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Savings Bank Accounts are meant to promote the habit of saving … • • Saving Account Definitions Types of Saving Account:
• • • • • Passbook Account Statement Account Notice Account Regular Savings Accounts National Savings Accounts
• • • •
Interest Rate How To Open A Saving Account Advantages Terms & Conditions provided by RBI for Saving Account
Current account is the name given to a transactional account in the United Kingdom and countries with a UK banking heritage. A transactional account is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Transactional accounts are meant neither for the purpose of earning interest nor for the purpose of savings, but for convenience of the business or personal client; hence they tend not to bear interest. Instead, a customer can deposit or withdraw any amount of money any number of times, subject to availability of funds.
Overdraft Facility International Transactions Unrestricted execution of financial transactions Currency trading.
Meaning: Fixed deposit account allows you to deposit your money for a set period of time, thereby earning you a higher rate of interest in return. Fixed deposits also give you a higher rate of interest than a savings bank account. The facilities vary from bank to bank. Interest rates on FDs: The rate of interest on FDs varies according the maturity with longer deposits generally earning a higher interest rate. Benefits: • Safety: Fixed deposit of reputed bank regulated by RBI. • Saves Tax: FD save tax & give high returns. • Loan facility on the amount deposited.( up to 75 – 90% of the deposit amount) • Fixed deposit yields higher returns than normal deposit (Savings account or CA).
• • • Lower rate of returns. Taxes: Interest earned on FD is fully taxable. Rising inflation can wipe out the interest benefits
Account Statement is a record of transactions and their effect on account balances over a specified period of time, for a given account. A bank account statement lists the debits and credits that took place over the relevant time period. A periodic summary of account activity with a beginning date and an ending date. Monthly credit card bills are also considered account statements. Account statements should be scrutinized for accuracy, and historical statements are critical for budgeting. Insurance companies may provide account statements summarizing paid-in cash values Brokerage accounts can also differ in terms of order execution speed, analysis tools used, scope of tradable assets, and the extent to which investors can trade on margin.
• A cheque is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specified demand account held in the maker/depositor's name with that institution. A cheque is valid for a period of 6 months from the date of issuance.
Open cheque: A cheque is called open when it is possible to get cash over the counter at the bank. The hoder of open a cheque can do the following
• • • Receive its payment over the counter at the bank Deposit the cheque in his own account. Pass it to some one else by signing on the back of the of a cheque.
Type of cheques
Crossed cheque: Since open cheque is subject to risk of theft, it is dangerous to issue such cheques. To avoid this ‘Crossed cheque’ are used. The payment of such cheque is not made over the counter at the bank, it is only credited to the bank account of the payee. A cheque can be crossed by drawing two transverse parallel lines across the cheque. Bearer cheque: A cheque which is payable to any person who presents it for payment at the bank counter is called ‘Bearer cheque’. A bearer cheque can be transferred by mere delivery and requires no endorsement.
A cheque is called a “Dishonoured Cheque” when it gets rejected because of issuer’s account has been frozen or limited, or because there are insufficient funds in the issuer’s account when the cheque was redeemed. A cheque drawn on an account with insufficient funds is said to have bounced and may be called a “Bounced Cheque”. A check may also be dishonored because it is stale or not cashed within a "void after date." Many checks have an explicit notice printed on the check that it is void after some period of days. Banks will typically charge customers for issuing a
• A demand draft, also known as a remotely created check . • A method used by individuals to make transfer payments from one bank account to another. Demand drafts are marketed as a relatively secure method for cashing checks . • DD is a written order for making payments. • The person making payments is called drawee and the recipient is called payee. The bank providing the service is called drawer. • Demand draft can be of two types: •Sight Draft •Time Drafts • Why DD right for us? •A relatively low cost, convenient method of making non-urgent overseas payments. •A convenient way for payment without the need to know accounting details of the payee •Less risk compared to a cheque as it can only be credited to a specific payee’s account
An overdraft is a facility granted to you whereby you can overdraw your current account up to an agreed limit. Reasons for Overdrafts Intentional short-term loan Failure to maintain an accurate account register ATM overdraft Merchant error Bank fees Victimization
Benefits and risks
Automated Teller Machine
An automated teller machine (ATM) is a computerized
Using an ATM, customers can access their bank accounts
in order to make cash withdrawals and check their account balances as well as purchasing mobile cell phone prepaid credit.
The first Automated Teller Machine (ATM) was introduced in the year 1967 by Barclays Bank in London
Transactional secrecy and integrity Is used to prevent fraud Customer identity integrity These have then been used to record customers' PINs and bank card information in order to gain unauthorized access to their accounts.
Form 16 is Certificate of deduction of tax at source under section 203 of the Income Tax Act, 1961. Employers provide TDS certificate to the employees on Form 16. Form 16 contains information about employee's salary, deductible allowances and TDS deducted and dates when it was deposited with the bank. An employee needs this information to do his income tax return. Types Of Forms Form 16 - Certificate of deduction of tax at source, from salaries. Form 16 A - Certificate of deduction of tax at source for interest on securities; dividends; interest other than interest on securities; winnings from lottery or crossword puzzle; winnings from horse race; payments to contractors and sub- contractors; insurance commission; Significance : This is the only authenticated document to show your income/earnings to outside world. Like ; Banker, housing loan institutions, income tax department & etc..
Permanent Account Number (PAN)
Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department
Benefits: • It is mandatory to quote PAN on return of income, all correspondence with any income tax authority. • It is also compulsory to quote PAN in all documents pertaining to financial transactions notified from time-to-time by the Central Board of Direct Taxes. Some such transactions are sale and purchase of immovable property or motor vehicle or payments in cash, of amounts exceeding Rs. 25,000/- to hotels and restaurants or in connection with travel to any foreign country. • It is also mandatory to mention PAN for obtaining a telephone or cellular telephone connection. • Likewise, PAN has to be mentioned for making a time deposit exceeding Rs. 50,000/- with a Bank or Post Office or depositing cash of Rs. 50,000/- or more in a Bank.
• Credit cards are issued by the credit provider. • Cardholders can use it to make purchases at merchants accepting that card. • The verification is performed using a credit card payment terminal or Point of Sale (POS) system with a communications link to the merchant's acquiring bank.
• Allows to make purchases on credit without carrying cash. • Allows convenient remote purchasing/ordering/shopping online or by phone. • Allows to pay for large purchases in small monthly installments.
• Tend to overspend more money. • Lost or stolen cards may result in unwanted expense and inconvenience. • You have to pay tax for purchasing in credit card.
What is Debit Card A debit card is a plastic card issued by banks to customers. A card which allows customers to access their funds immediately and electronically. Why Debit Card 1. An ATM Card (Debit Card) is a quick, easy and convenient way to receive a payment. Payments to debit card clear quickly — no need to bank a check or find your local bank branch or Agent. 2. When traveling from place to place, it’s not always easy to find a bank, but with millions of ATMs worldwide you can always access your funds. Futures Of Debit Card 1. The ability to purchase items at stores that have automated debit machines 2. The ability to withdraw cash from your bank account at an automatic transaction machine (ATM). Debit Card Types 1. Virtual debit Card These cards have been designed as a measure to check the fraudulent activity that are done through the Internet 3. Physical debit Card These cards are similar to other plastic cards but the main difference is that the cardholders should put the money in the card account before using the card
A traveler's cheque (also traveller's cheque, travellers cheque, traveller's check or traveler's check) is a preprinted, fixed-amount cheque designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.
Highlights : First issued on 1 January 1772 by the London Credit Exchange Company. 1874 Thomas Cook. American Express in 1891
Advantages : Available in currencies U.S. Dollars, Canadian Dollars, Pounds, Japanese Yen, and Euro. No expiry period. Replacement if lost or stolen.
Disadvantages : Black Market.
Fixed & Floating Interest Rate
Interest Rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis. The assets borrowed could include cash, consumer goods, large assets such as vehicle or building. Fixed Interest Rate is the amount charged for a loan with an interest rate that will remain at a predetermined rate for the entire term of the loan. Floating Interest Rate is an interest rate that is allowed to move up and down with the rest of the market. This contrasts with a fixed interest rate, in which the interest rate stays constant for the duration of the agreement.
Benefits Fixed Interest Even if the market push the high rates, the borrower pays fixed Equated Monthly Installment (EMI) Fixed Interest Rate brings a sense of certainty and security. Floating Interest Floating Interest rates are at least 1%-2% cheaper than fixed interest rates. Even if the floating rate goes over the fixed rate, it will be for a short period only. Drawbacks Fixed Interest Floating Interest The major drawback with Uneven nature of fixed rate is that it is monthly installments. usually 1 - 2.5% more than the floating rate home loan. If the interest rate decreases, the borrower doesn't get the benefit of reduced rates
Mutual Fund is an investment company which pools or collects money from investors for the purpose of investing in securities such as stocks, bonds and other assets You can make money from a mutual fund in three ways: • Income is earned from dividends on stocks and interest on bonds. A fund pays out all of the income it receives over the year to fund owners in the form of a distribution. • If the fund sells securities that have increased in price, the fund has a capital gain.. • If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit.
Types of funds:
• • • Equity Fund (stocks) Fixed- income Fund (Bonds) Money market funds
Advantages • Professional Management - The primary advantage of funds is the professional management of your money. • Diversification - By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. • Liquidity - Mutual fund allows your shares to be converted into cash at any time. • Simplicity Disadvantage • No Guarantees and Cost is high.
What is Electronic Clearing Service (ECS) - It is a mode of electronic funds transfer from one bank
account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc or for loan installments of financial institutions/banks or regular investments of persons. Types of ECS – – – – ECS (Credit) ECS (Debit) ECS (Credit) is used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment. ECS (Debit) is used for raising debits to a number of accounts of consumers/ account holders for crediting a particular institution. Banks handling ECS get freed of paper handling. Paper handling also creates lot of pressure on banks as they have to encode the instruments, present them in clearing, monitor their return and follow up with the concerned bank and customers. In ECS banks simply get the payment particulars relating to their customers. All they need to do is to match the account particulars like name, a/c number and credit the proceeds. Wherever the details do not match, they have to return it back, as per the procedure.
Difference between the credit and debit scheme.
Benefit to the bank – – – –
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