BANKING

A bank is a financial institution licensed to receive deposits and make loans”. By definition, banks
provide services of deposits and loans. In addition to these, commercial banks provide many other
services such as – credit cards, net banking, investment instruments (certificate of deposits, etc.),
purchase and sale of gold coins, and sometimes insurance as well..
Modern banking in India originated in the last decade of the 18th century. Among the
first banks were the Bank of Hindustan, which was established in 1770 and liquidated in 1829–32;
and the General Bank of India, established in 1786 but failed in 1791.
The largest and the oldest bank which is still in existence is the State Bank of India (S.B.I). It
originated and started working as the Bank of Calcutta in mid-June 1806. In 1809, it was renamed as
the Bank of Bengal. This was one of the three banks founded by a presidency government, the other
two were the Bank of Bombay in 1840 and the Bank of Madras in 1843. The three banks were
merged in 1921 to form the Imperial Bank of India, which upon India's independence, became
the State Bank of India in 1955. For many years the presidency banks had acted as quasi-central
banks, as did their successors, until the Reserve Bank of India was established in 1935, under
the Reserve Bank of India Act, 1934.
In 1960, the State Banks of India was given control of eight state-associated banks under the State
Bank of India (Subsidiary Banks) Act, 1959. These are now called its associate banks. In 1969
the Indian government nationalised 14 major private banks; one of the big banks was Bank of India.
In 1980, 6 more private banks were nationalised. These nationalised banks are the majority of
lenders in the Indian economy. They dominate the banking sector because of their large size and
widespread networks.
The Indian banking sector is broadly classified into scheduled and non-scheduled banks. The
scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India Act, 1934.
The scheduled banks are further classified into: nationalised banks; State Bank of India and its
associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector banks. The
term commercial banks refers to both scheduled and non-scheduled commercial banks regulated
under the Banking Regulation Act, 1949.
Generally the supply, product range and reach of banking in India is fairly mature-even though reach
in rural India and to the poor still remains a challenge. The government has developed initiatives to
address this through the State Bank of India expanding its branch network and through the National
Bank for Agriculture and Rural Development (NABARD) with facilities like microfinance .

Nationalisation in 1969 and 1980

Despite the provisions, control and regulations of the Reserve Bank of India, banks in India except
the State Bank of India (SBI), remain owned and operated by private persons. By the 1960s, the
Indian banking industry had become an important tool to facilitate the development of the Indian
economy. At the same time, it had emerged as a large employer, and a debate had ensued about the
nationalisation of the banking industry. Indira Gandhi , the then Prime Minister of India, expressed
the intention of the Government of India in the annual conference of the All India Congress Meeting
in a paper entitled Stray thoughts on Bank Nationalization.
Thereafter, the Government of India issued the Banking Companies (Acquisition and Transfer of
Undertakings) Ordinance, 1969 and nationalised the 14 largest commercial banks with effect from
the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the
country. Within two weeks of the issue of the ordinance, the Parliament passed the Banking
Companies (Acquisition and Transfer of Undertaking) Bill, and it received presidential approval on
9 August 1969.
The following banks were nationalised in 1969:

 Allahabad Bank
 Bank of Baroda
 Bank of India
 Bank of Maharashtra
 Central Bank of India
 Canara Bank
 Dena Bank
 Indian Bank
 Indian Overseas Bank
 Punjab National Bank
 Syndicate Bank
 UCO Bank
 Union Bank
 United Bank of India
A second round of nationalisations of six more commercial banks followed in 1980. The stated
reason for the nationalisation was to give the government more control of credit delivery. With the
second round of nationalisations, the Government of India controlled around 91% of the banking
business of India.
The following banks were nationalised in 1980:

 Punjab and Sind Bank

 Vijaya Bank
 Oriental Bank of India
 Corporate Bank
 Andhra Bank
 New Bank of India
Later on, in the year 1993, the government merged New Bank of India with Punjab National
Bank.[24] It was the only merger between nationalised banks and resulted in the reduction of the
number of nationalised banks from 20 to 19. Until the 1990s, the nationalised banks grew at a pace
of around 4%, closer to the average growth rate of the Indian economy.

BANKING SYSTEM IN INDIA

In India the banks and banking have been divided in different groups. Each group has their own
benefits and limitations in their operations. They have their own dedicated target market. Some are
concentrated their work in rural sector while others in both rural as well as urban. Most of them are
only catering in cities and major towns.
FINANCIAL REGULATORS IN INDIA
There are mainly three Financial regulators in India:

1. Reserve Bank of India (RBI) - Banking Sector

2. Securities Exchange Board of India (SEBI) - Capital Markets /Mutual Funds
3. Insurance Regulatory and Development Authority (IRDA) - Insurance Companies
STRUCTURE OF BANKING SYSTEM IN INDIA
Banks can generally be classified into various sub-categories as follows:
 PUBLIC SECTOR BANKS IN INDIA
o The State Bank Group and Nationalized banks: Is a group of 27 banks

o Has the largest number of branches in metro/ urban/rural areas throughout the country
o Contributes to about 75% of the total deposits
o Contributes about 70% of total advances of all commercial banks in India.
o Most have a very large branch network spread over all parts of the country
o Have a Large deposits and assets base
o Perform all kinds of core and modern banking functions
 SCHEDULED BANKS:
o These are banks which are listed in the second schedule of the Reserve Bank of India
Act, 1934
o These banks are required to maintain certain amounts with RBI and, in return, they
enjoy the facility of financial accommodation and remittance facilities at concessionary
rates from RBI
o State Co-operative Banks
o Commercial Banks
The banking system plays an important role in promoting economic growth not only by channeling
savings into investments but also by improving allocative efficiency of resources. The recent
empirical evidence, in fact, suggests that banking system contributes to economic growth more by
improving the allocative efficiency of resources than by channeling of resources from savers to
investors. An efficient banking system is now regarded as a necessary pre-condition for growth.
The banking system of India consists of the central bank (Reserve Bank of India -
RBI), commercial banks, cooperative banks and development banks (development finance
institutions). These institutions, which provide a meeting ground for the savers and the investors,
form the core of India’s financial sector. Through mobilization of resources and their better
allocation, banks play an important role in the development process of underdeveloped countries.
THE FINANCIAL SECTOR IN INDIA
Along with the rest of the economy and perhaps even more than the rest, financial markets in India
have witnessed a fundamental transformation in the years since liberalization. The going has not
been smooth all along but the overall effects have been largely positive.
Nationalization of commercial banks was a mixed blessing. After nationalization there was a shift
of emphasis from industry to agriculture. The country witnessed rapid expansion in bank branches,
even in rural areas. However, bank nationalization created its own problems like
excessive bureaucratization, red-tapism and disruptive tactics of trade unions of bank employees. It
was in this backdrop that wide-ranging banking sector reforms were introduced as an integral part of
the economic reforms programme started in early 1990s and which is still under way.
The Indian banking sector has witnessed wide ranging changes under the influence of the financial
sector reforms initiated during the early 1990s. The approach to such reforms in India has been one
of gradual and non-disruptive progress through a consultative process. The emphasis has been on
deregulation and opening up the banking sector to market forces. The Reserve Bank has been
consistently working towards the establishment of an enabling regulatory framework with prompt
and effective supervision as well as the development of technological and institutional infrastructure.
Persistent efforts have been made towards adoption of international benchmarks as appropriate to
Indian conditions. While certain changes in the legal infrastructure are yet to be effected, the
developments so far have brought the Indian financial system closer to global standards.
Private banks are today increasingly displacing nationalized banks from their positions of pre-
eminence. Though the nationalized State Bank of India (SBI) remains the largest bank in the country
by far, private banks like ICICI Bank, Axis Bank and HDFC Bank have emerged as important
players in the retail banking sector. Though spawned by government-backed financial institutions in
each case, they are profit-driven professional enterprises.
Financial Sector in India consists of three main segments:

1. Financial institutions -banks, mutual funds, insurance companies

2. Financial markets -money market, debt market, capital market, forex market
3. Financial products -loans, deposits, bonds, equities

BANK DEPOSIT ACCOUNTS

TYPES (DEMAND, TERM, AND FLEXI DEPOSITS)
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Deposits of banks are broadly classified into three categories: Demand deposit, Term
deposits and Flexi deposit or also known as Hybrid deposit.
DEMAND DEPOSITS ACCOUNT
Demand deposits are repayable on demand by the customers. Current account deposits, Savings
bank deposits and Call deposits are the examples of demand deposits. These deposits are repayable
on demand by the customers. The amount deposited on these accounts to be released upon the
request of customer without any delay.
CURRENT ACCOUNTS
Current accounts form a large portion of demand deposits of a bank. It can be opened by Individuals,
Business entities (firms, company), Institutions, Government bodies / departments, Societies,
Liquidators, Receivers, and Trusts.
THE MAIN FEATURES OF CURRENT ACCOUNTS

1. The current account does not have restrictions on the number and amount of withdrawals /
deposits. Hence this account is maintained by all businesses with one or more banks.
2. Withdrawals are permitted by cheques in favour of self and also in favour of other parties.
3. The payees of cheques can endorse the cheques in favour of third parties who can receive
payment in cash at the drawee bank branch or through their bank account via clearing or
collection.
 4. All current accounts are non-interest bearing and banks are not allowed to pay any interest or
brokerage in any form to the current account holders.
5. Cheque book facility is provided to each current account holder and bank undertakes to
honour all cheques drawn correctly so long as there is sufficient balance to the credit of the
account.
6. Overdrafts facility may be available in case of an emergency cash requirement (Overdraft is a
facility whereby banks honour cheques drawn by current account customers even when the
balance in the account is less than the amount of the cheques). This can be a temporary one
but Regular Overdraft (permanent) facility is granted as per prior arrangement made by the
account holder with the bank.
7. In such cases the bank would honour cheques drawn in excess of the credit balance but not
exceeding the overdraft limit. Every over draft occurrences, bank would charge agreed interest
on the overdraft portion of drawings.
8. The account holder periodically gets statements of accounts from the bank branch for
reconciliation and record
9. The statement of account would show date-wise the entire debit and credit transactions and
balances, as recorded in the bank’s ledger account of the customer.
SAVINGS BANK ACCOUNT (SB ACCOUNTS)
Savings bank accounts are intended for keeping savings of individuals and small businesses for
meeting their future money needs. Interest is given by banks on these accounts with a view to
encourage saving habit in the community. It can be opened by Individuals, guardians (on behalf of
their minor children / wards), Clubs, Associations, Trusts.

There are two types of Savings Bank Accounts available in India. They are: Cheque book facility
accounts and Non-cheque book facility accounts. (Some other variants also can be noted such as
zero balance and minimum balance type).

1. Cheque book facility accounts - Withdrawals are permitted by cheques drawn in favour of
self or other parties; The payees of cheques can receive payment in cash at the drawee bank
branch or through their bank account via clearing or collection; The account holder may also
withdraw cash by filling up withdrawal form.
2. Non-cheque book facility accounts - Withdrawals are permitted to the account holders only
at the drawee bank branch by filling up a withdrawal form or letter accompanied with the
account passbook and in such accounts third parties cannot receive payments.
MAIN FEATURES OF SAVINGS BANK ACCOUNTS

1. Withdrawals are permitted on demand of the account holder by presentation of cheques or

withdrawal form / letter. However, cash withdrawals in excess of the specified amount per
transaction / day (the amount varies from bank to bank) require prior notice to the bank
branch.
2. Banks put certain restrictions on the number of withdrawals as per - Month / quarter, Amount
of withdrawal per day, Minimum balance to be maintained in the account on all days etc.
3. Banks levy fee / penalty for violations of these rules. These rules are different for different
banks, as decided by their Board / Top Management. The rationale of these restrictions is that
 the savings bank account should not be used like a current account, as it is primarily intended
for keeping and accumulating the savings.
4. The bank pays interest on the minimum balance maintained in the account during the
specified period of every month.
5. Interest on savings bank account continues to be regulated by the Reserve Bank of India. It is
3.50% per annum and all commercial banks have to pay this rate on savings bank accounts.
No overdraft in excess of the credit balance in savings bank account is permitted, as there
cannot be any debit balance in savings accounts.
6. Most banks provide every savings bank account holder a passbook. This passbook is regularly
updated with information maintained by the bank in the customer’s ledger account in the form
of chronological order of Debit transactions, Credit transactions, and Credit balances.
TERM DEPOSITS ACCOUNT
Term deposits are repayable on maturity dates as agreed between the customers and the banker.
They are: Fixed deposits and Recurring deposits. It can also be withdrawn by compromising of the
interest rate or penalty deductions from the deposit, if depositor required to the amount prior
maturity.
FIXED DEPOSITS
Fixed deposits are repayable on a prefixed maturity date. The amount repayable is: The principal
amount and Agreed interest rate for the period. No operations are allowed to the customer against
the deposit, as is permitted in demand deposits.
MAIN FEATURES OF FIXED DEPOSITS

1. Fixed deposits are accepted for specified periods at specified interest rates as mutually agreed
between the depositor and the banker at the time of opening the account. Since the interest rate
on the deposit becomes contractual, it cannot be altered even though the interest rate changes -
upward or downward - during the period of the deposit.
2. Banks offer varying interest rates for different maturities as decided by their Board.
3. The maturity-wise interest rates in a bank will, however, be uniform for all customers subject
to two exception.
4. High value deposits above certain cut-off valu.
5. Deposits of senior citizens (above the specified age normally 60 years) may be offered higher
interest rate.
6. Minimum period of fixed deposit is 7 days and maximum period for which a bank can accept
a deposit presently is 10 years.
7. Those term deposits which are held for periods of 6 months and less are called Short Term
Deposits or Short Deposits.
8. The deposit receipt issued by the bank branch accepting the fixed deposit mentioning the
depositor’s Name, Principal amount, Maturity period, Interest rate, Dates of the deposit and its
maturity.
9. The deposit receipt is not a negotiable instrument nor is it transferable, like a cheque.
 10.Many banks prepay fixed deposits, at their discretion, to accommodate customers request for
meeting emergent expenses. In such cases, interest is paid for the period actually elapsed and
at rate generally1% lower than the rate applicable to the period elapsed.
11.Banks also may grant overdraft / loan against the security of their fixed deposits to meet
emergent liquidity requirements of the customers. The interest on such facility will be 1% to
2% higher than the interest rate on the fixed deposit.
12.Banks are required to calculate and credit the interest payable on the deposits on a quarterly
basis. However, for the convenience of the depositors banks pay interest at different desired
intervals namely Monthly / Quarterly / Half yearly / Yearly. Banks give different names to
such deposits for easy identification both by the bank and also the depositor.
RECURRING DEPOSITS
The customer deposits a fixed sum into the account at pre-fixed frequency (generally monthly /
quarterly) for a specified period (12 months to 120 months). The interest rate payable on recurring
deposits is pre-fixed and it is generally a little lower than the fixed deposit rate for the same period.
The total amount deposited along with the interest is repaid on the maturity date. However, depositor
may be allowed to take advance against the deposits or to have the deposit pre-paid before the
maturity, for meeting emergent expenses. In the latter case, the interest rate payable by the bank
would be lower than the contracted rate and some penalty would also be charged.
FLEXI DEPOSITS OR HYBRID DEPOSITS
Hybrid deposits or flexi deposits which combine the features of demand and term deposits. These
deposits are introduced in recent times by some banks to meet customers’ financial needs and
convenience and are known by different names in different banks. These deposits are a combination
of demand and fixed deposits for meeting customer’s financial needs in a flexible manner. Hence
these are hybrid deposits or flexi-deposits. For example: Quantum Deposit Scheme of ICICI Bank
and Multi Option Deposit Scheme (MODS) of SBI. The flexi deposits show a fusion of demand and
fixed deposits.
MAIN FEATURES OF FLEXI DEPOSITS

1. Only one savings / current account is opened and the term deposits issued under the scheme
are only on the bank’s books as no term deposit receipts are issued to the customer.
2. Once deposits in savings/current account cross a pre-agreed level, such surplus amount is
automatically transferred to term deposit account of a predetermined maturity (usually one
year) in the customer’s name for higher interest earning.
MAIN ADVANTAGES OF THE FLEXI-DEPOSITS

1. Advantage of convenience: The customer opens only one account (savings or current) under
the scheme and need not come to the bank branch each time for opening term deposit accounts
or for pre-paying/ breaking term deposit for meeting the shortfall in the savings/current
account.
2. Advantage of higher interest earning: The customer earns higher interest on his surplus funds
than is possible when he opens two separate accounts- savings and term deposits.
 BANK DEPOSIT ACCOUNTS - OPENING ASPECTS,
PROCEDURE AND KYC
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One of the primary function of a commercial bank is accepting deposits from public and in return,
bank will give interest earnings for the deposited money to the account holder depending on the type
of deposit accounts. It is a three part article, which will look into various aspects of deposit accounts,
its operations, and types of deposit accounts, offered our commercial banks in India. Opening
aspects and KYC is the first part that everybody should know before they get into the bank for
having relationship with bank and their deposit accounts.
OPENING OF DEPOSIT ACCOUNTS WITH COMMERCIAL BANKS IN INDIA

Public starts their bank relationship mostly opening a Savings bank account (SB Account) depositing
small sums of amounts as and when they have surplus money in their hand.
We will get the details on how to open a very basic and simple deposit account called "SB account"
or "Savings Bank Account".
To open a deposit account, person has to fill up an account opening application form, submit to the
concerned branch. Application form should be accompanied with the following documents in order
to avoid misuse or illegal dealings:

1. Introductory reference of an acceptable person or an existing account holder with the branch.
2. Acceptable proof of his / her identity and residential address. It may be one of: Aadhaar
Card / photo identity card such as Passport, Ration card, PAN card, Driving license,
Election identity card etc.
3. Recent photographs (2 to 3 varies from bank to bank, branch to branch).
4. An initial deposit amount not less than the minimum amount decided by the bank (amount
varies from bank to bank ranging from 0 to Rs 10,000/ or even more).
5. The bank keeps attested photo copies of all the documents along with the account opening
form.
NEED INTRODUCTION FOR OPENING BANK ACCOUNT?
Introduction is a good way for the bank to satisfy itself that the applicant is a person of certain
standing and known by the bank. It protects the bank through the Negotiable Instruments Act, 1881.
The Act governing the cheque - confers to all acts done "in good faith and without negligence" in
relation to the account holder.
Opening an account without proper introduction would not protect the banker and he may be held
liable for loss caused to others by this customer depositing forged or stolen cheque in his account
and withdrawing the deposits.
KNOW YOUR CUSTOMER (KYC) GUIDELINES OF RBI
In 2002, RBI issued an order to all banks to follow the procedure of "Know Your Customer" with
all their new and existing Domestic customers and Non-resident customers. It helps to verify the
identity and residential address of the customers with the help of specific documental evidence.
Hence proper KYC prevents misuse of the banking system for money laundering and financing of
terrorist activities.
These "Rules" would help to stop illegal moneys coming into the banking stream. It is mandatory
requirement to all religious and non-religious trust accounts should also have to follow
all KYC processes.
The RBI needs all banks to strictly follow the KYC guidelines and cash transaction norms.
The KYC Rules of RBI support the existing practice of some banks and makes it a compulsory
requirement to be followed by all the banks in regard to all of their customers who maintain
domestic / Non-resident rupee / Foreign currency accounts.
SPECIMEN SIGNATURE AND VERIFICATION
A Specimen (sample) signature of the customer is obtained on the account opening form in the
presence of the bank staff and it is attested by an authorized bank officer on the form itself. A
customer is recognized mainly by signature on the cheque / vouchers and these are compared with
the specimen signature on record to verify the genuineness of the customer’s signature.
POWER OF ATTORNEY
At times a depositor would like to transact his business through another person. Banks accept this
arrangement if account holder authorizes his/her representative as power of attorney. A power of
attorney is a document which is correctly stamped as per Stamp Act and submitted to the bank by the
account holder. Power of attorney gives permission to the person whose name is on the document to
operate the account in the place of the account holder, for example - Attorney or Agent.

BANK DEPOSIT ACCOUNT - OPERATIONS AND DIFFERENT

TYPES OF CUSTOMERS
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Operations of deposit accounts varies types of customers mainly individual customers and business
customers. Accounts of individuals comprise a majority of the deposit accounts in Personal segment
of most banks. Any individual who is a major and of sound mind can open a - Savings account and /
or Fixed deposit accounts.
We will look in to each of them in details.
BANK'S CUSTOMER AS INDIVIDUALS
Accounts of individuals comprise a majority of the deposit accounts in Personal segment of most
banks. Any individual who is a major and of sound mind can open a - Savings account and / or Fixed
deposit accounts.
An account for a minor child can also be opened and operated by the Father / Mother / Guardian.
This minor's account can be operated in one of the following modes (child will operate the account
only on attaining the majority):

1. In the single name of the child through the father / mother / guardian.
2. In the joint names of the father / mother / guardian and the child (payable to either or
survivor).
3. "Kids accounts" - Many banks allow minor children above specified age to open and operate
savings account in their single name. These accounts have certain limitations on withdrawals.
This is to inculcate savings and banking habits in the children while they are young.
BANK'S CUSTOMER AS JOINT DEPOSITOR
Joint deposit accounts are accounts that are opened by multiple number of people coming together
for some specific reasons or convenience. For practical reasons the transactions are done by:

 One of the persons who is on the account as a account holder

 Jointly by two or more persons
Their transactions would be accepted as per the instructions given for at the time of opening of the
account. These are generally as: Either or survivor / Former or survivor / Both jointly or survivor /
Any two jointly or last survivor.
DEPOSIT ACCOUNTS WITH ILLITERATE PERSONS
Illiterate persons who cannot sign are allowed to open only Savings account
(without cheque facility) and Fixed deposit account. Current account is not generally opened for
such persons. Withdrawals are permitted from the account on production of the passbook after
verification of the thumb impression and proper identification of the account holder.
NOMINATION IN DEPOSIT ACCOUNTS
A valid nomination is required in the event of the death of the sole depositor or all depositors, the
amount lying in the account will be returned to the nominee without any further legal formality.
CLOSING A DEPOSIT ACCOUNT UPON CUSTOMER’S REQUEST
A customer is entitled to terminate the relationship with a bank by applying for closing the deposit
account if account holder is not satisfied with the services of the bank or for any other reason e.g.
transfer to another place.
CLOSURE OF DEPOSIT ACCOUNTS BY BANK
A banker may close an account or stop operation on a customer’s deposit account by giving
reasonable notice to the customer, in any of the following cases:

 An Account may be closed on receipt of notice of death

 A joint account may also be closed on the death of any one of the account holders and fresh
account opened in the names of the surviving account holders, to avoid legal problems.
GARNISHEE ORDER OR ORDER OF COURTS
If a bank is served with a prohibitory order in execution of a decree of a court, a garnishee order, or
by Income Tax authority, the bank would immediately note a "caution" in the account and stop
payment of cheque or debits to the account, until the order is lifted in writing by the court or Income
Tax department. The customer will at the same time be advised of such an order and the freeze on
the withdrawals from the account that would follow the account operations are ‘stopped’ for
temporary period of the court order.

INDIAN FINANCIAL SYSTEM CODE (IFSC) FOR BANKS IN

INDIA
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A healthy economy requires a financial system that moves funds from people who save to people
who have productive investment opportunities. But how does the financial system make sure that
your hard-earned savings get channeled to the productive investor rather than to non-productive
investor? It needs well defined financial system controlled by Govt. or its agency. In India, its
by Reserve Bank of India (RBI) which has authority to control any financial business entity run in
India. Through a simple code (IFSC), every banking transaction under RTGS, NEFT,
and CFMS can be monitored by RBI without any hindrances.
WHAT IS IFSC CODE?
IFSC Code is the acronym for Indian Financial System Code developed by RBI - Reserve Bank
Of India as a unique Identification code to each of the bank branches in India. The Bank IFSC Code
consists of 11 alpha-numeric characters that uniquely identifies a bank-branch participating in the
RTGS and NEFT system. The Payment System Applications such as Real Time Gross Settlement
(RTGS), National Electronic Funds Transfer (NEFT) and Centralized Funds Management System
(CFMS) uses Bank IFSC code to identify the transaction data.
HOW BANK IFSC CODE WORKS IN BANKING TRANSACTIONS?
For example, CNRB0001995 is the IFS Code for Canara Bank, Chandigarh Branch which can be
explained as follows:

 First 4 characters represent the entity of the Canara Bank - CNRB

 Fifth position has been defaulted with a ''0'' (Zero) for future use - CNRB0
 Last 6 characters represent the identification number for the bank branch - 001995
As we can see the first four characters are the Bank's code, the fifth reserved for future putting "0"
(Zero) and the last 6 numeric characters are pointing to a particular bank branch.
HOW DO YOU FIND BANK IFSC CODE OF YOUR BANK BRANCH?
SB account holders can easily find their bank branch IFSC code from their account passbook or
monthly statement. If some want to transfer fund to your account through netbanking, they will need
your bank's IFSC code. If you want to transfer fund electronically ie., netbanking, from your account
to someone's account, you have to collect their bank's IFSC code and fill it up in the prescribed field
when you add beneficiary name.
The best way to get accurate IFSC code of a particular bank branch, it is highly advisable to visit
concerned bank's website and browse "locate branch" section. Links to each commercial banks
functioning in India is listed here making your journey to find IFSC code of concerned bank.

THE CONCEPT AND BASIC FUNCTIONS

OF BRANCH BANKING
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Bank Branch is considered as one of the most important channel of the bank and is generally the
most preferred channel from the customer's point of view. The bank branch is referred to as the face
of the bank since the customer can visit personally and meet and interact with the bank branch
officials and avail the various services offered by the bank.
BRANCH BANKING CONCEPT
In reality, the bank branch is the sales and service channel of a bank and the bank branch employees
are generally responsible for both sales and service of bank's products.
Sales in terms of branch banking could be of any of the bank's deposits, products, gold, retail or
other investment products of other approved organizations, such as life insurance, general insurance,
and mutual fund.
The most common examples of deposit products of a bank branch are savings bank account, current
accounts, fixed deposit accounts, and recurring deposit accounts. The customers or the prospects
desiring to open any of these accounts have to fill an Account Opening Form (AOF) and submit the
specified documents in order to meet the Know Your Customer (KYC) guidelines issued by the
Reserve Bank of India (RBI).
The examples of a bank's asset products include personal loan, home loan, car loan, and credit card.
When a customer approaches the branch for any of the loan products of the bank, the branch
employee takes down the contact details of the customer and the record of the lead generated are
kept with the bank for follow up action.
Sometimes, such leads are escalated to outsourced agencies, such as Direct Sales Agent (DSA) or
Direct Marketing Agent (DMA) of the bank. These agencies, in turn, get in touch with the customers
for obtaining the necessary documents. The credit decision whether to sanction or not the various
loans to the customers is taken by the bank officials in the credit sanctioning department of the bank.
In most of the banks, the front office activities that involve customer interaction are handled at the
branches of Banks, for instance, cash receipts and payments, issue of DD or lockers. The back office
activities, such as clearing and account opening may be centralized at a different location away from
the branch.
Activities like clearing centralize payments of drafts and other instruments, which are related to the
local area, may be grouped in to one centre. Certain other activities that are common across centres
may be performed at another place for the purpose of achieving efficiency of operation and
controlling costs.
SERVICES PROVIDED AT THE BANK BRANCHES
Several services are offered to customers by the bank branches. The following list only covers the
main services offered by most of the branches:

1. Account opening
2. Cash receipts
3. Cash payments
4. Cheque book issue
5. Stop payment of cheques
6. Closure of fixed deposits and premature withdrawals
7. Issue of DDs and banker's cheque
8. Safe deposit lockers
9. Foreign exchange services
10.Gold retail
11.DeMat services
12.Acceptance of clearing cheques
13.Deliverables, such as cheque books, debit cards, PINs and passwords
14.Acceptance of queries and complaints
 15.Investment services
16.Standing instructions
17.Retail loan products
Despite the emergence of several other delivery channels external to the bank, branch banking still
remains its utility. This might be due to the advantage of the location of branches enjoyed by the
customer. Also, in the current state of development the alternate channels have limited service
capabilities which make a branch an extremely useful service and delivery outlet. A branch is
capable of handling diverse requirements of a customer in addition to projecting the human feeling
arising out of the personal relationship with the branch officials.

E- BANKING
Electronic banking uses an electronic medium to help users get access to their funds. It eliminates
the need for the bank’s customers to visit the bank to do financial transactions. With more and more
customers now using the internet for a host of their day-to-day activities, this digital medium of
banking makes banking more accessible and convenient for users.
There are many different types of e-banking services which you can use for various bank
transactions. Let us have a look at some of the most popular options:

1. Internet Banking
Internet Banking is a type of e-banking service which allows you to do several financial and non-
financial transactions through the internet. You can use your PC or laptop and an internet connection
to use this facility.

With the help of Internet Banking, you can transfer funds to another bank account, check your
account statement, pay utility bills and do a lot more.

2. Mobile Banking
Most banks now also have an app for Mobile Banking. Just like the online portal of the bank used
for Internet Banking, you can use the app for many different types of banking transactions. If you
use an Android or iOS device, you can download the app of your bank and use this facility. The apps
can also be used for transferring funds, checking account statements, locate the nearest ATM, and
other banking services.

3. ATM
ATM or Automated Teller Machine is one of the most popular types of electronic banking. The
teller machine is also an electronic computerised telecommunication device which enables you to
withdraw funds, deposit funds, change Debit Card Personal Identification Number (PIN), and use
other banking services. It eliminates the need of visiting a bank and doing these transactions through
a human teller.

4. Debit Card
Debit Cards are used for many of our daily transactions. This card is connected to your bank account
and you can use the funds from your account directly through this card. When you use your Debit
Card for a transaction, the transaction amount is deducted from your bank account. You can use the
card to pay at POS outlets, shop online, and withdraw cash from ATMs.
 Different Types of Bank Loans
Loans can be utilised for various things in today’s world. It can be used for funding a start-up to
buying appliances for your newly purchased house. The different types of loans available in the
Banks and their specific characteristics that make these loans useful to the customers.

Personal Loans:
Most banks offer personal loans to their customers and the money can be used for any expense like
paying a bill or purchasing a new television. Generally, these loans are unsecured loans. The lender
or the bank needs certain documents like proof of assets, proof on income, etc. before approving the
personal loan amount. The borrower must have enough assets or income to repay the loan. In case of
personal loans, the application is 1 or 2 pages in length. The borrower gets to know about the denial
or approval of the loan within a couple of days.
The rate of interest associated with these loans can be on the higher side. The tenure of these loans is
not that long. So, if you borrow a big amount, it can be difficult for you to repay without planning
your finances properly.
Personal loans can prove to be of great help when you wish to take a small amount loan and repay it
as soon as possible.
Credit Card Loans:
When you are using a credit card, you must understand that you will have to repay for all the
purchases you make at the end of the billing cycle. Credit cards are accepted almost everywhere,
even when you are travelling abroad. As it is one of the most convenient ways to pay for the things
you buy, it has become a popular loan type.
In order to apply and avail a credit card, all you need to do is fill out a simple application form
provided by the card issuer. You can also choose to apply for a credit card online. These plastic
cards come with great rewards and benefits. It’s the loan where you need to repay on time but you
are also handsomely rewarded for using it.
Obviously, there are pitfalls associated with this type of loan. You must understand that there is a
high amount of interest on the amounts you borrow on your credit card. If you do not pay your credit
card bills on time, the interests will keep piling and might be difficult for you to manage your
finances with the rising outstanding balance. But if you use a credit card wisely and clear all your
debts on time, it can definitely prove to your best friend in your pocket.
Home Loans:
When you wish to purchase a house, applying for a home loan can help you to a great extent. It
provides you the financial support and helps you buy the house for yourself and your loved ones.
These loan generally come with longer tenures (20 years to 30 years). The rates offered by some of
the top banks in India with their home loans start at 8.30%. Your credit score is checked before the
loan request is approved by the lender. If you have a good credit score, there is a fair chance that you
will be able to enjoy lower rates of interest with your home loan.
Home loans are primarily taken for buying new homes. However, these loan can also be used
for home renovations, home extensions, purchasing land property, under-construction houses, etc.
Car Loans:
Buying a car can definitely instil a great sense of joy and happiness in you. A car will remain as your
asset and it is going to be one of the biggest investments that you make. A car loan helps you to pave
the path between your dream of owning a car and actually buying your car. Since credit reports are
crucial for judging your eligibility towards any loan, it is good to have a high credit score when
you apply for a car loan. The loan application will get approved easily and you might get a lower
rate of interest associated with the loan.
Car loans are secured loans. If you fail to pay your instalments, the lender will take back your car
and recover the outstanding debt.
Two-Wheeler Loans:
A two-wheeler is pretty essential in today’s world. May it be going for a long ride or a busy road in a
city – bikes and scooters help you to commute conveniently. A two-wheeler loan is easy to apply
for. This amount you borrow under this loan type helps you to purchase a two-wheeler. But if you do
not pay the instalments on time and clear your debt, the insurer will take your two-wheeler to
recover the loan amount.
Education Loans:
If you wish to get higher education in a reputed university in a different country, education loans can
help you a lot. These loans are opted by students who wish to study further but need financial
support for pursuing the courses. An education loan covers expenses like college/university fees,
library charges, travel costs related to their course, etc.
In order to be eligible for an education loan, you must submit all the required documents including
invitation letter from the university, educational qualification certificates, etc.
Loan Against the Insurance Schemes:
If your insurance scheme is eligible for a loan, you can avail the loan amount from your insurer. You
may also use the investment for insurance as collateral. Generally, loans cannot be availed right from
the commencement of the insurance policy. After 3 years into the scheme, you can apply for a loan
against insurance.
Loan Against Fixed Deposits:
This is a type of loan where your fixed deposit is the collateral. For example, if you have a fixed
deposit of Rs.10 lakh in the bank, you can avail a loan of up to Rs.8 lakh. However, the rate of
interest associated with this kind of a loan is usually higher than the fixed deposit rate.
Loan Against Mutual Funds and Shares:
Certain lenders provide loan against your mutual fund value and share value. However, you will not
be able to borrow huge amounts under this type of loans.
ADVANTAGES AND DISADVANTAGES OF BANKING.
A bank is a financial institution licensed to receive deposits and make loans”. By definition, banks
provide services of deposits and loans. In addition to these, commercial banks provide many other
services such as – credit cards, net banking, investment instruments (certificate of deposits, etc.),
purchase and sale of gold coins, and sometimes insurance as well.
Like any other institutions, banks come with their own benefits and drawbacks, let’s look at them in
detail.
ADVANTAGES OF BANKS
SAFETY OF PUBLIC WEALTH
Before the introduction of the modernized banking system, people used to save their money in hard cash. They stored
this cash in lockers, underground, with the grains, etc. There were so many instances when the money got stolen,
eaten by the rats or simply rot through the years. However, the modern banking system completely eliminated the
need to store hard cash. It actually helps save a huge proportion of public wealth that used to get spoiled in storage.
AVAILABILITY OF CHEAP LOANS
Before modern banks were established, people would borrow money from local money lenders, landlords, merchants
or other wealthy individuals. These loans were given at exorbitant interest rates that most people couldn’t afford to
pay, in the process the borrower would always remain in debt. It was a vicious cycle. Modern banks started providing
cheaper loans to the underprivileged section of the society, breaking the whole expensive loans system.
PROPELLANT OF ECONOMY
Banks create money with a system called credit creation. With the help of credit creation, banks can lend a lot more
money than the deposits that it holds. When banks lend this money to agriculture, industries, small businesses, and
service providers, they are actually helping the economy grow exponentially. This, in turn, creates employment and
spending power. Overall this one function of the bank is so powerful that the entire economy of any country relies on
it.
ECONOMIES OF LARGE SCALE
An extremely important benefit of any bank is its deep and wide reach through the branch banking system and the
benefits of large scale operations. The wider the bank can reach the better services it can provide. Now a day’s banks
provide services of net banking, card payments, ATM’s, etc. at even the most far-fetched and backward areas. Due to
these large scale operations, the services have become extremely cheap, or sometimes even free.
DEVELOPMENT IN RURAL AREAS
Banks aid rural development in more than one way. Firstly, the government makes it mandatory for the banks to lend
to specialized sectors such as agriculture, rural infrastructure, etc. This leads to the development of modern
infrastructure and methods in rural areas, thereby bringing in growth. Secondly, with the banks opening their
branches in the backward areas, the rural population has benefits of modern bank facilities such as check-in accounts,
ATM’s, locker facility, etc. Furthermore, when a new bank branch opens in a village, it needs facilities such as 24-
hour electricity supply, internet connection, new staff etc. This creates employment and the villagers can also benefit
from facilities of electricity and internet.
GLOBAL REACH
Many banks operate at the multinational level, this has helped people and businesses in a way that was not possible
before the establishment of modern banks. Multinational banks aids in remittance of cash, exchanging one currency
for another; aids in export by transferring documents and payments; lend money to government, institutions and other
world organizations. The reach of the banks is unlimited and it has helped in making the world a global village.
Though there are many benefits of the modern banks, it comes with its fair share of flaws. Let’s discuss the
disadvantages of banks to understand it better.
DISADVANTAGES OF BANKS
CHANCES OF BANK GOING BANKRUPT
The world economy goes through turbulent times every few years. Events such as great depression of 1929, World
War I & II, dot com bubble of 2000, or great recession of 2008, etc. expose banks to unnatural risks. During delicate
periods, if all the people decide to withdraw their money from the bank, all at once, the bank will become bankrupt.
Due to the function of credit creation, banks never have enough money to pay all its customers at the same time.
People, without a doubt, will lose their money if the bank goes bankrupt.
RISK OF FRAUD AND ROBBERIES
The rise in internet banking has given rise in cybercrime as well. Now more people are exposed to the risk of credit
card thefts, stolen passwords, net banking frauds, etc. There have been robberies where robbers have stolen millions
of dollars through the internet, without entering the bank premises physically. With the rise in internet banking, there
will be a more innovative way for conmen and robbers to cheat people. This leaves the public vulnerable. This also
increases the expenses that banks have to incur to safeguard their systems, which are eventually charged from the
customers.
RISK OF PUBLIC DEBT
This is not the risk of the bank per se, but this is the risk that people take on themselves while dealing with a bank.
Say a person is in the habit of maxing out his credit card every month and repays the bare minimum then he will
spiral into debt very fast. The habit of borrowing more than a person can afford to repay is actually a personal bad
habit, however, the easy lending policies of banks add fuel to the fire. This can be damaging to people’s personal
finances. It even affects businesses that take term loans and working capital loans from the banks and cannot repay it.
Comparatively fewer businesses are affected by debt epidemic, but it still exists.
This brings us to the conclusion that modern banks have benefited society in many ways, and its drawbacks are such
that can be easily overcome by proper policies and due diligence efforts. Thus overall the rise of banks has been a
blessing for the economy and the society.