A REPORT ON BFSI

A Project Submitted to Periyar University of Salem in Partial Fulfilment of the requirement

of the Award of the Degree of

Bachelor Degree of Commerce

Submitted By

JOTHIPRABA A

Reg. No: C21UG164COM016

NM ID: 4BA4E0656CBB52597F84C90647AFB556

Under the Guidance of

Mr. M. RAVI – BFSI TRAINE

PG DEPARTMENT OF COMMERCE

KSR COLLEGE OF ARTS AND SCIENCE FOR WOMEN

TIRUCHENGODE

(An ISO Certified Institution, Affiliated to Periyar University, Salem-11)

Recognized under 2(f) of the UGC Act, 1956

October/November 2023
BFSI PROJECT
 Name Jothipraba A

Department 3rd Year B. Com

Nan-Mudhalvan ID 4BA4E0656CBB52597F84C90647AFB556

Register number C21UG164COM016

College code: Per164

1. Cheque
Project title 2. Fixed Deposit
3. Home Loan

Date

SPOC Mr. S.Thangaraj, MA., MA(JMC)., M.Phil.,

 ACKNOWLEDGEMENT

I wish to express my gratitude to the principal Dr. M. Karthikeyan, M.A., M. Ed., M.

Phil., Ph.D., KSR College of Arts & Science for Women, Tiruchengode.

My deep sense of gratitude to the respected Dr. B. Senthil, M.B.M., M.Com.,

M.Phil., Ph.D., NET., SET., Head, PG Department of Commerce for his encouragement
throughout the training session.

I also whole heartedly thanks to Mr. S.Thangaraj, MA., MA (JMC)., M.Phil., Head,
Department of Tamil of KSR College of Arts & Science for Women, Tiruchengode.

I also whole heartedly thanks to Ms.J.Abitha M.Com., Co-Ordinater of KSR College

of Arts & Science for Women, Tiruchengode.

I would like to convey my sincere thanks to Mr.M.Ravi, B.Sc., trainer from BFSI for
his valuable guidance in completing this project
 DECLARATION

I hereby declare that this BFSI Training report submitted to Periyar University Salem
for the academic year 2023-2024 is a record of my original work done under the guidance of
Mr.M.RAVI Trainer

Date: Signature of the student

Place: (Jothipraba A)
 INDEX

S. No Contents Page No

1 Introduction 1

2 Project - 11

Cheque 2

3 Project - 7

Fixed Deposit 10

4 Project - 8

Home Loan 21
 Introduction

Banking is a fundamental pillar of the modern financial system, playing a pivotal role
in the allocation of capital, facilitating economic growth, and ensuring the smooth
functioning of financial transactions. The banking sector encompasses a wide range of
financial activities, from accepting deposits and providing loans to facilitating payments and
managing financial risks. It serves as a trusted intermediary between individuals, businesses,
and the government, promoting economic stability and growth.

In addition to traditional banks, the broader financial landscape includes entities

operating under the BFSI (Banking, Financial Services, and Insurance) umbrella. BFSI is an
acronym that represents the intertwined sectors of banking, financial services, and insurance,
reflecting the comprehensive nature of financial services in modern economies. This sector
includes insurance companies, asset management firms, and non-banking financial
institutions, among others. BFSI institutions contribute significantly to financial
intermediation, risk management, and wealth creation, thus diversifying and strengthening
the financial system.

Non-Banking Financial Companies (NBFCs) are a subset of financial institutions that

are distinct from traditional banks but play a crucial role in financial intermediation. NBFCs
are often involved in providing loans, investments, and various financial services, serving
individuals and businesses that may have limited access to conventional banking services.
They bring diversity and flexibility to the financial landscape, offering tailored financial
solutions to meet the specific needs of clients.

The financial system, in its entirety, encompasses banks, NBFCs, capital markets,
insurance providers, and other financial intermediaries. This system acts as the lifeblood of
an economy, ensuring the efficient allocation of capital, facilitating investments, enabling
savings, and managing risks. It fosters economic growth by channeling funds from savers to
borrowers, promoting liquidity and stability, and fostering innovation in financial products
and services.

In conclusion, banking, BFSI, NBFCs, and the broader financial system collectively
form the cornerstone of any modern economy. They function as integral components of
financial intermediation, promoting economic well-being, stability, and development by
catering to the diverse financial needs of individuals and businesses while facilitating the
flow of capital and resources within the society.

A resilient financial system plays a pivotal role in fostering economic growth by

stimulating investments, encouraging savings, and effectively managing risks. It acts as a
stabilizing force, equipped with mechanisms to mitigate financial crises and safeguard the
interests of investors. Essentially, the financial system serves as the lifeblood of an economy,
channelling vital funds and resources to key sectors, thereby shaping the economic well-
being and prosperity of individuals and nations.

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1. Take a photo of a cheque.

2. Explain each part of the cheque and how to fill the same.

3. Explain how a bank processes a cheque

4. Explain in detail how to fill a challan for depositing a cheque in a bank

Solution:

What is a cheque:

A cheque is a written financial instrument that allows the drawer to authorize the
transfer of a specified sum of money from their bank account to the payee. It typically
includes the drawer's name, the payee's name, the payment amount in both numerical and
written form, the date, and the drawer's signature. Cheques are a widely accepted method for
making payments and can be used for various financial transactions, such as paying bills,
transferring funds, or making purchases. They can be issued in different forms, such as bearer
cheques, order cheques, and post-dated cheques. When depositing a cheque, the payee's bank
initiates a clearing process to validate the cheque's authenticity and transfer the funds from
the drawer's account to the payee's account. Cheques are still in use in many parts of the
world, though electronic payment methods have reduced their prevalence in some regions.
Proper handling and security measures are essential to prevent fraud and misuse of cheques.

Picture of cheque:

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Parts of a cheque:

A typical cheque consists of several important parts:

a) Date
b) Drawer
c) Payee
d) Amount in Figures and Words
e) Signature

These parts are explained briefly below:

a) Date: The date on a cheque, often referred to as the "issuing date," serves multiple
vital functions. It verifies the cheque's authenticity, offers a record-keeping timeline,
and determines when it can be cashed or deposited. Cheques without a specified
future date are immediately payable, enabling prompt payment upon receipt. In
contrast, post-dated cheques, featuring a future date, restrict encashment or deposit
until the specified date arrives. Policies of banks and the legal enforceability of post-
dated cheques can vary by jurisdiction, emphasizing the need to comprehend local
regulations and maintain clear communication between the drawer and the payee.
Moreover, certain regions may void cheques if not presented for payment within a
specific timeframe from the date of issuance. Overall, the date on a cheque holds
significant implications for its legitimacy, timing of cashing, and associated risks,
rendering it a crucial consideration in cheque transactions.
b) Drawer: The "drawer" of a cheque is a pivotal role in the cheque issuance process.
This individual is the person who writes the cheque, and by doing so, authorizes the
payment specified on the cheque to the payee. The drawer must have a valid bank
account from which the funds will be drawn to cover the cheque amount. The act of
writing and signing the cheque is a legally binding commitment to make the payment
to the payee or recipient. The drawer's signature on the cheque is a crucial component,
as it signifies their consent and endorsement of the transaction. Furthermore, the
drawer is responsible for ensuring that there are sufficient funds in their bank account
to honor the cheque when it is presented for payment. Failure to have adequate funds
may result in the cheque bouncing, which can incur fees and potentially legal
consequences. In essence, the drawer's role in the cheque issuance process is one of
both authority and financial responsibility, and they play a pivotal part in facilitating
payments and financial transactions through the use of cheques.
c) Payee: The "payee" in the context of a cheque is a central figure representing the
individual or entity to whom the payment specified on the cheque is directed. The
payee is the intended recipient of the funds, and their name is inscribed on the cheque
to indicate precisely who should receive the payment. This role is crucial because it
clarifies the destination of the financial transaction. Whether it's for settling a debt,
making a purchase, or transferring money, the payee is the ultimate beneficiary. They
have the authority to endorse and deposit the cheque into their bank account or
negotiate it as required. The payee's identity ensures that the funds reach the intended

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 party, and the cheque's legitimacy hinges on their involvement in the transaction. In
essence, the payee plays a vital role in the cheque system by defining the recipient of
the payment and facilitating the secure and orderly transfer of funds.
d) Amount: The "Amount" on a cheque serves as a dual representation of the payment
amount, presented in both numerical and written forms. This redundancy is a crucial
security feature designed to prevent fraud and disputes. The numerical representation
ensures clarity, as it provides an exact figure for the amount to be paid. Meanwhile,
the written form acts as a fail-safe to confirm the amount in words, leaving no room
for misinterpretation or tampering. The combination of these two representations
safeguards the cheque's integrity and helps in cases where there might be
discrepancies or disputes regarding the amount. This system of dual representation
enhances the transparency and reliability of cheques, making them a secure and
trusted means of facilitating financial transactions.
e) Signature: The "Signature" on a cheque is a fundamental requirement that holds
significant importance in making the cheque valid. It represents the drawer's personal
endorsement and authorization of the payment specified on the cheque. Without the
drawer's signature, the cheque is incomplete and non-negotiable. The act of signing
the cheque is a legally binding commitment, indicating the drawer's consent to
transfer the funds from their bank account to the payee. This signature also serves as a
crucial security measure, verifying the authenticity of the cheque and providing a
means of authentication to prevent fraudulent transactions. In essence, the signature is
an indispensable element that finalizes the cheque and ensures its legitimacy, making
it a recognized and secure instrument for financial transactions.

All the elements discussed, including the drawer's signature, the amount in figures and words,
the payee, and the date, collectively constitute the essential parts of a cheque. These
components are crucial for the cheque's validity and functionality. The drawer's signature
signifies their authorization, the amount representations prevent disputes, the payee
designates the recipient, and the date determines when the cheque can be used. These parts
come together to form a reliable and secure means of conducting financial transactions
through cheques, emphasizing their continued importance in today's financial landscape.

How a bank processes a cheque:

In India, the processing of a cheque typically involves several stages to ensure the
smooth and secure transfer of funds between the drawer's and payee's bank accounts. Here's
an overview of how a bank in India processes a cheque:

1. Deposit: In India, depositing a cheque involves visiting a bank branch, using an

ATM, or utilizing mobile banking apps for cheque scanning. At the bank branch, the
payee fills out a deposit slip, hands the cheque to a teller, and gets an
acknowledgment. ATM deposits entail using the card, selecting the cheque deposit
option, and feeding the cheque into the ATM, which scans it and issues a receipt.
Mobile apps allow users to capture photos of the cheque and confirm the deposit.
Captured cheque images are crucial for verification and fund transfer. This modern

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 approach enhances convenience, security, and reduces the need for physical cheque
handling.

2. Image Scanning: In the cheque processing system in India, specialized equipment is

used to capture high-resolution digital images of both the front and back of the cheque
upon deposit. These images play a crucial role in processing and verifying the cheque,
eliminating the need for physical transportation of paper cheques. This technology
streamlines the process, enhances efficiency, and reduces the risk of loss or damage
associated with physical handling. Additionally, it facilitates remote deposit options,
such as mobile cheque scanning, offering a convenient way for customers to deposit
cheques from anywhere.

3. Data Entry: In the Indian cheque processing system, essential information from the
cheque, including the cheque number, account numbers of the drawer and payee, the
payment amount in both numerical and written forms, the issuance date, and payee
details, is meticulously entered into the bank's system. This data entry serves as the
foundation for subsequent verification and clearing processes, ensuring the accurate
and secure transfer of funds to the intended recipient and maintaining the reliability of
cheque-based financial transactions.

4. Verification: In the Indian cheque processing system, the bank conducts a rigorous
verification process to confirm the cheque's authenticity. This involves scrutinizing
the drawer's signature, checking for security features, and ensuring that there are
sufficient funds in the drawer's account to cover the payment. This meticulous
verification safeguards the legitimacy and security of cheque transactions in India.

5. Clearing House: If the cheque is drawn on a different bank than the payee's, the
transaction is sent to the local clearinghouse. The clearinghouse acts as an
intermediary to facilitate the settlement between banks.

6. Settlement: In the Indian cheque processing system, the clearinghouse plays a pivotal
role in facilitating the settlement of transactions between banks. After the initial
verification and validation process, the transactions are forwarded to the
clearinghouse, acting as an intermediary. At the clearinghouse, these transactions are
systematically processed and the accounts between different banks are settled. This
means that the payee's bank ultimately receives the payment from the drawer's bank,
effectively transferring the specified funds from one bank to another. This clearing
process ensures the smooth and secure transfer of funds, reinforcing the reliability and
efficiency of cheque-based financial transactions in India.

7. Fund Transfer: In India's cheque processing system, after thorough verification and
clearing, the verified funds are efficiently transferred from the drawer's account to the
payee's account, ensuring a secure and timely payment. This method underscores the
reliability and trust in cheque-based financial transactions in India.

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 8. Notification: In India's banking system, both the drawer and payee receive
transaction notifications through bank statements or electronic alerts. These
notifications confirm the successful processing of the cheque, with the drawer's
account being debited and the payee's account being credited, ensuring transparency
and accountability in the process.

9. Account Updates: The respective bank accounts are updated to reflect the
transaction, and the payee's account balance is increased by the cheque amount.

10. Cheque Return: If the cheque bounces due to insufficient funds or other issues, the
payee's bank will notify them, and the cheque is returned to the payee. The payee may
incur fees for a bounced cheque.

It's important to note that with the advent of electronic clearing systems like the Cheque
Truncation System (CTS) in India, most cheque processing is now done electronically,
reducing the time and effort involved in physical transportation of paper cheques. This
system allows for faster and more efficient cheque processing, making it a secure and
convenient means of payment in the country.

What is a challan:

In India, a bank challan is a form or document used for making various types of
payments to government agencies, educational institutions, and other organizations. It serves
as a means of generating a unique reference number for tracking and confirming payments. A
bank challan typically includes details such as the payer's name, the purpose of payment, the
amount, and the bank's name and branch where the payment is to be made. Once the payment
is made at the designated bank, the bank provides a stamped or validated copy of the challan
as proof of payment. Challans are commonly used for paying taxes, educational fees,
application fees for government exams, and other official charges. They are an important tool
in ensuring the systematic collection of funds and maintaining a record of financial
transactions in various sectors of the Indian economy.

Picture of challan:

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Parts of challan and how to fill it:

The common components of a challan form in India include:

1. Challan Identification Number (CIN)

2. Name and Address of the Payer

3. Name of the Bank/Branch

4. Type of Payment

5. Assessment Year/Financial Year

6. Amount in Figures and Words

7. Details of Tax, Penalty, or Fee

8. Interest and Penalty Calculation

9. Instructions for Filling the Challan

10. Acknowledgment

11. Verification

12. Bank's Acknowledgment

All the above components are explained below:

1. Challan Identification Number (CIN): The unique alphanumeric code assigned to

each challan serves as an identification and reference number, allowing for efficient
tracking and record-keeping of financial transactions.

2. Name and Address of the Payer: In this section, crucial information about the payer,
whether an individual or an entity, is provided. It typically encompasses their full
name, address, and contact details, ensuring that the payment is associated with the
correct source and facilitating communication if necessary.

3. Name of the Bank/Branch: This section provides precise information about the bank
where the payment is to be made, including the specific branch. It ensures that the
payment is directed to the correct location, preventing any confusion or misrouting of
funds.

4. Type of Payment: This section outlines the nature or purpose of the payment being
made, categorizing it into specific payment types like income tax, GST, property tax,
or any other applicable payment category. It helps in classifying and processing the
payment correctly, ensuring that it is allocated to the relevant account or authority.

5. Assessment Year/Financial Year: This section indicates the specific financial year
or assessment year for which the payment is intended. It ensures that the payment is

7
 correctly attributed to the designated time period, which is crucial for taxation and
financial record-keeping purposes.

6. Amount in Figures and Words: To prevent discrepancies, the amount to be paid is

presented in both numerical figures and words in this section. This dual representation
ensures clarity and accuracy in the payment amount, reducing the risk of errors or
misunderstandings.

7. Details of Tax, Penalty, or Fee: In this section, precise details regarding the type of
tax, penalty, or fee being paid are presented, often accompanied by any relevant
codes. This information is essential for correctly categorizing and processing the
payment, ensuring it is attributed to the appropriate financial obligation or regulatory
requirement.

8. Interest and Penalty Calculation: In situations where interest and penalties are
applicable, this section outlines the specifics of how they are calculated. This
information is crucial for understanding the additional charges associated with the
payment and ensures transparency in the penalty and interest assessment process.

9. Instructions for Filling the Challan: This section serves as a guide, offering
instructions on how to accurately fill out the challan form. It provides essential
guidance to ensure that the form is completed correctly, minimizing errors and
ensuring that payments are processed smoothly.

10. Acknowledgment: The challan form often includes a tear-off section, which acts as
an acknowledgment receipt for the payer. This portion is retained by the payer as
proof of the transaction, documenting the payment made for their records.

11. Verification: To affirm the accuracy of the provided details and the payment, the
payer is obligated to sign and date the challan. This signature and date serve as a
confirmation of the authenticity of the transaction, ensuring accountability and
accuracy in the payment process.

12. Bank's Acknowledgment: Upon making the payment, the bank furnishes an
acknowledgment, which may encompass the bank's stamp and signature. This
acknowledgment serves as a confirmation of the payment and validates that the
transaction has been successfully processed by the bank.

Conclusion:

In conclusion, the world of banking is a multifaceted and integral part of the broader
financial system, encompassing various institutions, services, and functions that together
drive economic activity. The Banking, Financial Services, and Insurance (BFSI) sector plays
a pivotal role in ensuring the smooth flow of funds, risk management, and financial stability.
Non-Banking Financial Companies (NBFCs) add diversity to the financial landscape by

8
offering specialized services. The financial system, comprising banks, BFSI, and NBFCs,
forms the backbone of a modern economy, connecting individuals, businesses, and
governments to the essential financial services they need. This interconnected system is
essential for economic growth and stability, facilitating investments, savings, and efficient
resource allocation. Understanding these components is vital for anyone navigating the
financial world, from individuals managing their finances to policymakers shaping the
financial industry's regulatory landscape.

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 FIXED DEPOSIT

If you Rs.2, 00,000 (INR Two Lakh), how will you invest the money among

Organization Amount Interest Rate Return after 24

months
Government Banks

Private Banks

Non-Banking Fin
Companies
Post Office savings

Solution:

Fixed deposit:

A fixed deposit in India, commonly known as a Fixed Deposit (FD), is a financial

instrument offered by banks and financial institutions. It is a type of investment where an
individual or entity deposits a sum of money with a financial institution for a predetermined
period, which can range from a few months to several years. In return, the institution pays a
fixed interest rate on the deposited amount, which is typically higher than that of a regular
savings account. Fixed deposits are considered a secure and low-risk investment option, as
they offer capital protection and assured returns. The deposited amount remains locked in for
the chosen tenure, and premature withdrawal may incur penalties. At the end of the fixed
deposit term, the principal amount along with the accumulated interest is returned to the
depositor, making it a popular choice for risk-averse investors seeking stable and predictable
returns on their savings.

Interest rate in fixed deposit:

Fixed deposits are a secure and lucrative avenue for managing your savings, offering
both capital protection and the potential for substantial interest earnings. Competitive interest
rates on Fixed Deposits (FDs) ensure that depositors can achieve an attractive Return on
Investment (ROI) over a set period. In the FD scheme, depositors contribute their funds just
once when initiating the account, and the interest rates offered are contingent on several
factors, including the bank of choice, the deposited amount, and the chosen tenure.

At the end of the predetermined tenure, the accrued interest is computed based on the initial
principal, and the total sum, including both the principal and interest, is reimbursed to the
depositor. Fixed deposit tenures may vary from as short as 7 days to as long as 10 years.
Various banks extend differing interest rates, with higher rates often available for smaller
deposits and reduced rates for substantial deposits exceeding Rs. 1 crore. Notably, DHFL
Bank stands out as a bank offering competitive interest rates, reaching up to 9.25% for fixed
deposits.

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The interest rates on fixed deposits are subject to a variety of influences, including shifts in
the Reserve Bank of India (RBI) monetary policy, such as the repo rate and base rate, as well
as the liquidity position of banks, economic conditions, and credit demand. The variables
affecting bank FD rates encompass the deposit amount, tenure, and depositor type.

In terms of competitive FD interest rates, Small Finance Banks and Non-Banking Financial
Companies (NBFCs) lead the way. They are followed by Public Sector Banks (PSU Banks)
and significant Private Sector Banks. Specific Private Sector Banks like Bandhan Bank, DCB
Bank, Tamilnadu Mercantile Bank, RBL Bank, IDFC First Bank, IndusInd Bank, Yes Bank,
SBM Bank, CSB Bank, and Federal Bank offer rates exceeding those of their peers.
Scheduled banks provide a range of FD interest rates, spanning from 2.50% p.a. to 9.00% p.a.
for regular depositors, with varying tenures from 7 days to 10 years. Senior citizens are
generally entitled to an additional interest rate of 0.50% to 0.75% p.a. over the standard FD
rates.

Loan against Fixed Deposit (FD):

Fixed deposit holders have the option to utilize their deposits as collateral to secure
loans, often in the form of an overdraft facility. This facility extends a credit limit based on
the value of the fixed deposit serving as security, and interest is typically applied only to the
amount withdrawn until the repayment is completed. Notably, depositors continue to accrue
interest on their pledged fixed deposits during the entire loan tenure. The flexibility to
withdraw funds up to the approved credit limit from the overdraft account empowers
borrowers to manage their cash flow in alignment with their repayment capacity. These
features of loans against fixed deposits offer a valuable means to address recurring liquidity
and cash flow disparities, all without the need to prematurely close fixed deposits, thereby
avoiding early withdrawal penalties. In India, fixed deposits are a highly preferred savings
avenue due to their safety, competitive returns, and user-friendly operational aspects.

Solution:

Organization Amount Interest Rate Return after 24

months
Government Banks 20,000 7.5% 23,000

Private Banks 75,000 8.75% 88,115

Non-Banking Fin 95,000 8.25% 1,10,675

Companies
Post Office savings 10,000 7% 11,400

Total 2,00,000 2,33,200

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 2,00,000 was divided into various ratios to invest in various firms for a period of 24
months and it increased to a sum of Rs. 2,33,200. The amount gained as interest in a period of
24 months is Rs. 33,200.

I have strategically invested my funds across various financial institutions, with

Rs. 20,000 in Government Banks, Rs. 75,000 in Private Banks, Rs. 95,000 in Non-Banking
Financial Companies (NBFCs) and an additional Rs. 10,000 in Post Office savings. I decided
to invest more of my money in Non-Banking Financial Companies (NBFCs) because I want
to take a significant risk to gain more profit. This is why I deposit a significantly more
amount when compared to other firms in Non-Banking Financial Companies (NBFCs).

I also understand that our returns on investment depend upon our Risk Apatite. And I
am aware of the fact that there are three types of investors in the economy. They are as listed
below:

 Low risk takers are those people to those who are considered to have a lower
likelihood of facing financial difficulties or defaulting on their financial
obligations. These individuals often exhibit stable financial profiles and
responsible financial behaviours, which make them less risky for financial
institutions and creditors.
 Moderate risk people typically fall between the low-risk and high-risk
categories in terms of financial risk. They may have certain factors that make
them somewhat riskier than low-risk individuals but less risky than high-risk
individuals.
 High risk individuals are those who are more likely to face financial
difficulties and challenges due to various factors that increase their level of
financial risk.

Services provided by banks:

Banks serve as multifaceted financial institutions that provide a comprehensive range

of services, accommodating the financial requirements of individuals, businesses, and the
overall economy. Among these offerings, deposit services, such as savings and current
accounts, form the foundation, offering secure avenues for money storage and day-to-day
transactions. Additionally, banks extend credit through personal, home, and business loans,
making significant financial undertakings possible. Investment opportunities include fixed
deposits for secure, interest-bearing savings, as well as access to mutual funds and demat
accounts for broader investment portfolios. Payment services, including credit and debit
cards, online and mobile banking, and electronic funds transfer, facilitate seamless financial
transactions. Banks also offer wealth management services like portfolio management and
financial planning to guide clients toward their financial objectives. Furthermore, they engage
in international banking, foreign exchange, trade finance, safety deposit services, insurance
products, government financial operations, merchant services, treasury management, and
educational resources. This extensive array of services underscores the critical role banks
play in supporting financial activities and promoting economic development.

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Online fund transfer resources:

The advent of online resources has revolutionized the way individuals and businesses
manage their finances and conduct transactions. These digital tools and platforms offer an
array of options for online fund transfers, providing convenience, speed, and security. From
traditional bank websites and mobile apps that enable seamless inter-account transfers to real-
time systems like RTGS and NEFT in India, which facilitate large-value transactions, the
landscape is diverse. Services like UPI and IMPS have made mobile banking a breeze, while
online wallets and cryptocurrency exchanges have introduced new ways to store and transfer
digital assets. Peer-to-peer payment platforms, international money transfer services, and bill
payment options add further versatility to the mix. As online resources continue to evolve,
they play an increasingly crucial role in facilitating financial transactions and fostering digital
financial inclusivity.

However only four major platforms are used widely to make payments from one bank
account to another bank account. They are as follows.

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  NEFT (National Electronic Fund Transfer)
 RTGS (Real Time Gross Settlement)
 IMPS (Immediate Payment Service)
 UPI (Unified Payments Interface)

NEFT (National Electronic Fund Transfer)

NEFT, or National Electronic Funds Transfer, is a crucial component of India's

electronic payment infrastructure. It offers a secure and streamlined mechanism for
individuals and businesses to transfer funds electronically. NEFT transactions occur in
batches, with predefined settlement windows throughout the day, allowing users to initiate
transfers during their bank's working hours. Most Indian banks, including public and private
sector institutions, cooperate within the NEFT system, ensuring broad accessibility. To
execute an NEFT transfer, the sender must furnish the recipient's bank account number, the
relevant branch's IFSC or MICR code, the recipient's name, and the transfer amount. While
NEFT does not guarantee instant fund transfers, it is a preferred choice for various financial
transactions, including salary disbursements, bill payments, and interbank settlements. NEFT
has significantly contributed to the country's financial digitization and has become an
indispensable tool for electronic fund transfers.

RTGS (Real Time Gross Settlement)

RTGS, or Real Time Gross Settlement, is an advanced electronic funds transfer

system employed in India, catering to high-value and time-critical financial transactions.
What sets RTGS apart is its real-time settlement mechanism, ensuring that funds are
transferred individually, instantaneously, and without any netting of debits and credits. This
means that the recipient receives the funds in their account immediately upon the
transaction's initiation. RTGS primarily serves high-value transactions, making it the
preferred choice for large-scale financial dealings, such as real estate transactions, interbank
settlements, substantial business payments, and investments. While there may be no upper
limit on the transaction amount, individual banks can establish their own limits, and the
system often comes with a higher fee compared to other electronic fund transfer methods.
The extensive participation of major banks in India, coupled with its real-time capabilities,
makes RTGS an indispensable tool for facilitating swift and secure electronic fund transfers
in the country.

Major difference between NEFT and RTGS:

NEFT RTGS
NEFT is a payment system that facilitates the RTGS is a payment system that enables
transfer of funds from one bank account to real-time, immediate, and individual
another on a deferred net settlement basis. transfer of funds between banks on a gross
settlement basis.

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NEFT operates in hourly batches and RTGS operates continuously, processing and
settles transactions in a deferred manner, settling transactions individually in real-time,
typically with settlement cycles scheduled without any batching or time delays.
throughout the day.

NEFT is available for both interbank and
intrabank transfers, allowing individuals
and businesses to transfer funds between
their own accounts or accounts in
different banks.
RTGS is primarily designed for large-value
transactions, typically involving a minimum
threshold amount, and is used for interbank
transfers or high-value transactions by
individuals and businesses.

NEFT transfers are settled in batches, and RTGS transfers are settled individually and
the funds are credited to the beneficiary's immediately, with the funds credited to the
account within a specific time window beneficiary's account in real-time, within
depending on the NEFT settlement cycle. minutes of initiating the transaction.

NEFT has specific operating hours during
which transactions can be initiated. It
operates on weekdays (Monday to Friday)
and on working Saturdays, excluding
bank holidays.
RTGS operates on weekdays (Monday to Friday)
and on working Saturdays, excluding bank
holidays. It has extended operating hours
compared to NEFT, allowing for more flexibility
in initiating transactions.

NEFT transactions have no minimum RTGS transactions usually have a minimum

transaction amount, and even small-value transaction amount threshold set by the
transactions can be processed through respective country's central bank or banking
NEFT. regulator.

NEFT transactions may have a maximum RTGS transactions often have higher transaction
transaction limit per transaction limits compared to NEFT, allowing for the
depending on the bank's policy, but it is transfer of larger amounts of money.
typically higher than the limit for
immediate payment systems.

NEFT transactions have a standardized RTGS transactions have an immediate

settlement process, and the funds are settlement process, and the funds are credited to
settled in the beneficiary's account within the beneficiary's account almost instantly, in
a specific time frame, usually on the same real-time.
day or the next working day.

NEFT charges a nominal fee for outgoing NEFT charges a nominal fee for outgoing
transactions, which varies based on the transactions, which varies based on the
transaction amount and the policies of the transaction amount and the policies of the
respective banks. respective banks.

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IMPS (Immediate Payment Service)

IMPS, Immediate Payment Service, stands out as a ground-breaking interbank

electronic funds transfer system in India. Its hallmark feature is the capability to facilitate
instant, round-the-clock, and real-time fund transfers, delivering exceptional convenience and
accessibility. IMPS empower users to perform rapid and secure money transfers between
bank accounts via mobile phones, internet banking, ATMs, or bank branches. To initiate an
IMPS transaction, users simply need the recipient's bank account number and the relevant
Indian Financial System Code (IFSC) or a Mobile Money Identifier (MMID). This versatility
positions IMPS as a versatile solution for a wide array of transactions, spanning person-to-
person transfers, bill settlements, online shopping, and mobile recharges. IMPS has played a
pivotal role in enhancing financial inclusion by offering individuals nationwide easy access to
digital payment services, thereby further advancing India's financial landscape into the digital
age.

UPI (Unified Payments Interface)

The Unified Payments Interface (UPI) stands as a groundbreaking payment system in

India, redefining the landscape of digital transactions. Governed by the National Payments
Corporation of India (NPCI), UPI offers a seamless and real-time channel for transferring
funds between bank accounts through mobile devices. It eradicates the need for traditional
payment methods, such as writing checks or relying on physical currency, making it a highly
convenient and secure option for various financial transactions, including shopping, bill
payments, and peer-to-peer transfers.

To leverage UPI's capabilities, individuals must connect their bank accounts to a UPI-
enabled mobile app, creating a virtual payment address (VPA). This VPA functions as a
unique identifier, similar to an email address, simplifying the process of sending and
receiving money. UPI provides a multitude of advantages, including round-the-clock
availability, immediate fund transfers, and compatibility with multiple banks and financial
institutions.

Furthermore, UPI empowers users to make online payments for products and services,
significantly reducing dependence on cash transactions and expanding financial inclusivity. It
has emerged as a transformative force in India's digital payment ecosystem, playing a pivotal
role in the country's transition towards a cashless economy. UPI remains in a state of
continuous evolution, introducing innovations and enhancements to further bolster the digital
payment landscape, solidifying its status as a cornerstone of India's digital financial
framework.

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Government Banks:

Bank State Bank of India

Type of customer Normal

Type of fixed deposit Cumulative

Date of deposit 19/03/2021

Date of maturity 19/03/2023

Amount 20,000

Tenure 2 years

Interest Rate 7.5%

Total Interest 23,000

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Private Banks:

Bank HDFC

Type of customer Normal

Type of fixed deposit Cumulative

Date of deposit 19/03/2021

Date of maturity 19/03/2023

Amount 75,000

Tenure 2 years

Interest Rate 8.75%

Total Interest 88,115

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NBFC:

Bank Kumaran Finance

Type of customer Normal

Type of fixed deposit Cumulative

Date of deposit 19/03/2021

Date of maturity 19/03/2023

Amount 95,000

Tenure 2 years

Interest Rate 8.25%

Total Interest 1,10,675

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Post office savings:

Post office savings

Type of customer Senior citizen

Type of fixed deposit Cumulative

Date of deposit 19/03/2021

Date of maturity 19/03/2023

Amount 10,000

Tenure 2 years

Interest Rate 7%

Total Interest 11,400

20
Imaging you are working in a bank and you get an application for a housing loan of
Rs.25 lakh

A. From a government employee with annual income of Rs.10 lakh

B. From a private sector with annual income of Rs.15 lakh

C. From a businessman with a turnover of Rs.50 lakh

D. A rich farmer with lands worth over Rs. 1 crore

Solution:

A housing loan, commonly known as a home loan or mortgage, is a financial

instrument offered by banks and financial institutions to support individuals in buying
residential properties. It allows individuals to borrow a substantial amount of money to
acquire a house or apartment, with the borrowed amount to be repaid over a predefined
period, often spanning several years. The property being purchased serves as collateral for the
loan, and in the event of the borrower's failure to make repayments, the lender has the legal
right to take possession of the property through a process called foreclosure. Housing loans
are a popular means for individuals to realize their homeownership aspirations by spreading
the cost of purchasing a property over an extended timeframe, making it more manageable
and feasible.

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Types of home loan:

 Home Loan
 Home Construction Loan
 Home Extension Loan
 Home Improvement Loan
 Composite Home Loan.

Home loan:

The most prevalent form of home loan is the one individuals often opt for when
buying a house. This type of loan is offered by various housing finance companies, public
banks, and private banks, and it enables you to borrow the necessary funds to purchase your
desired home. The borrowed amount is typically repaid in monthly installments over the
loan's tenure, which can extend for several years. In many cases, you can secure financing for
up to 80% to 90% of the property's market value, making it more accessible to a wider range
of buyers. It's important to note that while you're repaying the loan, the lender holds the
property as collateral, and ownership is fully transferred to you once the loan is completely
paid off. This makes home loans a popular choice for individuals looking to fulfill their
homeownership dreams without the need for immediate full payment.

Home construction loan:

In India, a home construction loan is a specialized financial product designed to

facilitate the construction of residential properties from the ground up. Unlike traditional
home loans that are used for purchasing existing properties, a home construction loan is
tailored to cover the various expenses associated with building or renovating a residential
structure. These loans are typically disbursed in stages, known as "construction-linked
disbursements," with funds released at key milestones throughout the construction process to
ensure that the borrower uses the money for its intended purpose. The repayment tenure for
these loans can vary but often extends to 15 to 20 years, with slightly higher interest rates

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compared to regular home loans to account for the additional complexities and risks involved
in the construction process. Borrower eligibility typically requires owning the land on which
the construction will take place, and lenders assess the feasibility of the construction project,
the borrower's financial stability, and the submission of necessary documentation, including
project estimates and approvals from relevant authorities. With potential tax benefits and the
constructed property serving as collateral, home construction loans empower individuals to
turn their dream homes into reality, step by step. Borrowers need to factor in not only the cost
of construction but also other expenses such as registration, stamp duty, and property taxes,
which can add to the overall financial outlay. Tax benefits are a notable advantage of home
construction loans, with deductions available on both the principal and interest components
of the loan under relevant sections of the Income Tax Act.

Home extension loan:

In India, a home extension loan is a specialized financial product designed to provide

homeowners with the means to expand or extend their existing residential properties. This
type of loan caters to individuals who wish to augment their living space, whether by adding
extra rooms, renovating their homes, or constructing additional floors. Home extension loans
typically cover the cost of construction materials, labour, permits, and other expenses
associated with the extension project. The repayment tenure for such loans varies, often
ranging from 5 to 20 years, depending on the lender's terms and the borrower's preferences.
Similar to home construction loans, funds for home extension loans are usually disbursed in
stages as the project progresses, and the property being extended serves as collateral. These

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loans empower homeowners to enhance their living spaces, accommodating their changing
needs without the financial burden of an upfront payment for the extension.

Home improvement loan:

In India, a home improvement loan is a financial product tailored to homeowners

looking to enhance the condition, aesthetics, or functionality of their existing residences.
These loans are specifically designed to cover expenses related to home renovation, repairs,
or upgrades. Whether it's modernizing the kitchen, renovating the bathroom, adding a new
room, or making structural improvements, a home improvement loan provides the necessary
financial support. Borrowers can typically access funds ranging from a few thousand rupees
to several lakhs, with repayment tenures that span from a few months to a few years. Interest
rates for these loans can be competitive, and they are often offered by various banks and
financial institutions. The property being improved typically serves as collateral, making it a
secured loan option. Home improvement loans empower homeowners.

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Composite home loan:

In India, a composite home loan is a versatile financial product that combines the
features of a home loan and a home improvement loan. This type of loan is designed to cater
to the diverse needs of homeowners who are not only looking to purchase a house but also
wish to fund home renovation or expansion simultaneously. A composite home loan provides
the convenience of a single loan application and approval process for both the purchase of a
new property and the financing of home improvement projects. Borrowers can access funds
for buying a house as well as making modifications or repairs to the same property, making it
a comprehensive solution for homeowners. These loans often come with flexible repayment
tenures and competitive interest rates, providing borrowers with the financial flexibility to
manage the combined expenses of acquiring and enhancing their homes. The property being
financed and improved serves as collateral for the loan, securing the borrowing with the real
estate asset. Composite home loans offer a convenient and holistic approach for individuals
seeking to fulfill their homeownership dreams and simultaneously invest in the improvement
of their living spaces.

SOLUTION:

As a banker I will prepare to get an application for a housing loan from government
employee & private sectors.

In choosing housing loan candidates, my preference lies with A and B due to their
stable incomes and job security. A, a government employee with a Rs. 10 lakh annual
income, and B, with a Rs. 15 lakh annual income and job market resilience, show promising
EMI repayment capacity.

However, C, a businessman, presents risks due to potential income manipulation,

and D, a farmer, faces income uncertainty from agriculture. Assessing EMI to NMI ratio is
crucial to gauge repayment capacity, emphasizing spareable income after necessary expenses.

25
The necessary documents to be collected for processing a housing loan application
include:
1. Address proof and ID proof.
2. PAN details.
3. Salary slip for the last three months, and bank statements if required.
4. Title deed, parent deed, Patta, and Chitta extract.
5. FMB (Field Measurement Book) extract.
6. DTCP (Directorate of Town and Country Planning) approved layout plan.
7. Building plan.
8. License for construction.
9. Tax receipt.
10. Encumbrance certificate for 30 years.

Eligibility criteria for a home loan for government employees may vary from one lender
to another. Some eligibility criteria include:
 Nationality: The applicant must be an Indian citizen
 Age: The applicant must be between the ages of 21 and 65
 Employment status: The applicant must have at least 3 years of work experience
 CIBIL score: The applicant must have a CIBIL score of 725 or higher
 Income: The applicant must have a steady source of income
 Assets and liabilities: The applicant's current assets and liabilities will be considered
 Property cost: The cost of the proposed house or property will be considered
 smooth application process for housing loan for government employees requires:
• You must be an Indian citizen between the age of 23 and 62 years
• You must have a work experience of at least 3 years
• You must have a CIBIL score of 750 or above

HOME LOAN BENEFITS FOR GOVERNMENT EMPLOYEES:

The following are some of the perks that you can enjoy as a government employee when you
apply for a housing loan:

i. Competitive interest rates:

If you are eligible for a housing loan, you may get a loan at a lower
housing loan rate interest. However, if you are a government employee, you can get a loan at
even lower rates. Female government employees in particular get up to 0.05% as a

26
concession on the home loan interest rate. Such benefits make it even more favourable for
government employees to apply for a home loan.

ii. Zero processing fees :

To qualify for a housing loan for government employees, you have to fulfil
the laid out house loan eligibility criteria. Eligible loan applicants will get the loan sanctioned
faster without waiting for days to get approval.

iii. Minimal paperwork:

Home loans for government employees require the applicant to submit only a few documents
online. This facilitates faster approval and disbursal process.

CONCLUSION:
Banking holds a crucial role in our day-to-day life. We must adhere to the banking system
as responsible citizens. The banking system acts as a crucial base for the financial system as
well as the entire economic system of the country. It provides a base to the market and the
companies. For the savings and other economical aspects banks are the most reliable option
for us where we can save, invest or borrow money by a given terms and conditions. That's
why we can easily say that money and banking are the most important segment in the
economic circumstances.

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