Banking Services and Operations

Which of the following is not implied by the author

1. earning profit was the sole objective for engaging in banking activities
2. wielding of power by the money lenders altered the course of history
3. banking activities were so designed as to suit the requirement of the higher caste

Directions: Answer the given question based on the following passage:

Before the indigenous bankers came into existence, the custom seems to have been to hoard capital wealth or deposit it with a friend. Gradually hawkers and guilds began to receive deposits and hold them as trust properties. No definite information is available whether they received deposits on payment of interest or for safe custody only. The Arthashastra lays down definite rules for the hoarding and utilization of wealth on interest, but is silent on the subject of deposit banking. Most early bankers were, however, traders who combined trade with banking.

There is evidence to show that in all important trade centers of the Buddhist period, there lived many bankers of great influence, who occupied prominent positions in guilds of commercial and industrial activities. Their main function was to finance traders, merchant adventurers or explorers in search of valuable materials, and kings in times of war and financial stress. Lending money on interest was common, the loans being secured by mortgage, by pledge of movables, or by surety. The Dharma Shastras, though in general agreement with the Arthashastra, introduced caste as an important factor in money lending, expectedly to the advantage of the higher castes.

During the early dynasties of the Muslim period, Multanis and Shroffs financed internal trade and commerce between different centres and acted as bankers to the Muslim rulers. It appears from the writings of a few Muslim historians, European travellers, State records and the Ain-e-Akbari, that both under the early Muslim and Mughal rulers in India, indigenous bankers played a prominent part in lending money, financing internal and foreign trade with cash or bills, and giving financial assistance to rulers. The Imperial Gazetteer records that Feroz Shah (1351-86) borrowed large sums of money from the Banker of Sasoti of Delhi for payment to his army. The soldiers of Delhi were paid by cash orders, italaq, in outlyhing places. These were discounted at Delhi by financiers who made a regular business of it and earned a good income.

Lending money on interest was therefore quite common, and steps were taken by the State to keep a check on usurers. Evidence shows that in the last quarter of the sixteenth century the Vaniks in Bengal charged interest at more than 500 per cent. As mentioned in the report of the United Provinces Banking Enquiry Committee, some indigenous bankers of the seventeenth and eighteenth centuries were so powerful that they were comparable with private banking houses in any other country, and seem to have fulfilled many of the functions of a central bank.

During the Mughal rule the issue of various kinds of metallic money in different parts of the country gave the indigenous bankers great opportunities for developing the very profitable business of money changing, revenue collectors, bankers and money changers to government in various parts of the empire. Many of them wielded great influence in the country.

What was the earliest known custom, according to the writer, that became a precursor to indigenous banking?

Directions: Answer the given question based on the following passage:

Before the indigenous bankers came into existence, the custom seems to have been to hoard capital wealth or deposit it with a friend. Gradually hawkers and guilds began to receive deposits and hold them as trust properties. No definite information is available whether they received deposits on payment of interest or for safe custody only. The Arthashastra lays down definite rules for the hoarding and utilization of wealth on interest, but is silent on the subject of deposit banking. Most early bankers were, however, traders who combined trade with banking.

There is evidence to show that in all important trade centers of the Buddhist period, there lived many bankers of great influence, who occupied prominent positions in guilds of commercial and industrial activities. Their main function was to finance traders, merchant adventurers or explorers in search of valuable materials, and kings in times of war and financial stress. Lending money on interest was common, the loans being secured by mortgage, by pledge of movables, or by surety. The Dharma Shastras, though in general agreement with the Arthashastra, introduced caste as an important factor in money lending, expectedly to the advantage of the higher castes.

During the early dynasties of the Muslim period, Multanis and Shroffs financed internal trade and commerce between different centres and acted as bankers to the Muslim rulers. It appears from the writings of a few Muslim historians, European travellers, State records and the Ain-e-Akbari, that both under the early Muslim and Mughal rulers in India, indigenous bankers played a prominent part in lending money, financing internal and foreign trade with cash or bills, and giving financial assistance to rulers. The Imperial Gazetteer records that Feroz Shah (1351-86) borrowed large sums of money from the Banker of Sasoti of Delhi for payment to his army. The soldiers of Delhi were paid by cash orders, italaq, in outlyhing places. These were discounted at Delhi by financiers who made a regular business of it and earned a good income.

Lending money on interest was therefore quite common, and steps were taken by the State to keep a check on usurers. Evidence shows that in the last quarter of the sixteenth century the Vaniks in Bengal charged interest at more than 500 per cent. As mentioned in the report of the United Provinces Banking Enquiry Committee, some indigenous bankers of the seventeenth and eighteenth centuries were so powerful that they were comparable with private banking houses in any other country, and seem to have fulfilled many of the functions of a central bank.

During the Mughal rule the issue of various kinds of metallic money in different parts of the country gave the indigenous bankers great opportunities for developing the very profitable business of money changing, revenue collectors, bankers and money changers to government in various parts of the empire. Many of them wielded great influence in the country.

What, according to the passage, were the earliest known activities a banker performed those days?

Directions: Answer the given question based on the following passage:

Before the indigenous bankers came into existence, the custom seems to have been to hoard capital wealth or deposit it with a friend. Gradually hawkers and guilds began to receive deposits and hold them as trust properties. No definite information is available whether they received deposits on payment of interest or for safe custody only. The Arthashastra lays down definite rules for the hoarding and utilization of wealth on interest, but is silent on the subject of deposit banking. Most early bankers were, however, traders who combined trade with banking.

There is evidence to show that in all important trade centers of the Buddhist period, there lived many bankers of great influence, who occupied prominent positions in guilds of commercial and industrial activities. Their main function was to finance traders, merchant adventurers or explorers in search of valuable materials, and kings in times of war and financial stress. Lending money on interest was common, the loans being secured by mortgage, by pledge of movables, or by surety. The Dharma Shastras, though in general agreement with the Arthashastra, introduced caste as an important factor in money lending, expectedly to the advantage of the higher castes.

During the early dynasties of the Muslim period, Multanis and Shroffs financed internal trade and commerce between different centres and acted as bankers to the Muslim rulers. It appears from the writings of a few Muslim historians, European travellers, State records and the Ain-e-Akbari, that both under the early Muslim and Mughal rulers in India, indigenous bankers played a prominent part in lending money, financing internal and foreign trade with cash or bills, and giving financial assistance to rulers. The Imperial Gazetteer records that Feroz Shah (1351-86) borrowed large sums of money from the Banker of Sasoti of Delhi for payment to his army. The soldiers of Delhi were paid by cash orders, italaq, in outlyhing places. These were discounted at Delhi by financiers who made a regular business of it and earned a good income.

Lending money on interest was therefore quite common, and steps were taken by the State to keep a check on usurers. Evidence shows that in the last quarter of the sixteenth century the Vaniks in Bengal charged interest at more than 500 per cent. As mentioned in the report of the United Provinces Banking Enquiry Committee, some indigenous bankers of the seventeenth and eighteenth centuries were so powerful that they were comparable with private banking houses in any other country, and seem to have fulfilled many of the functions of a central bank.

During the Mughal rule the issue of various kinds of metallic money in different parts of the country gave the indigenous bankers great opportunities for developing the very profitable business of money changing, revenue collectors, bankers and money changers to government in various parts of the empire. Many of them wielded great influence in the country.

The author attributes emergence of the new class of customers to ‘this transformation’. According to the passage ‘this transformation’ is

Directions: Answer the given question based on the following passage:

Indian banking has undergone a total transformation over the last decade. Moving seamlessly from a manual, scale-constrained environment to a technology-lending tradition, it has been a miracle. Nowhere in the world has such a transformation taken place in such a short span of time at such a low cost. The process began in 1999-2000, when a couple of banks signed their first core-banking transformation deal with Infosys. By 2009, about 50 banks with about 55,000 branches had completed the migration, offering their customers anywhere, anytime banking through various channels. Today, a consumer can go to an ATM across more than 44,000 locations, operate the bank account through the web, with instant reconciliation facility and all information available in a single database to help the decision makers.
Banking industry has grown at a compounded annual growth rate (CAGR) of 20% during the last decade. It has grown by a factor of five times. Total deposits have grown by 4.8 times, assets by 6.6 times, income interest by 9.5 times and net-worth by 4.5 times. Employee strength has grown by a mere 5%. This is an incredible transformation of an industry with no parallel in country. During 2000-2009, the gross domestic product (GDP) nearly trebled from Rs. 19,25,000 crore to Rs. 54,75,000 crore. Return on assets (ROA) which varies between 0.25% and 1.5% worldwide has risen from 0.87% to 1.0% in 2009 in the country.
In contrast to most countries, in India retail deposit forms a sizeable chunk of gross domestic savings, creating a large potential for investment. The ratio of the total deposit to GDP, which stood at 44% in 2000, has now climbed to 74%. However, the credit to GDP ratio presents an opposite picture and at 55% India lags behind many countries whose banks lend more than the size of their economies. We also have to catch up with the world’s best run banks in the area of cost management. India’s cost-income ratio lies anywhere between 37% and 66% and it is no match for international benchmark of 30-35%.
But the transformation is remarkable and this transformation has largely been enabled by indigenously developed information technology tools. Looking forward, the journey becomes even more remarkable, possibly because of the technology transformation that the banking sector has undergone. Although impressive, these numbers pale into insignificance when compared to the projected growth in the customer base. As per an estimate, Indian banks will add another 400 million customer accounts in the next decade. The focus on financial inclusion will deepen with the government and the industry working together. This has enormous implications for the industry, which must scale up systems, processes and infrastructure as well as boost the employee productivity to manage such growth. Likewise, the industry must change its mindset and innovate to cater to the unique needs of the next generation consumers when, according to a demographic projection for 2019, 450 million Indians will be below the age of 20.
The emergence of the new class of customers is the result of this transformation process of the last decade. The emerging challenges call for a new, more dynamic, and aggressive and challenging banking culture which meets the demands of customer relationships, product differentiation, brand values, reputation, corporate governance and regulatory prescriptions. Every bank, depending on its strategy, will have to migrate to its best position in this new structure from the branch level itself. The basic aim of the above strategies will have to be to improve the business performance of the banks. The size of ubiquitous and mass market retail banking and entry of non-traditional players will result in both seeking to collaborate more. And banking will wear a totally new look as urban consumers use their hand-held devices in lieu of cash and their rural counterparts discover the benefits of smart cards and other plastic technologies.

Which of the following demands, according to the passage, are required to be met by the challenging banking culture?

1. Brand values
2. Corporate governance
3. Customer relationship
4. Financial inclusion

   Directions: Answer the given question based on the following passage:

   Indian banking has undergone a total transformation over the last decade. Moving seamlessly from a manual, scale-constrained environment to a technology-lending tradition, it has been a miracle. Nowhere in the world has such a transformation taken place in such a short span of time at such a low cost. The process began in 1999-2000, when a couple of banks signed their first core-banking transformation deal with Infosys. By 2009, about 50 banks with about 55,000 branches had completed the migration, offering their customers anywhere, anytime banking through various channels. Today, a consumer can go to an ATM across more than 44,000 locations, operate the bank account through the web, with instant reconciliation facility and all information available in a single database to help the decision makers.
   Banking industry has grown at a compounded annual growth rate (CAGR) of 20% during the last decade. It has grown by a factor of five times. Total deposits have grown by 4.8 times, assets by 6.6 times, income interest by 9.5 times and net-worth by 4.5 times. Employee strength has grown by a mere 5%. This is an incredible transformation of an industry with no parallel in country. During 2000-2009, the gross domestic product (GDP) nearly trebled from Rs. 19,25,000 crore to Rs. 54,75,000 crore. Return on assets (ROA) which varies between 0.25% and 1.5% worldwide has risen from 0.87% to 1.0% in 2009 in the country.
   In contrast to most countries, in India retail deposit forms a sizeable chunk of gross domestic savings, creating a large potential for investment. The ratio of the total deposit to GDP, which stood at 44% in 2000, has now climbed to 74%. However, the credit to GDP ratio presents an opposite picture and at 55% India lags behind many countries whose banks lend more than the size of their economies. We also have to catch up with the world’s best run banks in the area of cost management. India’s cost-income ratio lies anywhere between 37% and 66% and it is no match for international benchmark of 30-35%.
   But the transformation is remarkable and this transformation has largely been enabled by indigenously developed information technology tools. Looking forward, the journey becomes even more remarkable, possibly because of the technology transformation that the banking sector has undergone. Although impressive, these numbers pale into insignificance when compared to the projected growth in the customer base. As per an estimate, Indian banks will add another 400 million customer accounts in the next decade. The focus on financial inclusion will deepen with the government and the industry working together. This has enormous implications for the industry, which must scale up systems, processes and infrastructure as well as boost the employee productivity to manage such growth. Likewise, the industry must change its mindset and innovate to cater to the unique needs of the next generation consumers when, according to a demographic projection for 2019, 450 million Indians will be below the age of 20.
   The emergence of the new class of customers is the result of this transformation process of the last decade. The emerging challenges call for a new, more dynamic, and aggressive and challenging banking culture which meets the demands of customer relationships, product differentiation, brand values, reputation, corporate governance and regulatory prescriptions. Every bank, depending on its strategy, will have to migrate to its best position in this new structure from the branch level itself. The basic aim of the above strategies will have to be to improve the business performance of the banks. The size of ubiquitous and mass market retail banking and entry of non-traditional players will result in both seeking to collaborate more. And banking will wear a totally new look as urban consumers use their hand-held devices in lieu of cash and their rural counterparts discover the benefits of smart cards and other plastic technologies.

Why does the author call transition from scale constrained banking to technology lending tradition a miracle?

1. Because of the negligible cost involved in the transition
2. Because the transition happened in a short span of time
3. Because some banks migrated to CBS by aligning with Infosys
4. Because the cost involved and time taken was very little

   Directions: Answer the given question based on the following passage:

   Indian banking has undergone a total transformation over the last decade. Moving seamlessly from a manual, scale-constrained environment to a technology-lending tradition, it has been a miracle. Nowhere in the world has such a transformation taken place in such a short span of time at such a low cost. The process began in 1999-2000, when a couple of banks signed their first core-banking transformation deal with Infosys. By 2009, about 50 banks with about 55,000 branches had completed the migration, offering their customers anywhere, anytime banking through various channels. Today, a consumer can go to an ATM across more than 44,000 locations, operate the bank account through the web, with instant reconciliation facility and all information available in a single database to help the decision makers.
   Banking industry has grown at a compounded annual growth rate (CAGR) of 20% during the last decade. It has grown by a factor of five times. Total deposits have grown by 4.8 times, assets by 6.6 times, income interest by 9.5 times and net-worth by 4.5 times. Employee strength has grown by a mere 5%. This is an incredible transformation of an industry with no parallel in country. During 2000-2009, the gross domestic product (GDP) nearly trebled from Rs. 19,25,000 crore to Rs. 54,75,000 crore. Return on assets (ROA) which varies between 0.25% and 1.5% worldwide has risen from 0.87% to 1.0% in 2009 in the country.
   In contrast to most countries, in India retail deposit forms a sizeable chunk of gross domestic savings, creating a large potential for investment. The ratio of the total deposit to GDP, which stood at 44% in 2000, has now climbed to 74%. However, the credit to GDP ratio presents an opposite picture and at 55% India lags behind many countries whose banks lend more than the size of their economies. We also have to catch up with the world’s best run banks in the area of cost management. India’s cost-income ratio lies anywhere between 37% and 66% and it is no match for international benchmark of 30-35%.
   But the transformation is remarkable and this transformation has largely been enabled by indigenously developed information technology tools. Looking forward, the journey becomes even more remarkable, possibly because of the technology transformation that the banking sector has undergone. Although impressive, these numbers pale into insignificance when compared to the projected growth in the customer base. As per an estimate, Indian banks will add another 400 million customer accounts in the next decade. The focus on financial inclusion will deepen with the government and the industry working together. This has enormous implications for the industry, which must scale up systems, processes and infrastructure as well as boost the employee productivity to manage such growth. Likewise, the industry must change its mindset and innovate to cater to the unique needs of the next generation consumers when, according to a demographic projection for 2019, 450 million Indians will be below the age of 20.
   The emergence of the new class of customers is the result of this transformation process of the last decade. The emerging challenges call for a new, more dynamic, and aggressive and challenging banking culture which meets the demands of customer relationships, product differentiation, brand values, reputation, corporate governance and regulatory prescriptions. Every bank, depending on its strategy, will have to migrate to its best position in this new structure from the branch level itself. The basic aim of the above strategies will have to be to improve the business performance of the banks. The size of ubiquitous and mass market retail banking and entry of non-traditional players will result in both seeking to collaborate more. And banking will wear a totally new look as urban consumers use their hand-held devices in lieu of cash and their rural counterparts discover the benefits of smart cards and other plastic technologies.