Meaning of banking
A bank is a financial institution licensed to receive deposits and make loans. Banks
may also provide financial services, such as wealth management, currency
exchange and safe deposit boxes.
Thus it can be defined as a company which collects money from the public in the
form of deposits and lends the same to borrowers. It can be an institution that
provides facilities for safekeeping, lending and transfer of money.
According to the Banking Regulations Act 1949, “banking means the accepting, for
the purpose of lending or investments, of deposits from the public, repayable on the
demand or otherwise and withdrawal by cheque, draft, order or otherwise.
Role of commercial banks in India
Mobilizing Saving for Capital Formation:
The commercial banks help in mobilizing savings through network of branch
banking. By mobilizing savings, the banks channelize them into productive
investments. Thus they help in the capital formation of a developing country.
Financing Industry:
The commercial banks finance the industrial sector in a number of ways. They
provide short-term, medium-term and long-term loans to industry. In India they
provide short-term loans.
In India, the commercial banks underwrite the shares and debentures of large scale
industries. Thus they not only provide finance for industry but also help in
developing the capital market which is undeveloped in some countries.
Financing Trade:
The commercial banks help in financing both internal and external trade. The banks
provide loans to retailers and wholesalers to stock goods in which they deal.
Moreover, they finance both exports and imports of developing countries by
providing foreign exchange facilities to importers and exporters of goods.
Help in Monetary Policy:
The commercial banks help the economic development of a country by faithfully
following the monetary policy of the central bank. In fact, the central bank depends
upon the commercial banks for the success of its policy of monetary management in
keeping with requirements of a developing economy.
Accelerating the rate of capital formation
The commercial banks encourage the habit of savings among people and mobilize
idle resources for production purpose.
Financing Agriculture:
The commercial banks help the large agricultural sector in developing countries in a
number of ways. They provide loans to traders in agricultural commodities.
The small and marginal farmers and landless agricultural workers, artisans and
petty shopkeepers in rural areas are provided financial assistance through the
regional rural banks in India. These regional rural banks operate under a
commercial bank.
Procedure of opening a Bank Account
1. Deciding the type of bank account you need to open- there are several
types of bank accounts that can be opened- Saving account, fixed deposit
account, current account or recurring deposit.
2. Approach any bank of choice and meet the bank officer
Once the type of bank account is decided, a person must go to a convenient
bank. He has to meet a bank officer regarding the opening of the account. The
officer will provide a proposal form to open a bank account.
3. Fill up the bank account opening form- the proposal form
The proposal form must be duly filled in all respects. Necessary details such
as name, address, occupation, etc. must be filled in whenever required. Two
or three specimen signatures are required in the card.
4. Give references for opening a bank account.
The bank normally requires the reference or introduction of the prospective
bank account holder by any of the existing account holders of that type of
account.
5. Submit the Bank account opening form and document
The duly filled in proposal with the necessary documents must be submitted
to the bank. Also certified copies of articles and memorandum of association
must be produced.
6. Verification of the form
The bank officer will verify the proposal form. He checks whether the form is
complete in all respects or not.
7. Deposit the initial amount in the newly opened account
After getting the proposal form clear, the necessary initial money is deposited
in the account. After depositing the initial amount, the bank will provide a
pass book, a cheque book and a pay in slip book.
Modes of transferring Money Online
1. Real-time gross settlement systems are specialist funds transfer systems
where the transfer of money or securities[1] takes place from one bank to
another on a "real time" and on a "gross" basis. RTGS systems are typically
used for high-value transactions that require and receive immediate clearing.
RTGS payments typically incur higher transaction costs and usually operated
by a country's bank. In India, transfer of funds with RTGS is done for high
value transactions, the minimum amount being Rs 2 lakh
2. National Electronic Funds Transfer (NEFT) is an electronic funds
transfer system maintained by the Reserve Bank of India (RBI). Started in
November 2005,[1] NEFT is a facility enabling bank customers in India to
transfer funds between any two NEFT-enabled bank accounts on a one-to-one
basis. It is done via electronic messages.
3. Immediate Payment Service (IMPS) is an instant real-time inter-
bank electronic funds transfer system in India. IMPS offer an inter-bank
electronic fund transfer service through mobile phones. It is managed by
the National Payments Corporation of India (NPCI) and is built upon the
existing National Financial Switch network.
4. Online banking, also known as internet banking, it is an electronic payment
system that enables customers of a bank or other financial institution to
conduct a range of financial transactions through the financial institution's
website. The online banking system will typically connect to or be part of
the core banking system operated by a bank and is in contrast to branch
banking which was the traditional way customers accessed banking services.
