The Primary Functions performed by Banks are:

1. Accepting Deposits

For Savings deposits, the following conditions have been set by the RBI:

Banks are free to determine the savings bank deposit interest rate, provided they follow these 2 conditions:

1. For Savings Bank Deposits up to Rs.1 lakh, the interest rate offered by each Bank would be uniform.
2. Banks can offer differential rates for Savings Bank Deposits exceeding Rs. 1 lakh. However, they must ensure that they do not discriminate in matters relating to interest paid to depositors when the amount involved is the same and is accepted on the same date at any of its offices.

For Term deposits, the following conditions have been set by the RBI:

Commercial Banks have the freedom to fix their interest rates on domestic term deposits of different maturities. For this, they require the prior approval of their respective Board of Directors/Asset Liability Management Committee (ALCO). However, they must ensure that they do not discriminate in matters relating to interest paid on deposits, when they are accepted on the same date and for the same maturity, at any of its offices.

Link: https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=9867#32

The Secondary Functions performed by Banks are:

a. Agency Functions

There are no particular guidelines set by the RBI regarding Agency Functions performed by a Bank.

b. General Utility Functions

The services provided by Banks vary from Bank to Bank. Hence, there are no guidelines set by the RBI for these functions.

The internal structure and department within a Bank vary from Bank to Bank. Some of the general and important departments which are present in all Banks are:

• Risk Management

To ensure better risk management and avoidance of concentration of credit risks, the Reserve Bank of India has advised the banks to fix limits on their exposure to specific industry or sectors and has issued guidelines on banks’ exposure to single and group borrowers in India. Some of the guidelines regarding Risk Management set by the RBI are:

1. The exposure ceiling limits would be 15% of capital funds in case of a single borrower and 40% of capital funds in the case of a borrower group.
2. Banks’ exposure to activities such as leasing, hire purchase and factoring should not exceed 10%

Link: https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=9875#211

• Treasury

For Treasury, Banks have to follow the regulatory ratios as given by the Government. The different rates set by the RBI are (Last Updated on June 02, 2020):

• Technology

RBI has mandated Core Banking Solution (CBS) for all commercial banks. Core Banking Solution (CBS) is a networking of branches and banks, which enables Customers to operate their account from anywhere regardless of the origin of account. It increases convenience and makes it easier to use banking services for customers.

Link: https://financialservices.gov.in/sites/default/files/F.%20No.%2071262012-BOA.pdf

• International Banking

International Banking is generally governed by the Foreign Exchange Management Act (FEMA) and some requirements are even set by the RBI.

• Banking

RBI sets the charges involved for different services such as NEFT, RTGS, ATM, Cheque, Mobile Banking Services and it also charges membership fees from the Banks for providing such services to customers.

• Lending

The guidelines relating to this department are covered under the Loans and Advances functions of the Bank.