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What are the three levels at which banks are organized?
Village or town level, district level, state level
What type of bank operates at the district level and acts as a link between primary credit societies and state co-operative banks?
What is the primary function of commercial banks?
Accepting deposits and granting loans
What does SIDBI stand for?
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Which bank provides assistance and guidance for the export of products abroad?
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Loans and advances are both granted by banks to customers for a long period of time.
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The ___________ Bank is the apex institution for financing agricultural and rural sectors.
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What does the current deposit account not earn?
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Match the following types of bank deposit accounts with their descriptions:
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Banks provide short-term finance by discounting bills of exchange free of cost.
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What does a bank do?
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A bank accepts deposits from people and ________ money to those who need it for various purposes.
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Banks act as ________ between people having surplus money and those borrowing money.
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Banking facilitates business activities and is considered as an important auxiliary to ___________.
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Banks facilitate payment through _________ instead of currency.
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A __________ advances money out of his own private wealth and generally does not accept deposits from others.
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Which of the following is NOT a type of bank?
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What is the primary role of a Central Bank?
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Name one example of a Public Sector Bank in India.
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Which of the following can banks provide to their customers?
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Banks can issue currency notes.
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What is a Development Bank's primary purpose?
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What is the role of Co-operative Banks?
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Statement (i) is true.
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Statement (ii) is true.
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Statement (iii) is false.
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Statement (iv) is false.
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Statement (v) is true.
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Statement (vi) is true.
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Statement (vii) is true.
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Statement (viii) is true.
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What is the term for someone who deposits money in a bank?
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What is the main purpose of a foil in banking?
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The ______ signature is used to authorize withdrawals.
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What is the action referred to for removing funds from a bank account?
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Which of the following is a term related to banking?
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To open various deposit accounts, banks often require a minimum ______.
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What information should you collect about interest rates?
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Deposits made in a savings bank account serve to meet present as well as future needs.
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A fixed amount is required to be deposited in a Fixed Deposit Account every month.
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The rate of interest on deposits made in a Recurring Deposit Account is relatively higher than on savings bank deposits.
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Current Deposit Account can be opened only by businessmen, not by educational institutions.
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Home Construction Saving Deposit Account is a type of recurring deposit account.
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The rate of interest allowed on fixed deposit depends on the length of the period for which the deposit is made.
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In the case of savings bank account, withdrawal of money is allowed only by the account-holder.
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Banks do not pay interest on the balance of a current deposit account.
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Savings Bank Account can be opened with a ____________ amount of deposit.
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A Fixed Deposit Account carries interest at a rate, which is ____________ than that on savings bank account.
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Overdraft facility is allowed to holders of __________ deposit account.
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Money can be withdrawn from a current account by issuing ____________.
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The rate of interest allowed on the balance of a recurring deposit account is ________ than the rate allowed on fixed deposit account.
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Pay-in-slip is required to be used while opening a savings bank account.
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Withdrawal form cannot be used by an account-holder if he/she uses cheques for withdrawing cash from savings bank account.
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A savings bank account-holder cannot introduce another person at the time of opening a savings bank account.
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The Pass Book must be presented by the account-holder for entering deposits and withdrawals by the bank.
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Application form for opening a savings bank account is available free of charge.
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To make payment to a third party by cheque, the name of the party must be mentioned on the cheque.
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Counterfoil of the pay-in-slip is returned to the ________________ by the bank.
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The right-hand part of the pay-in-slip is called the ________.
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A cheque needs to be attached to the ________ of the pay-in-slip before depositing.
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Before payment of a cheque, the signature of the account-holder is verified with the ___________.
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The Teller system helps quick ___________ of cash by account-holders.
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Deposit of cash into savings bank account can be made at the ___________ counter.
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Which of the following is an example of e-banking?
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Which of the following is not a function of Central Bank?
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Which of the following is not a commercial bank?
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Which is not a valid document to withdraw money from the bank?
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What is meant by 'Bank'?
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What is meant by 'Banking'?
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What facility is provided by credit cards to a bank's customers?
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What is meant by cash credit?
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What function does 'Development Bank' perform?
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What is meant by Central Bank?
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What are the functions performed by EXIM Bank?
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What is NABARD?
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What are the primary functions of a commercial bank?
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What is a Fixed Deposit Account facility?
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Describe the procedure for opening a savings bank account.
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State the procedure for depositing cash into the savings bank account.
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What is a pay-in-slip?
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Study Notes
Meaning of Bank
- An establishment authorized by the government to accept deposits, pay interest, clear checks, give loans, act as a financial intermediary, and provide other financial services.
- Serves as a safe place to store money and access it when needed.
- Loans are offered at reasonable interest rates to individuals and businesses.
- Banks prioritize safety of deposits and promote saving habits by offering interest.
Difference Between Banks and Money-Lenders
- Banks are organized institutions, while money-lenders are individuals.
- Banks accept deposits and lend money, while money-lenders may not accept deposits, lending from their private wealth.
- Banks serve a broader clientele, while money-lenders primarily cater to specific groups like farmers and low-income people.
- Banks accept diverse forms of security, while money-lenders often prioritize gold, jewelry, or land.
- Banks have a flexible loan recovery process, while money-lenders have more rigid processes.
- Interest rates for banks are regulated by the Reserve Bank of India (RBI), while money-lenders have the freedom to decide their own interest rates, often higher.
Role of Banking
- Encourages savings and makes funds available for productive use.
- Acts as an intermediary between those with surplus money and those requiring funds.
- Facilitate business transactions through receipts and payments via checks.
- Provide loans to businesses for short and long-term purposes.
- Facilitate import-export transactions.
- Contributes to national development by providing credit to farmers, small-scale industries, self-employed individuals, and large businesses.
- Elevates living standards by offering loans for consumer durables, housing, and vehicles.
Types of Banks
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Central Bank: Guides and regulates a country's banking system. Example: The Reserve Bank of India.
- Does not deal directly with the public.
- Acts as the government's banker, holding deposit accounts of other banks and providing them with money when needed.
- Provides guidance to other banks.
- Maintains records of government revenue and expenditure.
- Advises the government on monetary and credit policies.
- Determines interest rates for bank deposits and loans.
- Sets foreign exchange rates.
- Issues currency notes and regulates their circulation.
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Commercial Banks: Accept deposits and grant short-term loans.
- Provide medium and long-term loans to businesses.
- Offer housing loans to individuals.
- Examples: State Bank of India, Corporation Bank, Bank of Baroda, Punjab National Bank, etc. (public sector)
- Examples: The Jammu and Kashmir Bank Ltd., ICICI Bank Ltd., Development Credit Bank Ltd, Lord Krishna Bank Ltd., Bharat Overseas Bank Ltd., Global Trust Bank, ING Vysya Bank, etc. (private sector)
- Examples: Hong Kong and Shanghai Banking Corporation (HSBC), Citibank, American Express Bank, Standard & Chartered Bank, Grindlay’s Bank, etc. (foreign)
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Development Banks: Provide medium and long-term capital for business expansion, modernization, and adoption of new technologies.
- Examples: Industrial Finance Corporation of India (IFCI) and State Financial Corporations (SFCs).
- They also invest in companies by subscribing to their shares and debentures.
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Co-operative Banks: Belong to their members, who are both owners and customers.
- Often formed by individuals from the same local or professional community.
- Provide a wide range of banking and financial services to their members.
- They operate at three levels: village/town, district, and state.
- Examples: Primary credit societies, central co-operative banks, and state co-operative banks.
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Specialised Banks: Cater to specific areas of business activity.
- Examples: EXIM Bank, SIDBI, and NABARD.
Banking Activities
- Acceptance of deposits and investment of money.
- Facilitates business activities through the exchange of goods and services.
- Banking is an important auxiliary to trade by providing money for production and facilitating exchange between buyers and sellers.
- Banking activities are legal transactions in our country, regulated by appropriate laws.
Public Confidence and Banking
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Banks heavily rely on public confidence.
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Without it, they cannot survive.### Export-Import Bank of India (EXIM Bank)
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Provides support for businesses exporting products abroad and importing products from foreign countries.
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Offers loans to exporters and importers.
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Provides information about the international market, including export/import opportunities, risks, and competition.
Small Industries Development Bank of India (SIDBI)
- Provides loans on easy terms for establishing small-scale business units or industries.
- Finances modernization, new technology implementation, and market activities for small-scale industrial units.
- Focuses on promoting, financing, and developing small-scale industries.
National Bank for Agricultural and Rural Development (NABARD)
- Apex institution for financing agricultural and rural sectors.
- Provides short-term and long-term credit to individuals engaged in agriculture, handloom weaving, fishing, etc.
- Offers financial assistance, particularly to cooperative credit, in agriculture, small-scale industries, cottage and village industries, handicrafts, and allied economic activities in rural areas.
Primary Functions of Commercial Banks
- Accepting deposits: Banks mobilize deposits from the public, offering interest on various deposit types.
- Granting loans and advances: Banks lend money to individuals and businesses at higher interest rates than offered on deposits.
Types of Commercial Bank Loans
- Loans: Granted for a specific time period, usually short-term, but also term loans for longer periods.
- Advances: Short-term credit facilities to meet daily business needs.
Types of Commercial Bank Advances
- Cash Credit: Borrowers draw up to a specified limit, with interest charged only on the withdrawn amount.
- Overdraft: Temporary arrangement allowing customers to withdraw more than their account balance, with a pre-determined limit.
- Discounting Bills of Exchange: Banks make payments before the due date of bills by deducting a discount rate, providing funds without waiting for maturity.
Secondary Functions of Commercial Banks
- Issuing letters of credit, travelers’ cheques, etc.
- Providing safe deposit vaults or lockers for valuables, important documents, and securities.
- Facilitating foreign exchange dealings for customers.
- Transferring money between accounts and bank branches using cheques, pay orders, and demand drafts.
- Providing guarantees for customer purchases of goods, machinery, vehicles, etc.
Reserve Bank of India
- Established in 1935, the Central Bank of India.
- Initially based in Calcutta, the central office moved to Mumbai in 1937.
- Fully owned by the Government of India since nationalization in 1949.
- Its main function is the general superintendence and direction of the banking system.
Types of Bank Deposit Accounts
- Savings Bank Account: Suitable for individuals with limited income who want to save for future needs.
- Current Deposit Account: Preferred by businesses, companies, and institutions for frequent transactions.
- Fixed Deposit Account (Term Deposit Account): Allows deposits for a fixed period with higher interest rates.
- Recurring Deposit Account: Enables regular monthly saving with interest accrued at maturity.
- Home Construction Savings Deposit Account: Designed for individuals saving for home construction.
Opening a Savings Bank Account
- Decide on the initial deposit amount.
- Inquire about the minimum balance requirement at the bank.
- Collect an application form from the bank.
- Fill out the form with personal information, occupation, address, specimen signature, and details of the person introducing you.
- Submit the application form along with required documents, and the initial deposit amount to open the account.
Opening a Savings Bank Account
- To open a savings bank account, individuals must provide personal details, proof of identity, and address.
- A guarantor or introduction from a known person with an account at the bank is usually required.
- Some banks may accept attested copies of passport or driving license as proof of identity.
- The applicant submits specimen signatures on both the application form and a separate card with their photograph.
- After the application is approved, the individual must deposit the initial amount at the bank and receive a passbook recording their initial deposit.
Depositing Money in a Savings Account
- Cash deposits use a pay-in-slip: a printed form with two parts divided by a perforation (foil and counterfoil).
- Complete the pay-in-slip with the deposit date, account number, name of the account holder, amount in figures and words, and a count of different currency notes.
- Separate pay-in-slips are used for cash and cheque deposits.
- Signing and presenting the pay-in-slip at the bank's cash counter secures the foil part of the slip, and the counterfoil is returned to the depositor with a rubber stamp and signature.
- Cheque deposits require filling out a pay-in-slip with details such as the deposit date, account number, cheque number and date, the name and address of the bank on which the cheque is drawn, and the amount of the cheque.
- The cheque is attached to the foil and presented at the counter; the foil is kept by the bank, and the counterfoil is returned to the depositor.
Withdrawing Money from a Savings Account
- Account holders can withdraw money using three methods: withdrawal forms, cheques, and ATM cards.
- Withdrawal forms require the account holder to fill in details such as the withdrawal date, account number, amount in figures and words, and their signature.
- The withdrawal form is presented with the passbook, and the bank clerk verifies the balance and signature before approving payment.
- Cheques can be used to withdraw cash or to make payments to other parties.
- The withdrawal amount will need to be filled onto the cheque and the signature of the account holder used.
- ATM cards permit account holders to deposit or withdraw money from their accounts at automated teller machines (ATMs) at any time.
- ATM cards are magnetic cards that require a personal identification number (PIN) to operate.
Teller Counters
- Teller counters are used to facilitate quick cash transactions.
- Manual Teller Counters allow withdrawals within a certain limit, usually requiring a cheque or withdrawal form for verification.
- Automatic Teller Machines (ATMs) provide 24-hour, self-service cash transactions.
- ATM machines use a magnetic card and a personal identification number (PIN) for account holder verification.
E-Banking (Electronic Banking)
- E-banking refers to banking services provided through electronic channels like computers and the internet.
- Examples of e-banking include automated teller machines (ATMs), debit cards, credit cards, and net banking.
- ATM cards allow account holders to access their funds electronically.
- Debit cards deduct the payment amount directly from the account holder's balance.
- Credit cards allow account holders to borrow funds on a short-term basis with interest charges.
- Net banking refers to banking services, such as viewing account balances, opening fixed deposits, transferring funds, and paying bills, conducted online through the internet.
Banking Services
- It is an auxiliary to trade.
- Banks facilitate export and import.
- Banking services encourage savings and act as an intermediary between depositors and borrowers.
Types of Banks
- Central Bank: The main bank of a country. This central bank issues currency, regulates the banking system and acts as the banker's bank. It also acts as the government banker.
- Commercial Bank: Provides loans and credit facilities to individuals and businesses.
- Development Bank: Offers credit or loans for medium to long term financial requirements of businesses.
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Co-operative Bank: Serve the common interest of members.
- Primary Credit Societies operate at the village level.
- Central co-operative Banks operate at the district level.
- State Co-operative Banks operate at the state level.
Functions of Commercial Banks
- Primary functions: Accepting deposits, granting loans, advances, cash, credit, overdraft and discounting of bills.
- Secondary functions: Issuing letter of credit, undertaking safe custody of valuables, providing consumer finance, educational loans, etc.
Types of Bank Accounts
- Savings Bank Account: For individuals who want to save money.
- Current Deposit Account: For businesses and people who require frequent transactions.
- Fixed Deposit Account: For individuals who want to save for a fixed period.
- Recurring Deposit Account: Allows people to invest a fixed amount every month.
Modern Banking Services
- Phone Banking: Enables customers to make payments, check account balances, and access other services over the phone.
- Mobile Banking: Allows customers to receive and send messages (SMS) from and to the bank.
- Net Banking: Customers can view their bank accounts and make transactions online.
- Debit Card: Allows customers to withdraw cash and make payments at ATMs and POS (Point of Sale) terminals.
- Credit Card: A card that provides credit to the cardholder, allowing them to make purchases and pay later.
Procedures for Opening a Savings Bank Account
- Fill out an application form.
- Provide proper introduction to the bank by someone known to the bank.
- Submit a specimen signature of the account holder.
Additional Information about Banking
- EXIM Bank: Provides guidance and support to exporters and importers.
- NABARD: Helps in financing agricultural and other rural activities.
Key Points to Remember
- Cash Credit: Financing facility provided by banks, enabling customers to borrow funds against their stock or other assets.
- ATM (Automated Teller Machine): A machine that allows bank customers to access their accounts and perform transactions like cash withdrawals and balance inquiries.
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Description
Test your knowledge on the organization and functions of banks with this quiz. Explore different types of banks, their roles, and key concepts in banking operations. Perfect for students and anyone interested in understanding the banking sector.
