CLASSIFICATION OF BANKS

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CLASSIFICATION CLASSIFICATION OF BANKS OF BANKS & & CREDIT CREATION CREDIT CREATION IN BANKS IN BANKS

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CLASSIFICATION OF BANKS. & CREDIT CREATION IN BANKS. CREDIT CREATION. DEPOSITS PRIMARY DEPOSITS DERIVATIVE DEPOSITS. MULTIPLE CREATION OF CREDIT. LOANS & ADVANCES MONEY AT CALL & SHORT NOTICE DISCOUNTING OF BILLS INVESTMENTS. ILLUSTRATION: MAXIMUM EXPANSION OF LOANS & DEPOSITS. - PowerPoint PPT Presentation

Transcript of CLASSIFICATION OF BANKS

Page 1: CLASSIFICATION OF BANKS

CLASSIFICATION CLASSIFICATION OF BANKSOF BANKS

& &

CREDIT CREATION CREDIT CREATION IN BANKSIN BANKS

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CREDIT CREATIONCREDIT CREATION

DEPOSITSDEPOSITS PRIMARY DEPOSITSPRIMARY DEPOSITS DERIVATIVE DEPOSITSDERIVATIVE DEPOSITS

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MULTIPLE CREATION OF MULTIPLE CREATION OF CREDITCREDIT

LOANS & ADVANCESLOANS & ADVANCES MONEY AT CALL & SHORT MONEY AT CALL & SHORT

NOTICENOTICE DISCOUNTING OF BILLSDISCOUNTING OF BILLS INVESTMENTSINVESTMENTS

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ILLUSTRATION:ILLUSTRATION:MAXIMUM EXPANSION OF MAXIMUM EXPANSION OF

LOANS & DEPOSITSLOANS & DEPOSITSBANKBANK DEPOSITDEPOSIT RETAINED AS RESERVERETAINED AS RESERVE LENTLENT

11STST 10,000.0010,000.00 2,000.002,000.00 8,000.008,000.00

22NDND 8,000.008,000.00 1,600.001,600.00 6,400.006,400.00

33RDRD 6,400.006,400.00 1,280.001,280.00 5,120.005,120.00

44THTH 5,120.005,120.00 1,024.001,024.00 4,096.004,096.00

55THTH 4,096.004,096.00 819.20819.20 3,276.803,276.80

66THTH 3,276.803,276.80 655.36655.36 2,621.442,621.44

77THTH 2,621.442,621.44 524.29524.29 2,097.152,097.15

88THTH 2,097.152,097.15 419.43419.43 1,677.681,677.68

99THTH 1,677.681,677.68 335.54335.54 1,342.141,342.14

1010THTH 1,342.141,342.14 268.43268.43 1,073.701,073.70

TOTALTOTAL 44,631.2144,631.21 8,926.258,926.25 35,704.9235,704.92

ADDIT.LADDIT.L 5,368.795,368.79 1,073.151,073.15 4,295.084,295.08

GRAND GRAND TOTALTOTAL

50,00050,000 10,000.0010,000.00 40,000.0040,000.00

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DEPOSIT MULTIPLIER & DEPOSIT MULTIPLIER & CREDIT CREATION FORMULACREDIT CREATION FORMULA K= 1/rK= 1/r

K= Deposit multiplierK= Deposit multiplier

r= ratio of cash reserve to deposit r= ratio of cash reserve to deposit

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LIMITATIONS OF CREDIT LIMITATIONS OF CREDIT CREATIONCREATION

ADEQUATE CASH RESERVEADEQUATE CASH RESERVE AVAILABILITY OF SECURITIESAVAILABILITY OF SECURITIES QUANTITY OF MONEY IN CIRCULATIONQUANTITY OF MONEY IN CIRCULATION ATTITUDE OF PEOPLE ATTITUDE OF PEOPLE POLICY OF THE CENTRAL BANKPOLICY OF THE CENTRAL BANK NATURE OF BUSINESS CONDITIONSNATURE OF BUSINESS CONDITIONS LEAKAGESLEAKAGES BEHAVIOUR OF OTHER BANKSBEHAVIOUR OF OTHER BANKS USE OF CHEQUEUSE OF CHEQUE

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CLASSIFICATION OF BANKSCLASSIFICATION OF BANKS

1.1. COMMERCIAL BANKSCOMMERCIAL BANKS

2.2. INVESTMENT BANKS OR INVESTMENT BANKS OR INDUSTRIAL BANKSINDUSTRIAL BANKS

3.3. EXCHANGE BANKSEXCHANGE BANKS

4.4. CO-OPERATIVE BANKS CO-OPERATIVE BANKS

5.5. LAND DEVELOPMENT BANKSLAND DEVELOPMENT BANKS

6.6. SAVINGS BANKSSAVINGS BANKS

7.7. CENTRAL BANKSCENTRAL BANKS

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BANKING SYSTEMBANKING SYSTEM BRANCH BANKINGBRANCH BANKING UNIT BANKINGUNIT BANKING

CORRESPONDENT BANKINGCORRESPONDENT BANKING GROUP BANKING GROUP BANKING CHAIN BANKINGCHAIN BANKING DEPOSIT BANKINGDEPOSIT BANKING INDUSTRIAL BANKSINDUSTRIAL BANKS MIXED BANKINGMIXED BANKING INVESTMENT BANKINGINVESTMENT BANKING NARROW BANKINGNARROW BANKING UNIVERSAL BANKINGUNIVERSAL BANKING LOCAL AREA BANKLOCAL AREA BANK


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