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Saturday, 29 April 2017

Various Types of Banks

1. Central Bank- The central bank is the apex bank in banking structure of any country. The Central Bank controls the flow of currency in the economy. It regulates the other banks in the country. It also works as a banker to the government. The central bank plays a very important role in the economy of the country. It helps stimulate growth and control inflation in the country. It does so by controlling the flow of money in the economy. When other banks are in a problem, they approach the Central Bank for assistance. Hence it is also called as a banker's bank. In India, the Reserve Bank of India is the Central Bank. Likewise, The Bank of England is the Central Bank of  England and Federal Reserve Bank is the central bank of the United States of America.

2. Commercial banks- Commercial banks are the banks which do the banking business with the aim of earning profits. They accept deposits from the public and lend them to traders, manufacturers, and businessmen. There are three types of commercial banks-
(a) Public sector banks- These are banks where the majority of the shares are held by the Government or the Reserve Bank of India. Examples of public sector banks are State Bank of India, Bank of Baroda, Bank of India etc
(b) Private sector banks- These are the banks where the majority of shares are held by private individuals/entities. Example, HDFC Bank, ICICI Bank, Axis Bank etc.
(c) Foreign banks- These are the banks which are registered outside of India but have their branches in India. Example, Citibank, Standard Chartered Bank, HSBC etc.

3. Development Banks - These banks provide financial assistance to various industries for the purchase of machinery and equipment, modernization and expansion. For example, IFCI (Industrial Finance Corporation of India and SFCs (State Financial Corporations)

4. Co-operative banks - Co-operative banks are the banks whose main objective is to provide financial assistance to economically weaker sections of the society. Such banks are registered under the Cooperative Societies Act. Examples of cooperative banks are The New India Cooperative Bank, Cosmos Co-op Bank etc. There are three types of cooperative banks-
(a) Primary Credit Societies- These institutions are formed at village level or town level. The operations of such banks are limited to a very small area
(b) District Central Cooperative Banks- These banks operate at the district level. They act as a link between primary credit societies and state cooperative banks
(c) State Cooperative Banks- State Cooperative Banks are biggest forms of cooperative banks. They operate at the state level. Some of State Cooperative banks operate in multi States.

5. Specialized Banks- These banks specialize in providing financial assistance to a particular industry or sector. For example, EXIM Bank, SIDBI, NABARD etc.
(a) EXIM Bank stands for Export-Import Bank. This Bank specializes in providing financial assistance to import and export sector. The services of Exim Bank are  Limited only to export and import sector. EXIM Bank provides all the required support to exporters and importers.
(b). SIDBI stands for Small Industries Development Bank of India. SIDBI specializes in providing financial assistance to small industries. They provide loans on easy terms to small industries
(c) NABARD stands for National Bank for Agricultural and Rural Development. NABARD specializes in providing financial support to the agricultural sector in the rural areas

6. Regional Rural Banks- The main aim of Regional Rural Banks (RRBs) is to provide banking services in rural areas. Its function is to provide financial assistance to small traders and farmers in rural areas

7. Exchange Banks. These banks are mainly concerned with the financing of foreign trade. The main function of such banks is to provide a facility for transfer of money from one country to another. Example Bank of America and Bank of Tokyo are Exchange banks operating in India

8. Indigenous Bankers - These are private lenders who charge a very high rate of interest on loans given by them

9. Savings Bank- The main aim of the Savings Bank is to cultivate a habit of saving among people. For example, Post Office savings bank

Thursday, 27 April 2017

Understanding Utility

The study of the concept of utility is a part of Micro Economics.  Micro Economics is a branch of economics which deals with the behavior of individual units of an economy like individual demand, individual prices, individual industries etc.

For a layman, utility means usefulness. However, for economics, the utility is the want-satisfying power of a particular commodity. For example, food, clothing, and shelter have utility for everyone as everyone has a want for these.

Features of Utility-

Relative concept - Utility of a particular commodity changes from time to time and place to place. For example, the utility of umbrella is higher during monsoon season than in any other season. Similarly, the utility of woolen clothes is more in parts of the country which are cold. For example, woolen clothes have more utility in Shimla & Manali than in Chennai

Subjective concept - Utility of a particular commodity is not same for all the individuals. It differs from person to person. For example, the utility of a book is greater for an educated person than an illiterate person

Ethically Neutral - Study of Ethics deals with the study of what is good & what is bad, what is moral & what is immoral. The utility has nothing to do with ethics. Any commodity which has a want-satisfying power has utility. For example, Knife has utility in cooking at the same time it has utility for a murderer also

Utility and usefulness are not one and the same - Utility is different from usefulness. A commodity may have utility, but it may not be useful. For example, cigarette has a utility for a smoker, but it is not useful to him as it is injurious to health

Utility and pleasure are not one and the same - The commodity which has utility may not be pleasurable. For example, medicines/injections have utility during illness but are not pleasurable

Utility differs from satisfaction - Utility and satisfaction are two different terms. Satisfaction is the feeling that you get after consumption of a particular commodity. On the other hand, utility means expected satisfaction from a particular commodity

Not measurable - You cannot measure utility. You can just experience it. You can just feel it, but you cannot express utility in numeric terms

Depends upon the intensity of want - For example, water has more utility for you when you are thirsty whereas its utility reduces if you are not thirsty.

Utility Forms Basis of demand - There will be a demand for a particular commodity only if it has utility. A person with short/long sightedness will have a demand for spectacles, but one who doesn't have any vision problem will have no demand for it