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October 28, 2016

Banking Awareness 2017 in Simple Language - Lesson 17

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Dear Gr8 Ambitionists, in our previous Banking Awareness 2017 Lesson 16, we have learnt about the Currency. In today's lesson, we shall learn about various Banking & Financial Organizations. Happy Reading :)

Banking Awareness 2017 : Banking & Financial Organizations

MDB (Multilateral Development Bank)

MDB are institutions that provide financial support and financial advise for economic and social development activities in developing countries.

The following are usually classified as the main MDBs
  1. World Bank 
  2. International Fund for Agricultural development (IFAD)
  3. European Investment Bank (EIB) 
  4. Islamic Development Bank (IsDB) 
  5. Asian Development Bank (ADB) 
  6. European Bank for Reconstruction and Development (EBRD) 
  7. CAF - Development Bank of Latin America (CAF) 
  8. Inter - American development Bank group (IDB, IADB) 
  9. African Development Bank (AFDB)
  10. Asian Infrastructure Investment Bank (AIIB)
  11. National Development Bank (NDB)

IMF (International Monetary Fund)

  • Formation : 27 Dec 1945
  • Headquarter : Washington D.C.
  • Head : Christine Lagarde (MD)
  • Members : 188 countries 
IMF is working to foster global monetary cooperation, secure financial stability, facilitate iternational trade, promote high employment and sustainable economic growth and reduce poverty around the world.

All the members of IMF are also International Bank for Reconstruction and Development (IBRD) member and vice-versa.

Voting Shares :
  1. India - 2.6% 
  2. China - 6%
  3. USA - 16.5%. 
Functions :
  1. Merchant of Currencies : IMF main function is to purchase and sell the member countries currencies. 
  2. Helpful for the Debtor countries. 
  3. To promote exchange stability. 
  4. Temporary aid for the devalued currency. 
  5. To avoid exchange depreciation. 
  6. Declaration of scare currency: If the demand of any particular country currency increases & its stock with the fund falls below 75% of its quota the IMF can declare it scare.
Publications :
  1. World economic outlook 
  2. Global Financial Stability Report 
  3. IMF Fiscal Monitor

World Bank

  • Formation : July 1944
  • Headquarter : Washington DC
  • Head : Dr. Jim Yong Kim (from 23rd March 2012)
  • Chief Economist : Kaushik Basu (Since September 5, 2012)
  • The world bank is an international financial institutions that provides loans to developing countries for capital programs. It comprises two institutions the International Bank for Reconstruction & Development (IBRD) and the International Development Association (IDA). 
  • World Bank was created at the 1944, Bretton Wood Conference along with three other institutions, including the IMF. The president of the world bank is traditionally an American.

Members :
  • 188 countries
    • 188 countries (IBRD) 
    • 173 countries (IDA) 
Each member state of IBRD should also be a member of the IMF and only members of IBRD are allowed to join other institution within the bank (such as IDA). IDA is called soft Loan window of the world. 

Voting Shares : 
  1. India - 2.91% (7th largest share) 
  2. China - 4.42% (3rd largest share) 
  3. USA - 15.85% (Largest share). 
  1. World Bank provides various technical services to the member countries. 
  2. Bank can grant loans to a member country up to 20% of its share in the paid up capital. 
  3. Generally, Bank grants loans for a particular project duly submitted to the bank by the member country. 
  4. The debtor national has to repay either in reserve currencies or in the currency in which the loan was sanctioned. 
  5. Bank also provides loan to private investors belonging to member countries on its own guarantee, but for this loan private investors have to seek prior permission from those countries where this amount will be collected.
  6. Settlement of disputes among member countries. 
  7. For long term development projects, world Bank provides loan for the period 5-20 years. 
Major Contribution of World Bank in India

India was first to get loan assistance from World Bank during 1995-1996. World Bank provided loan to Indian Government and extended loan for development of its financial institutions which include IDBI (Industrial Development Bank of India) & ICICI.
  1. Doing business 
  2. Global Economic Prospects 
  3. Global Financial Development Report 
  4. Climate change & Poverty 
  5. International Debt Statistics 
  6. World Development Report 

NDB (New Development Bank)  

The NDB, formerly referred to as the BRICS Development Bank, is a multilateral development
bank operated by the BRICS states (Brazil, Russia, India, China, South Africa) as an alternative to the existing American & European dominated World Bank and IMF. The goal of the bank is to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economics and developing countries All BRICS members have equal shareholding of 20% each. 

  • July 2014 (Treaty Signed) 
  • July 2015 (Treaty in Force) 
Headquarter : Shanghai, China 

President : K.V. Kamath (For first year) 

Sanghai was selected as the headquarter after competition from New Delhi and Johannesburg. 

Note : First loan to be issued in April 2016 and will be given in Chinese currency (Renminbi). 

ADB (Asian  Development Bank)

  • Head office : Manila (Philippines)
  • President : Takehiko Nakao  
  • Member : 67 
  • Motto : Fighting poverty in Asia and Pacific 

The Asian Development Bank (ADB) is a regional development Bank established in 19 December 1966. It focuses on reducing poverty through inclusive economic growth and sustainable environmental growth in Asia through loans & grants. 

ADB mainly focuses five operational areas.
  1. Education 
  2. Infrastructure 
  3. Finance Sector Development 
  4. Environment change 
  5. Regional Co-operation and integration. 
In ADB Japan holds largest share 15.7%, USA holds 15.6%, China 6.5% and India holds 6.4% share and voting power of India in ADB is 5.386% 

The 12 members of board of Directors are elected by board of governors and 8 out of 12 members are elected by members countries from within Asia Pacific region and 4 other are elected by member countries from outside regions.

AIIB (Asian Infrastructure Investment Bank)

Headquarter : Beijing, China
President : Jin Liquin (First)
Vice-President : Dr. D.J. Pandian

It is an international financial institution, which focuses on construction in Asia Pacific Region.
This bank was an initiative of Government of China and supported by 37 regional and 20 non-regional members. Total 57 founding members have signed the agreement for this bank.
It is considered a competitive bank for world dominating financial powers like World Bank, ADB & IMF.

Voting Shares :
  • China : 26.06%, 
  • India : 7.5%, 
  • Russia : 5.92% 
Authorized Capital : 100 Billion US Dolor.
Capital Shares
  • China : 29.78 billion dollars 
  • India : 8.36 billion dollars 
  • Russia : 6.54 billion dollars 
Capital Share %
  • China : 30.34%, 
  • India : 8.52%, 
  • Russia : 6.66% 

WTO (World Trade Organization)

Formation : 1 January 1995
Headquarter : Centre William Roppard, Geneva, Switzerland
Members : 164 (Since 31 December 2015) 
(Afghanistan is the 164th member)
WTO is an intergovernmental organization which regulates international trade. WTO signed by 123 nations on 15 Apr 1994 replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. WTO deals with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants adherence to WTO agreements, which are signed by representatives of member governments & ratified by their parliaments.

Note : India Membership : 1 Jan 1995 (GATT-8 July 1948)

Functions of WTO
  1. To implement rules & provisions related to trade policy and to help member countries to decide strategies of trade and tariff. 
  2. To provide facilities for implementation, administration and operation of multilateral & bilateral agreements of the World Trade and Resolving Trade disputes. 
  3. To assist international organisations such as IMF and IBRD for establishing coherence in Universal Economic Policy determination. 
    1. WTO 1st Ministerial Conference : 9-13 Dec 1996 (Singapore)
    2. WTO 10th Ministerial Conference : 15-19 Dec 2015 (Nairobi, Kenya) [In 10th Conference : The completion of Liberia's and Afghanistan accession to the WTO is an agenda] 
Publications : World Trade Report, International trade statistics.

NHB (National Housing Bank) 

  • Headquarter : New Delhi
  • Head : Sh. Sriram Kalyanraman. 
  • Set up on 9 July, 1988 under the NHB act 1987. 
  • It is a wholly owned subsidiary of Reserve Bank of India. 
  • It is an apex financial institution for housing. 
  • Objective : To operate as a principal agency to promote housing finance institutions both at local & regional levels. 
  • NHB registers, regulates and supervises Housing Finance Company (HFCs), keeps surveillance through on site & off site mechanisms and co-ordinates with other regulators. 
  • NHB has formulated a scheme called, Energy Efficient Housing Scheme (EEHS), 2011 for lending towards energy efficient housing units/buildings. 
  • Golden Jubilee Rural Housing Finance Scheme (GJRHFS) has been conceptualized to address the problem of rural housing through improved access to housing credit. 
That's all for now friends. In our next Banking Awareness lesson, we shall learn about few more Banking & Financial Institutes. Happy Reading :)

  • Read Lesson 2 from Here

  • Read Lesson 3 from Here

  • Read Lesson 4 from Here

  • Read Lesson 5 from Here

  • Read Lesson 6 from Here

  • Read Lesson 7 from Here

  • Read Lesson 8 from Here

  • Read Lesson 9 from Here

  • Read Lesson 10 from Here 

  • Read Lesson 11 from Here

  • Read Lesson 12 from Here  

  • Read Lesson 13 from Here 

  • Read Lesson 14 from Here

  • Read Lesson 15 from Here   

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