1. ,A STUDY ON “MICRO FINANCE”
WITH REFERENCE
TO
CANARA BANK MAHILA BRANCH,JAYNAGAR 3RD BLOCK
BANGLORE
SUBMITTED IN PARTIAL FULFILLMENT FOR
THE REQUIREMENT OF
‘BACHELOR OF BUSINESS MANAGEMENT’
BANGALORE UNIVERSITY, FOR THE ACADEMIC YEAR
2012-2013
SUBMITTED BY
DEEPTHI.S
REG NO: 10Q8C18004
UNDER THE GUIDANCE OF
Ms. SEEMA SHETTY
SILICON CITY COLLEGE OF MANAGEMENT AND COMMERC
KUMAR NURSERY, NEW BANK COLONY,
OFF KANAKAPURA ROAD, KONANKUNTE, BANGALORE-560062.

2. DECLARATION
I hereby declare that the project titled-A study on “MICRO
FINANCE” submitted to silicon city college of management and
commerce (Bangalore University) for the award of BACHELORE OF
BUSINESS MANAGEMENT course has been prepared under the
guidance of Ms.Shailaja Pai Branch manager,Canara Bank Mahila
branch,Bangalore.
This report has been submitted in partial fulfillment of the
requirement for the award of Bachelor of Business Management to
Silicon City College of management and commerce (Bangalore
University) and has not been submitted to any other University
/Institution for the award of any degree.
Place: BANGALORE (DEEPTHI.S)
Date: Reg No:10Q8C18004

3. ACKNOWLEDGEMENT
I take this opportunity to express my great sense of gratitude
to my parents and family who have been real source of inspiration and
support for me.
I am greatful to Prof. B.S.Venkatesh, Director of Silicon City
Educational Academy, who has been the back bone in completion of
this project.I thank him for extending his co-operation.
I express my sincere thanks to my internal guide Ms.SEEMA
SHETTY,who has been the torchbearer and has guided me for the
successful completion of this project. I also thank all the other faculty
members for guiding me.
I would like to thank Ms.Shailaja Pai, Branch Manager,Canara
Bank Mahila Branch of jaynagar 3rd block, for providing me an
opportunity to do a project.
I also thank Mr.Shivaraj,assistant,Canara Bank Mahila Branch,
who inspite of busy schedule helped and guided me for the completion
of this project.
Lastly I thank all the staffs and employees for providing such
valuable information which became basis for this project.
(Signature)

4. SL.NO: CHAPTERS PAGE NO:
INTRODUCTION:
• Micro finance
• Meanings
• Definitions
CHAPTER1 • Advantages
• Disadvantages
• Classifications
• Contents
• banking
RESEARCH METHODOLOGY:
• Research Design
• Data collection
• Primary Data
• Secondary Data
CHAPTER2 • Tools used for Data Collection
• Scope of the study
• Objectives of the study
• Limitations of the study
COMPANY PROFILE:
CHARTER3 • Introduction and History
• Board of Directors
• Achievements & Awards

5. • Product Development
• Mission and vision
• Customer Relationship Management
• Types of Insurance services
• Risk Management
DATA ANALYSIS &
INTERPRETATION:
• Introduction
CHAPTER4 • Types of analysis
• Importance of Data Analysis
• Tools for Data Analysed
• Interpretation Of Data
FINDINGS AND DISCUSSIONS:
• Findings
• Suggestions
CHAPTER5 • Results
• Summary
• conclusion
TERMINALS:
• Annexure
CHAPTER6
• Bibliography
• Appendix

6. INTRODUCTION

7. BRIEF HISTORY OF BANK
A bank is a institution, which deals in money. It accepts deposits from
the public and creates credit with a view to lend or invest.
The word ‘bank’ is derived from the words ‘bancus’ or
‘banquet’ that is a bench. The early bankers ,the jews in Italy transacted
their business on benches in the market places, when a banker failed,
his ‘bench’ was broken into pieces by the people which indicated the
bankruptcy of the individual banker. but this explanation was turned
out on the ground that the Italian money changes as such were never
called bankers in the middle ages . some others say that the word
‘banks’ originally derived from the German WORD ‘PACK’ meaning a
joint stock fund, which was italianised into ‘Banco’ when the Germans
were masters of a great part of Italy . According to professor Rama
Chandra Rao, “what ever be the origin of the word bank, it would trace
the history of banking in Europe from the middle ages”.
A bank is a financial institution and a financial intermediatary that
accepts deposits and channels those deposits into lending activities,
either directly by loaning or indirectly through capital markets. A bank
is a connection between customers that have capital deficits and
customers with capital surpluses.
Due to their influence within a financial system and an economy, banks
are generally highly regulated in most countries. Most banks operate
under a system known as fractional reserve banking where they hold
only a small reserve of the funds deposited and lend out the rest for
profit. They are generally subject to minimum capital requirements

8. which are based on an international set of capital standards, known as
the Basel accords.
According to ancient European history, the Babylonians were the
earliest people to develop a systematized banking system. It s said that
temples of Babylon were used as banks and as such the temples of
Ephesus and Delphi were famous great banking institution. The anti
religious feelings which developed afterwards led to the collapse of
public confidence in depositing money in temples and the priest ceased
to perform the banking business. Whenever peace and solidarity were
threatened, the spread of banking also was affected entirely. However,
after the revival of civilization and with the development of social and
economic institutions, money transactions also were revived.
It was in the 12th century that some banks were established in Venice
and Genoa. These banks were simply receiving deposit and lending
money to the people. In fact they were not banks of the modern type.
The origin of modern banking may be traced to money dealers in
Florence who received money in the form of deposits and lend it to
business people. At this time, Florence was the center of money market
in Europe.
In England, money changing became an important function of bankers
during the reign of Edward III. Money changing refers to conversion
foreign coins into British money this function was performed by the
royal exchanger on behalf of the Crown.
In another development gold smiths of England prepared the ground
for modern banking in England during the period of queen Elizabeth.

9. the gold smiths used to receive valuables and funds of their customers
and issue receipts acknowledging the same. These receipts in course of
time became promissory notes. The seizure of a huge sum of money
kept as safe custody by the city merchants at royal mint by the
government resulted in the establishment of public banking in England.
As a result of this royal repudiation, the merchants began to entrust
their cashiers with large sums but later they misappropriated their
master’s money for their own benefit. Finding that their employees
had not treated them better than their king, the city merchants decided
to keep their cash with the goldsmiths.
The main players in the bank are:
1. Banker
2. Customer
1.Banker: According to sec5 {c} of the banking regulation act 1949, a
banker is a person who undertakes business of banking.” A banker is a
dealer in debt, his own and other peoples”.
2.Customer: As regards the customers, there is no legal definition but
based on various judgements on sec131/131A of NI act of 1881, a
customer means a person who seeks to open account which banker
accepts with proper introduction. The relationship is not based on
frequency of transactions, and duration.also a person who avails
service like safe custody, remittance, locker facility etc. is not
considered as a customer.

10. HISTORY OF BANKING
Banking in one form or the other, was in
existence even in ancient times. the writings of Manu and kautilya
contain references to banking.
The history of banking begins with the first prototype banks of
merchants of the ancient world, which made grain loans to
farmers and traders who carried goods between cities. Their
began around 2000BC in Assyria and Babylonia. Later, ancient
Greece and during the roman empire, lenders based in temples
made loans and added two important innovations: they accepted
deposits and changed money. Archaeology from this period in
ancient china and India, also shows evidence of money lending
activity.
Banking in the modern sense of the word can be traced to
medieval and early renaissance Italy. To the rich cities in the north like
Florence ,venice and Sialkot genoa. The bardi and Peruzzi families
dominated banking in 14th century Florence, establishing branches in
Europe.
One of the most famous Italian bank was the medici bank,
setup by Giovanni di biccide ‘medici’ in 1397. the development of
banking spread from northern Italy through Europe and a number of
important innovatins took place in amsterdam during the dutch
republic in 16th century, and in London in the 17th century. In germany,
banking dynasties such as welser, fugger and berenberg have played a

11. central role over centuries. During the 20th century, developments in
telecommunications and computing caused major changes to banks
operations and let banks dramatically increase in size and geographic
spread. The late-2000’s financial crisis caused many bank failures,
including of some of the worlds largest banks, and much debate about
bank regulation.
History of banking depends on the history of money- and on
grain-money and food cattle-money used from atleast 9000 BC, two of
the earliest things understood as available to barter. Anatolian obsidian
as a raw material for stone-age tools being distributed as early as
12500BC, with organized trade occurring in the 9th millionnia. In
Sardinia one of the four main sites sourcing the material deposits of
obsidian with in the Mediterranean, trade of this were replaced in the
third millionnia by trade in copper and silver. The society adapted from
one fixed material as value deposits available for trade to another.
However, modern banking is of recent origin. It came into existence
only after the industrial revolution. The industrial revolution led to the
growth of industries and commerce. In order to meet the rapid growth
of financial requirement of industries and commerce, joint stock banks
came into exitance. So, joint stock banks or modern banks are of recent
development.

12. NATURE OF BANKING BUSINESS
The nature of banking business can be understood from the
following:
1. Intermediaries or middlemen: banks act as middlemen between
those members of public who have sufficient funds to be
deposited in commercial banks for earning interests and those
who need funds, and so, are willing to borrow funds from banks
on interest for investment in their business activities.
2. Dealers in debt or financial obligations: the varies types of
deposits accepted by commercial banks from varies depositors
are the debts or financial obligations incurred by the banks, and
are their financial obligations or liabilities to the depositors, and
the advances granted by them to borrowers are the debts
incurred by the borrowers in favour of banks.
3. Creator of money: Banks are not only dealers in money but also
creators of money.
4. Service industry:All the services provided by banks fall under
service sector industry, they render a variety of services to the
depositors as well as the general public.
5. Network of branches:banks are one of the orders form of financial
institution and they have wide network of branches through
which they provide their services across the world.
Thus this is the nature of banking business.

13. BANKING IN INDIA
Banking in India originated in the last decades first banks
were The General Bank of India, which started in 1786, and Bank of
Hindustan, which started in 1770; both are now defunct. The oldest
bank in existence in India is the State Bank of India, which originated in
the Bank of Calcutta in June 1806, which almost immediately became
the Bank of Bengal.
This was one of the three presidency banks, the other two
being the Bank of Bombay and the Bank of Madras, all three of which
were established under charters from the British East India Company.
For many years the Presidency banks acted as quasi-central banks, as
did their successors. The three banks merged in 1921 to form the
Imperial Bank of India, which, upon India's independence, became the
State Bank of India in 1955.
Merchants in Calcutta established the Union Bank in 1839,
but it failed in 1840 as a consequence of the economic crisis of 1848-49.
The Allahabad Bank, established in 1865 and still functioning today, is
the oldest Joint Stock bank in India.(Joint Stock Bank: A company that
issues stock and requires shareholders to be held liable for the
company's debt) It was not the first though.

14. That honor belongs to the Bank of Upper India, which was
established in 1863, and which survived until 1913, when it failed, with
some of its assets and liabilities being transferred to the Alliance Bank
of Simla.
Foreign banks too started to app, particularly in Calcutta, in
the 1860s. The Comptoir d'Escompte de Paris opened a branch in
Calcutta in 1860, and another in Bombay in 1862; branches in Madras
and Pondicherry, then a French colony, followed. HSBC established
itself in Bengal in 1869. Calcutta was the most active trading port in
India, mainly due to the trade of the British Empire, and so became a
banking center.
The first entirely Indian joint stock bank was the Oudh
Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The
next was the Punjab National Bank, established in Lahore in 1895,
which has survived to the present and is now one of the largest banks
in India.
Around the turn of the 20th Century, the Indian economy was
passing through a relative period of stability. Around five decades had
elapsed since the Indian Mutiny, and the social, industrial and other
infrastructure had improved. Indians had established small banks, most
of which served particular ethnic and religious communities.
The presidency banks dominated banking in India but there
were also some exchange banks and a number of Indian joint stock
banks. All these banks operated in different segments of the economy.

15. The exchange banks, mostly owned by Europeans,
concentrated on financing foreign trade. Indian joint stock banks were
generally under capitalized and lacked the experience and maturity to
compete with the presidency and exchange banks.
This segmentation let Lord Curzon to observe, "In respect of
banking it seems we are behind the times. We are like some old
fashioned sailing ship, divided by solid wooden bulkheads into separate
and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of
banks inspired by the Swadeshi movement. The Swadeshi movement
inspired local businessmen and political figures to found banks of and
for the Indian community. A number of banks established then have
survived to the present such as Bank of India, Corporation Bank, Indian
Bank, Bank of Baroda, Canara Bank and Central Bank of India.
The fervour of Swadeshi movement lead to establishing of
many private banks in Dakshina Kannada and Udupi district which were
unified earlier and known by the name South Canara ( South Kanara )
district. Four nationalised banks started in this district and also a
leading private sector bank. Hence undivided Dakshina Kannada district
is known as "Cradle of Indian Banking".
During the First World War (1914–1918) through the end of the
Second World War (1939–1945), and two years thereafter until the
independence of India were challenging for Indian banking. The years
of the First World War were turbulent, and it took its toll with banks
simply collapsing despite the Indian economy gaining indirect boost due
to war-related economic activities.

16. POST-INDEPENDENCE:
The partition of India in 1947 adversely impacted the
economies of Punjab and West Bengal, paralyzing banking activities for
months. India's independence marked the end of a regime of the
Laissez-faire for the Indian banking.
The Government of India initiated measures to play an active
role in the economic life of the nation, and the Industrial Policy
Resolution adopted by the government in 1948 envisaged a mixed
economy.
This resulted into greater involvement of the state in different
segments of the economy including banking and finance. The major
steps to regulate banking included:
The Reserve Bank of India, India's central banking authority, was
established in April 1935, but was nationalized on January 1, 1949
under the terms of the Reserve Bank of India (Transfer to Public
Ownership) Act, 1948 (RBI, 2005b).
In 1949, the Banking Regulation Act was enacted which
empowered the Reserve Bank of India (RBI) "to regulate, control,
and inspect the banks in India".
The Banking Regulation Act also provided that no new bank or
branch of an existing bank could be opened without a license
from the RBI, and no two banks could have common directors.

17. ADOPTION OF BANKING TECHNOLOGY
The IT revolution had a great impact in the Indian banking
system. The use of computers had led to introduction of online banking
in India. The use of the modern innovation and computerisation of the
banking sector of India has increased many fold after the economic
liberalisation of 1991 as the country's banking sector has been exposed
to the world's market.The Indian banks were finding it difficult to
compete with the international banks in terms of the customer service
without the use of the information technology and computers.
The RBI in 1984 formed Committee on Mechanisation in the
Banking Industry (1984)whose chairman was Dr C Rangarajan, Deputy
Governor, Reserve Bank of India. The major recommendations of this
committee was introducing MICR Technology in all the banks in the
metropolis in India.This provided use of standardized cheque forms and
encoders.
In 1988, the RBI set up Committee on Computerisation in Banks
(1988) headed by Dr. C.R. Rangarajan which emphasized that
settlement operation must be computerized in the clearing houses of
RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and
Thiruvananthapuram.
It further stated that there should be National Clearing of inter-
city cheques at Kolkata,Mumbai,Delhi,Chennai and MICR should be
made Operational.It also focused on computerisation of branches and
increasing connectivity among branches through computers.

18. It also suggested modalities for implementing on-line
banking.The committee submitted its reports in 1989 and
computerisation began form 1993 with the settlement between IBA
and bank employees' association.
In 1994, Committee on Technology Issues relating to Payments
System, Cheque Clearing and Securities Settlement in the Banking
Industry (1994) was set up with chairman Shri WS Saraf, Executive
Director, Reserve Bank of India.
It emphasized on Electronic Funds Transfer (EFT) system, with
the BANKNET communications network as its carrier. It also said that
MICR clearing should be set up in all branches of all banks with more
than 100 branches.
Committee for proposing Legislation On Electronic Funds
Transfer Electronic banking refers to DOING BANKING by using
technologies like computers, internet and networking,MICR,EFT so as to
increase efficiency, quick service,productivity and transparency in the
transaction.
The recent developments in the banking are:
1. Mobile banking.
2. Tele banking.
3. E-banking.
4. Automated teller machine.
5. Electronic fund transfer.
6. Core banking.
7. Anywhere banking.

19. MEANING AND DEFINITION
Bank is one of the service sector. Its main aim is to render service
not a profit. Bank is an institution that deals with the money.
Banks plays a vital role in shaping economic destiny of a nation. They
collect the scattered savings of the community and make them
available for the socially desirable and economically beneficial
purposes. They contribute to the growth and stability of economy by
providing finance to industrial and commercial activities.
According to prof.kinley defines a Bank as“ An establishment which
makes to individuals such advances of money as may be required and
safely made and to which individuals entrust money which is not
required by them for use”.
A bank performs two important functions:
1.Accepting the deposits.
2.lending the deposit to the needy people.
According to Dr.H.L.Hart defines a banker as “one who, in the ordinary
course of his business, honors cheques drawn upon him by persons
from and for whome he receives money on current accounts”.
According to this definition, the essential characteristics of a bank are:
i.acceptance or receiving of current account.
ii.payment of cheques drawn against those deposits or repayment of
those deposits.

20. According to Sir John paget customer is difined as “To constitute a
customer, there must be some recongnisable course or habit of dealing
in the nature of regular banking business.
According to the Indian banking regulation act of1949 defines the term
banking company as “any company which transacts the business of
banking in India”.
According to the Indian banking regulation act of 1949 defines the term
Banking as “Accepting, for the purpose of lending or investment, of
deposits of money from the public, repayable on demand or otherwise,
and withdrawal by cheques, draft, order or otherwise”.
As per this act, the term banking includes not only the above
mentioned important activities, but also several other activities, such as
the collection of cheques, drafts and bills, remittance of funds,
acceptance of safe custody deposits, which are generally referred to as
subsidiary services.
From the above definitions, it is clear that a bank is an
institution which deals with the public and lends money to the needy
people.it also performs a number of agency and general utility services
to the customers and the general public as well.collectig and making
payments on behalf of the customers, accepting safe custody deposits,
underwriting shares and debentures of companies, issuing of letter of
credit, travellers cheques etc..are some of the agency and general
utility services of a modern bank.

21. TYPES OF BANKS
Banks may be classified into six types based on the functions
they perform. They are:
1. commercial banks.
2. Industrial banks.
3. Agricultural bank.
4. Exchange banks.
5. Savings bank.
6. Central bank.
1.commercial banks:
it is a bank that accepts deposits from the public and provide credit
facilities to commerce and industry.since most of the deposits are
repayable on demand or after a fixed period, they do not grant
long- term loans.they confine themselves to short and medium-
term laons. In addition to these primary functions of accepting
deposits and lending funds, modern banks perform a number of
agency and general utility functions. The real significance of the
commercial banks lies in the fact that they are not merely dealers
in money as they lend many times larger than the deposits.a large
part of the money in circulation is in the form of bank money. This
helps the economic activities of a country.
2.Industrial banks:
it is also called as investment banks. Industrial banks are banks
which provide long-term finance to industries. They are also called
investment banks, as they invest their funds in subscribing to shares

22. and debentures of industrial concerns.industrial banks are not
found in all the countries of the world. In India there are no
industrial banks. Instead, special industrial finance corporations
have been set up for providing long term finance to industries.
3.Agricultural banks:
Agricultural banks are the banks which provide finance to
agriculture. These banks are organized on co-operative basis.they
extend loans to the members at a relatively reasonable rate of
interest. Agricultural banks in India are of two types a) agricultural
co-operative societies and b) land mortgage or land development
banks. Agricultural co-operative societies provide short term loans
to the agriculturists for the purchase of fertilizers, pesticides,seeds,
payment of wages etc. land development banks provide long term
finance to the farmers for the purchase of agricultural equipments,
tractors, construction of wells, making permanent improvement of
lands,etc.
4.Exchange banks:
Exchange banks specialize in financing the foreign trade.they supply
the necessary foreign exchange for the importers and exporters. In
many countries, commercial banks themselves undertake foreign
exchange business.
5.savings bank:
Savings banks are specialized institutions which induce people to
save something out of their income. They pool the small savings of
poor and middle income sections of the societies. In India, the

23. savings banks business is performed by the commercial banks and
post offices.
7. Central banks:
Central bank is a special institution which regulates the entire
banking structure and monetary stability. It regulates the note
issue. It functions in close co-operation with the government. It
maintains internal and external values of currency. In short central
bank is a apex bank of the country.
The main functions performed by the central banks are:
1.issue of currency notes.
2. central banks act as the banker to the government. it accepts
money to the account of state and central government, and makes
payments on behalf,carries out their exchange, remittance and
other banking operations and manages debts.
3.central bank has been entrusted with the responsibility of
maintaining the external value of rupee and for this purpose bank
holds gold and forex reserve.
4.controller of credit.
5. central bank act as a banker’s bank. Every commercial bank is
required to keep with the central bank as cash balance a certain
percentage of their time and demand liabilities.it acts as a leader of
last resort to them.the banks can borrow money from the central
bank during financial crisis by re-discounting eligible bills and
against approved securities.

24. MANDATORY FUNCTIONS OF BANKS
The two mandatory functions performed by the banks are:
1 primary function
2 secondary function
PRIMARY FUNCTION
1 receiving of deposits
2 lending of funds
3creation of credit
4 remittance of funds
1 receiving of deposits:
The main type of deposits are
a)current deposits
b)savings bank deposits
c)fixed deposits
d)recurring deposits
2 lending of funds
Lending of funds constitutes the main business of commercial
banks. Banks lend funds to the public by the way of :
a)loans: a loan is a financial arrangement under which an advance is
granted by a bank to a borrower on a separate account called the
loan account. When a loan is granted to the borrower at once in a
lumpsum either in cash or by the transfer to the credit of his
current account.
b)overdrafts: an over draft is a financial arrangement under which a
current account holder is permitted by the bank to overdraw his

25. account, to draw more than the amount standing to his credit up to
a agreed limit.
c)cash credits: a cash credit is a financial arrangement under which
a borrower is allowed to advance under a separate account called
as cash credit account up to a specified limit called the cash credit
limit. In the case of a cash credit, the borrower need not withdraw
the whole amount at once in one lumpsum. He can withdraw the
amount in installments as and when he needs money.
d)discounting of bills of exchange: discounting of bill is an
arrangement under which a bank takes a bill of exchange maturing
with in a short period of 60days or 90days from an approved
customer and pays him or credit his current account immediately
the present value of the bill.then, on the due date the bill the bank
receives the face value of the bill from the acceptor of the bill. In
case the bill is dishonored by the acceptor the bank recovers the
amount from the customer who has discounted the bill.
3 creation of credit:
Credit creation is one of the very important function of bank. Banks
are basically manufacturers of money. Creation of credit means
expansion of bank deposits by giving loans and advances.
4 remittance of funds:
Banks help their customers in transferring funds from one place to
another by issuing bank draft, mail transfer etc;

26. Secondary functions
1 group one:agency function:
They are ;
a)purchase and sale of securities
b)acting as trustees, executor, administrator.
c)payment and collection of subscriptions, dividend, salaries, pension
etc;
d)acting as attorney
2 group two:general functions:
They are :
a)travelers cheque:these cheques are usually useful for those who
travel frequently. These cheques can be purchased by anyone and the
purchaser is supposed to deposit money to the issuing bank equivalent
to the amount of travellers cheque.
b)merchant banking:it includes variety of services, which are provided
by non banking agencies and professionals. A number of activities
undertaken by merchant bankers like feasibility studies to identify
projects, helping in entrepreneurs to get industrial licenses, helping
expansion and diversification program of companies.
c)safe custody of valuabeles:bank provides safe custody to assets like
shares, debentures, bonds, fixed deposits receipts, jewellery etc; bank
charge certain amount as bank charges for providing the facility of safe
custody to the customer.

27. d)teller system under this, the teller is authorize to receive cash and
make payment upto limited amount without reference to the ledger
balance or the specimen signature.
e) gifts cheques:bank also sell gift cheque against payment in cash or
by debit to accounts.the gifts cheques are usually issued in fixed
denominations. These cheques are usually given as gift and these can
be drawn even by non account holders.
f)credit cards: these cards are basically issued to current and savings
account holders, free of charge. The holders of credit cards are able to
purchase gooda and services upto a certain amount without making
immediate payment.
g)tax consultancy: banks provide consultancy services to enable the tax
payers to pay tax on time.
h)underwriting of securities:banks takes the job of underwriting a
portion of the issues of public undertakings.they also underwrite shares
and debentures of joint stock company.
I)housing finance:banks advice loans directly to the parties or advance
housing loans indirectly to state housing boards or urban development
corporations.
j)factoring:it is an agreement between bank institution and business
concern.
k)leasing finance:it is a method of financing equipment and
machineary.it is a mechanism where in a person can through a bank
acquire an asset for its used by paying a pre-determined amount called
“rental” over a period of time.

28. L)letter of credit:it refers to letter issued by the importer bank in fovour
of the exporter authorizing him to supply goods and draw bills upto a
certain amount.
m)foreign exchange activities:banks perform a following activities with
respect of foreign trade.i)important packing facilities.ii) issue of
solvency certificate.iii)dissemination of trade information.etc.
n)consultancy functions:banks undertake the number of consultancy
services like helping small scale industries in providing information
about availability of assistance like marketing, technical and financial
etc.

29. NEED AND IMPORTANCE OF BANKS OR BANKING:
The need and importance of bank or banking are:
1. Mobilisation of savings: banks mobilize the small savings of the
people and make them available for the socially desirable sectors. Thus
they contribute for the capital formation.
2. Financing industry: banks provide finance to the industries.they
provide short term, long term and medium term loans to industries.
3. Finance trade: the commercial banks provide finance both for
internal and external trade. They provide loans to retailers,
wholesalers, importers, exporters for meeting their financial
requirements.
4. development of capital market: commercial banks underwrite the
shares and debentures of public limited companies. They have also
gone in for mutual funds. This has further strengthened the capital
market.
5. financing agriculture: commercial bank provide finance for the
agricultural purpose.they provide loans to trade in agricultural
commodities.they also provide finance for the small and marginal
farmers.
6. financing consumer activities: commercial banks provide finance to
consumers for the purchase of houses, vehicles, consumer durables.this
helps in raising the standard of living of the people.

30. RESEARCH
METHODOLOGY
PART-A

31. DEFINITION OF FINANCE:
Finance is defined in numerous ways by different groups of
people. Though it is difficult to give a perfect definition of Finance
following selected statements will help you deduce its broad meaning.
1. In General sense,
"Finance is the management of money and other valuables, which can
be easily converted into cash."
2. According to Experts,
"Finance is a simple task of providing the necessary funds (money)
required by the business of entities like companies, firms, individuals
and others on the terms that are most favourable to achieve their
economic objectives."
3. According to Entrepreneurs,
"Finance is concerned with cash. It is so, since, every business
transaction involves cash directly or indirectly."
4. According to Academicians,

32. "Finance is the procurement (to get, obtain) of funds and effective
(properly planned) utilisation of funds. It also deals with profits that
adequately compensate for the cost and risks borne by the business."