BANKS

A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities: A central bank circulates money on behalf of a government and acts as its monetary authority by implementing monetary policy, which regulates the money supply. A commercial bank accepts deposits and pools those funds to provide credit, either directly by lending, or indirectly by investing through the capital markets. Within the global financial markets, these institutions connect market participants with capital deficits (borrowers) to market participants with capital surpluses (investors and lenders) by transferring funds from those parties who have surplus funds to invest (financial assets) to those parties who borrow funds to invest in real assets. A savings bank (known as a "building society" in the United Kingdom) is similar to a savings and loan association (S&L). They can either be stockholder owned or mutually owned, in which case they are permitted to only borrow from members of the financial cooperative. The asset structure of savings banks and savings and loan associations is similar, with residential mortgage loans providing the principal assets of the institution's portfolio.

DEPOSITS ACCOUNTS
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank, and represent the amount owed by the bank to the customer. Some banks charge a fee for this service, while others may pay the customer interest on the funds deposited.

Incase of death of the account holder his legal heirs are paid interest at the rates applicable to Savings bank deposit from the date of death till the date of settlement. 2. Now Current accounts are available with debit card and online banking facilities which make the transactions more easier. Saving accounts current accounts Saving accounts: Savings accounts: Accounts maintained by retail banks that pay interest but can not be used directly as money (for example. 2. these accounts let customers keep liquid assets while still earning a monetary return. public enterprises etc who need banking facility more frequently.Types of deposits accounts: 1. These cheque operated account is primarily meant for businessmen. 1. Unlike savings bank account. However these account cannot be considered as a saving account since the banks are not allowed to pay any interest to current account balance. by writing a cheque). firms. Current account: Current Account is one of the most basic and flexible deposit options for all the business needs. no limits are fixed by banks on the number of transactions permitted in the Account. Although not as convenient to use as checking accounts. Certain service charges are also imposed for operating current account. . Most of the banks usually insists for a higher minimum balance as compared to savings account to be maintained in Current account. companies.

Y. .12. The interest charged will be 2% more than the rate of interest earned by the deposit. Bank fixed deposits are one of the most common savings scheme open to an average investor. It is possible to get a loans up to75. along with other specified incomes. Also. is exempt from income tax up to a limit of Rs. Investor gets a lump sum (principal + interest) at the maturity of the deposit. say for a minimum period of 15 days to five years and above. The facilities vary from bank to bank. 000/under Section 80L.90% of the deposit amount from banks against fixed deposit receipts. thereby earning a higher rate of interest in return.Fixed deposits: A fixed deposit is meant for those investors who want to deposit a lump sum of money for a fixed period. investment on bank deposits.Y. With effect from A. 1998-99. The 1995 Finance Bill Proposals introduced tax deduction at source (TDS) on fixed deposits on interest incomes of Rs. Fixed deposits also give a higher rate of interest than a savings bank account. Bank deposits are fairly safer because banks are subject to control of the Reserve Bank of India. 1993-94. advantages Bank deposits are the safest investment after Post office savings because all bank deposits are insured under the Deposit Insurance & Credit Guarantee Scheme of India. bank deposits are totally exempt from wealth tax.5000/and above per annum. Some of the facilities offered by banks are overdraft (loan) facility on the amount deposited. premature withdrawal before maturity period (which involves a loss of interest) etc. from A.

Recurring deposit: The Recurring deposit in Bank is meant for someone who want to invest a specific sum of money on a monthly basis for a fixed rate of return. No interest is allowed on this type of account. At the end. is one of the best investment option for the low income groups. They offer different types of deposits for the facility of the customers. a systematic way for long term savings. Current Account or Demand Deposits: Any amount can be withdrawn from this account any time without any notice. i. . Major functions of the banks 1.Receiving Deposits: This is the main function of commercial banks to collect savings of individuals and firms. you will get the principal sum as well as the interest earned during that period. The scheme.

i. Medium Term Loans: Loans from one to five years are called medium term loans. more than ten years are long term loans. Fixed Deposit: Amount cannot be withdrawn before the fixed future date in this type of deposit. Advancing Loans: This is the important function of the commercial bank. High interest is allowed in fixed deposit which is different according to period. (a. High Interest rate Is charged on this type of accounts. Credit is given to the people in different ways. Short Term Loans: These loans are advanced for the period of six months to one year.): Making Loans: There are three types of loans given to borrowers. 3. The saving account carries lower rate of interest. ii. iii: Long Term Loans: Loans which are advanced for the period.ii. iii. . Saving Account: This type of deposit account which is usually held by the middle class group.

payable on demand.): Cash Credit: Bank also gives credit against immovable property and interest is charged by the bank.): Discounting of Bills: This is income source of bank to discount bills of exchange. (c. They charge nominal Interest and discount only reputed and clear bills of exchange] CashcreditAccount: This account is the primary method in which Banks lend money against the security of commodities and debt. counter part of demand deposits of the Bank . (d. Cash Credits are. therefore. the account holder is permitted to withdraw a certain sum called "limit" or "credit facility" in excess of the amount deposited in the account.): Bank Overdraft: Banks allows their trustful customers to draw more than the deposit they have in the Bank. in theory. It runs like a current account except that the money that can be withdrawn from this account is not restricted to the amount deposited in the account.(b. These are. Bank charges interest on overdraft. Instead.

real estate and creation of infra structure also falls in this category. Classification of loans .e. the borrower or his customer pays the Bank a pre-determined interest depending upon the terms of transaction. Bank takes the bill drawn by borrower on his(borrower's) customer and pay him immediately deducting some amount as discount/commission. The Bank then presents the Bill to the borrower's customer on the due date of the Bill and collects the total amount. This type of loan is normally given to the borrowers for acquiring long term assets i. Banks lend money in this mode when the repayment is sought to be made in fixed. Term Loan: Term Loans are the counter parts of Fixed Deposits in the Bank. consumer durables.Overdraft: The word overdraft means the act of overdrawing from a Bank account. pre-determined installments. Financing for purchase of automobiles. Purchases of plant and machinery. setting up new projects fall in this category.. Under this type of lending. the account holder withdraws more money from a Bank Account than has been deposited in it. In other words. constructing building for factory. Bill Discounting: Bill discounting is a major activity with some of the smaller Banks. assets which will benefit the borrower over a long period (exceeding at least one year). If the bill is delayed.

RBI sets targets in terms of percentage (of total money lent by the Banks) to be lent to certain sectors. Financing of Small Scale Industry. This type of lending is called Priority Sector Lending. Export finance is.Another way to classify the loans is through the activity being financed. Agricultural Activities and Export activities fall under this category. in fact. Financing Priority Sector in the economy is not strictly on commercial basis as not only the general approach is liberal but also the rate of interest charged on such loans is less. which in RBI's perception would not have had access to organised lending market or could not afford to pay the interest at the commercial rate. Small business. Viewed from this angle. bank loans are bifurcated into : Priority sector lending Commercial lending Priority Sector Lending The Government of India through the instrument of Reserve Bank of India (RBI) mandates certain type of lending on the Banks operating in India irrespective of their origin. This is also called directed credit in Indian Banking system. available at a discount of 20% or .

Fresh and innovative products are being launched to facilitate the corporate customer who forms the core of this business. therefore. Indian Banks. Commercial Lending: This is the mainstay of Indian Banking . Part of the cost of this concession is borne by RBI by means of refinancing such loans at concessional rate. This activity survived despite a number of restrictions imposed on it in the past.its bread and butter activity. Today many banks focus on this activity for improving their bottom lines. There is big competition among banks to secure bigger share of this business Internet banking in India: . this activity had been relegated to a secondary position as banks were driven by the desire to excel themselves in what is known as "priority sector banking" yet it is this part of their loan portfolio which has kept them afloat and help meet the costs. With financial sector reforms. contribute towards economic development of the country by subsidizing the business activities undertaken by entrepreneurs in the areas which are consider "priority sector" by RBI. Although historically. the focus has shifted from "priority sector banking" and commercial lending has been reinstated to its rightful place.more on the normal rate of interest to Indian corporates.

Even the Morgan Stanley Dean Witter Internet research emphasised that Web is more important for retail financial services than for many other industries. free bill payment and rebates on ATM surcharges • Credit cards with low rates • Easy online applications for all accounts. Credit cards: .highly sophisticated offerings enabling integrated sales of additional products and access to other financial services. CDs.minimum functionality sites that offer only access to deposit account data .to Level 4 sites . It falls into four main categories. In other words a successful Internet banking solution offers • Exceptional rates on Savings. and IRAs • Checking with no monthly fee. Internet banking involves use of Internet for delivery of banking products & services.such as investment and insurance. including personal loans and mortgages • 24 hour account access • Quality customer service with personal attention.The Internet banking is changing the banking industry and is having the major effects on banking relationships. from Level 1 .

It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. .[1] The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.A credit card is a small plastic card issued to users as a system of payment.