Management in financial instituitions

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E commerce and banks inIndia



IntroductionE commerce is a buzz word in all trade,industry and government

E commerce has been around for the lasttwo decades

Internet based e- commerce is playing acritical role in addressing strategic , missioncritical business needs of the companies



De nitionE commerce is buying and selling onelectronic networks ,predominantly theinternet.

It involves tangible goods and services orintangible items like music information

i! Instruments of E commerce are thetelephone, the fa!, the television,electronic payment and money ,EDI andinternet.



"ypes of e commerce#usiness to #usiness$#%#&

It refers to situation where onebusiness makes a commercialtransaction with another

Advantages'educed transaction costsImproved product (ualityImproved service



#usiness to )ustomer$#%)& It is the type of commerce

transaction in which businessessell products or services toconsumers

Advantages

)onvenience*ore choice#etter prices



Drivers of E commerceE commerce is easy and a+ordableE commerce transforms the marketplaces- E commerce will change the

way business is conducted, newproducts and markets will bedeveloped.Enhanced customer service-companies are turning to the internetas a way not only to lower costs butalso to increase service (uality levels



E commerce has a catalytice+ect-it serves to accelerate anddi+use more widely, changes that

are alreadyunder way in theeconomy.Increases interactivity in the

economy- these linkages nowe!tend upto small busineses andhouseholds and reach out to the

world at large.



Improved value chainmanagement- colloborativesharing of information about thesupply and demand chains ofenterprises.

E commerce alters the relativeimportance of time- it reducesthe importance of time by

speeding up production cycles.



)ritical issues for Ecommerce

inancial issues )ustoms and ta!ation Electronic payments

egal issuesniform commercial code

Intellectual property codeprivacy



*arket access issues "elecommunicationinfrastructure "echnical standards ecurity



'ole of banks in Ecommerce "here are three modes of e

banking /"* networks

Internet #anking

mart cards



)ommercial #anks



*eaning

A fnancial institution that provides services, such asaccepting deposits, giving

business loans and auto loans,mortgage lending, andbasic investment

products like savingsaccounts and certifcates odeposit.



Commercial banks operating in

India may be categorized into;

1. Scheduled banks2. Non- scheduled

banks.



)entral #ank and its roles



De nition

/ccording to 0era mith 1)entral#anking is a banking system inwhich a single bank has either

complete control or a residuarymonopoly of note issue2It serves as banker to the

government and controls thesupply of money in India.In India, 'eserve #ank in

England, #ank of England and in



"he rst )entral #ank in theworld was setup in 3445 In

weden

E+ective )entral #ank came intobeing in 3467 with theestablishment of #ank 8f

England.



unctions of )entral #ank

Issuing of Notes- "he notesissued by the central bank are anunlimited legal tender.

Banker to the Government-)entral bank is banker, agent and

nancial advisor to the

governmentBanker’s Bank- It is an ape!bank of all banks in the country



Supervision of the banks- /s abankers bank , the central bank alsosupervises the commercial banksLender of the last resort- If acommercial bank fails to get nancialaccommodation from anywhere, itapproaches central bank as last resort.

Custodian of foreign ex hange- thecentral bank maintains foreign e!changereserves in order to promoteinternational trade



Clearing house fun tion-)entral bank also performs thefunction of clearing house.



)ash reserve ratio- It refers tominimum percentage of a bankstotal deposits re(uired to kept

with the central bank.

!ualitative Instruments

*argin re(uirement-It refers tothe di+erence between thecurrent value of the security

o+ered for loans and the value of



'ationing of credit- It refers to!ation of credit (uotas for

di+erent business activities

Direct action- "he central bankmay initiate direct action againstthe member banks



Di+erences between )entralbank and )ommercial banks

)entral bank is an ape! bankwhile commercial bank functionsunder controls of the central bank

)entral bank focuses on socialwelfare while commercial bankfocuses on pro t ma!imization

)ommercial bank contributes tothe ;ow of credit through creditcreation while central bank

controls ;ow of credit

Management in financial instituitions

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