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JAIIB PPB 2022 Principles and Practices of Banking Short Notes Part 3

JAIIB PPB 2022 Principles and Practices of Banking Short Notes Part 3

JAIIB exams are going to be held this month. These exams are finally getting held after so many postponements that were happening last year. The syllabus of JAIIB includes three papers, out of which PPB is one. 

The first paper of JAIIB is divided into five modules which are mentioned below:

PAPER MODULES
Principles & Practices of Banking

(2022)

A – Indian Financial System

B – Functions of Banks

C – Banking Technology

D – Support Services – Marketing of Banking services or Products

E – Ethics in Bank & Financial Institutions

You can also check the detailed syllabus of all the papers of JAIIB by clicking on the link here.

PPB 2022 SHORT NOTES:-

JAIIB PPB Principles and Practices of Banking Short Notes Part 1 & Part-2

UNIT – 11: RECENT DEVELOPMENTS IN THE INDIAN FINANCIAL SYSTEM

  • A committee was set up by the Indian government in 1984 under the chairmanship of Sukhamoy Chakravarty for the purpose to review the Indian monetary system. 

After the setup of this committee, the Narasimham committee & Narayanan Vaghul working group was also set up. 

This committee recommended various financial sector reforms which were initiated in 1990. Out of the suggested reforms, the following mentioned were adopted by the government: 

  1. Interest rates were deregulated 
  2. Money Market Mutual Fund (MMMFs)
  3. Transactions in Electronic mode
  4. Liquidity Adjustment Facility (LAF)
  5. Establishment of the Clearing Corporation of India Ltd. (CCIL)
  6. Development of New Market Instruments. Treasury Bills of different duration, CP (Commercial papers), CD (Certificates of Deposits), MMMFs, etc. have been introduced by the government.

Important Topic:- IIBF JAIIB DB&F PPB NEW SYLLABUS & LATEST STUDY MATERIAL 2022

  • Commercial paper is in the form of a promissory note which is an unsecured money market instrument. Commercial paper allows high-rated corporate borrowers to utilize money from different sources and they also provide an additional instrument to the investors.
  • CD, Certificate of Deposit, is a kind of Negotiable money market instrument issued in the dematerialised form. These certificates are issued as a receipt for the funds deposited at the bank. The minimum deposit period required certificate of deposit is 8 days.
  • So far, RBI has taken many steps to introduce and upgrade a safe and efficient mode of payment system in the country to fulfill the requirements of the public at large.
  • Because paper-based payments are still very much prevalent in the Indian economy, RBI introduced technology MICR (Magnetic Ink Character Recognition) to speed up and bring efficiency in processing of cheques.
  • A separate High Value Clearing system has been introduced to clear a cheque having value of Rs. 1,00,000.00 and above. This system of high-value clearing has been available at selected centers. But this system has been discontinued as of now.
  • Speed clearing system has been launched as a recent development in paper based instruments. The system was for local clearance of outstation cheques which were drawn on branches of the Bank which were enabled with core banking. The cheque truncation system and the framing of CTS-2010 standards have also been introduced to enhance the security features of cheques.

Electronic Payments

  • Due to continued increase in cheque values, there has been an added pressure on the existing setup cheque clearing, resulting in finding alternative systems which are cost effective. Some of them are given below:
  • Electronic Clearing Service (ECS) Credit
  • Regional ECS (RECS)
  • Electronic Clearing Service (ECS) Debit
  • National Electronic Funds Transfer (NEFT) System
  • Real Time Gross Settlement (RTGS)System
  • Clearing Corporation of India Limited (CCIL)

Other Payment Systems

  • Prepaid instruments facilitate the purchase of goods and services against these instruments themselves. These prepaid instruments have some value stored in them which represents the value that has been filled for by the holders, either in cash or bank accounts. 

These payment instruments are issued in the form of smart cards, internet wallets, mobile wallets, mobile accounts, paper vouchers, magnetic stripe cards, etc.

  • The prepaid payment instruments cannot be used for cross-border transactions except for payment instruments that have been approved under FEMA, 1999 (Foreign Exchange Management Act). 
  • In October 2008, the Reserve Bank of India came out with the operating guidelines for banks on mobile banking. As per RBI guidelines, only those banks were allowed to offer mobile banking services which had licenses and were being supervised in India as well as had a physical presence in India. 

Read Also:- IIBF JAIIB PPB QUESTION PDF – principles and practices of banking

ATMs/ Online Transactions/ Point of Sale (POS) Terminals

  • As per the data provided by RBI, by September 2021, scheduled commercial banks had 2.13 lakhs of Automated Teller Machines (ATM) installed. In addition to that there were more than 27000 white label ATMs were also installed by WLA operations up to September 2021. 

Customers of the banks could withdraw cash from any bank terminal up to five times in a month without getting charged for the services.

  • As per the guidelines of the Reserve Bank of India, a bank is required to recredit the failed transactions within 7 working days and if the credit is delayed beyond the specified period, they are required to compensate the customer.
  • By the end of the financial year 2020, more than 5 million POS terminals in India. These POS terminals helped the bank customers to pay for their purchases through credit and debit cards. This has helped the POS to reach a steady growth such as grocery shops, restaurants, gas, and fuel stations.
  • To provide convenience to the customer banks have also permitted cash withdrawal by using debit cards that have been issued by the banks at such POS terminals.
  • Because there has been an increased use of debit and credit cards for online transactions, to reduce the risk arising out of them, the reserve bank of India has mandated that all CNP (card not present) transactions need to be authenticated in addition by using information which is not already on the card as well as an online alert should be sent to the cardholders informing them of the transactions that happen with their cards.

National Payments Corporation of India (NPCI)

  • Reserve Bank of India had encouraged the setup of NPCI (National payments corporation of India) so as to make it work as an umbrella organization to operate very Retail payment systems in India. 

NPCI started its function in early 2009 and it has chicken over the working of NFS (national financial switch) from IDRBT (Development and Research in Banking Technology).

  • Payment and settlement systems fall under the purview of the Central bank’s functions. In this function, it is required to observe the objectives of safety and efficiency through the monitoring of existing and planned systems, assessing them for any requirement of changes, etc. 
  • By observing the system of payment and settlement, the Central Bank also helps in maintaining system stability and reducing systematic risk as well as maintaining public confidence in the system.

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