Banking Evolution and Functions

Questions and Answers

Which type of deposit account is designed for individuals who are not financially literate?

Fixed Deposit

Current Account

No-frills Account (correct)

Savings Account

What is the primary function of banks that involves accepting money from customers?

Executing Standing Instructions

Granting Loans & Advances

Acting as a Trustee

Accepting Deposits (correct)

What is the importance of KYC norms in opening a deposit account?

To verify the customer's identity (correct)

To promote financial inclusion

To ensure customer confidentiality

To determine the customer's creditworthiness

Which of the following is a type of institutional account holder?

Sole Proprietorship firm Signup and view all the answers

What is the purpose of a pay-in-slip in a deposit account?

To deposit money into the account Signup and view all the answers

What is the term for the premature withdrawal of a fixed deposit?

Premature encashment Signup and view all the answers

What is the role of the REBI in the Indian banking system?

To regulate the banking system Signup and view all the answers

What is the purpose of a demand draft?

To make a payment to a specific beneficiary Signup and view all the answers

Study Notes

Evolution of Banking

Origin of banking dates back to ancient times, with the first unit of currency being introduced
Evolution of banking in the West: from goldsmiths to modern banks
Evolution of banking in India: from indigenous banking to modern banking system
Importance of banking: facilitates economic growth, provides liquidity, and manages risk

Phases of Banking Evolution

Phase 1: Early banking (ancient times to 18th century)
Phase 2: British colonial era (18th century to 1947)
Phase 3: Post-independence era (1947 to 1991)
Phase 4: Liberalization and reforms (1991 onwards)

Reserve Bank of India (RBI) Act, 1934
Banking Regulation Act, 1949
Nationalization of banks (1969 and 1980)
Liberalization of banking sector (1991)

RBI and its Role

Regulator of Indian banking system
Formulates monetary policy and regulates financial institutions
Ensures stability and growth of the financial system

Primary Functions of Banks

Accepting deposits: current, savings, recurring, and fixed deposits
Granting loans and advances: term loans, short-term credit, overdraft, cash credit, and purchasing and discounting of bills

Secondary Functions of Banks

Agency functions: payment and collection of cheques, bills, and promissory notes, execution of standing instructions, and acting as a trustee and executor
General utility functions: safe custody, safe deposit vaults, remittances of funds, pension payments, and acting as a dealer in foreign exchange

Opening and Operating Deposit Accounts

Procedure for opening deposit account: KYC norms, application form, introduction, proof of residence, specimen signature, and nomination
No-frills account: a basic banking account with limited features
Procedure for operating deposit account: pay-in-slips, issue of passbook, issue of cheque book, and issue of fixed deposit receipt

Closure and Transfer of Accounts

Closure of accounts: reasons and procedures
Transfer of accounts to other branches: reasons and procedures

Types of Account Holders

Individual account holders: single or joint, illiterate, minor, married women, and non-residents
Institutional account holders: sole proprietorship firm, joint stock company, Hindu Undivided Family, clubs, associations, and societies

Methods of Remittances

Demand drafts
Bankers' cheques
Mail transfer
Telegraphic transfer
Electronic Funds Transfer

Insurance

Introduction to insurance: concept, types, and importance
Evolution of life and general insurance: history, development, and role
Role of IRDA as regulator of insurance in India

General Insurance

Meaning and principles of general insurance
Types of general insurance: fire, marine, and miscellaneous insurance
Organization and administration of general insurance in India
Functions of general insurance: risk assessment, policy issuance, and claims settlement

Life Insurance

Meaning and principles of life insurance
Types of life insurance policies: term, whole life, endowment, and annuity
Working of Life Insurance Corporation of India
Career options in insurance business

Risks and Accidents

Meaning and importance of hazards protection
Social security and type of risks and accidents
Procedure for settlement of claims

Description

This quiz covers the evolution of banking in the West and India, including its history, phases, and reforms. It also explores the primary functions of banks, including accepting deposits and granting loans and advances.