Banking Structure Of India and UK

Submitted By: -Group -5

Pooja Yadav

Aditi Khandelwal

Tulsi Meena

Kiran Meena

Jyoti Yadav

Overview:

1) India Banking structure2) UK banking structure3) Lending Rate & Interest Rate4) Reserve Parameter5) Independence index of C.B.

Banking Structure Of India

Banking Structure Of UK

Top Banks In India Top Banks In UK

(Top Banks of India & United Kingdom on the basis of total assets)

SBI($390 billions)

ICICI ($99 billions)

PNB($90.9 billions)

Bank of Baroda($73 billions)

HDFC($66.7 billions)

HsBc($2,634.14 billions)

Barclays PLC($2,114.13 billions)

Royal Bank Of Scotland Group($1,635.93 billions)

Lloyds Banking Group($1,339.99 billions)

Standard chartered PLC($725.914 billions)

Interest Rate on Accounts In India And UK

(Saving Accounts Interest Rates)

YES Bank(7.00%)

Kotak Mahindra Bank(6.00%)

State Bank Of India( 4.00%)

ICICI(4.00%)

Axis Bank(4.00%)

TSB bank (up to 5% AER yield)

Nationwide(up to 5% AER yield)

Lloyds bank(up to 4% AER yield)

Santander(up to 3% AER yield)

Difference Between Indian and UK banking System

These are four major points:-

1. Higher fees than competitors in UK2. Higher Checking Account rates in UK3. Fewer Branches per state than most national institutions in UK 4. more flagrant violations of regulations in UK

Why is the UK banking system so big?

There are Four major factors:

1. Clustering in financial hubs2. Comparative advantages3. Implicit subsidiary4. Historical factors

How big is the UK banking system?

There are two commonly used definitions of banking system size:-

1. Ownership basis:— this typically includes UK-owned monetary financial institutions’ total assets,including the assets of their non-resident branches and subsidiaries, but excludes the assets of foreign-owned banks’ UK subsidiaries and branches.

Cont…..

2. Residency basis— defined as assets of monetary financial institutions located in the United Kingdom regardless of the nationality of their ultimate owner. This includes UK-owned banks’ UK assets and the (UK) assets of foreign banks’ UK subsidiaries and branches.

Central Bank Independence

It refers to the freedom of monetary policymakers from direct political or governmental influence in the conduct of policy.

Instrument independence refers only to the central bank’s ability to freely adjust its policy tools in pursuit of the goals of monetary policy.

Measuring independence

Legal measures of central bank independence may not reflect the relationship between the central bank and the government that actually exists in practice . The form of independence may also matter for inflation.

Types Of Interest Rate

Repo rate: Repo Rate or Repurchase Rate is the rate at which the RBI lends funds to commercial banks and other financial institutions within the country.

Reverse Repo Rate(RRR): when banks have excess funds, they voluntarily transfer it to RBI as their money is safe and secure with them. Generally, Reverse Repo Rate is always lesser than Repo Rate.

Cont….

Marginal Standing Facility Rate (MSF): -

In MSF, banks can borrow cash from RBI against their approved government securities during emergency and critical situation only.

Cash Reserve Ratio (CRR): The percentage of the deposits that should be kept aside by banks is called CRR. The Central Bank has the power to determine the lending capacity of the banks through CRR. They will increase CRR if they want to reduce the lending amount.

Cont….

Statutory Liquidity Ratio (SLR): -

At the end of every day, banks are required to maintain a minimum ratio of their Time liabilities and Net Demand in the form of liquid assets like gold, cash and government securities. The ratio of time liabilities and liquid assets in demand is called SLR.

Bank Rate : the rate of interest charged by The Central Bank of India against loans offered to banks . In UK, the monetary policy committee (MPC) of “Bank Of England” sets the bank rate.

Cont….

Base Rate: -The Reserve Bank of India sets a minimum rate below which banks are not allowed to lend to their customers. Banks and building societies use the base rate to calculate their interest rates for some mortgage products.

Savings Deposit Rate: -The interest rate earned by an account holder for the amount maintained in their savings account is called savings deposit rate.

Term Deposit Rate

RBI Bank Rates In 2017

Facilities Provided by Banks to Customers in India1. Online banking2. Bank draft 3. Banker's cheque4. RTGS5. NEFT 6. Cash Credit

Facilities Provided By UK Banks to CustomersLLOYDS BANK:-Lloyds has an account especially for students. This has provided overdraft of up to £1,500 for three years and an optional credit card with a minimum limit of £500. We can also open a business account.

Cont….

HSBC(Hong Kong and Shanghai Banking Corporation ):-

Provide free overdraft of £3,000 per year for three years and 2% in-credit interest on the first £1,000. we can open a business account.

Cont….

Provide account for both student and business:-

- For students it provide free overdraft of up to 2,000 for three years as well as a 33% discount on coach travel with National Express.

- For business if you’re just starting your business, you’ll get free banking for 2 years, a free business credit card for the first 12 months and a free £500 overdraft for the first year.

What is Foreign Exchange ?

In narrow terms, Forex simply means foreign currency or money other than the domestic currency or money.In Broader Terms, Forex Means:-

1. Study of all the currencies of the different countries

2. How they are exchanged or traded with each other

3. Exchange rates and how they are set

4. The Exchange markets

5. The Participants

Foreign Exchange Market in India

The changing contours were mirrored in a rapid expansion of foreign exchange market in terms of

1. Participants2. Transaction Volumes3. Decline in transaction costs 4. More efficient mechanisms of risk transfer

The origin of the foreign exchange market in India could be traced to the year 1978 when banks in India were permitted to undertake intra-day trade in foreign exchange.

Foreign Exchange Market UK

1. The daily transaction in the foreign exchange market UK is quite high. In 2001, the daily turnover was $353 billion in the forward market and $151 billion in the spot market.

2. The foreign exchange business in the country has shown a steady growth.

3. The UK foreign exchange market is dependent on the Bank of England. The Bank of England, on behalf of the HM Treasury, controls and manages the Exchange Equalization Account. This account holds the country’s foreign exchange and gold reserves.

4. The growth rate of FOREX trading in the country has been a whopping 41% than the previous year.

Gold Reserves

Gold Reserve :- is a quantity of gold held by a central bank to support the issue of currency.

India:-Gold Reserves in India remained unchanged at 557.77 tonnes in the fourth quarter of 2016 from 557.77 tones in the third quarter of 2016.

UK:-Gold Reserves in the United Kingdom remained unchanged at 310.29 Tones in the third quarter of 2016 from 310.29 Tonnes in the second quarter of 2016. Gold Reserves in the United Kingdom averaged 329.57 Tonnes from 2000 until 2016.

Cont….(In India)

Actual GR =557.77

Previous GR=557.77

Highest GR=557.77

Lowest GR=357.75

Dates =2000 – 2016

Unit= Tonnes

(In UK)

Actual GR =310.29

Previous GR=310.29

Highest GR=588.27

Lowest GR=310.25

Dates =2000 - 2016

Unit=Tonnes

Summray:-

The Socio-economic conditions in both the regions are different and the opportunities available for the bank to cover the market are driven by this key factor apart from the Legal and Regulatory adherence.

The Banking governance is more mature in India than in the UK (in terms of how the banks conduct business and how they are governed).