MICROCREDIT OR MICROFINANCE

               Micro credit is the extension of very small loans to the unemployed to poor Endeavour and to others living in poverty who are not considered bankable. These individuals lack collateral steady employment and variable credit history and therefore cannot meet even the most minimal qualification to gain excess to traditional credit.
                Microcredit is a part of microfinance which is the provision of the wider range of the financial services to the very poor. Microcredit is the financial innovation which originated in Bangladesh where it has successfully enabled to extremely impoverish people to engage itself employment project. The founder of this microcredit is Prof. Mohammad Yunus in mid 1970s. He is also the founder of grami8n bank of Bangladesh with which Mr. Yunus has received the Noble Peace Price 2006 and to pay respect towards microcredit the united nation organization has declared year 2005 “The International Year of Microcredit.”

Basel Norms

     Basel is the city of Switzerland where in 1992 the BIS conference was held (Banks for International Settlement) & this conference for organized by the European Banks in which they have prepared some guidelines for the banking industry dividing into parts Basel-I & Basel-II.
    Basel I- between 1994 to 2004
    Basel II- after 2004
           The Basel-I guidelines were only intact with the CAR of the banks in which banks were bound to maintain their CAR between 8-12%
    BASEL III
            Basel III (or the Third Basel Accord) is a global, voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity risk. It was agreed upon by the members of the Basel Committee on Banking Supervision in 2010–11, and was scheduled to be introduced from 2013 until 2015; however, changes from 1st April 2013 extended implementation until 31 March 2018. The third installment of the Basel Accords (see Basel I, Basel II) was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis. Basel III was supposed to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage.

Key principles of BASEL III :

Capital requirements: The original Basel III rule from 2010 was supposed to require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of Tier I capital (up from 4% in Basel II) of "risk-weighted assets" (RWA).[3] Basel III introduced "additional capital buffers", (i) a "mandatory capital conservation buffer" of 2.5% and (ii) a "discretionary counter-cyclical buffer", which would allow national regulators to require up to another 2.5% of capital during periods of high credit growth.

Leverage ratio: Basel III introduced a minimum "leverage ratio". The leverage ratio was calculated by dividing Tier 1 capital by the bank's average total consolidated assets; The banks were expected to maintain a leverage ratio in excess of 3% under Basel III. In July 2013, the US Federal Reserve Bank announced that the minimum Basel III leverage ratio would be 6% for 8 Systemically important financial institution (SIFI) banks and 5% for their insured bank holding companies. Liquidity requirements: Basel III introduced two required liquidity ratios. The "Liquidity Coverage Ratio" was supposed to require a bank to hold sufficient high-quality liquid assets to cover its total net cash outflows over 30 days; the Net Stable Funding Ratio was to require the available amount of stable funding to exceed the required amount of stable funding over a one-year period of extended stress.

Tier I Capital: Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. It is B composed of core capital, which consists primarily of common stock and disclosed reserves (or retained earnings), but may also include non-redeemable non-cumulative preferred stock. The Basel Committee also observed that banks have used innovative instruments over the years to generate Tier 1 capital; these are subject to stringent conditions and are limited to a maximum of 15% of total Tier 1 capital. This part of the Tier 1 capital will be phased out during the implementation of Basel III.

Tier II Capital: Tier 2 capital, or supplementary capital, include a number of important and legitimate constituents of a bank's capital base. These forms of banking capital were largely standardized in the Basel I accord, issued by the Basel Committee on Banking Supervision and left untouched by the Basel II accord. National regulators of most countries around the world have implemented these standards in local legislation. In the calculation of regulatory capital, Tier 2 is limited to 100% of Tier 1 capital.

RUPAY CARD

                RuPay is the Indian domestic card payment network set up by National Payments Corporation of India (NPCI) at the behest of banks in India. The RuPay project had been conceived by Indian Banks Association (IBA) and had the approval of Reserve Bank of India (RBI).
                RuPay LogoNational Payments Corporation of India (NPCI) has a plan to provide a full range of card payment services including the RuPay ATM, RuPay MicroATM, Debit, Prepaid and Credit Cards which will be accepted in India and abroad, across various channels like POS, Internet, IVR and mobile etc.
               The initial focus of NPCI would be to approach those banks who have not been issuing any payment card at all more specifically – Regional Rural Banks (RRBs) and urban co-operative banks.
                All Public Sector Undertakings (PSU) banks set to join RuPay system by the end of year 2012. RuPay-based debit cards can be used by the consumers on the Internet from September, 2012. The government of India had launched India’s first domestic payment card network, RuPay, to compete with Visa Inc and Mastercard Inc.

Objectives of RuPay:
           The Main Objective of the RuPay payment network project is to reduce the overall transaction cost and develop products appropriate for financial inclusion.

• Reduce overall transaction cost for the banks in India by introducing competition to international card schemes. 
• Develop products appropriate for the country particularly for financial inclusion. 
• Provide card payment service option to many banks who are currently not eligible for card issuance under the eligibility criteria of international card schemes. 
• Build environment whereby payment information of the country remains within the country 5. Shift Personal Consumption Expenditure (PCE) from cash to electronic payments in a growing economy with a population of 1.2 billion

Important Points to Remember:

• RuPay is the Indian domestic card payment network. 
• The RuPay payment network set up by National Payments Corporation of India (NPCI) at the behest of banks in India. 
• The RuPay project had been conceived by Indian Banks Association and had the approval of Reserve Bank of India. 
• The main objective of RuPay project is to reduce overall transaction cost for the banks in India by introducing competition to international card schemes. 
• NPCI has plan to provide full range of credit service like RuPay ATM, RuPay MicroATM, Debit, Prepaid and Credit Cards which will be accepted across various channel POS, Internet, IVR, Mobile etc. 
• All state-owned banks are expected to join the RuPay system by the end of this year. 
• RuPay-based debit cards can be used by the consumers on the Internet from September, 2012.

CAPITAL MARKET

                              Capital market deals with medium term and long term funds. It refers to all facilities and the institutional arrangements for borrowing and lending term funds (medium term and long term). The demand for long term funds comes from private business corporations, public corporations and the government. The supply of funds comes largely from individual and institutional investors, banks and special industrial financial institutions and Government.

STRUCTURE I CONSTITUENTS I CLASSIFICATION OF CAPITAL MARKET
                Capital market is classified in two ways

• CAPITAL MARKET IN INDIA

1. Gilt - Edged Market  Gilt - Edged market refers to the market for government and semi-government securities, which carry fixed rates of interest. RBI plays an important role in this market.
2. Industrial Securities Market :- It deals with equities and debentures in which shares and debentures of existing companies are traded and shares and debentures of new companies are bought and sold. 
3. Development Financial Institutions :- Development financial institutions were set up to meet the medium and long-term requirements of industry, trade and agriculture. These are IFCI, ICICI, IDBI, SIDBI, IRBI, UTI, LIC, GIC etc. All These institutions have been called Public Sector Financial Institutions. 
4. Financial Intermediaries :- Financial Intermediaries include merchant banks, Mutual Fund, Leasing companies etc. they help in mobilizing savings and supplying funds to capital market.

• The Second way in which capital market is classified is as

1. Primary Market :- Primary market is the new issue market of shares, preference shares and debentures of non-government public limited companies and issue of public sector bonds.
2. Secondary Market This refers to old or already issued securities. It is composed of industrial security market or stock exchange market and gilt-edged market.

Money Market

                  A money market is a market for borrowing and lending of short-term funds. It deals in funds and financial instruments having a maturity period of one day to one year. It is a mechanism through which short-term funds are loaned or borrowed and through which a large part of financial transactions of a particular country or of the world are cleared. It is not a single market but a collection of markets for several instruments like call money market, Commercial bill market etc.
                 The Reserve Bank of India is the most important constituent of Indian money market In money market the players are

• Government 
• RBI
• DFHI (Discount and finance House of India) Banks
• Mutual Funds
• Corporate Investors
• Provident Funds
• PSUs (Public Sector Undertakings)
• NBFCs (Non-Banking Finance Companies) etc. 

STRUCTURE OF INDIAN MONEY MARKET

• Organised Sector 
• Call and Notice Money Market 
• Indigenous Bankers 
• Treasury Bill Market 
• Money Lenders 
• Commercial Bills 
• NBFI 
• Certificate of Deposits 
• Commercial Papers 
• Money Market Mutual Funds 
• The REPO Market 
• DFHI 

Organised Sector Of Money Market :-
                 Organised Money Market is not a single market, it consist of number of markets. The most important feature of money market instrument is that it is liquid. It is characterised by high degree of safety of principal. Following are the instruments which are traded in money market
1) Call And Notice Money Market
                 The market for extremely short-period is referred as call money market. Under call money market, funds are transacted on overnight basis. The participants are mostly banks. Therefore it is also called Inter-Bank Money Market. Under notice money market funds are transacted for 2 days and 14 days period. The lender issues a notice to the borrower 2 to 3 days before the funds are to be paid. On receipt of notice, borrower have to repay the funds.
2) Treasury Bill Market (T - Bills)
                This market deals in Treasury Bills of short term duration issued by RBI on behalf of Government of India. At present three types of treasury bills are issued through auctions, namely 91 day, 182 day and364day treasury bills. State government does not issue any treasury bills. Interest is determined by market forces. Treasury bills are available for a minimum amount of Rs. 25,000 and in multiples of Rs. 25,000. Periodic auctions are held for their Issue. Commercial Banks, Primary Dealers, Mutual Funds, Corporates, Financial Institutions, Provident or Pension Funds and Insurance Companies can participate in T-bills market.
3) Commercial Bills
                Commercial bills are short term, negotiable and self liquidating money market instruments with low risk. A bill of exchange is drawn by a seller on the buyer to make payment within a certain period of time. Generally, the maturity period is of three months. Commercial bill can be resold a number of times during the usance period of bill.
4) Certificate Of Deposits (CDs)
                 CDs are issued by Commercial banks and development financial institutions. CDs are unsecured, negotiable promissory notes issued at a discount to the face value. The scheme of CDs was introduced in 1989 by RBI. The main purpose was to enable the commercial banks to raise funds from market. At present, the maturity period of CDs ranges from 3 months to 1 year. They are issued in multiples of Rs. 25 lakh subject to a minimum size of Rs. 1 crore. CDs can be issued at discount to face value. They are freely transferable but only after the lock-in-period of 45 days after the date of issue.
5) Commercial Papers (CP)
                  Commercial Papers were introduced in January 1990. The Commercial Papers can be issued by listed company which have working capital of not less than Rs. 5 crores. They could be issued in multiple of Rs. 25 lakhs. The minimum size of issue being Rs. 1 crore. At present the maturity period of CPs ranges between 7 days to 1 year. CPs are issued at a discount to its face value and redeemed at its face value.
6) Money Market Mutual Funds (MMMFs)
                   A Scheme of MMMFs was introduced by RBI in 1992. The goal was to provide an additional short-term avenue to individual investors. In November 1995 RBI made the scheme more flexible. The existing guidelines allow banks, public financial institutions and also private sector institutions to set up MMMFs. The ceiling of Rs. 50 crores on the size of MMMFs stipulated earlier, has been withdrawn. MMMFs are allowed to issue units to corporate enterprises and others on par with other mutual funds. Resources mobilised by MMMFs are now required to be invested in call money, CD, CPs, Commercial Bills arising out of genuine trade transactions, treasury bills and government dated securities having an unexpired maturity upto one year. Since March 7, 2000 MMMFs have been brought under the purview of SEBI regulations. At present there are 3 MMMFs in operation.
7) The Repo Market
                    Repo was introduced in December 1992. Repo is a repurchase agreement. It means selling a security under an agreement to repurchase it at a predetermined date and rate. Repo transactions are affected between banks and financial institutions and among bank themselves, RBI also undertake Repo.
8) Discount And Finance House Of India (DFHI)
                    In 1988, DFHI was set up by RBI. It is jointly owned by RBI, public sector banks and all India financial institutions which have contributed to its paid up capital.It is playing an important role in developing an active secondary market in Money Market Instruments.

II. Unorganised Sector Of Money Market
                     The economy on one hand performs through organised sector and on other hand in rural areas there is continuance of unorganised, informal and indigenous sector. The main constituents of unorganised money market are:-
1) Indigenous Bankers (IBs) Indigenous bankers are individuals or private firms who receive deposits and give loans and thereby operate as banks. IBs accept deposits as well as lend money. They mostly operate in urban areas, especially in western and southern regions of the country.
2) Money Lenders (MLs) They are those whose primary business is money lending. Money lending in India is very popular both in urban and rural areas. Interest rates are generally high. Large amount of loans are given for unproductive purposes.
3) Non - Banking Financial Companies (NBFCs)
                  They consist of
1. Chit Funds
                  Chit funds are savings institutions. It has regular members who make periodic subscriptions to the fund. The beneficiary may be selected by drawing of lots. Chit fund is more popular in Kerala and Tamilnadu.
2. Nidhis
                 Nidhis operate as a kind of mutual benefit for their members only. The loans are given to members at a reasonable rate of interest. Nidhis operate particularly in South India.
3. Loan Or Finance Companies
                 Loan companies are found in all parts of the country. Their total capital consists of borrowings, deposits and owned funds. They give loans to retailers, wholesalers, artisans and self employed persons. They offer a high rate of interest along with other incentives to attract deposits. They charge high rate of interest varying from 36% to 48% p.a.
4. Finance Brokers
                They are found in all major urban markets specially in cloth, grain and commodity markets. They act as middlemen between lenders and borrowers. They charge commission for their services.