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First of all, let’s talk about and understand what priority sector lending is,
So the Government of India understand that certain sectors of the economy need more support that is why it has fixed a certain amount of percentage that the bank csp have to lend to various Industries like agriculture small scale industries small businesses service Enterprises microcredit education loan and Housing loans so every bank in India with some exception and has to give about 40% of its total loans within these sectors so these sectors in combination are known as priority sectors for banking, next is another important concept that is the basic so that is the minimum interest rate for reference of different banks, show any bank which is lending to which is giving out loans define the interest rates in terms of base rate so far example if SBI gives a loan to let’s say Reliance then it would say the interest rate is base rate plus 1% or 100 Basis points so this is the reference and it is a minimum rate so they cannot give any loans which are below the base rate of the bank, so basic system they place the base prime lending rate system which was there up till 2010, this was replaced because banks could give out loans below BPLR in the earlier year before 2010, however now base rate is defined as the minimum interest rate that the bank can give loans in, so after 2010 base rate is applicable to all new loans and even poor loans which now come on for renewal, the different thing is that banks are free to calculate their base rates according to the cost at which they borrow these funds, however the two conditions are applied by the Reserve Bank of India but this base rate is calculated, RBI has to find it to be consistent or appropriate,
The calculation of the best rate by different banks has to be made public by the bank on their website or in their offices,
The Basel 3 Norms: –
Basel norms are defined by BIS that is the bank of international settlements in Basel that is a city in Switzerland and BIS has it’s their members as they all the central banks of the world, Teddy find different norms or practices for all the banking sector for the entire banking sector of the world so that they do not indulge in bad practices which destabilized these banks so the goal of Basel norms is to ensure financial stability and common standards of Banking Regulation in the world so has to avoid instability in the banking sector, so Basel 3 are the latest set of norms after Basel 1 and Basel 2 they were released in 2010 but will be implemented or adopted by all the banks in the world by 2019,
CAR (Capital adequacy ratio): –
CAR is capital adequacy ratio which is also known as capital to risk-weighted asset ratio that is CRAR so we will not get into the details of what these individuals’ terms are, but it expresses the Bank’s capital as a percentage of its risk-weighted credit exposure, so the amount of money and the bank has that is its capital divided by its risk-weighted assets gives the CRAR or capital adequacy ratio, It measures the amount of risky exposure that the bank has,
Core banking solutions: –
Now we can understand a very important concept that is the core banking solutions so CBS uses computer and Network Technology to allow a bank to centralize its Record-Keeping and allow access from any location and this is very important because all the transaction made within a bank are centralized and you can access the service of a bank, for example, taking out money from any place in the country or across the world as well so customers are allowed to access their bank accounts and perform basic money transaction from any branch office in the country or in-fact around the world it includes transactions, loans, mortgage payments, etc. further other banks make these services available across multiple channels like ATMs, internet banking, mobile banking and branches etc. and this was a significant advancement over earlier traditional type of Banking when all the banking transactions had to be done manually and the cheques for example had to be transferred physically from one place to other place so using mobile and internet technology Banks can perform all these function in a centralized manner,
So, these are the few of terminology in the banking sector of India, thank you.
