Banking Solutions for Customer Convenience

Banking has evolved with time. The entire infrastructure and concept of traditional piled files and documents has given away to a much more sophisticated and sleek outlook. Moreover with technology growing with a rapid pace the time consuming factor has been replaced with doorstep banking methods which permits you to carry on with your banking 24/7 without having to pay the bank any visit. Money orders and transfers have taken a backseat for Online Money transfers, Card and mobile banking. Even Security trading, Stocks and Mutual Funds can be accessed by traders and investors alike without finding the need to consult each other or pay each other any visits.

When Banking started of for Independent India, you had Nationalized and regional banks handling the country’s finances. As the years progressed you had more branches opening up. The 80s and 90s saw a whole lot of Global Banks like Standard Chartered, Barclays, Grindlays opening their banks up in India. Still banking didn’t seem to be convenient. The modus of transaction was pretty gloomy and boring with people having to wait their turns to visit the teller’s counter to complete their transactions. With technology coupled with the internet coming into play banking solutions have become more custom made for the average consumer. Online Banking ensures that a person is tuned completely with his finances at any given point from any part of the world. Ditto for mobile banking. The last couple of decades also saw numerous Indians migrate abroad on a bid to pursue their lives and carrier. Getting monetary transactions wasn’t easy then. Postal services and courier faux passes weren’t that convincing. Now with banks offering many solutions NRI Banking has also been made easier.

Various facilities for NRI Banking consist of NRI Savings account, NRI Term Deposits and provision to remit money to India. Mobile Banking and Online Banking also offer Mobile bill payment and online bill payments respectively. Typical business banking ensures commercial as well as retail banking services. In Commercial Banking, various corporate entities and major industrial houses are liable to be offered loans to proceed with their business and financial commitments. This kind of banking is generally profitable as it includes a large amount of money. Incase of retail banking services which is basically mass marketing business transactions, direct transaction with individuals which includes loans, various accounts and deposits, and locker facilities banks look to improve their consumer base. Establishing good customer relationship strengthens your financial base as with every major deal that you incorporate via your customers adds to your treasury. As of now the Retail section is undergoing a strain courtesy the recession. The failure to repay debts has seen the fall of global financial houses. So it is very important that a thorough examination is done to ensure know your customer (KYC) norms prior to issuing major loans.

Banks also provide special facilities to their HNI (High net individual) worth customers. These people generally have a huge amount invested with the financial house and indulge in hefty transactions. They are provided with world class banking facilities termed as Priority Banking and Premier Banking, both words justifying their meaning. Savings account for the average investor has also been made easier where you no longer need a referral to open an account or minimum balance to save in your account (* condition applies in both cases). Currently the major Global players in the Indian Finance Sector include Standard and Chartered, HSBC and Barclays. Banks of Indian origin that have gradually made waves include ICICI, HDFC, SBI and Axis Bank. All in all modern day banking has every element that ensures Wealth Management Services for the longer run.

Retail Banking Services

The Banking sector is considered to be the largest Business provider. It is diversified with every section catering to one particular transaction. It could be either individual/personal or business to business banking. The kind of banking where the financial institute directly executes transactions with the consumer is called Retail Banking. Retail Banking services include savings and checking accounts, personal loans, credit cards, debit cards, etc, etc.

On general terms retail banking refers to typical mass-market banking in which individual customers use local branches of larger commercial banks. Retail banking aims to be the sole destinations where an individual finds as many as financial services possible catered to meet his needs. As of late Retail Banks has also gone ahead and stepped into wealth management services, brokerage accounts, private banking and retirement planning. One of the most prominent features of modern day is retail banking is the facilities that it has provided to its consumers. Right from ATM’s to credit cards to debit cards to phone banking and online banking retail banking has provided it’s consumers with the most convenient banking facilities. While some of these services are outsourced to ensure financial regulations, they often intertwine with core retail banking accounts like checking and savings to allow for easier transfers and maintenance. The core idea is that a consumer can avail banking services without paying any branch a visit for the same. In most cases it provides single window service which means that customers can visit one counter for any banking need.

One the most critical factors that determines the success of Retail Banking is flexibility in its branch organization. Regional differences could be taken into consideration, but they must co-ordinate with each other to ensure that every need of the consumer is met. The most prominent product sought after in Retail Banking is personal loans. These loans are launched by financial houses under different yet attractive brand names to attract customers. The tenure granted for repayments usually lasts from 5-7 years with housing loans being provided for a longer duration: i.e of 15 years. In recent past retail lending has been a key profit maker for numerous banks. The new age private banking sectors have highly benefited through this aspect of retail lending, but in the longer run it has been the public sector banks who have profited the most, thanks to their vast branch network and out reach.

The last decade has witnessed the emergence of Retail Banking in the global front. Establishing good customer relationship strengthens your financial base as with every major deal that you incorporate via your customers adds to your treasury. As of now the Retail section is undergoing a strain courtesy the recession. The failure to repay debts has seen the fall of global financial houses. So it is very important that a thorough examination is done to ensure know your customer (KYC) norms prior to issuing major loans. Customers on their behalf need to be very cautious and pay close attention to all aspects of their account. Reviewing your bank statements on a regular basis and ensuring that you aren’t paying extra charges is a good way to keep your accounts safe and secure.

Online Money Transfer has made banking all the more easier.

Modern Day Banking has become extremely hectic with loads of transactions occurring at the same time across the globe. With financial regulations stepping up, there are businesses that require banking 24/7. With technology evolving on a regular basis, new concepts of banking are being introduced now and then. With the birth of the internet, all major transactions have become faster and secured. Ditto for mobile banking, banking has been at its convenient best. Gone are the days when you had to wait till the teller counted your number and you silently followed his instructions either to deposit an amount to or have a cheque encashed.

As of today all the major financial houses offer their customer with doorstep banking facilities in order to ensure that they stay tuned with their finances from any part of the world. Online Money transfer makes transactions easier when you transfer money from one country to another. Ideally when an individual residing in one country proposes to transfer a certain amount of money to another country through the Net Banking Facility that is offered to him from the bank he has an account with, the procedure is termed as Online Money Transfer. Here he is entitled to get the amount transferred to any country of his choice, provided the same bank has a branch existing there and at the same time the money that is transferred will be converted into the currency of that particular country. The transfer is almost instant, at the most a couple of business days and you are provided with timely updates regarding your transactions. In most cases the recipient usually receives the amount in a matter of seconds irrespective of the location.

Earlier you had money transfer options from banks through traditional money transfer orders, which would consume a whole lot of time but most importantly keep both the sender and recipient in anxiety. In most cases this problem had plagued Indians for decades. During the 80s and 90s when a whole lot of Indians migrated abroad to get their NRI status they found it extremely difficult to remit money to and from India. But due to the successful economical growth that the country witnessed in the last decade or so, the problem of money transfer started easing up. Globalized banks started opening up bases in India and with the advent of the internet they introduced the platform of Internet/Online Banking. The financial houses created websites for themselves and set it live online for their consumers to server their purpose. Online banking also ensured that any new products or schemes launched were displayed almost instantly and at any given point of time it reached out to millions of potential users, thus providing a cost effective mode of advertisement.

Online money transfer also includes money transfers from stocks, bonds, Mutual Funds and Equity trading. Almost every privatized financial player provides online money transfer facility. The most prominent medium of payment or transaction online is through Paypal. Other major financial players who help in establishing online money transfers in India are Barclays, Western Union and Axis Bank amongst others. Transferring money from one part of the world to another is a minor issue now as customers can easily avail this facility either from their homes or offices. Moreover with the concept of Mobile Banking taking center stage business banking will be at its very best.

Wealth Management Services

Wealth Management services are a professional service provided by reputed financial organizations to their valued customers. Generally speaking it is termed as an investment advice as it encompasses all parts of a person’s financial life. The prime objective is to provide worthy individuals with tailored retail banking services such as taxations, investment decision and other primary transactions with the goal of sustaining and growing long-term wealth. This is a value added gift to the customers that the financial institutes offer as it provides a detailed insight to all primary monetary transaction made and in the process updating him regarding his/her current financial situation, so that he can meet future financial obligations with ease.

Wealth management services are provided by independent financial advisors or large corporate entities who’s primarily goal is focused on high net worth individuals (HNWI). This activity ensures a long lasting association between the organization and the customer involved. These customers fill in the bracket of mass affluent or upper retail client, because of their net worth; the number of investment instruments that they opt to invest upon, their assets (insurance, mutual fund, stocks, bond etc etc) under management. Large financial and brokerage institute create separate sales forces, services and other ‘benefits’ to retain or attract these customers who are typically more profitable than other retail banking, brokerage, or insurance customers. This helps banks capitalize on their customer base to create additional revenue streams, by offering HNWI and the mass affluent extended products and services. Wealth management services complements the existing expertise of CPA’s (Certified Public Accountants) and leverages the financial knowledge & information about clients’ lives that they already posses. All in all it is a winner and all the bankers associated with investment banking benefit a lot through it.

Typically a Wealth Management Team from any major financial Institute consists of financial advisors who are categorized into three major divisions; a) The Product Specialists, b) The Investment Generalists & c) The Wealth Managers. The Product Specialists are financial advisers who focus on products such as managed accounts, stocks or fixed-income alternatives. This group corresponds to CPAs who offer only traditional accounting services. The Investment Generalists are financial advisers providing a wide range of investment products, but lack comprehensive financial planning orientation. Wealth managers make a detailed insight into the financial lives of their clients that enables them to come out with integrated solutions. It also offers the wealth manager the opportunity to cross-sell a wide range of products and services to each client as appropriate. When a customer has a whole lot of accumulated wealth that could be used for certain gains for the customer as well as for the organization, the bank offers him/her various investment instruments/modules and appoints investment advisors to help him make decisions. These investment modules could start of from mere schemes like deposits that the bank itself offers to investing in insurance, mutual funds and general stocks and bonds to provide long term capital gain and growth.

Through sophisticated analytics, relevant financial planning and asset allocation tools financial institutes derive rich integrated insights about the HNWI client’s investment portfolio, thereby providing them the opportunity to borrow an amount (leverage) from the client, by offering him investment modules and then cross investing this amount in a manner that would ensure that by the end of the tenure of investment both the client and the organization profits a lot. Every financial operation is processed identically. Every major transaction has a successful update or a banking statement to act as a testimony in case of technical deficiencies. Wealth management solutions/services is a fully integrated and component-based solution that guarantees consistency of data throughout.

Import Letter of Credit

Import letter of credit is a term that is associated with global business or international trading. International trade continues to grow every year as nations expand their global sales and new nations join in. Trade related financial services have developed and expanded in depth, complexity and effectiveness to support the expansion of world trade. This has given rise to an important term called “Import Letter of Credit”. On Business lines it is defined as the designation given by the importer (person or body making the payment on imported goods), to the commercial letter of credit (document where the bank guarantees the worth of importer), established in favor of the exporter. The same document is termed “export letter of credit” by the exporter.

Import Letters of Credit provide importers the most widely used and accepted international trade payment mechanism and finance instrument. By structuring Letter of Credit terms to allow Deferred Payment or Trade Acceptance a Letter of Credit can be utilized to provide financing to the importer. It guarantees payment, provided the seller complies with the terms and conditions within the Letter of Credit. An irrevocable letter of credit cannot be cancelled or varied without the consent of all parties. A bank issue an import letter of credit on the behalf of an importer or buyer under the following Circumstances a) When a importer is importing goods within its own country, b) Any act of merchandize where goods from the country is sold to another commercially, c) When an Indian exporter who is executing a contract outside his own country requires importing goods from a third country to the country where he is executing the contract. The first out of these three is the most common reason to get a letter of credit in modern day trading.

There are certain fees and reimbursements associated with this kind of trading though. The issuing bank charges the applicant fees for opening the letter of credit. The fee charged depends on the credit of the applicant, and primarily consists of: A) Opening Charges, which comprises of commitment and usage charges for the period of the letter of credit, B) Retirement Charges: This is to be paid when the period of letter of credit terminates. The bank providing the letter scrutinizes the bill according to UCPDC (Uniform Customs and Practice for Documentary Credits), and levies charges based on value of goods. There are certain risks also that are associated while opening this kind of account. Basic risks include: Financial Standing of the Importer, the goods involved, the exporter and country risk and foreign exchange risk. Price risk is another crucial factor associated with all modes of international trade. All banks need to evaluate their strategies on the mentioned criteria’s prior to issuing the letter of credit.

Import Letter of Credit provides
importers the most widely used and accepted international trade payment mechanism and finance instrument. By structuring Letter of Credit terms to allow Deferred Payment or Trade Acceptance an L/C can be utilized to provide financing to the importer. With the amount of influx creeping in the Indian Market, people primarily into forex business or into international trading will value this document. Most importantly international trading has a whole lot of money involved and if done properly could accumulate a turnover capable of running a state’s budget; hence it is important that it is handled with care.

The Concept and Importance of NRI Banking.

The term NRI (Non-Residential Indians), refers to a section of people having Indian origin but residing outside India. NRI Banking is done to attract NRI’s to carry out financial transactions, like depositing amounts and other remittance into India through banking channels. NRI Banking was introduced by the Government of India in 1970, to bolster the balance of payments between Indian banks and NRI’s through Non-Resident (External) Account Rules which are governed by the Exchange Control Regulations. Funds held in these kinds of accounts enjoy certain provisions like tax-exemptions, free repatriation facilities, etc.

NRI Banking in India is maintained by banks that hold official authorized dealers license from the reserve Bank of India. The financial budget for 2007-08 extends NRI accounts to regional rural banks (RRBs) as well. This would boost the economical growth in areas like Bihar, Kerela and Central India where the financial regulation as of now has been stagnant.
NRI-Banking facilitates the NRI customer to open the following types of accounts: 1) NRE (Non-Residential External) Account, 2) NRO (Non-Residential Ordinary) Account and 3) FCNR [B] (Foreign Currency non-residential bank) Accounts. All NRI’s are permitted by the RBI to open all these accounts except for people residing in Pakistan or Bangladesh, as they would need special permission. Joint accounts of two or more non-residents and nomination facility are permitted. The NRE account is opened in the form of Savings, Current or fixed deposits in Indian rupees. The funds in this account are fully repatriable. NRO accounts can be opened in the same manner as an NRE account, the only difference the funds here are not repatriable. FCNR accounts can be opened using a US, European and Japanese currency. The funds in this account are also repatriable.

NRI money transfer and NRO term deposits follow a modular structure. These various modules render Banking solutions in a seamlessly integrated fashion. The Masters module permits maximum parameterization to be done, enabling the end user to make all changes with regard to Interest Rates or with regard to any changes as per directives from Head Office / RBI. Inventory, Currency, Country, Exchange rate and return reason details are also maintained. Scheduling of charges is also important. Most global banks having their bases set up in India offers products and services that tailor to the need of a wide range of customers. Hence the charges that need to be incorporated for these transactions should be fixed after through analysis. These charges mostly depend on the magnitude of transaction taking place. Other major facilities include authorization and freezing of Accounts, account closure, pre-closure, Renewal & overdue renewal of Deposits and issuing of final Savings Bank Interest Calculations.

As for interest rates provided on the NRI accounts are concerned, FCNR (B) and NRE are subject to a cap, and should not exceed the SWAP rates. In the case of NRO accounts, rates are determined by the banks. The interest rates, currently at 3.5% apply to a period of 1 to 3 years. As per RBI statistics, total NRE/ FCNR deposits made during 2006-2007 amounts too USD 37,751 million. The figure however is estimated to grow with regional & co-operative banks offering lucrative offers to bolster the NRI funds.

Mobile Banking – The future of Banking is here

Modern day banking has evolved a lot with time. Gone are the days when customers queued in front of a teller’s window awaiting their turn to get their cheque encashed or deposited in their accounts. The current day banking scenario is much more savvy and fast. From net banking to phone banking the customer has been provided with numerous facilities to make banking much easier, safer and comfortable. Mobile banking, the new-age phone banking facility also referred to M-banking or SMS banking is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device.

The advent of the Internet revolutionized the way the financial services industry conducted their businesses. They empowered organizations with new business models and new ways to offer non-stop accessibility to their customers. The ability to offer financial transactions online has also created new players in the financial services industry, such as online banks, online brokers and wealth managers who offer personalized services, although such players still account for a tiny percentage of the industry. Mobile devices, especially smartphones, are the most promising way to reach the masses and to create “stickiness” among current customers, due to their ability to provide services anytime, anywhere, their high rate of penetration and potential to grow has made them a dominating force in the world of e-banking. The mobile banking business model depends on banking agents, i.e, the retail or postal outlets that process financial transactions on behalf of telcos or banks. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them.

Mobile Banking models are classified into 3 main categories. 1) Bank Focused Models, 2) Bank-Led model, 3) Non-Bank led model. The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks’ customers. The bank-led model offers a distinct alternative to conventional branch-based banking, through which a customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade partner (telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank (e.g: telco) performs all the functions.

Mobile Banking is the hottest area of development in the banking sector and is expected to replace the credit/debit card system in future. Currently (September, 2008), there are 47 million mobile users, with approximately 2 million being added every month While the government incurs a transaction cost of Rs 12-13 for every Rs 100 it shells out, mobile banking helps it reduce the cost to a mere Rs 2. RBI estimates that around 40 per cent of Indians lack access to formal financial services and are largely ‘unbanked’. The number of mobile users is estimated to have far surpassed the number of Internet users. Hence it is important to safeguard the secure usage of this medium for financial transactions. Some techniques that can be implemented for the same include using the phone-lock function on your mobile device when it is not in use, choosing passwords which are difficult to crack and keeping them safe and ensuring that the phone is configured securely, especially when it comes to configuring the Web browser and email software. Keeping your mobile phone updated with the latest patches and updates including antivirus updates help a lot.

Term Loans & Deposits

A Loan is a kind of a debt where a borrower borrows a desired amount of money from the bank, keeping a security along with the condition that the sum received will be paid back in Equated Monthly Installments along with a rate (fixed/floating/flat) of interest: i.e – an amount charged on the loan issued. A deposit is a kind of an investment where the customer invests a certain amount of money in a scheme for a certain period of time in exchange of an interest which a bank pays at the end of the tenure of that scheme. With the kind of influx and financial regulations that is going on in the finance sector, various financial houses, private and public sector banks offers suitable schemes to their customers to either opt for a loan or to go in for a deposit.

A Term Loan is defined as a loan which is repaid through regular periodic payments referred as Equated Monthly Installments or EMI, usually over a period of 1 to 10 years. If you approach a bank for a loan of one lac (1,00,000 INR), the bank after going through various calculations based on your eligibility criteria which mainly depends on your monthly income & your liabilities decides to provide the amount. You get the loan and agree to repay it within a period of somewhere between 6 months to 4 years. This is an example of term loan. Failure to repay the loan within the stipulated period will only result in the bank confiscating the security that you provided as a guarantee while taking the loan. Short term loans whether personal or commercial/business are taken for shorter repayment duration hence making the repayment options all the more easier for the borrower. A short term personal loan is taken for personal usage such as home house renovations, wedding, vacation planning etc. Short term business loans are mainly provided to raise working capital of your business. They are appropriate for both new and existing businesses. When dealing with new businesses, most banks will grant only shorter-term loans, because short-term loans are less risky than loans with longer terms.

A Term Deposit is a deposit held at a financial institute and has a fixed term. These are generally short-term deposits with maturities ranging anywhere from a month to a few years. When a term deposit is made, the account holder can only withdraw the amount after the term has ended or by giving a predetermined number of days notice. Term deposits are an extremely safe investment and are therefore very appealing to conservative, low-risk investors. Currently banks also offer flexible-term deposits (flexi deposits), which is a combination of a term-deposit facility and a savings account. Here the account holder is asked to deposit a certain amount from his savings account as a term deposit. This amount can be withdrawn if the required withdrawal amount isn’t available in your savings account. Once the amount that you withdraw from your term deposit is deposited in your savings account, the same amount that you withdrew is deducted from your savings account and deposited to your term deposit account.

Now comes the big question??? How are these two major terms related to each other? Well a bit of common sense does provide the answer. For instance you make in a term deposit of a lac for 3 years. The bank agrees to pay you an interest of 9% p.a. So at the end of 3 years going through the interest rate the amount that will be provided to you will approximately be around a lac and thirty thousand (1,30,000 INR). Now once you deposit the amount into a term deposit scheme for 3 years you will not be entitled to operate through that account. So what the bank usually does is loan this particular amount for a period that is lesser then the period of deposit. Now take another case: Say the bank could have 1 lac loaned to a company or individual for 3 years at 12% p.a, then at the end of the tenure the bank would re-collect an amount of around a lac and forty thousand (1,40,000 INR). So the bank profits by 10,000 INR. So the sole purpose of these two functions; i.e loans and deposits is financial regulation. You please a customer and at the same time you get business done for your bank. Most banks uses this theory to get a large part of their revenue streaming in.

Business Banking

Business Banking or Commercial Banking refers to an area of banking primarily dealing with deposits and loans from corporations or large businesses. It is a separate entity from retail or investment banking as it doesn’t involve the provision of financial services direct to consumers. It makes loans to business and consumers, its primary liabilities are deposits and assets loans and bonds. Business banking for commercial or any small scale business is daunting. Commercial loans are obtained to increase or expand an on going business or to support new business ventures. Commercial loans are provided according to their status of business.

Business Banking provides a number of loans to suit the specific needs of the organizations. Business banks offer various checking account options and savings account options that cater to different needs depending on what business you have. These loans are categorized as secured loans and unsecured loans. A secured loan is one in which the borrower keeps a security against the sum borrowed. The most common kind of loan that falls under this category and is usually sought after is the mortgage loan. A mortgage loan is usually sought after during purchasing of property. Here again the individual opting for a loan is required to provide a security against loan borrowed. It is usually a loan against property where the person opting for the loan on failing to repay will have the property confiscated by the bank. The loan can be repaid through easy monthly installments. Unsecured loans don’t ask for security and are mostly made through marketing ventures such as credit cards, debit cards etc.

Business banking through commercial lending services enables your business to grow from a small medium enterprise to a large scale banking business through a seasonally adjusted payment loan. Usually business organizations opt for a “commercial interest only” loan as it gives them an option as it provides an option of paying the interest on the loan for the first few years only. A commercial loan can be repaid anytime within 10-20 years time, mostly depending on the size of the loan. Interest rates for these kind of loans tend to vary depending on the tenure of the loan. Major services through commercial banking include processing of payments, issuing bank drafts, accepting money on term deposits, lending money through overdraft and currency exchange. Commercial mortgage banking is carried out by bankers who fund the loan using their own finances as a service to mortgage for their investors.

Business banking through commercial banks varies greatly in size through money center banks that offer a wide range of traditional and non-traditional services to international lending to various regions. This kind of banking receives huge revenues through various sources. Their assets and liabilities are typically managed in a way that the revenue is maximized and liquidity is maintained. However, the fluctuation in the rates of interest all over the world makes it unpredictable for commercial banks to estimate their revenue.

Modern day business banking includes foreign exchange, payment of interest and granting of loans. As business banking involves huge monetary transactions commercial banks control a whole lot of wealth, but it is allowed to only hold on to a small fraction of it as the rest has to go out for circulations. The activities of these banks in certain functions such as the interest rate are monitored by the apex bank to ensure transparency and secure the overall interests of the tax-paying citizen. Commercial banks also offer various other functions such as opening savings account, safe deposit boxes and trust services.

Loans

Loan is a kind of a debt that a banking/financial organization lends to a borrower for his personal or professional reasons. Initially the money isn’t directly handed over to the borrower, rather like every other debt instruments some security is provided against the amount borrowed. This particular amount is then repaid in forms of installments, not necessarily of the same size though. For this particular service the bank does charge a fee termed interest on the amount borrowed. On legal terms a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money.

Typically the kind of loans a bank generally issues is a secured loan and an unsecured loan. A secured loan is one in which a borrower provides an asset or document as security against the sum borrowed from the bank. This security/asset is held by the bank till the entire loan along with interest is repaid. The most common kind of loan that comes under this category is a mortgage loan. A Mortgage loan is a heavy loan that is provided to the customer for purchasing property against security, namely another property. This security is a possession of the bank till the complete debt is paid of. The debt can be paid of in easy installments. Failure to repay the debt will ensure that the bank acquires legal control of the property that has been kept as mortgage against the loan provided. Other kind of secured loans include auto loan that is used for purchasing automobiles such as cars, and stock hedge loans that is used for purchasing stocks and bonds and used for investing in stock markets.

An unsecured loan is a monetary loan that is used without any specific security to the borrower. These kinds of loans are issued against different marketing packages such as debit cards, credit card and overdrafts depending on the lender and borrower. Banks that offers big loans to individuals for business or professional reasons are commercial banks and it is through loans issued that they make business. This kind of banking is also termed business banking. Commercial banking dominates most of the banking sector as they generate the maximum amount of profit by interest garnered through loans provided. These loans are generally huge in nature taken by individuals for their business and professional purposes and repaid in due course of time along with interest. Say if a loan of a crore is issued to an individual at 10% p.a, then the interest solely runs upto 10 lacs on a yearly basis and if the loan is repaid in the course of 10 years then the total interest garnered on the loan issued amounts to a crore which was the original amount loaned, hence the return is twice the amount loaned and hence the margin of profit.

Other types of popular loans provided by banks include back to back loans or parallel loans, parent loans for educational purposes, loans in process and portfolio loans. A parallel loan or back to back loan is taken when two companies from different countries borrow each others currency for a stipulated period of time in order to reduce foreign exchange risk. Parent loan for educational purposes is a non-need based consumer loans issued to parents to meet the educational cost of their children and doesn’t have a stated maximum amount. The repayment of the loan starts within two months of issue and the stipulated period to repay the loan is 10 years. Loans in process are loans that have been sanctioned of legally on paper and documents but are yet to be issued completely through statement via cheque or draft. Portfolio loans are loans held by banks as investments or assets for future profits. On a much bigger picture it is the loans that has brought upon proper financial regulation in India, hence making the value of the Indian Rupee much stronger against a foreign currency that dominates the financial market world wide.