MA0036- FINANCIAL SYSTEM AND COMMERCIAL BANKING

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ASSIGNMENT

DRIVE	FALL 2014
PROGRAM	MBADS – (SEM 3/SEM 5) / MBAFLEX / MBAN2 – (SEM 3)
SUBJECT CODE & NAME	MA0036- FINANCIAL SYSTEM AND COMMERCIAL BANKING
SEMESTER	3
BK ID	B1618
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

1 Explain the significance of financial system. Write the characteristics, need and importance of financial system.

Answer: A financial management system is the methodology and software that an organization uses to oversee and govern its income, expenses, and assets with the objectives of maximizing profits and ensuring sustainability.

Significance of financial system:

v  Provision of liquidity: The link between liquidity and economic performance arises because many high return investment projects

v   

2 Write the features of money market and its constituents. Explain about the margin trading and give one example.

Answer: Features of money market and its constituents:

Securities

Money markets specialize in short-term--less than one year--debt securities. This short maturation time provides the same benefits as liquid cash for the investor. Basically, a money market security is an IOU from a government, financial institution or other large corporation. Money market securities are safer than most other securities and therefore offer lower returns.

Mutual Funds

3 Write short notes on:

A) Commercial Banks

Answer: A commercial bank is a type of bank that provides services such as accepting deposits, making business loans, and offering basic investment products.

Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to individual members of the public (retail banking).

In the US the term commercial bank was often

b) Cooperative Banks

Answer: Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world.

Cooperative banking, as discussed here,

4 Explain the formation and purpose of Reserve Bank of India. Write the functions of RBI.

Answer: Formation and purpose of Reserve Bank of India: - The Reserve Bank of India is the central bank of the country. Central banks are a relatively recent innovation and most central banks, as we know them today, were established around the early twentieth century.

The Reserve Bank of India was set up on the basis of the recommendations of the Hilton Young Commission. The Reserve Bank of India Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank, which commenced

Functions of RBI: -

5 Explain the features of core banking system. Explain the electronic fund transfer and its benefits.

Answer: Features of core banking system:

Today Urban Co-operative Banks are facing stiff competition from Private Sector and Multinational Banks. The Urban Co-operative banks have upper hand in terms of services with human-touch, with very tightly knit relationship with the customer. However with fast-track lifestyles, customer needs are growing at much faster pace and UCBs are finding it difficult to cope up with it.

At the same time with a strongly built setup of professionals and state of the art technologies, Private Sector Banks have already made a dent, in the

6 Explain the perspectives in retail banking and also explain the five questions that are to be answered by the financial institution.

Answer: Perspectives in retail banking: The UK retail banking market faces a period of change due to the impacts of unprecedented levels of new regulation, new digital technologies, increasing competition, and the uncertain economic climate. Yet we see considerable opportunities for the incumbent banks and newer entrants: profit potential is attractive and there is also a chance for the banking system to recover its reputation in the eyes of the public. And market shares are likely to become more fluid. Given this context, we see 5 sets of challenges for retail management teams: redesigning and simplifying product structures, evolving distribution channels, sharpening the cost structure, rethinking the savings and investment business, and upping their games on customer service and conduct.

Five questions that are to be answered by the financial institution:

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