Page 208 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 9: Commercial Banking Services

10. ………………………….indicates how well a bank's programmes can be sustained and the Notes
capital sum serves as a cushion against temporary losses.
11. Market discipline according to ……………is a lever to strengthen the safety and soundness
of the banking system.
12. …………………is the most profitable business of a commercial bank but at the same time
it is highly risky.
13. Term lending policy of a commercial bank is usually based on industrial activity and
………………..needs.

14. A bank has the social obligation of meeting the diverse …………… needs of the society
ranging from personal needs to small businesses to large industrial business needs.
15. …………………..reserve helps a banker to trade off successfully between liquidity and
profitability.

9.17 Summary

 The importance of Commercial banks and their contribution are discussed. An attempt is
made is to provide the effect of RBI banking regulations, demand supply theory of money,
interest and profitability of banks are explained.

 The risk management practices observed by banks are discussed. The management of
primary and secondary reserves, loan policy formulation and issues involved are discussed.
 There is also discussion on the financial institutions, which offer a variety of specialized to
traditional services to the business and act as mediators and agents of transfer of funds to
create wealth to the society at some charge for the service, which would be their source of
revenue. They have the obligation of creating a qualitative Financial System and should
cooperate with the regulatory bodies engaged with various measures to discipline the
economic system.

9.18 Keywords

Credit or loan: Credit or loan refers to sum of money along with interest payable.
Finance: Finance is monetary resources comprising debt and ownership funds of the state,
company or person.
Financial Institutions: Financial Institutions are business organizations that act as mobilizes
and depositories of savings and as purveyors of credit or finance. They also provide various
financial services to the society.
Financial System: Financial System is concerned about money, credit and finance.
Money: Money refers to the current medium of exchange or means of payment.

9.19 Review Questions

1. What is the role of commercial banking in developing the economy?
2. Explain about the functions of commercial banks.
3. Write about the regulating policies RBI with respect to commercial banks.

4. What are the various factors influencing the level of secondary reserve in commercial
banks?

LOVELY PROFESSIONAL UNIVERSITY 203