1. Meaning of Banking
Bank is an institution which acts as the
mediator between those people who have
surplus money and those who are in need of
money.
The process of banking includes both
Lending and Borrowing. The medium of
advertisement conveys to the customer the
requirement of the bank.

2. COMMERCIAL BANKING
Functions of Commercial banks:
ACCEPTANCE OF DEPOSITS
TYPES OF DEPOSITS
SAVINGS
ACCOUNT FIXED DEPOSITS
CURRENT RECURRING
ACCOUNT ACCOUNT
ADVANCING OF THE LOANS.
 ISSUING OF TRAVELLERS CHEQUES.
 PROVIDIING ATM & CREDIT CARDS FACILITY ETC.
 SAFE DEPOSIT VAULTS.
 COLLECTING VARIOUS BILLS.
 OPENING OF DEMAT ACCOUNT.
 HOME BANKING.
 CREDIT CREATION.

3. CENTRAL BANKING
Central bank is an apex bank which has overall control of banking system in
the economy. Every country must have one bank as a central bank.
In India RBI is Central Bank.
Functions of Central Banks.
 Monopoly of note issue.
 Banker of the bank.
 Banker Agent & Advisor to the government.
 Lander of the last resort.
 Custodian of foreign Exchange.
 Central clearing house.
 Publication of statistical information.
 Control of credit.

4. Monetar y Policy
Introduction:
Monetary policy is one of those macroeconomic
concepts which is more frequently talked but not
precisely defined. There is no fixed objectives of
monetary policy. They have been changing over the
years
Definitions:
1.According to H.G.Johnson,” monetary policy is a
policy employed by the central bank to control the
supply of money as an instrument for achieving the
objectives of general economic policy”

5. 2.According to Paul Einzig, ”Monetary policy
refers to the deliberate and conscious
credit control measures adopted by central
bank of a country designed to ensure a
more efficient operation of the monetary
system”
Objectives of Monetary policy:
1.Stability of external value of currency:
During the Gold standard time a currency
was convertible into gold according to pre-
determined rate to maintain the external
value of the currency (expanding credit
during inflow of gold and contracting credit
during outflow of gold)

6. 2.Stable price level: Next objective is to ensure a stable
price level internally irrespective of the impact of the
external value of the currency
3.Maintenance of full employment: World wide
Depression produced mass unemployment. Keynes
suggested the Govt to carry out this policy to arrest
the unemployment situation. It is commonly called as
economic stability
4.Rapid economic growth: During the middle of 1950s
rapid economic growth has been added to the
objectives in US,UK,Japan and Russia to recover the
economy from IInd WW.

7. 5.BOPs equilibrium: During 1960s it has been
added by most of the affected countries
6.Maintenance of stable interest rate: A reduction
in interest rates would force banks to lower
their lending rates (Repo rate) and borrowing
rates (Reverse Repo rates). Due to financial
sector reforms, RBI has moved towards a
market oriented interest rate scenario
7.To control inflation: Controlled expansion of
money supply with the public and the banking
system would contain the inflationary pressures
in the economy

8. Instruments of Monetary policy
Quantitative Qualitative Methods
Methods
1.Fixation of Margin
1.Bank Rate Policy
Requirements
2.Open Market
2. Consumers Credit
Operations
3.Control through Directives
3.Cash Reserve
Ratio 4. Moral Suasion
5.Rationing of Credit
6.Direct Action

9. Positive Aspects:
1.Control of inflation
2.Economic growth
3.Healthy competition
4.Increase in bank deposits
5.Capital formation

10. Negative Aspects:
1.Huge budgetary deficit
2.Lack of banking
infrastructure
3.Management problems of
banks & FIs
4.Problem of black money
5.Existence of unorganized
money market
6.Changing Govt policies