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MONEY LAUNDERING

It is the process of disguising illegal sources of money so that it looks like it came from legal sources. It refers to money generated through illegal activities like drug trafficking, illegal sale of arms, ransoms realized in kidnappings, extortions, smuggling, etc. Thus it is different from black money which is unaccounted money or the money on which tax has not been paid, but the source of earning is not illegal. Money laundering is one of the major means of funding of terrorism around the world. Adoption of KYC norms is one of the effective methods for checking the menace of money laundering. 
The process of Money Laundering involves 3 steps:- Placements, Layering and Integration. In India, government has framed Prevention of Money Laundering Act – (PMLA) 2002 to control money laundering. Instances of violations of PMLA in banking business are to be reported to Financial Intelligence Unit- India (FIU- IND) in Ministry of Finance, New Delhi. Banks are also required to report all cash transactions of above Rs. 10 Lac to FIU-IND on monthly basis.

COUNTERFEIT CURRENCY

It refers to the fake currency. Possession or use of counterfeit money is a legal offence. On detection of fake note by banker, it has to be cancelled and surrendered to nearest police station.

FINANCIAL INCLUSION

The term inclusion refers to coverage of common man and all other persons not covered by some particular vital service. Financial inclusion thus means providing basic financial services to the people not yet covered by these services. It is estimated that roughly 60% of Indians do not have any linkage with the banks. The government has taken up a strong initiative to provide basic financial services to these people.
In 2010-11 budget, it was decided to extend banking services to all the unbanked habitations with a population of 2000 and above by 31st March 2012. A multimedia campaign-SWABHIMAN was launched to popularize this project. Reserve Bank of India identified about 73000 such habitations and they were allotted to all the public sector banks with a target of opening 5 crore bank accounts. The mission was completed successfully and now it has been extended to cover all unbanked centers to achieve a target of at least one bank account per family.


To facilitate opening of such a large number of accounts, RBI introduced two initiatives:
  1. Business Correspondent (BC): Banks were allowed to recruit agents called BC for transacting their routine day – to – day business. Banks could make anybody, person, NGO, even companies as their BC and they could be assigned any job as BC.
  2. Business Facilitator (BF): Unlike BC, the BF cannot do actual transactions. Their role is to spread awareness about various banking products and government schemes.

ULTRA SMALL BRANCH (USB)

It is an intermediate ‘Brick and Mortar’ branch between the present base branch and Business Correspondent (BC) locations so as to provide support to a cluster of BC units at a reasonable distance. These Branches may provide support to about 8-10 BC Units within a distance of 3-4 Kms.

MICRO FINANCE INSTITUTION (MFI)

These are intermediary financial institutions which are given soft loans by the banks for giving smaller loans to the beneficiaries in backward/interior areas. Of late, MFIs have earned a bad name as most of them started indulging in a variety of financial mal practices, since almost all their customers were illiterate. Taking advantage of their ignorance, MFIs started fleecing their customer. Ultimately, government formed a committee under chairmanship of Y.H. Maleghamto look into the functioning of MFIs. A major recommendation of the committee was that RBI should be asked to regulate the functioning of MFIs and government has accepted it.


WHAT IS MICRO FINANCE?

Micro-finance is an economic development tool whose objective is to assist the poor to work their way out of poverty. It covers a range of services which include, in addition to the provision of credit, many other services such as savings, insurance, money transfers, counseling, etc.Normally, loans up to Rs. 50,000 are covered under Micro Finance.

SELF HELP GROUP (SHG)

Concept of SHG was developed in Bangladesh by Mr. Mohammad Yunus, founder of Grameen Bank and winner of Nobel peace prize. It refers to a voluntary group of roughly 8 to 10 persons formed for pursuing some economic activity. The group works from its own funds for about 6 months after which the group is sanctioned a bank loan in proportion to savings of the group. In India, the concept has officially been adopted by NABARD and is implemented through banks.

JOINT LIABILITY GROUP: 

A group of small farmers formed on the lines of Self Help Group is called Joint Liability Group.
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