N.M.F.Jr.

College of Commerce Malad (E)

Subject: O.C.M (Assignment)

Sr. No. Topic Name (Assignment Name) Roll No.

1. Departmental Organisation 1 – 10

2. Statutory Corporation 11 – 20

3. Government Company 21 – 30

4. Multinational Corporation 31 – 40

5. NABARD 41 – 50

6. KVIC 51 – 60

7. Women’s Self Help Group 61 – 70

8. World Bank 71 – 80

9. SIDBI 81 – 90

10. Commercial Bank 91 – 100

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 Departmental Organisation
Departmental Organization is a classic and widely used form of government activity in several
countries. The government fully organises, manages, and funds these groups.
A public enterprise works as a full-fledged ministry or a major sub-division of a government
department under this structure.
All of the undertaking’s activities and operations are overseen by a minister who reports directly to the
parliament.

Introduction
At that moment, the capable clergyman delegated his authority to various levels of the board for
effective working and achievement of defined goals.
Each arrangement concern, as well as other major decisions made by departmental organisations, is
chosen by the governing service.
Nonetheless, the parliament has outlined the main arrangements for these types of endeavours.
Different persons who work in these types of undertakings are government representatives since they
are directly influenced by the government.
These activities also have an impact on state and local governments. The best examples of the
departmental organisation are Indian Railways, which are managed by the rail line service, and Post
and Telegraph administrations, which are run by the communication service.

Characteristics of Departmental Organisation

● The public authority is in charge of such initiatives’ administration. The venture is overseen and
limited by the division’s government employees.
● Depository funds, such as venture capital and receipts, are also deposited in the public authority
depository.
● It recognises genuine opposition, and government approval is required to sue the enterprises.
● Its records are also scrutinised in the same way as those of any other government agency.
● Enlistments in these divisions are based on the same norms and methods as those in public
authority offices.
● The employees who operate in this type of huge corporation are subject to the same
administrative rules that apply to other government divisions.

Different Types of departments:

1.General management
This department is in charge of creating and implementing general company strategies. It is in charge
of the entire operation. General management is responsible for creating general business strategies,

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planning, monitoring plan implementation, decision-making, and workforce guidance, as well as
punctuality and disciplinary concerns.

2.Department of Marketing
This department’s employees are in charge of understanding client demands and developing tourism
products to meet those needs. Marketing managers are primarily responsible for the following tasks:
Understanding the environment, staying on top of economic developments, recognising client wants and
knowing the strengths and weaknesses of peer rivals are all part of market research.
Understanding Market Divisions entails breaking down the overall tourism market into smaller
segments. It also entails focusing on specific markets and developing distinct, enticing tourism offerings
for diverse market categories.

3.Department of Operations
The Operations Department creates a package and sells it to the consumer by combining two or more
tourism components (among attractions, transportation, intermediaries, location, accommodation, and
activities).
It plans and executes a tour within or outside of the country, ensuring that it is a success.
To find the optimum trip arrangements, it emphasises client requests and supplier options.
It creates the tour itinerary and informs consumers about the tour’s schedule as well as specifics like
how to get to the destination and what to see and do there.
It makes contact with the appropriate agencies to make arrangements for lodging and to book travel
tickets.

4.Department of Finance
The Finance Department is in charge of obtaining and disbursing funds for the tourism industry’s
operations. Finance professionals evaluate both short- and long-term capital requirements.
Maintenance of office buildings, vehicles, office infrastructure, and company equipment are long-term
capital requirements in tourism.
The payment of workers and staff, the provision of communication facilities, the payment of power, and
other resources are all short-term capital requirements.
A huge proportion of tourism enterprises must make an initial investment in the hotel, lodge, and airline
reservations.
The only goal of tourist business owners investing their money is to achieve a good return on their
investment.
As a result, the finance department’s leader is responsible for attaining the organization’s goals through
prudent financial management.

5.Department of Sales
This section is entirely responsible for selling tourists the appropriate tourism items. In the tourism
industry, the salesperson is the first point of contact between the company and the customer.
To persuade customers, the employees must have a thorough understanding of the product and
excellent communication abilities. In addition, the salesperson advertises the destination.
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New customers are identified and nurtured by the sales team.
After examining the customer’s demands, the sales staff makes recommendations for the best products.
They successfully market a tourism product by addressing the customer, providing key characteristics,
answering customer questions, and closing the sale.
The sales team maintains a cordial relationship with the clients.

6.Department of Human Resources

This department is in charge of hiring talented and experienced personnel to fill openings in various
departments.
It is also in charge of organising new employee orientation programmes and training, as well as
recognising and motivating employees to meet organisational goals.

Advantages of department organization :

● Departmental undertakings are an important weapon for the government to use in advancing
economic and social justice in the country. The government employs these businesses as a tool to
effect social change. For example, a government can help people in far-flung rural areas flourish
socially, economically, and intellectually by establishing a post office, broadcasting, and
telecasting programmes.
● Direct government control: These businesses operate under direct government supervision and
are affiliated to one of the government’s ministries. At the top, a minister is selected who is
responsible to parliament or the state legislature for the smooth operation of these types of
organisations.
● Maintaining secrecy: Another major benefit of departmental undertakings is the ability to keep
crucial policy concerns secret. The government has complete authority over such institutions
and can easily conceal sensitive information such as defence in the interest of the public good.
● Avoid misusing government funds: Departmental undertakings, like all other government
entities, are subject to strict budgeting, accounting, and auditing. They are closely monitored,
and all personnel who work on these projects are held accountable, ensuring that public funds
are not misappropriated.
● The tax burden on the general public is reduced: Because all income from these departments
goes directly into the government’s purse, the tax burden on the general people is reduced. Every
activity is supported by the government, and all earnings are returned to the government.

Disadvantages of departmental Organisation:

● Bureaucracy’s Influence: Because of heavy red tape and bureaucracy, departmental
organisations lack autonomy and initiative. Every decision must be approved by the
government, which slows down the entire process. As a result, unlike other types of
businesses, the departmental undertaking lacks the flexibility to conduct its operations.
● Excessive parliamentary control: It operates under a great deal of parliamentary control,
which makes day-to-day operations challenging. Parliament creates all major policies and
rules, which are then implemented by a minister who serves as the head of these
organisations.

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 ● Financial reliance: Departmental undertakings are financially reliant on government budget
appropriations. They are unable to make long-term investment decisions that may generate
cash for these organisations on their own.
● Officers working in departmental undertakings have a careless attitude toward their jobs
because they are frequently transferred. The informal work attitude of employees causes a
lot of operational inefficiency in these firms.
● Lack of professionalism: Civil officials employed in departmental activities lack relevant
professional management skill sets, resulting in a high level of non-professionalism. Because
they are afraid of being chastised by parliament or ministers, these executives cannot afford
to be inventive.
● Political influence: When a departmental organisation functions, it is subjected to an
excessive amount of political influence. The power balance between the ruling party and the
opposition has an impact on how well it performs.

Conclusion
Departmental Organization is a classic and widely used form of government activity in several
countries. The government fully organises, manages, and funds these groups.
The public authority is in charge of such initiatives’ administration. The venture is overseen and limited
by the division’s government employees.
A public enterprise works as a full-fledged ministry or a major sub-division of a government
department under this structure.

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 Statutory Corporation
Statutory corporations are defined as autonomous corporate bodies that are created by a special act of
Parliament or state legislature having predefined functions, duties, powers and immunities as defined
by the act of the legislature.
Statutory corporations enjoy autonomy in case of finance and are answerable to the particular
legislature under which it was formed.
List of Some Public Corporation Statutory Organisations in India:
Life Insurance Corporation (LIC)
Reserve Bank of India (RBI)
Air India CorporationFood Corporation of India (FCI)
State Bank of India (SBI)Central Warehousing Corporation (CWC)
Oil and Natural Gas Commission (ONGC)

Features of Statutory Corporation

The following are the features of statutory corporation:
1. Corporate Body: Statutory corporations are corporate bodies. They are artificial persons which are
created by the law and are regarded as a legal entity. These corporations are managed by a board of
directors who are appointed by the Government.
These corporations have the right to enter into contracts and are able to do any kind of business under
the company name.
2. State Owned: Statutory corporations are fully owned by the state, the state lends full support by
subscribing to the capital in whole.
3. Autonomous Employee System: The employees of the statutory corporations are not regarded as
government servants although being owned by the Government. The employees are recruited and paid
as per the rules laid down by the corporation.
4. Financial Autonomy: Statutory corporations have financial autonomy or independence. They are not
managed under any kind of accounting, budget and audit. However, in times of need, the statutory
corporations can borrow money from the government.
5. Answerable to the legislature: The statutory corporations enjoy freedom in case of internal
management and running of the operations of the corporation, but are answerable to the state or
government legislature that created it.

types of statutory corporations

● Corporations sole, where a pre-existing office (most commonly, a Secretary of a Department) is
incorporated into a statutory corporation.

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 ● Single member corporations. It is common in Victoria to create a statutory corporation with a
sole member (or 'incorporator'). This is distinct from a corporation sole, in that a separate entity
is established, to which a member is appointed.
● Multi-member corporations. Most statutory corporations in Victoria are constituted by multiple
members, ordinarily organised as a board. For multi-member corporations, the enabling statute
will contain provisions governing how the members may make decisions for the entity.

Merits of Statutory Corporation

Following are the merits of statutory corporation:
1. Expert Management: Statutory corporations are managed by directors who are very much
experienced in their respective fields. This imparts professionalism in the management of the statutory
corporations.
2. Autonomy in Administration: Statutory corporations enjoy autonomy in the administration of the
corporation.
3. Quick decision making: Statutory corporations have significantly less file work and formalities as
compared to other forms of organisations which results in quick decision making.
4. Efficient Staff: The employees of the statutory corporation are provided fair wages, facilities and
proper working conditions along with developmental programs. All these contribute towards making
employees motivated to perform more efficiently.
5. Ease of raising capital: As these corporations are owned by the government, fundraising is easy as
they can raise funds by issuing bonds at low interest rates.

Demerits of Statutory Corporation

Following are the demerits of statutory corporation:
1. Autonomy only on paper: Although statutory corporations are autonomous, the working of these
corporations are hampered by interference from ministers, political parties that impacts their
autonomy.

2. Rigid laws: The statutory corporations enjoy flexibility in operations, but rigid rules and regulations
make changing any of the existing rules a time-consuming process. Any amendment that needs to be
made to the existing set of rules needs to be presented in parliament which makes it tedious.
3. Lacks Initiative: These corporations lack any profit motive and therefore the employees and
management are not interested in taking any initiative for generating profit.
4. Clash of Interest among members: The members of board directors are selected by the government
and there may exist differences of opinion among directors, which leads to a clash of interests among
them.

Conclusion
Statutory corporations are independent corporate bodies established by a special act of Parliament or
a state legislature, with predetermined functions, duties, powers, and immunities as outlined by the act.
Statutory companies have financial autonomy and are accountable to the legislature under which they

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were established. A statutory body is an important government body that has the authority to pass laws
on behalf of the government in specific areas.

Government Company
A government company is a company in which the Government or State Government holds 51% or
more of the paid-up capital. Government Company, also called Public Enterprise, State Enterprise. It
works as other companies registered under the Companies Act.

Features of Government Companies

The main features of Government companies are as follows:
● It is registered under the Companies Act.
● It has a separate legal entity. It can sue and be sued and can acquire property in its name.
● The annual reports of the government companies are required to be presented in parliament.
● The capital is wholly or partially provided by the government. In the case of a partially owned
company, the capital is provided both by the government and private investors. But in such a
case, the central or state government must own at least 51% shares of the company.
● It is managed by the Board of Directors. All the Directors or the majority of Directors are
appointed by the government, depending upon the extent of private participation.
● Its accounting and audit practic s are more like those of private enterprises, and its auditors are
Chartered Accountants appointed by the government.
● Its employees are not civil servants. It regulates its personnel policies according to its articles of
associations.

Advantages of Government Companies

The merits of government company form of organizing a public enterprise are as follows:

Simple Procedure of Establishment

A government company, as compared to other public enterprises, can be easily formed as there is no
need to get a bill passed by the parliament or state legislature.
It can be formed simply by following the procedure laid down by the Companies Act.

Efficient Working on Business Lines

The government company can be run on business principles. It is fully independent in financial and
administrative matters. Its Board of Directors usually consists of some professionals and independent
persons of repute.

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Efficient Management
As the Annual Report of the government, the company is placed before both the house of parliament
for discussion; its management is cautious in carrying out its activities and ensures efficiency in
managing the business.

Healthy Competition
These companies usually offer healthy competition to the private sector and, thus, ensure the
availability of goods and services at reasonable prices without compromising the quality.

Disadvantages / Limitations of Government Companies

The government companies suffer from the following limitations:

Lack of Initiative
The management of government companies always has a fear of public accountability. As a result, they
lack initiative in taking the right decisions at the right time.
Moreover, some directors may not take a real interest in the business for fear of public criticism.

Lack of Business Experience

In practice, the management of the companies is generally put into the hands of administrative service
officers who often lack experience in managing the business organization on professional lines.
So, in most cases, they fail to achieve the required efficiency levels.

Change in Policies and Management

The policies and management of these companies generally keep on changing with the change of
government. Frequent change of rules, policies, and procedures leads to an unhealthy situation of
business enterprises.

Arguments for Public Enterprise

The state is regarded most desirable due to the following arguments

Prevention of Monopoly
This is a strong argument in favor of nationalization that st abolishes the economic powers from the few
mo monopolists. It thus enables the govt to take steps for the welfare of the

Economic Prosperity
The government’s position to modernize the industry, communications, and transport for the best
interest of the nation. So the rapid growth of Industries causes economic prosperity in the country.

Maximum Utilization of Resources

All the oil, gases, minerals, and other national resources can be utilized maximum to achieve economic
development.

Development of Backward Area

All the regions of the country developed equally under nationalization. Regional and social factors a
reconsidered preferential while the government decides regarding the location of a new plant.
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Improvement of Working Conditions
The government improves the working conditions of the workers in nationalized industries. The state
is interested in providing just rates of pay, the security of services, and other fringe benefits.
So a peaceful atmosphere can be maintained in the industrial field.

Protection of Public Interest

Unhealthy competition among the industrialists injures the interest of the public, which can be
measured and mitigated by state ownership.

Economy
It enables the Govt to achieve the economy in different fie Ids due to the coordination in numerous
departments.

Promotion of Defense service

Nationalization is desired to strengthen the specific industries for the defense of the country.

Centralized Management
Centralized management is possible due to coordination in the nationalized industry. It thus enables
the state to solve the problems of organization, capital, labor operation, and marketing.

High Standard of Living

It tends to increase the economic activities of the country, which greatly influences the standard of living
of the people.

Use of Surplus Profit

Under state ownership, the profit of the enterprises would go to the public treasury, which can be
employed for the welfare of the country.

Uniformity in Services
As all the public utility services i.e., water, railway, post office, communications, electricity, are
connected by the state, so uniformity in the quality of services can be maintained.

Skilled Services
The government may hire the services of outstandingly talented and skilled persons due to its largest
resources. So all the undeveloped resources of nationalized industries can be utilized for productive
purposes by skilled services.

Arguments against Public Enterprise

The nationalization of the industry is not considered desirable on the following grounds:-

Costly Management
The management of the nationalized industry is complicated and unwieldy. There are numerous
departments and paid persons i.e., directorate, regional office conduct its management.

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Lack of decision making
All the necessary matters are decided by various officials and committees. In the case of conflicting
views, a quick decision cannot be made for urgent matters which are dangerous in business.

Lack of Efficiency
Nationalized industries are managed by salaried persons who are generally found less efficient as
compared with privately owned concerns. Th ere is also a lack of flexibility and adaptability where is
an asset of private ownership.

Bureaucracy
There is an extensive and rigid procedure of the state machinery by which the event is dealt with. Such
stipulated rules have made the process of work every complicated, which results in delay and loss of
initiative.

Absence of profit motive

The salaried persons are not concerned with profit. Therefore, nationalize d undertaking hardly run
successfully due to a lack of personal interest.

Chances of Loss
The loss of nationalized enterprises is regarded as the loss of the nation. So the structure of a
nationalized economy will greatly be affected by the failure of such a scheme.

Limited Investment
Investors hesitate to invest a large sum of money due to the risk of nationalization. Therefore, the
volume of investment remains limited in the private sector.

Undue Interferences
Nationalized enterprises are undesirably interfered with by political parties. Such undue activities are
handicapped in the progress of a sound business.

Objectionable to Public
The public generally criticizes the giant policy of nationalization. So the government may not be in a
position to initiate new schemes freely.

Loose Supervision
Skilled and efficient businessmen are replaced after nationalization. The charge usually is taken over
by the officials who are incompetent and inexperienced to run the industries. So the production volume
is affected due to loose supervision.

Uncertain Situation
The giant policy of state ownership does not remain forever. It may be changed by the change
government, which results in confusion and hesitation.

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Chances of Fraud
The controlling authority of the state enterprises may play discrimination and favoritism. They may
appoint dishonest and corrupt persons.
Therefore fraud and manipulations may occur in the transaction, which causes exploitation of the
public.

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 Multinational Corporation
INTRODUCTION:
A multinational corporation is a business organisation that operates in many different countries at the same
time. In other words, it’s a company that has business activities in more than one country. A multinational
corporation (MNC) has facilities and other assets in at least one country other than its home country. Such
companies have offices and/or factories in different countries and usually have a centralized head office from
where they coordinate global management. Very large multinationals may have budgets that exceed those of
many small countries.

Multinational corporations are sometimes referred as transnational, international corporations.

Examples of Indian multinationals.

Meaning of Multinational corporations:

A multinational company (MNC) is defined as a business entity that operates in its country of origin and also
has a branch abroad. The headquarter usually remains in one country, controlling and coordinating all the
international branches.
Depending on the size of the MNC, there could be several branches and subsidiaries in multiple nations. For
example, Amazon started in 1995 from a garage near Seattle and today, as a multinational company, it operates
in over 30 countries.

Definition of Multinational Corporation (MNC) :

An MNC is a company that has its facilities, plants and other assets in a country other than its home country
or the country that it is incorporated in. They are popularly termed as International Companies or Transnational
Corporations. A centralized headquarters is responsible for coordinating activities across branches.
The history of MNCs finds its roots in colonialism and imperialism. One of the earliest known MNCs in India
is the British East India Company (EIC) established by the Charter Act of 1600.

Some examples of MNCs are – Burger King, Walmart, Adidas etc.

Characteristics of a Multinational Corporation:

Some of the characteristics common to various types of multinational corporations include:

⮚ A worldwide business presence.

⮚ Typically, large and powerful organizations.
⮚ Business conducted in various languages.
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 ⮚ A complicated business model and structure.
⮚ Direct investments in foreign countries.
⮚ Jobs created in foreign countries, potentially with higher wages than found locally.
⮚ Seeks improved efficiencies, lower production costs, larger market share.
⮚ Has substantial expenses associated with navigating rules and regulations of foreign countries.
⮚ Pays taxes in countries in which it operates.
⮚ Reports financial information according to International Financial Reporting Standards (IFRS).
⮚ Sometimes accused of negative economic and/or environmental impacts in foreign markets.
⮚ Sometimes accused of negative economic impacts in home country due to outsourcing jobs.

Features of Multinational Corporation:

1. Huge Assets and Turnover:
As MNC is operating on a global basis, they have huge physical and financial assets. This also results in huge
turnover (sales) of MNCs. In fact, in terms of assets and turnover, many MNCs are bigger than national
economies of several countries.
2. International Operations:
MNCs have production and marketing operations in several countries; operating through a network of
branches, subsidiaries and affiliates in host countries.
3. Centralised Control:
MNCs are characterized by unity of control. MNCs control business activities of their branches in foreign
countries through head office located in the home country. Management of branches operate within the policy
framework of the parent corporation.
4. Mighty Economic Power:
MNCs are powerful economic entities. They keep on adding to their economic power through constant
mergers and acquisitions of companies, in host countries.
5. Advanced and Sophisticated Technology:
Generally, a MNC has advanced and sophisticated technology at its command. It employs capital intensive
technology in manufacturing and marketing.
6. Professional Management:
A MNC employs professionally trained managers to handle huge funds, advanced technology and
international business operations.
Merits Of Multinational Corporation:
1. Employment Generation:
MNCs create large scale employment opportunities in host countries. This is a big advantage of MNCs for
countries; where there is a lot of unemployment.

2. Inflow of Foreign Capital:

MNCs bring in much needed foreign capital for the rapid development of developing countries. This inflow
of capital will bring much needed boost for growth of the domestic economy.

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3. Proper Use of Idle Resources:
MNCs are in a position to utilize idle physical and human resources of the host country properly because of
their advanced technical knowledge. This results in an increase in the national income of the host country.
4. Technical Development:
MNCs carry the merits of technical development of host countries. In fact, MNCs are a vehicle for transfer of
technical development from one country to another. Poor countries also begin to develop technically after
hosting MNCs.
5. Managerial Development:
MNCs employ latest management techniques. People employed by MNCs do a lot of research in management.
In a way, they help to professionalize management along with latest lines of management theory and practice.
This leads to managerial development in host countries.
6. End of Local Monopolies:
The entry of MNCs leads to competition in the host countries. Local monopolies of host countries either start
improving their products or reduce their prices. Thus MNCs put an end to exploitative practices of local
monopolists. As a matter of fact, MNCs compel domestic companies to improve their efficiency and quality.
7. Improvement in Standard of Living:
By providing quality products and services, MNCs help to improve the standard of living ofpeople of host
countries.
8. Promotion of International Brotherhood and Culture:
MNCs integrate economies of various nations with the world economy. Through their international dealings,
MNCs promote international brotherhood and culture; and pave a way for world peace and prosperity.
Demerits Multinational Corporation:
1. Danger for Domestic Industries:
MNC’s, because of their vast economic power, pose a danger to domestic industries which are still in the
process of development. Domestic industries cannot face challenges posed by MNCs. Many domestic
industries have to wind up, as a result of threat from MNCs. Thus MNCs give a setback to the economic
growth of host countries.
2. Repatriation of Profits:
Repatriation of profits means sending profits to their country. MNCs earn huge profits. Repatriation of profits
by MNCs adversely affects the foreign exchange reserves of the host country; which means that a large amount
of foreign exchange goes out of the host country.

3. Interference:
Initially MNCs help the Government of the host country, in a number of ways; and then gradually start
interfering in the political affairs of the host country. There is, then, an implicit danger to the independence of
the host country, in the long-run.

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4. Disregard of the National Interests of the Host Country:
MNCs invest in most profitable sectors and disregard the national goals and priorities of the host country.
They do not care for the development of backward regions and never care to solve chronic problems of the
host country like unemployment and poverty.
5. Misuse of Mighty Status:
MNCs are powerful economic entities. They can afford to bear losses for a long while in the hope of earning
huge profits. They have ended local competition and achieved monopoly in a greater extent. This may be the
unfair strategy of MNCs to wipe off local competitors from the host country.
6. Exploitation of Natural Resource:
MNCs tend to use the natural resources of the host country carelessly. They cause rapid depletion of some of
the non-renewable natural resources of the host country. In this way, MNCs cause a permanent damage to the
economic development of the host country.
7. Selfish Promotion of Alien Culture:
MNCs tend to promote alien culture in host country to sell their products. They make people forget about their
own cultural heritage e.g. In India, MNCs have created a taste for synthetic food, soft drinks etc. This
promotion of foreign culture by MNCs is injurious to the health of people also.
8. Exploitation of People:
MNCs join hands with big business houses of host country and emerge as powerful monopolies. This leads to
concentration of economic power only in a few hands. Gradually these monopolies make it their birth right to
exploit poor people and enrich themselves at the cost of the poor working class.
Conclusion:
Multinational companies need to evaluate social responsibility, employee devilment, competitors, and
customers in accordance with business ethics. The companies can operate well if they follow cultural practices
in countries where they operate. In addition, they should consider the regulations and ethical framework in
countries where they operate. From the discussion, it appears that combining business and ethics is somewhat
difficult. While international businesses have to respond to social issues, their aim is to make profits. Often,
the public good is not considered or given less priority. As such, multinational consider profitability before
evaluating the governing ethics. For multinational companies to grow in terms of sales and profits, it is vital
for them to consider business ethics. The companies should develop ethics initiatives build on cultural,
regulatory, and ethical frameworks of the countries where they operate in. As such, the companies can
establish business ethics that that are acceptable and contribute to their growth.

NABARD
Introduction:

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India is an agricultural country. Agriculture and its allied activities act as main source of livelihood for most
of the rural population of India. Government of India is aware about the need of boosting institutional credit
in rural economy. The Reserve Bank of India (RBI) constituted a Committee to Review the Arrangements for
Institutional Credit for Agriculture and Rural Development (CRAFICARD), under the Chairmanship of Shri
B. Sivaraman, to take review of agricultural credit in India. The recommendation of the committee was
accepted and National Bank for Agriculture and Rural Development (NABARD) came into existence on July
12, 1982, under the special Act of the Parliament i.e. The National Bank for Agriculture and Rural
Development Act, 1981.
The NABARD has been recognized as an apex institution for agricultural finance. The NABARD was
established with the objective of providing and regulating credit and other facilities for the promotion and
development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural
crafts and allied economic activities.
Meaning of NABARD:
NABARD has been providing long-term refinance to the approved financial institutions under the provisions
of Section 25(i)(a) of NABARD Act, 1981 to supplement their resources for providing adequate credit for
taking up investment activities in agriculture and allied activities and rural off-farm sector etc.
Definition of NABARD:
National Bank for Agriculture and Rural Development (NABARD) in India is a financial institution which
deals with matters pertaining to policy, planning and operations in the fields of agriculture and economic
development in rural areas. It is involved in many developmental activities such as working on the betterment
of tribal communities’ livelihood, promotion of cotton industries and working on increasing crop productivity.
Objectives of NABARD:
The objectives of providing long-term refinance are as under:
⮚ Supporting capital formation in agriculture and allied activities, thereby promoting growth of
Agriculture, AH, Fishery, Forestry etc. sectors.
⮚ Directing flow of credit for promotion of thrust activities of NABARD.
⮚ To meet the credit requirement of JLGs and SHGs.
⮚ Support for non-farm sector activities (MSME, Rural Housing & Commercial Vehicles), thereby
promoting alternate employment opportunities in rural and semi-urban areas.
⮚ Support for Climate Adaptation and Mitigation projects.
⮚ Refinance support for credit linked capital subsidy schemes of GoI, whose subsidy is channelized
through NABARD.

⮚ Features of NABARD:

Following are some of the important features of NABARD:

1.Apex Bank:
NABARD acts as an apex bank for meeting the credit needs of all type of financial institutes working in the
field of agricultural and rural development. It works to frame policies and guidelines for rural financial
institutions in India. It also provide credit facilities to institutes working in agricultural finance. It also monitors
the flow of rural credit in India. The bank implements the policy of the Central Government and the RBI with
regard to agricultural credit.

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2. Refinancing Facilities:
It provides refinancing facilities to State Co-operative Banks (SCBs), Land Development Bank (LDBs),
Regional Rural Banks (RRBs) and other approved financial institutions for financing rural economic activities.
It also provides short-term, medium-term and long-term credit to these institutes. During natural calamities,
such as droughts, crop failure and floods, the bank helps by refinancing commercial and cooperative banks so
that the farmers tide over their difficult period.
3. Assistance to Financial Institutes:
It plays an important role in preparing and developing action plans for Cooperative Banks and Regional Rural
Banks. It also monitors implementation of development action plans of these banks. It provides financial
assistance to cooperative banks for building improved Management Information System (MIS),
computerization of operations and development of human resources.
4. Provides Credit for Rural Development:
It takes initiatives in the development and promotion of different activities in rural area by providing funds to
State governments. It also provides refinancing for upliftment of weaker section of the society. It also works
on improvement of small and minor irrigation by way of promoting agricultural activities. Provides finance
for promotion of non-farm activities and employment in non-farm sectors for the purpose of reducing rural
unemployment.
5. Supervision of Financial Institutes Engaged in Agricultural Finance:
It undertakes inspection of Regional Rural Banks (RRBs) and Cooperative Banks as per the guidelines of
Banking Regulation Act, 1949. It can also undertake inspection of State Cooperative Agriculture and Rural
Development Banks (SCARDBs) and apex non- credit cooperative societies on a voluntary basis.
6. Provides Recommendations to Reserve Bank of India:
It Provide recommendations to Reserve Bank of India on issue of licenses to Cooperative Banks, opening of
new branches by State Cooperative Banks and Regional Rural Banks (RRBs).
7. Financing Rural Industries:
It plays an important role in providing refinance to small scale industries and other village and cottage
industries. It provides loans to commercial and co-operative banks to promote rural employment. It organizes
skill and entrepreneurship development programmes to promote an entrepreneurial culture among the rural
youth and encourage them to start enterprises in the rural areas.
8. Role in National Development:
It plays an important role in the improvement of storage facilities for agricultural commodities by promoting
development of warehousing facilities. It has also promoted the export of agricultural commodities. It is
playing a key role in sustainable development of the country through Green, Blue and White revolution.
Functions of NABARD:
NABARD plays a few distinct roles. They are as follows:
⮚ The NABARD scheme aims to provide funds for India’s rural infrastructure to enable long term
irrigation practices.
⮚ Generally offering financial services and aid for the development and improvement of rural India.
⮚ Planning, implementing and managing any funding programs for farming and agricultural activities.

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 ⮚ Providing all kinds of funding services for developing and growing food processing units and food
parks in designated areas.
⮚ Offers both long-term refinance and short-term refinance servicing to its customers. Simultaneously,
it provides any direct refinance services to Indian cooperative banks.
⮚ Offering lending services, cold chain, and storage infrastructure to rural warehouses.
⮚ Marketing federations can receive credit facilities from the NABARD scheme.
⮚ Creating new policies for India’s rural financial institutions.

Conclusion:
In a nutshell, NABARD is tasked with funding credit institutions in rural areas, fostering institutional
development, and evaluating and inspecting customer banks in order to fulfil its function as a facilitator of
rural prosperity.
In 2007-2008, NABARD launched an innovative direct lending facility under the ‘Umbrella Programme for
Natural Resource Management.’ This program provides loans at affordable interest rates to fund natural
resource management initiatives. Already, 35 projects have received loans totalling almost Rs 1000 crore.
Some of the projects that have been approved include I tribal honey collection in Maharashtra; (ii) the Tussar
value chain by a women producer company (‘MASUTA’); and (iii) eco-tourism in Karnataka.
In terms of rural development, NABARD has made a significant contribution. NABARD, the main
Development Bank mandated by the Government of India to facilitate loan flow for upgrading and boosting
agriculture and other local industries, sanctioned agricultural credit flow of Rs 1,57,480 crore in 2005-2006.
The GDP is predicted to rise at an annual rate of 8.4 percent. The Indian economy as a whole is poised for
quicker and greater development in the coming years. The significance of NABARD in the overall
development of India, and particularly in rural and agricultural development, is critical.

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 KVIC

Introduction:
Khadi was symbol and the spirit of self reliance in pre-independence India. During the Indian struggle for
independence Khadi played an important role in the boycott of foreign clothes. It provides livelihood and
economic independence to artisans in the villages. After independence Government of India took several
initiatives in promotion and development of khadi and village industries through its Five Year Plans. To
promote khadi and village industry, All India Khadi and Village Industries Board was set up in 1953. In 1956,
a statutory body Khadi and Village Industries Commission (KVIC) was created with a special Act of
Parliament i.e. the Khadi and Village Industries Commission Act, 1956. In April 1957, KVIC was established
and took over the work from All India Khadi and Village Industries Board. It is an apex organization under
the Ministry of Micro, Small and Medium Enterprises, with regard to khadi and village industries within India.
KVIC has its head office at Mumbai.
KVIC is actively working for planning, promotion and production of Khadi as well as in setting up of village
and rural industries in India. It plays a key role in identifying the potential for the development of rural
industries and undertakes the valuable task of promoting and developing locally operating village enterprises.
It gives emphasis on utilizing the locally available raw material and human skills which ultimately helps to
generate non-farm employment opportunities in the rural areas. It also helps to strengthen the rural economy.
It plays a role of co-ordinator with other agencies engaged in rural development.
KVIC receives fund from the Ministry of Micro, Small and Medium Enterprises for effective implementation
of various programs and schemes. The KVIC use these funds to implement its programs either directly through
its state offices or indirectly through Khadi and Village Industries Boards. Khadi and Village Industries
Commission functions at the national level and there are respective State Khadi and Village Industries Boards
in the different States to achieve the broad objective of rural development.

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Meaning of KVIC:
Khadi and Village Industries Commission is a non-constitutional body which is incorporated under the
Parliament Act, passed by the Government of India. KVIC aims to plan, promote, facilitate, organize, and
assist in the establishment and development of Khadi and Village industries in the rural areas. In this article,
we focus on the different schemes organized under the Khadi and Village Industries Commission (KVIC) in
detail.
Objectives of KVIC:
The broad objectives of establishing the KVIC are
⮚ The social objective of providing employment.
⮚ The economic objective of producing saleable articles.
⮚ The wider objective of creating self-reliance amongst the poor and building up of a strong rural
community spirit.
⮚ These objectives can be achieved through effective implementation of various schemes and programs
of KVIC.

Features of KVIC:
Following are some of the important features:
1. Rural Development:
India is an agricultural country and most of its population is residing in rural India. KVIC is the premier
organization which plays an active role in the development of rural India. The Khadi and Village Industries
plays a very important role in the development of Indian economy, particularly in the development of the rural
areas. KVIC facilitates proper utilization of natural resources in rural India for generating income for the rural
masses. It also promotes the development of tiny, cottage and small scale enterprises in the rural areas.
2. Employment Generation:
Due to massive population growth, agricultural sector is losing its ability to generate additional employment
in rural areas. It is necessary to create employment opportunities for the fast increasing workforce in rural
areas. Khadi and Village Industries are labour intensive in nature. The KVIC is established with the broader
objective to promote non-farm employment opportunities in rural areas. It also concentrates on the betterment
of rural artisans and socio-economic weaker section of the society. The KVIC has been generating large scale
employment in the rural areas with low per capita investment.

3. Entrepreneurship Development:

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Entrepreneurship Development is one of the major functions of KVIC. KVIC helps to provide additional
livelihood avenues to the village communities. KVIC generate self-employment opportunities through
establishment of micro enterprises by organizing traditional artisans and unemployed youth. It increases their
earning capacity as well as prevents migration. The KVIC actively participates in many international trade
exhibitions for popularising its products in international markets.
4. Financial Assistance:
KVIC formulated many schemes for financial assistance for rural industrialization and employment
generation. It finances to the projects for rural industrialization and also provides for margin money by way
of subsidy. There are provisions for higher rate of subsidies in case of beneficiaries of the weaker sections,
tribal areas and backward regions. These schemes are implemented by KVIC, State Units of KVIC and District
Industries Centres (DICs) with involvement of Banks. The KVIC also provides financial assistance to
institutions and individuals for development and operation of Khadi and Village Industries.
5. Research and Development:
To face the challenge of globalization, KVIC has introduced a number of new products range like Khadi denim
jeans to cater the need of the market. The KVIC undertakes trainings of sales staff for effective marketing of
the products. KVIC is taking several steps to set standards of quality to ensure genuineness of the khadi
products. KVIC signed Memorandum of Understanding (MoU) with National Institute of Design (NID) to
provide design support services in packaging, marketing, communication, publicity, disseminating materials
and other design-related activities. The KVIC is also charged with the responsibility of encouraging and
promoting research in the production techniques and equipment employed in the Khadi and Village Industries.
KVIC plays an important role in technological improvements in products and processes of Khadi and Village
Industries in reducing the cost of production and derive higher incomes. It also promotes use of non-
conventional energy and electric power for sustainable development.
6. Marketing and Promotion:
In order to attract younger generation, the KVIC is holding exhibitions, seminars, lectures in universities and
colleges to disseminate knowledge of KVIC products. KVIC has also launched a massive marketing
development plan to generate interest, awareness and attraction amongst the masses. Efforts are taken for
improvements in the quality of products, packaging and marketing. The Government will continue to
encourage the khadi and village industry sector so that its products can become more competitive,
7. Other Functions:
The KVIC is charged with the planning, promotion, organization and implementation of programs for the
development of Khadi and other village industries in the rural areas. It organizes training programme for
artisans engaged in Khadi and village industries. The KVIC may also undertake directly or through other
agencies studies concerning the problems of Khadi and Village Industries.
Conclusion:
KVIC promotes many additional village businesses, including handmade paper, polymer, agro and chemical-
based products, beekeeping, and other forest-related activities. Numerous banking organisations provide
KVIC loans at competitive interest rates. KVIC acquired the All India Khadi and Village Industries Board
shortly after its creation.

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 Women’s Self Help Groups (Mahila Bachat Gat)
Introduction:
Dr. Muhammad Yunus, an economist from Bangladesh, known as the Father of Microfinance founded the
Grameen Bank in Bangladesh in October 1983 with the vision to eradicate poverty. Traditional banks refused
to make small loans to the poor. Hence the idea of Grameen Bank was born to give small loans to poor which
can make a big difference in their life. Small loans would not only help them to survive but also create the
spark of enterprise and empower them to pull them out of poverty. The success of the Grameen microfinance
model has inspired hundreds of countries throughout the world. Grameen Bank and Dr. Yunus jointly won the
Nobel Peace Prize in 2006. Indian Self Help Group Model is refined model of Bangladesh’s Model to eradicate
poverty and empower the women. All self-help groups are based on the fundamental principles of “helping
each other” and “unity is strength”. A Self Help Group (SHG) is a small group of homogeneous individuals
who come together with the objective of creating common fund through savings and meet members’
emergency needs by providing collateral free loan. When the self help groups are managed by women it is
popularly known as Women’s Self Help Group. In India, SHGs first emerged within the Mysore Resettlement
and Development Agency (MYRADA) initially called Credit Management Groups in 1985. RBI accepted the
SHG strategy as an alternative credit model. In India, Self Help Group – Bank Linkage Programme was
initiated by NABARD since 1992.

A SHG is a voluntary association. Every member of the group makes a small savings at a regular interval.
After group collects sufficient fund it can start lending it to the members as per their needs at a reasonable rate
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of interest. In India, many SHGs are linked to banking institutions for the delivery of micro-credit. Registration
of SHG is not compulsory. There are simple rules framed by the members of the group for smooth conduct of
the operation of the group. All decisions are taken in collective manner by the SHG members. The
empowerment of women through SHGs would lead benefits not only to the individual women but also for the
family and community as a whole. The SHGs empower women and trains them to take active part in socio-
economic progress of the nation. SHG develops saving habits among the women. It enhances status of women
as they participate, lead, take decisions and get benefited through collective efforts.
Meaning of Women’s Self Help Groups:
An SHG comprises a small group of women who come together to make regular monetary contributions.
Emerging as important micro-finance systems, SHGs work as platforms that promote solidarity among
women, bringing them together on issues of health, nutrition, gender parity and gender justice. SHGs have
already made a significant contribution in developing entrepreneurship aptitudes among rural women by
enhancing their skills and giving them a chance to engage in various entrepreneurial activities. SHGs provide
women entrepreneurs with micro-loans to sustain their businesses, while also creating an environment for
them to develop greater agency and decision-making skills.

Features of Women’s Self Help Groups:

Following are some of the important features of Women’s Self Help Groups.
1. Formation:
Self Help Group is a small group of homogeneous individuals. It is generally formed by NGOs, or team of
dedicated functionaries of the government. It is an informal group and registration under any Societies Act,
State Co-operative Act or any other Act is not mandatory. It is recognized by the government and does not
require any formal registration. SHGs have well-defined rules and by-laws, hold regular meetings and
maintain records. However for wider outreach and institutionalize them, SHGs can get themselves registered.
Many SHG sare registered under the Cooperative Laws or Societies Act. But these laws were found to be
ineffective in addressing the needs of the SHGs.

2. Membership:
Homogeneous group of SHG is generally formed through a process of self-selection based upon the affinity
of its members. As per National Urban Livelihood Mission (NULM) at least 5 members are required. It is
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difficult to manage bigger group and members cannot actively participate. From one family, only one person
can become a member so that more families can participate. Mixed groups are generally not preferred.
Women’s groups are generally found to perform better. Effective participation of members can be ensured if
they are of the same social and financial background.
3. Democratic Setup:
SHG is group of the members, for the members and by the members. It is the group which reflects the people’s
real participation in the process of development. Every member of the group actively participates in the
functioning of SHGs. Members are responsible for their own future by organizing themselves into SHGs.
They elect or select leader for proper functioning of the group. Leader is responsible for holding regular
meetings and maintaining records and accounts of the group. These groups run on the principle of collective
leadership and mutual discussions.
4. Habit of Saving:
The SHG encourages small saving habits at regular interval among its members. Savings of all group members
help to generate common fund to be used to lend to members in times of need. The self-help group inculcates
the thrift and savings habit among the members of each group.
5. Mutual Trust:
Most of the Indian villages are facing challenges such as poverty, illiteracy, lack of skills, health care etc. It is
difficult to tackle these problems individually. There is a need of group efforts to solve these problems. The
basic philosophy of forming SHGs is to overcome individual shortcomings and weaknesses with collective
efforts. Self help groups are working as vehicle of change in rural India. SHG brings rural poor and
marginalized individuals together to solve the problems of individuals as well as community as a whole.
Through mutual trust thousands of the poor and the marginalized individuals are building their lives, their
families and their society. Government also gives due recognition to SHGs for effective implementation of
development schemes at the grass root level.
6. Promotes Entrepreneurship:
The poor and marginal individuals in rural area face scarcity of capital and managerial skills. SHGs provide
them capital at low interest rate which give them opportunity to start micro enterprise. These micro enterprises
use untapped manpower in the area which generates employment opportunities in the rural area. Timely
financial support and managerial skills help to promote first generation micro entrepreneurs in rural areas. It
also helps to generate additional income to poor households. SHGs build income and employment generation
capabilities in the marginalized rural individuals. Self-employment through micro enterprise will help in
poverty eradication. NGOs and Government take initiatives to motivate rural individuals to start micro
enterprise by providing skill development trainings and marketing and technical support.
7. Women Empowerment:
Consistent efforts by government and non-government machineries were not achieving much in the economic
development of women in India. Empowerment of women is recognized as the need of the hour. SHG is an
emerging tool for socio-economic development of women all over the world. SHGs are working effectively
in promoting women entrepreneurship. Government provides different financial and non-financial assistances
to promote the Self Help Groups for women empowerment. SHGs empower women by providing her
knowledge, finance and opportunity.
8. Collateral Free Loan:
Formal financial services failed to meet credit requirements of rural poor individuals due to absence of any
recognized employment and non-availability of collateral. The lack of loans from formal institutions leaves
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the poor with no other option but to borrow money from local money lenders at huge interest rates. SHGs
provide small loans to the poor individuals for undertaking self employment projects. It provides employment
for themselves and their families. Loans are given on the principle of mutual trust and either minimum or no
documentation is required to get loan. The rate of interest differs from group to group. Generally rate of interest
charged by the SHGs are little higher than the interest charged by banks. It saves poor individuals from the
clutches of local money lenders. It also encourages poor individuals to actively participate in banking
activities. It builds trust and confidence between bankers and the poor rural people. It ensures timely
repayment of loans as all members of the group are responsible for collecting repayment amount from the
members who borrowed the loan.
Functions Of SHGs:
The major functions of an SHG include:
1.Savings and Thrift:
All SHG members regularly save a small amount. While the amount may be small, it is stressed that the
savings have to be a regular and continuous habit with all the members. “Savings first—Credit later” becomes
the motto of every SHG member. It is enforced that SHG members take a step towards self-dependence when
they start small savings. They learn financial discipline through savings and internal lending. (Advantage:
This is useful when they use bank loans.)
2.Internal lending:
The savings are used for giving loans to the SHG members. The group decides the purpose, amount, rate of
interest, schedule of repayment etc., are to be decided by the group itself. Proper accounts are maintained by
the SHG.
3. Discussing problems:
In every meeting, the SHG should be encouraged to discuss and try to find solutions to the problems faced by
the members of the group. Individually, the poor people are weak and lack resources to solve their problems.
When the group tries to help its members, it becomes easier for them to face the difficulties and come up with
solutions.
4. Taking bank loan:
The SHG takes a loan from the bank, which is then loaned out to its members.
Advantages of the SHGs:
The advantages of SHGs are as follows:
⮚ Combating social evils: The SHGs play a crucial role in overcoming social evils like alcoholism, drug
addiction, gambling, etc.
⮚ Women empowerment: Women SHGs make their members independent from social constraints and
allow them to make independent decisions. They can even actively participate in the gram sabha.
⮚ Active participation in democracy: SHGs can actively participate in the aspects of local governance.
This would mean the inclusion of weaker and marginalised sections of the society in the local
governance.
⮚ Increase employment opportunities in rural India: It allows for micro-level entrepreneurship
within the rural society and reduces too much dependence on agriculture.
⮚ Easier access to government schemes: The government schemes are mostly meant for the
marginalised sections of the society. The inclusion and identification of these people are highly
difficult. If they are grouped together, it is easier for the government to identify those who are in need
26 | Page
 of assistance quickly and efficiently. It also prevents the exploitation and corruption of the government
at the ground level.
⮚ Improves the standard of living: The collective team effort by the SHGs for financial inclusion
allows for the improvement in the living standard, family planning, healthcare, of the vulnerable
sections of the society.
⮚ Financial discipline: The members of the SHGs are encouraged to open savings accounts in banks.
This assures improved living conditions, increased spending on education, health, etc.

Limitations of SHGs:
⮚ Too much dependence on government and NGOs: Many SHGs are dependent on the promoter
agencies for their survival. In case these agencies withdraw their support, the SHGs are vulnerable to
downfall.
⮚ Lacks qualified facilitator: The facilitators do not have professional training with regard to
organising SHGs.
⮚ Lacks up-gradation of skills: Most SHGs are not making use of new technological innovations and
skills. This is because there is limited awareness with regards to new technologies and they do not
have the necessary skills to make use of the same. Furthermore, there is a lack of effective mechanisms
that promote skill development in rural areas.
⮚ SHGs are run by non-professionals: There is no professionalism within the SHGs. This does not
promote the expansion and improvement of the SHGs. This does not allow for the increase of wages
of the members and improvement in their living conditions. This also leads to errors in accounting and
mismanagement of the funds.
⮚ Lacks security: SHGs are mostly not registered. They are run based on the trust between the members.
The savings made by the SHG members may not be safe, which brings in mistrust between the
members.

Conclusion:
Self-help group is a useful platform to enhance women's health through increased knowledge and
awareness on health issues, and financial security during health emergencies etc. it’s very active in
providing income generating activities. However there is no much significant improvement in health
behaviour or knowledge about health related issues.

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 World Bank
World Bank (for roll number 71 to 80)
Introduction:
The World Bank is an international organization dedicated to provide finance, advice and research to
developing nations. Conventionally it is not a bank. Instead, it comprises two institutions namely the
● International Bank for Reconstruction and Development (IBRD) and
● the International Development Association (IDA).

As on date 189 member countries share ownership of the bank. The Bank works closely with three other
organizations:
● The International Finance Corporation
● The Multilateral Guarantee Agency
● The International Centre for the Settlement of Investment Disputes.

All five organizations are collectively known as the World Bank Group.
● The International Bank for Reconstruction and Development (IBRD) provides debt financing to
governments that are considered middle income.
● The International Development Association (IDA) gives interest-free loans to the governments of poor
countries.
● The International Finance Corporation (IFC) focuses on the private sector and provides developing
countries with investment financing and financial advisory services.
● The World Bank is the Multilateral Investment Guarantee Agency (MIGA), an organization that
promotes foreign direct investments in developing countries.
● The International Centre for Settlement of Investment Disputes (ICSID) provides arbitration on
international investment disputes.

WORLD BANK's Origin:

The World Bank was created at the 1944 Bretton Woods Conference along with the International Monetary
Fund (IMF). The head quarter of World Bank is in Washington, D.C. The intention behind the founding of
the World Bank was to provide temporary loans to low-income countries which were unable to obtain loans
commercially. The World Bank provides financial and technical assistance to the member countries of the
world. It also offers developmental assistance to middle- and poor- income countries. The bank considers
itself a unique financial institution that provides partnerships to reduce poverty and support economic
development by giving loans and offering advice and training to both the private and public sectors. It focuses
on improving education, health, and infrastructure. It also uses funds to modernize a country's financial sector,
agriculture and natural resources management.
World Bank Group
With 189 member countries, the World Bank Group is a unique global partnership. Five institutions working
for sustainable solutions that reduce poverty and build shared prosperity in developing countries. All of these
efforts support the Bank Group’s twin goals of ending extreme poverty by 2030 and boosting shared prosperity
of the poorest 40% of the population in all countries.

How did the World Bank Come into Existence?

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The Bretton Woods Conference, officially known as the United Nations Monetary and Financial Conference,
was a gathering of delegates from 44 nations that met from July 1 to 22, 1944 in Bretton Woods, New
Hampshire (USA), to agree upon a series of new rules for international financial and monetary order after the
conclusion of World War II. The two major accomplishments of the conference were the creation of the
● International Bank for Reconstruction and Development (IBRD) and
● International Monetary Fund (IMF).

What is International Bank for Reconstruction and Development (IBRD)?

● Following the recovery from World War II, the International Bank of Reconstruction and Development
broadened its mandate to increasing global economic growth and eliminating poverty.
● The Bank only finances sovereign governments directly or projects backed by sovereign governments.
● At the same time, middle-income countries are home to 70% of the world’s poor people, as the benefits
of this economic growth are unevenly distributed across their populations.

Governance of IBRD:
IBRD Boards of Governors: The Boards of Governors consist of one Governor and one Alternate Governor
appointed by each member country. The office is usually held by the country's minister of finance, governor
of its central bank. The Board of Governors delegates most of its authority over daily matters such as lending
and operations to the Board of Directors.

IBRD Board of Directors: The Board of Directors consists of currently 25 executive directors and is chaired
by the President of the World Bank Group. Executive Directors are appointed or elected by the Governors.
Executive Directors select the World Bank President, who is the Chairman of the Board of Directors.
Executive Directors are authorised for daily matters such as lending and operations.

● IBRD raises most of its funds in the world's financial markets.

● IBRD has maintained a triple-A rating since 1959.
● IBRD earns income every year from the return on its equity and from the small margin it makes on
lending.

What is the International Finance Corporation (IFC)?

IFC is the largest global development institution focused exclusively on the private sector in developing
countries. The Bank Group has set two goals for the world to achieve by 2030: end extreme poverty and
promote shared prosperity in every country. It is a private-sector arm of the World Bank Group, to advance
economic development by investing in for-profit and commercial projects for poverty reduction and promoting
development. IFC is also a leading mobilizer of third-party resources for projects.

Governance of IFC

IFC Boards of Governors:

The Boards of Governors consist of one Governor and one Alternate Governor appointed by each member
country. The office is usually held by the country's minister of finance, governor of its central bank. The Board
of Governors delegates most of its authority over daily to the Board of Directors.

IFC Board of Directors:

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The Board of Directors consists of executive directors and is chaired by the President of the World Bank
Group. Executive Directors are appointed or elected by the Governors. Voting power on issues brought before
them is weighted according to the share capital each director represents. The directors meet regularly to review
and decide on investments and provide overall strategic guidance to IFC management.

● IFC raises virtually all funds for lending activities through the issuance of debt obligations in
international capital markets.
● Since first being rated in 1989, IFC has been rated triple-A every year by Standard and Poor's and by
Moody's.
● IFC makes loans to businesses and private projects generally with maturities of seven to twelve years.
● It determines a suitable repayment schedule and grace period for each loan individually to meet
borrowers' currency and cash flow requirements.
● It may provide longer-term loans or extend grace periods if a project is deemed to warrant it.
● It does not have a policy of uniform interest rates for its investments. The interest rate is to be
negotiated in each case in the light of all relevant factors, including the risks involved and any right to
participation in profits, etc.

What is International Development Association (IDA)?

IDA is the part of the World Bank that helps the world’s poorest countries. Overseen by 173 shareholder
nations, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programs that boost
economic growth, reduce inequalities, and improve people’s living conditions. IDA is one of the largest
sources of assistance for the world’s 75 poorest countries, 39 of which are in Africa, and is the single largest
source of donor funds for basic social services in these countries.
IDA supports a range of development activities that pave the way toward equality, economic growth, job
creation, higher incomes, and better living conditions. IDA's work covers primary education, basic health
services, clean water and sanitation, agriculture, business climate improvements, infrastructure, and
institutional reforms.

Governance of IDA:
IDA Boards of Governors: The Boards of Governors consist of one Governor and one Alternate Governor
appointed by each member country. The office is usually held by the country's minister of finance, governor
of its central bank. The Board of Governors delegates most of its authority over daily matters such as lending
and operations to the Board of Directors.

IDA Board of Directors: The Board of Directors consists of executive directors and is chaired by the
President of the World Bank Group. Executive Directors are appointed or elected by the Governors. IDA lends
money on concessional terms. This means that IDA credits have a zero or very low-interest charge and
repayments are stretched over 30 to 38 years, including a 5- to 10-year grace period. IDA also provides grants
to countries at risk of debt distress.

What is International Centre for Settlement of Investment Disputes (ICSID)?

ICSID was established in 1966 by the Convention on the Settlement of Investment Disputes between States
and Nationals of Other States (the ICSID Convention). The ICSID Convention is a multilateral treaty
formulated by the Executive Directors of the World Bank to further the Bank’s objective of promoting
international investment.

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Governance of ICSID
Administrative Council:
One representative of each Member State, and one vote per State. Adopts ICSID arbitration, conciliation and
fact-finding rules. Adopts an annual budget and approves annual report.
Elects Secretary-General and Deputy Secretaries-General. Each State designates persons to a list of arbitrators
and conciliators.

Secretariat: Led by Secretary-General. Provides technical and administrative support to proceedings. Offers
training and technical assistance to governments and the public.
Contributes to the development of investment law through publishing and outreach.

ICSID Panel of Arbitrators and Panel of Conciliators: Each ICSID Member State may designate four
persons to each Panel.

Conciliation Commission or Arbitral Tribunal: an Arbitral tribunal or Conciliation Commission is

constituted by Secretary-General. In most instances, the tribunals consist of three arbitrators: one appointed
by the investor, another appointed by the State, and the third, presiding arbitrator appointed by agreement of
both parties.
Each case is considered by an independent Conciliation Commission or Arbitral Tribunal, after hearing
evidence and legal arguments from the parties.

What is the Multilateral Investment Guarantee Agency (MIGA)?

● MIGA is a member of the World Bank Group and its mandate is to promote cross-border investment
in developing countries by providing guarantees (political risk insurance and credit enhancement) to
investors and lenders.
● MIGA was created to complement public and private sources of investment insurance against non-
commercial risks (currency inconvertibility and transfer restriction, government expropriation, war,
terrorism, and civil disturbance, breaches of contract, and the non-honouring of financial obligations)
in developing countries.
● MIGA convention that defined its core mission was submitted to the Board of Governors of the IBRD
in 1985 and went into establishing MIGA as the newest member of the World Bank Group in 1988.
● The Convention can be amended by the Council of Governors of MIGA.

Governance of MIGA
Council of Governors: MIGA is governed by its Council of Governors which represents its member
countries. The Council of Governors holds corporate authority, but primarily delegates such powers to MIGA's
Board of Directors.

MIGA Board of Directors: The Board of Directors consists of directors and votes on matters brought before
MIGA. Each director's vote is weighted in accordance with the total share capital of the member nations that
the director represents. MIGA aims to promote foreign direct investment into developing countries to support
economic growth, reduce poverty and improve people’s lives.

What is the Criteria for World Bank Group Membership?

To become a member of the Bank, under the IBRD Articles of Agreement, a country must first join the
International Monetary Fund (IMF).

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Membership in IDA, IFC, and MIGA are conditional on membership in IBRD.
Membership in ICSID is available to IBRD members, and those which are a party to the Statute of the
International Court of Justice (ICJ), on the invitation of the ICSID Administrative Council by a vote of two-
thirds of its members.

What are the Major Reports of the World Bank?

● Ease of Doing Business (Stopped publishing recently).
● Human Capital Index.
● World Development Report.
Other Recent Publications:
● World Bank Paper on india’s Poverty.
● South Asia Economic Focus (Bi- Annual).
● Groundswell report

What about the Cooperation between the World Bank Group and India?
● India was one of the forty-four original signatories to the agreements reached at Bretton Woods that
established the International Bank for Reconstruction and Development (IBRD) and the International
Monetary Fund (IMF).
● It was also one of the founding members of the IFC in 1956 and the IDA in 1960. India later became
a member of the MIGA in January 1994.
● IBRD lending to India commenced in 1949 with a loan to the Indian railways, the first investment by
the IFC in India took place in 1959, and by IDA in 1961 (a highway construction project).
● During the 1950s, the IBRD was India's sole source of World Bank borrowings.
● By the end of the decade, India's mounting debt problems became an important factor in the launch of
the IDA, the soft loan affiliate of the World Bank (WB) group.
● By the end of the 1960s, the United States, until then India's largest source of external resources,
sharply cut its bilateral aid program. Since then, the WB emerged as the most important source of
official long-term finance.
● During the 1960s and 1970s, the IDA accounted for nearly three-fourths of all WB lending to India
and, in turn, India was by far the largest recipient of IDA funds, accounting for more than two-fifths
of all its lending.

During the 1980s, while the WB shifted its emphasis to stress policy reforms and greater economic
liberalization, it continued to lend to poorly governed public sector institutions in India and was muted in its
criticism of India's closed economy.

MIGA Performance Standards are environmental and social standards which help to structure and implement
sustainable projects. For Indian market, one of the options is a breach of contract insurance which MIGA
would offer to investors. In case the government doesn’t perform its obligation, under the contract
arrangement, then MIGA can come and cover that risk for investment.
In July 2020, the World Bank and the Government of India signed the USD 750 million agreement for an
Emergency Response Programme for MSMEs (Micro, Small, and Medium Enterprises).

Features of World Bank:

Bank Following are some of the important features of World Bank:

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 ● Organization and Structure: The organization of the bank consists of the Board of Governors, the
Board of Executive Directors and the Advisory Committee, the Loan Committee and the president and
other staff members. All the powers of the bank are vested in the Board of Governors which is the
supreme policy making body of the bank. The board consists of one Governor and one Alternative
Governor appointed for five years by each member country. The Board of Executive Directors consists
of 21 members, 6 of them are appointed by the six largest shareholders, namely USA, UK, Germany,
France, Japan and India. The rest of the 15 members are elected by the remaining countries.

● Goals: The World Bank Group has set two goals to be achieved by 2030.
○ End extreme poverty by decreasing the percentage of people living on less than $1.90 a day to
no more than 3%.
○ Promote shared prosperity by fostering the income growth of the bottom 40% for every country
The World Bank is a vital source of financial and technical assistance to developing countries around
the world. It is not a bank in the ordinary sense but a unique partnership to reduce poverty and support
development. The World Bank Group comprises five institutions managed by their member countries.

● Financial Products and Services: World Bank provides low-interest loans, zero to low-interest
credits, and grants to developing countries. It supports in areas such as education, health, public
administration, infrastructure, financial and private sector development, agriculture, and
environmental and natural resource management. Some of the projects are co-financed with
governments, other multilateral institutions, commercial banks, export credit agencies, and private
sector investors.

● Innovative Knowledge Sharing: World Bank offers support to developing countries through policy
advice, research and analysis and technical assistance. Analytical works of World Bank often helps
developing countries. It also helps in capacity development of the developing countries. World Bank
also sponsors, host or participates in many conferences and forums on issues of development. It also
collaborates with partners on many developing issues. It also takes effort to provide access to the best
global expertise to the developing countries.

● Innovation and Entrepreneurship: In the competitive economy, innovation and entrepreneurship

plays an important role in the growth of the business. It helps in higher productivity which leads to
increased economic growth. It helps in creation of employment to eradicate poverty. Innovation allow
firms to specialize, meet international best-practice standards and upgrade quality.

Conclusion:
World Bank recognizes that innovation and entrepreneurship are important to address major developmental
challenges. The World Bank invests in innovative and entrepreneurship projects.

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The World Bank brings global experience, knowledge, research and investments to help client countries
develop effective innovation and entrepreneurship ecosystems, such as policies, strategies, regulations and
institutions that foster investments and jobs.

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 SIDBI

SIDBI (for roll number 81 to 90)

Small Industrial Development Bank of India (SIDBI)

Small Industrial Development Bank of India (SIDBI) was established on 2nd April, 1990. It
was established under the Small Industrial Development Bank of India Act, 1988. It was initially started as a
wholly owned subsidiary of Industrial Development Bank of India (IDBI). Presently the ownership of SIDBI
is held by 34 public sector institutes. SIDBI has its head office at Lucknow. It has 15 regional offices and 84
branches operating all over India. It also co-ordinate the functions of institutions engaged in similar activities.

Micro, Small and Medium Enterprises (MSME’s) are focused domains for SIDBI. MSME plays an important
role in the Indian Economy as it provides major employment in the economy. SIDBI takes structural initiative
to resolve financial and non-financial hurdles of MSMEs. It helps to make MSMEs strong, vibrant and globally
competitive. There are many efforts taken by SIDBI to emerge as a brand which is customer friendly towards
MSMEs. It facilitates and strengthens credit flow to MSMEs. It identified financial and development gaps in
the MSMEs and took efforts to resolve the same. SIDBI dedicated its resources towards evolution of a vibrant
ecosystem. It supports emerging entrepreneurs by infusing skills and re-skilling initiatives. SIDBI has taken
steps for technological upgradation and modernization of existing MSMEs. It also expands the channels
for marketing the products of MSMEs.

MISSION of SIDBI
To facilitate and strengthen credit flow to MSMEs and address both financial and developmental gaps in the
MSME eco-system.

VISION of SIDBI
To emerge as a single window for meeting the financial and developmental needs of the MSME sector to
make it strong, vibrant and globally competitive, to position SIDBI Brand as the preferred and customer -
friendly institution and for enhancement of share - holder wealth and highest corporate values through modern
technology platform

Objectives of SIDBI
● To promote marketing of products of small scale sector.
● To upgrade technology and also undertaking modernization of small scale units.
● To provide more financial assistance to small scale ancillary and tiny sector.
● To encourage employment oriented industries.
● To coordinate all the other institutions involved in the promotion of small scale industries.
History of SIDBI bank
When SIDBI was established, SDBI used to act as a subsidiary of Industrial Development. The head office of
the SDBI bank is located in Lucknow, Uttar Pradesh.

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The scope of business of SIDBI is MSME( Micro Small And Medium Enterprises) is considered a powerful
shrine cylinder of India.SIDBI has been helping India for very long periods and got many financial advantages
due to the efforts of SDBI! SIBDi has been giving its service for building a legal society for many years.

What does SIDBI bank do?

It works under SIDBI Credit Plus Models. It provides loans for industrial development. Along with this, SIDBI
also provided consultancy and other mutual facilitation and financial facilities to MSMEs.

The main functions of SIDBI are to increase the money supply in the MSME sector and conduct a well-
planned program to support it. We provide term loans to banks, small finance banks, and Non- banking
Financial Institutions. To meet the long-term financing needs of industrial sectors. They are helping to provide
Microfinance through Microfinance Insinuations. They are providing loans and short-term loans to newly
created industries.

What is the scope of business of SIDBI?

A vast number of small-scale industries are present in the business of SIDBI. Small and middle businesses
whose value does not overstep ten crores.

It carries around 60 lakh such units across the nation, and the three crore population has got service in them.
Under SIDBI, about 38% of exposure rts and about 40℅ manual touring work in India. SIDBI provides much
employment for tourism, fitness services, transportation, and civil work from time to time.

Which bank is the Shareholder of SIDBI?

The largest shareholder of SIDBi is SBI (State bank of India). State bank of India holds 16℅ shares of SIDBI.
This also contains the Government of India and the Life Insurance Corporation. According to the grade of
London’s ranking company ” The Banking,” SIDBI is ranked 30th in the world.

Features of SIDBI:
Following are some of the important features of SIDBI :
1. Financial Institute for Promotion of MSMEs: SIDBI is established to provide short term and long
term finance to the MSMEs. It is principal financial institution for micro,small and medium sector
units. It also coordinate the functions of institutions engaged in financing MSMEs. It provides
refinance to Banking and Non-Banking Financial Companies (NBFC) to increase supply of credit to
MSMEs. Besides the refinance operations SIDBI also lends directly to MSMEs. SIDBI caters to the
specific needs of Indian MSMEs that are not fulfilled through traditional sources of finance.
2. Sustainable Development: SIDBI is working towards sustainable development of MSMEs in India.
It helps MSMEs in creation of economic wealth while preventing ecological wealth of the country. It
promotes culture of energy efficient and sustainable finance. It takes initiative to enhance awareness
of benefits of climate control amongst MSMEs. SIDBI’s focused lending schemes promote investment
in clean production and energy efficient technologies. It helps to reduce the emission of greenhouse
gases to contribute towards reduction in pollution.
3. Advisory Function: SIDBI also works as advisor and mentor for MSMEs. It helps MSMEs in
expanding marketing channels for the products both in the domestic as well as international markets.
It also initiates steps for modernization and technological upgradation of current units.
4. Services to MSMEs: SIDBI provides different types of financial and non-financial services through
its associates and subsidiaries. These associates and subsidiaries are as follows:

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 a. SIDBI Venture Capital Ltd. (SVCL): a wholly owned subsidiary of SIDBI which was set up
in July 1999, is providing venture capital to emerging sectors, such as, life sciences,
biotechnology, pharmaceuticals, engineering and information technology.
b. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): a trust to
implement the Credit Guarantee Scheme (CGS) through which credit facilities are extended
without third party guarantee on collateral security by eligible lending banks/Financial
Institutions.
c. SME Rating Agency of India Ltd. (SMERA): was set up by SIDBI, Dun & Bradstreet
Information Services India Private Limited (D&B) and several public, private and foreign
sector banks as an MSME dedicated third-party rating agency to provide comprehensive,
transparent and reliable ratings and risk profiling.
d. India SME Technology Services Limited (ISTSL): a platform where MSMEs can tap
opportunities at the global level for acquisition of new and emerging/ green technologies or
establish business collaboration.
e. India SME Asset Reconstruction Company Ltd (ISARC): An Asset Reconstruction
Company (ARC) to acquire non-performing assets (NPAs) and to resolve them throughits
innovative mechanisms with a special focus on the NPAs of MSME sector.
f. Micro Units Development & Refinance Agency (MUDRA): for ‘funding the
unfunded’micro enterprises in the country
5. Achievements of National Goals: SIDBI’s initiatives help in poverty alleviation and employment
generation through financing MSMEs. It promotes entrepreneurship and fosters competitiveness in
MSME sector. It takes initiatives in skill development of entrepreneurs. It promotes entrepreneurship
among women and economically weaker section of the society. It provides finance to industries in
semi-urban areas to create more employment opportunities which reduces migration of population to
urban areas.
6. Different forms of Finance: SIDBI offers the following facilities to its customers:
a. Direct Finance: SIDBI offers direct financing to the MSMEs through financing Working
Capital, Term Loan, Foreign Currency Loan, Equity Support, Energy Saving Scheme etc.
b. Indirect Finance: SIDBI offers indirect assistance by providing Refinance to Banks, State
Level Financial Institutions, etc. with an extensive branch network across the country.
c. Micro Finance: SIDBI offers microfinance to small businessmen and entrepreneurs for
establishing their business.
7. Digital Initiatives:
a. SIDBI Startup Mitra: It is digital initiative by SIDBI launched on March 17th, 2016. It brings
together all stakeholders, start-up entrepreneurs, incubators, investors, industry bodies, mentors
and advisors and banks at one platform. It helps in financing and development of new
entrepreneurs. It also works as knowledge partner for State and Central Governments.
b. Udyami Mitra: SIDBI has launched the ‘Udyami Mitra’ Portal to improve accessibility of
credit and handholding services to MSMEs. They can select and apply for preferred banks
through this portal. Under the portal, entrepreneurs can apply for loan without physically
visiting any bank branches and can select suitable bank branch, track their application status
and avail multiple loan benefits. It also has facility for uploading all necessary documents.
Through the portal the MSMEs can also seek handholding support for getting finance
c. Nodal/Implementing Agency: SIDBI has been assigned the role of nodal agency by the
Government of India. It helps in implementing various subsidy schemes for MSMEs. These
schemes help in upgradation, modernisation and expansion of business.

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DUTIES OF SIDBI
SIDBI is required to furnish their returns from time to time to the Central Government as well as the
Reserve Bank. Except as required under the SIDBI Act or in accordance with the law or practice and
usage customary among bankers, they need not divulge any information relating to their business. At the
same time for the efficient discharge of their functions they
should collect from or furnish to the Central Government, Reserve Bank or such other Bank, Corporation or
Institution, credit information or such other information.

Schemes offered by SIDBI in MSME Sector:

● Direct Financing: which offers working capital as assistance, term loans foreign currency loans.
● Indirect Finance: assistance by providing refinance, comprising banks.
● Micro Finance: which offers small-scale credit loans on immediate bases.
● STFS (SIDBI Trader Finance Scheme): this scheme offers wholesale retailers who have running a
business for at least 3 years.
● SEF (SMILE equipment Finance): Helps MSMEs to buy new equipment for them.
● TULIP (Top-Up Loan for Immediate Purpose): This loan will provide within 7 days.
● SPEED: Loan for Purchase of Equipment for Enterprises development Loans under a partnership with
OEM (Original Equipment Manufacturer).
● Working Capital Cash Credit Scheme: which provides instant loans.

Functions of SIDBI:
● SIDBI emerged as a single window operation to meet its financial and improvement needs as well as
to make the MSME sector strong, vibrant, and globally competitive.
● SIDBI helps financial institutions in lending to small-scale industries so that they have a healthy
financial position and also provides non-financial assistance to business owners by helping them
procure raw materials.
● SIDBI engages commercial banks and other financial institutions to grant credit to small-scale
industries and encourage credit by small independent company business units and also provide
resource assistance to them.
● SIDBI also provides venture capital assistance through Venture Capital Fund, and it also co-promotes
state-level venture funds.
● SIDBI conducts surveys in specific geographical locations to determine the potential of developing
MSMEs in the specific area where it is found.
● SIDBI helps in expanding business areas for small-scale industry sector products in domestic and
international markets in partnership with commercial banks.
● SIDBI also aims to enhance shareholder wealth through modern technologies and innovative ideas by
providing a digital platform. It also provides services like factoring and leasing to domestic
independent company business units in the small-scale sector.
● SIDBI also provides an additionally timely flow of credit for working capital as well as term loans to
small-scale enterprises in collaboration with commercial banks.
● SIDBI takes initiatives for modernization and technological upgradation of existing industrial units to
become future units that generate more wealth and employment.
● SIDBI also acts as a nodal agency for various ministries of the Government of India :
○ Ministry of MSME.
○ Ministry of commerce and industry.

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 ○ Ministry of Textiles.
○ Ministry of food processing industry
● Small Industries Development Bank of India refinances loans that are extended by the PLIs to the
small-scale industrial units and also offers resources assistance to them.
● It discounts and rediscounts bills.
● It also helps in expanding marketing channels for the products of SSI (Small Scale Industries) sector
both in the domestic as well as international markets.
● It offers services like factoring, leasing etc. to the industrial concerns in the small-scale sector.
● It promotes employment-oriented industries particularly in semi-urban areas for creating employment
opportunities and thus checking the relocation of people to the urban areas.
● It also initiates steps for modernisation and technological up-gradation of current units.
● It also enables the timely flow of credit for working capital as well as term loans to Small Scale
Industries in cooperation with commercial banks.
● It also co-promotes state-level venture funds.

Benefits of SIDBI
● Custom-made: SIDBI policies loans as per the requirements of your businesses. If your requirement
doesn’t fall into the ordinary and usual category, Small Industries Development Bank of India would
assist in funding you in the right way.
● Dedicated Size: Credit and loans are modified as per the size of the business. So, MSMEs could avail
different types of loans custom-made for suiting their business requirement.
● Attractive Interest Rates: It has a tie-up with several banks and financial institutions over the world
and could offer concessional interest rates. The SIDBI has tie-ups with World Bank and the Japan
International Cooperation Agency.
● Assistance: It does not just provide a loan, it also offers assistance and much-required advice. Its
relationship managers assist entrepreneurs in making the right decisions and offering assistance till the
loan process ends.
● Security Free: Businesspersons could get up to Rs.100 lakhs without providing security.
● Capital Growth: Without tempering the ownership of a company, the entrepreneurs could acquire
adequate capital for meeting their growth requirements.
● Equity and Venture Funding: It has a subsidiary known as SIDBI Venture Capital Limited which is
wholly owned that offers growth capital as equity through venture capital funds that focusses on
MSMEs.
● Subsidies: SIDBI offers various schemes which have concessional interest rates and comfortable
terms. SIDBI has in-depth knowledge and a wider understanding of schemes and loans available and
could help enterprises in making the best decision for their businesses.
● Transparency: Its processes and the rate structure are transparent. There aren’t any hidden charges.

Conclusion:
Small Industries Development Bank of India ( SIDBI) was set up on April 2nd, 1990, under the act of the
Indian Parliament.
Today’s article covered almost a detailed brief of SIDBI bank. It starts from when it was established to how
it works. We have got in-depth information related to the bank.SIDBI bank helps every type of business, but
is it mandatory to have an MSME registration number. However, we can say that SIDBI, by refinancing,

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discounting, rediscounting, and indirect functions and direct assistance encourages the small sector in rural
India.

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 Commercial Bank

Commercial Bank (for roll number 91 to 100)

Origin of Bank:
The term BANK comes from the French word 'BANCO' which Means A 'bench'. In earlier days, money-
lenders used to display coins of different currencies in big heaps or benches or tables for the purpose of lending
or exchanging.

MEANING:
A bank is a financial institution which deals with deposits and advances and other related services. Bank
provides various services related to money or financial requirements of consumers.

Definition:
As per The Indian Banking Regulation Act, 1949 banking company means "any company which transacts the
business of banking in India" and the word banking has been defined as "accepting for the purpose of lending
or investment of deposits of money from public, repayable on demand or otherwise, and withdrawable by
cheque, draft and order or otherwise."

Types of bank:
There are several types of banks as follows:

CENTRAL BANK:

The central bank is the apex financial institution in the banking industry in the country. Every country has
their own central bank. In India, The Reserve Bank of India (RBI) is the central bank. The RBI was established
in 1945 under the Reserve Bank of India Act, 1944.Some functions of RBI are as follows:
1. Frames monetary policy
2. Issues currency notes
3. Acts as a banker to the Government
4. Acts as a banker's bank to commercial and other banks in India.

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Commercial Bank:
The Commercial banks play an important role in economic and social development of a country. Commercial
banks performs important functions such as: Primary Functions i.e. accepting of deposits and lending of
money and Secondary Functions Le agency functions and utility functions. In India, commercial banks are
divided into three groups:
A. Public sector banks where majority of capital is held by the government such as Bank of India, State
Bank of India etc.
B. Private sector banks are owned by a group of individuals such as AXIS bank, HDFC bank etc.
C. Foreign banks are those banks which are established outside India but these banks have branches in
India such as Citi bank, HSBC, Standard Chartered etc.

Functions of Commercial Bank:

The functions of commercial banks can he classified into two groups which is as follows:
● Primary Function
○ Accepting deposits
○ Granting loans and advances
● Secondary Function
○ Agency Function
○ Utility Function

I) Primary Functions:
The primary functions of commercial banks one known as core banking functions. The primary
functions are as follows:

A) Accepting Deposits: Commercial banks collect deposits from individuals and organisations. The deposits
can be classified into two types Le Time Deposits and Demand deposits.

a) Time Deposits: Time deposits are called as time deposits because they are repaid to the customers offer
the expiry of decided time.

1) Fixed Deposit:
Fixed deposit account is an account where fixed amount is kept for fixed period of time bearing fixed interest
rate. Rate of interest is more as compared to saving bank account and varies with the deposit period. Normally,
withdrawal of amount is not permitted before maturity date. However, depositar con withdraw amount before
maturity date for which bank will reduce the interest rate. For amo deposited in this account, a fixed deposit
receipt (FDR) is issued by the bank. Against this receipt loan can be taken from the bank

2) Recurring Deposit:
It is operated by salaried persons and businessmen having regular income. A certain fixed sum of money is
deposited into the account every month. Withdrawal of accumulated amount along with interest is paid after
the maturity date. Rate of interest is higher which is similar to fixed deposit account. Separate passbook is
provided to know the position of RD account

b) Demand Deposits:

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Demand deposits are those which are repaid to customers whenever they demand. That means money can be
withdrawn as per the wish of the customer through withdrawal slips, Cheques ATM cards, online transfer etc.

1) Saving Account:
It is generally operated by those who earn regular or fixed income such as salary or wages. The main aim of
this deposit account is to encourage habit of savings among people. These deposit accounts are meant for the
purpose of maximum savings. There are restrictions on withdrawal limits from these accounts. These accounts
carry low interest rates. Interest is credited monthly, quarterly, half-yearly and yearly basis on this account.
Passbook facility. balance on SMS, account statement etc. facilities are provided to account holders to
ascertain financial position.

For saving account holders some banks provide separate facility of flexi deposit. This focility combines the
advantages of saving account and fixed deposit account. This is not separate deposit account. It is a type of
saving bank account or current deposit account with special features and benefits.

In case of multiple option deposit account, the excess amount after a particular limit gets automatically
transferred to fixed deposit. When adequate funds are not available to honor payments or cheques in savings
account, funds get transferred from fixed deposit to saving banks account.

2) Current Account:
This account is operated by business firms and other commercial organizations such as hospitals, educational
institutions etc. who have regular banking transactions. In this account there is no restriction on deposits and
withdrawals of amounts. No interest is paid by the bank on this account. Overdraft facility is available for this
account. For current account, banks provide statement of account every month.

B) Granting loans and advances:

Banks grant loans and advances to business firms and others who are in need of bank funds. The loans are
provided for longer period of time from 1 year and more. Advances are provided for shorter period from 4
months to 1 year. The advances are in the form of cash credit, overdraft and discounting of bills etc.

1) Loans:
Commercial banks provide loan to businessman and others. The borrowers can use entire amount sanctioned
or can withdraw in installments. Interest is charged on the amount sanctioned. The loans are as follows:

a) Short Term Loans are for a period upto 1 year to meet working capital requirements of the borrower.
b) Medium Term Loans are for a period of 1 year to 5 years to meet working capital as well as fixed capital
requirements of the borrower. c) Long Term loans are for a period of 5 years or more to meet long term
capital requirements of the borrower.

2) Advances:
Advances are small term fund provided to businessman to satisfy different financial requirements of the
business. Advances are as follows:

a) Cash Credit:

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The cash credit advances are provided to current account and savings account holders. It pro- vides working
capital for longer period of time. Interest rate is higher on CC. Separate CC account has to be maintained by
the borrower.
b) Overdraft:
This facility is offered to current account holders to meet their working capital requirements. The period can
vary from 15 to 60 days. Interest is charged on actual amount withdrawn. No separate account is maintained,
and entries are shown in current account. It is a temporary arrangement for a short period.
c) Discounting of bills of exchange:
The drawer of bills of exchange or beneficiary can discount the bill with bank and obtain an advance. On the
due date of the bill, the bank will recover the amount from the drawee.

II) Secondary Functions:

Secondary functions of commercial banks are classified into two groups:
A. Agency Functions
B. Utility Functions

A) Agency Functions:
A commercial bank acts as an agent or representative of its client and performs certain functions as follows:

1) Periodic Collections and Payments:

Commercial bank collects salary, dividends, interests and any other income periodically as well as makes
periodical payments such as taxes, bills, premiums, rent etc. on the standing provided by customer.
Commercial bank charges certain fixed amount quarterly or annually in the form of service charges from
customer for providing such services.

2) Portfolio Management:
Large commercial banks undertake to purchase and to sell securities such as shares, bonds, debentures etc. on
behalf of the clients. This handling of securities is known as portfolio management. Due to this facility more
clients are opting for such services of commercial banks.

3) Fund Transfer:
Commercial banks provide facility of fund transfer from one branch to another branch or branch of another
bank. Commercial banks come with various initiatives to make these trans- fer hassle free.

4) Dematerialisation:
Banks provides dematerialisation facilities to their clients to hold their securities in an elec- tronic format. On
behalf of clients, it undertakes the electronic transfer of shares in case of purchase or sale.
5) Forex Transactions:
Forex is an abbreviation for foreign exchange. A bank may purchase or sell foreign exchange on behalf of its
clients. A bank purchases forex from its clients which the clients receive from foreign transactions and sell
the forex when the clients need it for overseas transactions.

B) Utility Functions:

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A commercial bank performs utility functions for the benefits of its clients. It provides certain facilities or
products to its clients as follow:

1) Issue of Drafts and Cheques:

A draft /cheque is an order to pay money from one branch of bank to another branch of the same bank or other
bank. A bank issues drafts to its account holders as well as non account holders whereas cheques are issued
only to the account holders. Bank charges commission for issuing a bank draft.

2) Locker Facility:
This is common utility function of any commercial bank. The bank provides locker facility for the safe custody
of valuables, documents, gold ornaments etc.

3) Project Reports:
A bank may prepare project reports and feasibility studies on behalf of the clients. Project reports enable the
business firm to obtain funds from the market and to obtain clearance from government authorities.

4) Gift Cheques:
Banks issue gift cheques and gold coins to account holders as well as to non account holders. The gift cheques/
coins can be used by the clients for the purpose of gifting on occasions like weddings, birthdays etc.

5) Underwriting Services:
A commercial bank may underwrite the issue of securities issued by companies. If the shares are not fully
subscribed, the underwriting bank agrees to take up the unsubscribed portion of the securities,

6) Gold related Services:

Now a days many banks are providing gold services to its customers. Bank are commercially buying and
selling gold or gold ornaments from customers on large scale basis. Some bank also provides advisory services
to its customers in terms of gold funds, gold ETF etc.

7) E-banking Service:
E-banking stands for electronic banking it is also called 'Virtual Banking'. E-banking is the result of the
development in the field of electronics and computers. Under E-banking, the banking operations are
computerised. Some of the elements of E-banking are as follows:

1) Automated Teller Machine:

The ATMs are electronic machines which are operated by the customer on his own to with- draw or deposit
money. It can be used for other banking transactions also such as balance enquiry, transferring money, request
for cheque book or bank statements etc. Nowadays, ATM also provides facility of cash deposits through CDM
(cash deposit machines.)

2) Credit Cards:
A credit card is a payment card. It allows the cardholder to pay for different transactions he performs. The
issuing bank creates a revolving account and grants a line of credit to the cus- tomer or user. Credit card offers
convenience to customers as customer need not carry cash.

3) Debit Cards:

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Most of the banks nowadays offer debit card as soon as account is opened by account holder. Through debit
card payments, the amount gets deducted from account holder's account. Some banks offer personalised debit
and credit cards as per the requirement of customer.

4) RTGS:
RTGS stands for Real Time Gross Settlement. RTGS is a fund transfer system where transfer of funds or
money takes place from one bank to another bank on "real time" and on "gross basis". It is the fastest money
transfer system through the banking channel.
● Real Time Settlement means payment transaction is not subject to any waiting period. The
transactions are settled as soon as they are processed. The receiving bank has to credit the account of
the client within 2 hours of receiving the funds transfer message.
● Gross Settlement means the transactions are settled on one to one basis without bunching with any
other transactions. The minimum amount to be remitted through RTGS is Rs. Two lacs while there is
no upper limit for transactions. However, omount changes from bank to bank.

5) NEFT:
NEFT stands for National Electronic Fund Transfer. Under this system, funds are transferred electronically
from one branch to another branch or one bank to another bank in the country. The client has to give details
of NEFT code of branch and account number of beneficiary to whom the money is to be transferred.

The NEFT settlements take place at particular time during working hours. For instance, settlements of fund
transfer requests in NEFT system is done on half-hourly basis. There are 24 half- hourly settlement batches
run from 8 am to 7 pm on all working days of week. The main difference between NEFT and RTGS is that in
the case of RTGS, transfer is done on gross settlement basis while NEFT is on deferred net basis, where
transactions are bundled together.

6) Net Banking and Mobile Banking:

With the introduction of net banking, the client is able to transact banking operations with the help of
computers, laptop and other gadgets. The internet banking services enable a client to check various
transactions, facilitates payments of various things, transferring funds etc.

Mobile banking refers to the use of banking services with the help of mobile phones. The client registers with
the bank for this facility and gets a unique code for transactions. The client can perform various transactions
such as request for balances, transfer of funds, stop payment, issue of cheque book etc.

7) IMPS Facility:
IMPS stands for immediate payment services. This facility allows customers to instantly trans- fer funds to
any other bank account.

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