 years only 2.48 3.05 2.96 3.03 6.49 1.50
Broken period interest on FCNR (B) Deposits w.e.f. August 1st, 2009
Currency USD GBP EUR CAD AUD JPY
Broken Period Interest 1.00% 1.00% 1.00% 1.00% 1.00% NIL
Interest Rates for RFC (Maturity less than 1 year) w.e.f. 01.04.2010
Savings Bank Deposits w.e.f. May 31st , 2003 (%)
Domestic 3.5
Karnataka Bank Limited Company Snapshot Purchase a Full Report on this Company
Business Description:
The Karnataka Bank Limited (the Bank) is a private sector bank. The Bank operates in
four business segments: treasury, corporate and wholesale banking, retail banking and
other banking operations. During the fiscal year ended March 31, 2010, the Bank opened
17 branches in Patna, Kanakapura, Tambaram, Vellore, Dhanbad, Kolkata -
Bhowanipore, Naganathapura, Gundlupet, New Delhi - Ashokvihar, Ujjain, Ghaziabad,
Kancheepuram, Chennai - Annanagar (West), Brahmapur, Serillingampally, Durg and
Rajarhat - Kolkata. As at March 31, 2010, it had 464 branches, 217 automated teller
machines (ATM) outlets, eight regional offices, one international division, one data
centre, one customer care centre, five service branches, two currency chests, six
extension counters and two central processing centers, spread across 20 states and two
Union Territories.
Financial implication of Karnataka bank

Current financial results
KARNATAKA BANK LTD ,

REGD & HEAD OFFICE : MANGALORE 575002
UNAUDITED QUARTERLY FINANCIAL RESULTS FOR THE QUARTER ENDED 30.09.2010

Rs in lakh
UNAUDITED AUDITED
Quarter ended Half year ended Year Ended

30.09.2010 30.09.2009 30.09.2010 30.09.2009 31.03.2010
1 Interest Earned 57184 49437 111647 97165 204342

(a+b+c+d)
a) Interest/Discount 39662 32327 78029 65506 138898

on advances/bills
b) Income on 16698 17095 32686 31595 63346

Investments
c) Interest on 11 13 38 49 58
balances with
Reserve Bank of
India and other
inter bank funds
d) Others 814 2 894 15 2040
2 6360 5354 13227 18593 31126

Other Income
3 63544 54791 124874 115758 235468

TOTAL INCOME
(1+2)
4 43275 43895 85792 86969 170779

Interest expended
5 12711 10234 23971 18959 38605

Operating expenses
(i+ii)
i) 7173 5308 14015 10405 20680

Employees Cost
ii) 5538 4926 9956 8554 17925

Other operating
expen
ses
6 TOTAL 55986 54129 109763 105928 209384

EXPENDITURE
((4+5) excluding
provisions &
Contingencies)
7 7558 662 15111 9830 26084
Operating Profit
before
provisi
ons &
contin
gencie
s (3-6)
8 5768 524 7183 2274 7108
Provisions (other
than
tax)
and
Conti
ngenc
ies
9 0 0 0 0 0
Exceptional Items
1 1790 138 7928 7556 18976

0 Profit (+)/Loss (-)
from
Ordin
ary
Activit
ies
before
tax (7-
8-9)
1 -1082 -1497 408 1915 2264

1 Tax Expense
1 2872 1635 7520 5641 16712

2 Net Profit (+)/Loss
(-)
from
Ordin
ary
activiti
es
after
Tax
(10-
11)
1 0 0 0 0 0
3 Extraordinary Items
(net of
tax
expen
se)
1 2872 1635 7520 5641 16712

4 Net Profit (+)/Loss
(-) for
the
period
(12-
13)
1 13421 12162 13421 12162 13399

5 Paid up equity share
capita
l
(Face Value Rs 10/-)
1 - - - - 169876
6 Reserves excluding
revalu
ation
reserv
es (as
per
balan
ce
sheet
of
previo
us
accou
nting
year)
1
7 Analytical Ratios
i) Nil Nil Nil Nil Nil

Percentage of
share
s held
by
Gover
nment
of
India
ii)
Capital Adequacy
Ratio 11.41 12.55 11.41 12.55 11.85
(%)
11.71 12.93 11.71 12.93 12.37
i) Basel –I
ii) Basel - II
iii) Earning per share
(EPS) 2.14* 1.34* 5.61* 4.64* 13.50
(Rs)
2.14* 1.34* 5.61* 4.62* 13.45
a) Basic EPS
b) Diluted EPS
before Extraordinary
items (net of Tax 2.14* 1.34* 5.61* 4.64* 13.50
expense) 2.14* 1.34* 5.61* 4.62* 13.45
b) ) Basic EPS
Diluted EPS
after Extraordinary
items (net of Tax
expense)
* Not Annualised
iv
) NPA Ratios as on
date 58738 49360 58738 49360 54964
17274 16706 17274 16706 18861
a) Gross NPA
3.66 3.86 3.66 3.86 3.73
Net NPA
1.11 1.34 1.11 1.34 1.31
b) % of Gross NPA
0.20 0.14 0.54 0.46 0.67
% of Net NPA
c) Return on
Assets-
Public Shareholding
1 -No of Shares 134199212 121609178 134199212 121609178 133976322
8 -Percentage of 100% 100% 100% 100% 100%
Share holding
1 Promoters and
9 Promoter group
shareholding
a) Pledged NA NA NA NA NA
/encumbered
-Number of shares NA NA NA NA NA
- Percentage of
shares(as a % of the
total shareholding of NA NA NA NA NA
promoter and
promoter group)
-Percentage of
shares (as a % of
the total share
NA NA NA NA NA
capital of the
company.
NA NA NA NA NA
b) Non-encumbered NA NA NA NA NA
-Number of shares
- Percentage of
shares(as a % of the
total shareholding of
promoter and
promoter group)
-Percentage of
shares (as a % of
the total share
capital of the
company.
Notes:
1. The above financial results for the quarter ended 30th September 2010 have
been reviewed by the Audit Committee and approved by the Board in the
meeting held on 15TH Ocotober 2010.
2. To the extent applicable to the interim financial reporting, the Bank has
consistently followed the same accounting policies followed for the preparation
of audited financials for the year ended March 31, 2010 which have been
subjected to Limited Review by the Central Statutory Auditors.
3. The above results have been arrived at after considering usual and necessary
provisions as per RBI guidelines and in accordance with Income Tax Act and
applicable Accounting Standards.
4. The Working results for the quarter ended September 30, 2010 have been
arrived at after considering provision for loan losses, depreciation on
investments and fixed assets on actual basis. The bank has made provisions
for various employee benefits like pension, gratuity, etc on an estimated basis.
The impact of additional liability on (i) pension benefits arising on account of
the 9th Bipartite settlement and (ii) the amendment made to the Payment of
Gratuity Act, 1972 has been estimated and amortized over a period of 5 years
on pro-rata basis. Provision for Income-tax and other contingencies are on an
estimated basis subject to adjustment if any.
5. The Bank has implemented the decision taken at the meeting of State Level
Bankers’ Committee (SLBC), Karnataka held on 29.09.2010 to restructure
eligible advances under Coffee Debt Relief Package 2010 and treat them as
Standard assets pending receipt of clarifications /directions from Reserve Bank
of India in this regard.
6. The Bank has identified four business segments viz Treasury, Corporate and
wholesale banking, Retail Banking and Other Banking operations. The
Geographic Segments consist of the Domestic Segment only as the Bank does
not have any foreign branch. The segment results are annexed.
7. Status of the shareholders complaints is as under:
Complaints Complaints Complaints Complaints

pending at received redressed pending at the
the during the during the end of the
beginning of quarter quarter quarter
the quarter
Nil 45 45 Nil
8. Corresponding previous period figures have been regrouped / rearranged

wherever necessary.
By order of the Board
Place: Bangalore
Date: 15th October 2010 P Jayarama
Bhat
Managing Director &
C.E.O.
SUMMARY BALANCE SHEET AS ON 30th SEPTEMBER 2010 Rs in lakhs
As on As on
30.09.2010 30.09.2009
CAPITAL AND LIABILITIES
Capital 13421 12162
Reserves and Surplus 177590 150479
Deposits 2504531 2158212
Borrowings 91725 40044
Other Liabilities and Provisions 72722 62040
TOTAL 2859989 2422937
ASSETS
Cash and balances with Reserve Bank of India 177483 128614
Balances with Banks and Money at Call & Short Notice 4075 5908
Investments 1043504 970032
Advances 1568307 1248703
Fixed Assets 14608 14258
Other Assets 52012 55422
TOTAL 2859989 2422937
Contingent Liabilities 928660 951287

Bills for collection 124449 107106
Segment wise Results for the quarter ended 30.09.2010 Rs in Lakhs
year ended
Business Segments 3 months 3 months 6 months 6 months Audited

ended ended ended ended 31.03.2010
30.09.2010 30.09.2009 30.09.2010 30.09.2009
Segment Revenue
Treasury 18805 19282 37116 44020 80829
Corporate /Wholesale Banking 21985 16871 42912 33799 66129
Retail Banking 21529 17807 41837 35947 83941
Other Banking Operations 1225 831 3009 1992 4569
Total 63544 54791 124874 115758 235468

Segment Results
Treasury -4902 -2668 -6979 -1364 -7768
Corporate /Wholesale Banking 564 -1155 1811 -590 -5135
Retail Banking 5712 3833 11758 8891 30314
Other Banking Operations 965 679 2438 1684 3788
Total 2339 689 9028 8621 21199
Unallocable expenses 549 551 1100 1065 2223
Profit before tax 1790 138 7928 7556 18976
Capital Employed
(a)Treasury Operations
86871 79441 86871 79441 85826
(b)Corporate Banking
60381 50076 60381 50076 59464
(c)Retail Banking
43725 33107 43725 33107 37934
(d) Other Banking Operations
37 17 37 17 51
Total 191014 162641 191014 162641 183275
Part B - Geographic Segments
There is only one segment i.e. Domestic segmment
"The Karnataka Bank Limited is proposing, subject to receipt of requisite of approvals, market
conditions and other considerations, a right issue of its equity shares and to file a Draft Letter of
Offer with the Securities and Exchange Board of India".

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Banks borrow money by accepting funds deposited on current accounts, by accepting

[edit] Business model

An interior of a branch of National Westminster Bank on Castle Street, Liverpool

• Capital raising (Equity / Debt / Hybrids)

[edit] Risk and capital

[edit] Banks in the economy

[edit] Economic functions

[edit] Bank crisis

Currently in most jurisdictions commercial banks are regulated by government entities

[edit] Types of banks

[edit] Types of retail banks

National Bank of the Republic, Salt Lake City 1908

ATM Al-Rajhi Bank

National Copper Bank, Salt Lake City 1911

[edit] Types of investment banks

[edit] Both combined

• Universal banks, more commonly known as financial services companies, engage

[edit] Other types of banks

• Central banks are normally government-owned and charged with quasi-regulatory

[edit] Challenges within the banking industry

[edit] United States

Main article: Banking in the United States

As a reaction, banks have developed their activities in financial instruments, through

[edit] Accounting for bank accounts

[edit] Brokered deposits

[edit] Banking by country

[edit] See also

Look up bank or banking in Wiktionary, the free dictionary.

[edit] Further reading

Retrieved from "http://en.wikipedia.org/wiki/Bank"

• What links here

• This page was last modified on 20 October 2010 at 10:24.

Reserve Bank of India

Logo of RBI The RBI headquarters in Mumbai

[edit] 1950 - 1960

[edit] 1960 - 1969

[edit] since 2000

Central Board of Directors

[edit] Supportive bodies

The Board of Financial Supervision (BFS), formed in November 1994, serves as a

[edit] Offices and branches

[edit] Main Functions

The RBI Regional Office in Delhi.

The RBI Regional Office in Kolkata.

[edit] Monetary Authority

[edit] Manager of exchange control