Anda di halaman 1dari 28





Prof. Swati

Harsha (Honours)



I would like to express my warmest thanks & deep sense of gratitude to my teacher Prof.
Swati as well as our principal Dr. Ashwani Kumar who gave me the golden opportunity to do
this wonderful project on the topic BANK DEALINGS, which also helped me in doing a lot
research and I came to know about so many new things. I am really thankful to them.
Secondly, I would like to thanks my friends who helped me a lot in finalizing this
project within the limited time frame. I also thankful to all Staff Members who made
available necessary data to me.


I hereby declare that Summer Training report intended by me for the award of degree
(Honours) 3rd Semester. Under Punjabi University, Patiala in the original worth conducted by
me and the material has neither been copied nor reproduced from any other sources. The data
provided in study is correct to best knowledge & belief.

1319 (Honours) 3rd Semester

S No.

Meaning of Banking
Definition of Banking
Features of bank
Purpose of Bank
Role of Banking
How to open Bank Account
Functions of Commercial


Form of accepting Deposit
Types of Bank Accounts
Different Types of Loans
Latest RBI Rates-2016

Page No.


The banking system in the world can be traced back to 1157, when the first bank called the
Bank of Venice was established in Italy to finance the monarch in the war period. In
England, the Bank of England was established in 1694 on Italian lines to support the
government with finance. The first bank in India was established by Alexander & co. and
English agency as the Bank of Hindustan. In 1770. This bank was failed in 1782.

The word bank is used in the sense of a commercial bank. It is of Germanic origin though
some persons trace its origin to the French word Banqui and the Italian word Banca. It
referred to a bench for keeping, lending, and exchanging of money or coins in the market
place by money lenders and money changers.
There was no such word as banking before 1640, although the practice of safe-keeping and
savings flourished in the temple of Babylon as early as 2000 B.C. Chanakya in his
Arthashastra written in about 300 B.C. mentioned about the existence of powerful guilds of
merchant bankers who received deposits, and advanced loans and issued hundis (letters of
transfer). The Jain scriptures mention the names of two bankers who built the famous
Dilware Temples of Mount Abu during 1197 and 1247 A.D.
The first bank called the Bank of Venice was established in Venice, Italy in 1157 to finance
the monarch in his wars. The bankers of Lombardy were famous in England. But modern
banking began with the English goldsmiths only after 1640. The first bank in India was the
Bank of Hindustan started in 1770 by Alexander & Co., an English agency house in
Calcutta which failed in 1782 with the closure of the agency house. But the first bank in the
modern sense was established in the Bengal Presidency as the Bank of Bengal in 1806.
History apart, it was the merchant banker who first evolved the system of banking by
trading in commodities than money. Their trading activities required the remittances of
money from one place to another. For this, they issued hundis to remit funds. In India, such
merchant bankers were known as Seths.
The next stage in the growth of banking was the goldsmith. The business of goldsmith was
such that he had to take special precautions against theft of gold and jewellery. If he seemed
to be an honest person, merchants in the neighbourhood started leaving their bullion, money
and ornaments in his care. As this practice spread, the goldsmith started charging something
for taking care of the money and bullion.
As evidence for receiving valuables, he issues a receipt. Since gold and silver coins had no
marks of the owner, the goldsmith started lending them. As the goldsmith was prepared to
give the holder of the receipt and equal amount of money on demand, the goldsmith receipt
became like cheques as a medium of exchange and a means of payment.

The next stage in the growth of banking is the moneylender. The goldsmith found that on an
average the withdrawals of coins were much less than the deposits with him. So he started
advancing the coins on loan by charging interest. As a safeguard, he kept some money in the
reserve. Thus the goldsmith-money- lender became a banker who started performing the two
functions of modern banking, that of accepting deposits and advancing loans.

Finance is the life blood of trade, commerce and industry. Now-a-days, banking sector acts as
the backbone of modern business. Development of any country mainly depends upon the
banking system.
The term bank is either derived from old Italian word banca or from a French word banque
both mean a Bench or money exchange table. In olden days, European money lenders or
money changers used to display (show) coins of different countries in big heaps (quantity) on
benches or tables for the purpose of lending or exchanging.
A Bank is a financial institution which is involved in borrowing and lending money. Banks
take customer deposits in return for paying customers an annual interest payment. The bank
then uses the majority of these deposits to lend to other customers for a variety of loans. The
difference between the two interest rates is effectively the profit margin for banks. Banks play
an important role in the economy for offering a service for people wishing to save. Banks
also play an important role in offering finance to businesses who wish to invest and expand.
These loans and business investment are important for enabling economic growth.
A commercial bank is a financial institution which deals with money and credit. It accepts the
deposits from the public and makes the surplus funds available to those who require them and
also remitting money from one place to another place safely.

Collects money from those who have it to spare or who are saving it out of their incomes,
and it lends this money to those who require it.
- Crowther

An institution whose debts (bank deposits) are wisely accepted in settlement of other
people`s debt to each other.
- R.S., Sayers
A banking company as one which carries on as its principal business, the acceptance of
money deposit on current account or otherwise subject to withdrawal by cheque, draft or
-Indian Central Banking Enquiry Committee
The Negotiable Instrument Act; 1881 defined the term as including person or corporation
acts as bankers- a definition neither satisfactory nor helpful.
Section 277 (F) of the Indian companies Act defines a banking thus: a banking company
means a company which carries on as its principal business for accepting of deposits for
money on current account or otherwise, subject to withdrawal by cheque, draft or order,
notwithstanding that it engages in addition in anyone or more of the following form of

Characteristics / Features of a Bank

1. Dealing in Money
Bank is a financial institution which deals with other people's money i.e. money given by

2. Individual / Firm / Company

A bank may be a person, firm or a company. A banking company means a company which is
in the business of banking.
3. Acceptance of Deposit
A bank accepts money from the people in the form of deposits which are usually repayable on
demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It
also acts as a custodian of funds of its customers.
4. Giving Advances
A bank lends out money in the form of loans to those who require it for different purposes.
5. Payment and Withdrawal
A bank provides easy payment and withdrawal facility to its customers in the form of cheques
and drafts, It also brings bank money in circulation. This money is in the form of cheques,
drafts, etc.
6. Agency and Utility Services
A bank provides various banking facilities to its customers. They include general utility
services and agency services.
7. Profit and Service Orientation
A bank is a profit seeking institution having service oriented approach.
8. Ever increasing Functions
Banking is an evolutionary concept. There is continuous expansion and diversification as
regards the functions, services and activities of a bank.

9. Connecting Link
A bank acts as a connecting link between borrowers and lenders of money. Banks collect
money from those who have surplus money and give the same to those who are in need of
10. Banking Business

A bank's main activity should be to do business of banking which should not be subsidiary to
any other

Everyone needs banks, but not everyone understands how banks work, or the role they play
in the worlds economy. Here are five questions and answers to help explain.
1. What do banks do?
Banks play an important role as an intermediary, or go-between, in the financial system. They
have three main functions:
a. Banks are where people can safely deposit their savings, which banks then pay interest on.
If there were no banks, people would have to store and protect their savings themselves,
which would involve major risks.
b. Banks are largely responsible for the payments system. Electronic payments are becoming
more important as people use less cash. This means that banks are processing more card
payments, transfers, direct debits, etc. every day.
c. Banks issue loans to both people and companies. Without banks, it would be very hard for
people to buy a home or start a business, or for companies to make investments.
2. Why is this important?
Our economy couldnt function without banks. By attracting savings and granting credit,
banks are the oil for the wheels that keep the economy turning.
Without banks wed have to pay for everything with cash, which wed have to save
somewhere. Thats obviously very risky.
Without banks as a go-between, savers and borrowers would have to find each other
personally, and a single transaction between a saver and a borrower would be very costly: just
think of the fees youd have to pay a solicitor to draw up a contract.
Plus, the saver would be assuming a big riskif the borrower cant repay, the saver would
lose all their savings. A bank lends money to a lot of people and companies. If some are
unable to repay their loans, the bank can absorb these losses and savers wont be affected.

Banks also help solve the issue that customers generally want ready access to the money they
deposit, while many loans require long-term commitments, such as a 30-year mortgage for
financing a house.
So banks borrow (i.e. hold customers deposits) short-term but lend long-term. By doing this
they transform debts with short maturities (deposits) into credits with very long maturities,
managing the risks associated and collecting the difference in the interest rate as profit. This
is known as term transformation and is a vital part of banking.
3. Why and how does using a bank minimise risk for customers?
Managing and monitoring risks are at the heart of banking, and most banks have strict
policies in place at various levels to handle both financial and non-financial risk, including
social and environmental risk.
But more generally speaking, banks make transactions possible that otherwise wouldnt have
been possible, or that only wouldve been possible with huge risks. One reason why banks
can handle such transactions, and private individuals and companies cant, is scale.
Even though savers can generally withdraw their savings at any time, the total amount of
money held by a bank doesnt fluctuate much because they have many customers. This scale
helps banks cover risks, such as those related to term transformation mentioned above.
Other risks, such as a borrower not being able to repay, are reduced through diversification,
meaning that banks can spread risks over various countries and industries.
This doesnt mean that risks are non-existent, but theyre spread over the bank's portfolio and
initially absorbed by the banks margins, with equity capital there to cushion unexpectedly
high losses.
Above all, banks specialise in estimating possible risks. However, its important to realise
that risks can never be eliminated completely. In fact, that wouldnt be a good thing either. A
certain level of risk is necessary to keep the economy going.
Economic growth is driven by entrepreneurs who start up new enterprises, i.e. take risks.
Sometimes they fail, but if no one would take such risk, there would be no economic growth.
4. How does a bank make money?


A bank can make money in a variety of ways. Most of a bank's revenue comes from the
interest they receive on the money they lend. Interest is, however, also a major cost for a
bank, as savers receive interest on their savings.
Very basically, banks earn money by charging more interest on loans than that they pay on
Interest income is used to cover the costs involved in keeping interest-rate risk under control,
to cover losses on loans that are not repaid or not repaid in full, and to pay the bank's
overhead, such as wages.
Besides interest income, banks also make money from other transactions and services, such
as providing financial advice and products to large corporations.

Banks accept deposits and make loans and derive a profit from the difference in the interest
rates paid and charged to depositors and borrowers respectively. The process performed by
banks of taking in funds from a depositor and then lending them out to a borrower is known
as financial intermediation.
Banks are vital institutions in any society as they significantly contribute to the development
of an economy through facilitation of business. Banks also facilitate the development of
saving plans and are instruments of the governments monetary strategy among others.
Credit provision Credit fuels economic activity by allowing businesses to invest beyond
their cash on hand, households to purchase homes without saving the entire cost in advance,
and governments to smooth out their spending by mitigating the cyclical pattern of tax
revenues and to invest in infrastructure projects.
Liquidity provision Businesses and households need to have protection against
unexpected needs for cash. Banks are the main direct providers of liquidity, both through
offering demand deposits that can be withdrawn any time and by offering lines of credit.
Further, banks and their affiliates are at the core of the financial markets, offering to buy and
sell securities and related products at need, in large volumes, with relatively modest
transaction costs.
Risk management services Banks allow businesses and households to pool their risks
from exposures to financial and commodity markets. Much of this is provided by banks

through derivatives instruments transactions. Banks also enable individuals and businesses to
take part in the global foreign exchange and commodity markets indirectly. It would be very
difficult for example for a small company needing only a few million Japanese yen to import
a vehicle from Japan to get onto the global currency markets without the aid of a bank.
Remittance of Money Cash can be transferred easily from one place to another and from
one country to another by the help of a bank. It has facilitated transactions in distant places.
This, in turn, has expanded the internal and external trade and market. The men have become
free of the risks of carrying cash, gold, silver etc. The credit instruments issued by banks such
as cheque, draft, Real time gross settlement, credit cards have facilitated the transfer of
Rapid Economic Development The banks make available loans of different periods to
agriculture, industry and trade. They make direct investments in industrial sectors. They
provide industrial, agricultural and commercial consultancy hence facilitating the process of
economic development.
Promotion of Entrepreneurship The role of private sector is crucial in accelerating the
pace of economic growth. The banks increase the participation of the private sector in
economic development by making available the loans easily on reasonable rate of interest.
The expansion of financial sector encourages entrepreneurs to make investments by
promoting entrepreneurship.

How to open bank account?

Procedure to open a saving and current bank account can vary from bank to bank depending
upon their requirement but to establish a banker-customer relationship beside fulfilling all the
essential of valid contract following are the general formalities required by bankers:
Application in prescribed form: The first step in opening an account with a bank is to fill a
prescribed form available with the bank. Bank charges nothing for this form and this may


differ from bank to bank. This form contains full information of the customer after getting
duly filled. Generally following are the information being demanded on the form:
Name of the applicant
Name of the nominee
Their address
Their occupation
Full signature
Specimen signature
Signature of the introducer
1. Introduction of new customer: Because of large no. of fraud cases admitted in the books
of many banks through opening of account in fictitious name, irregular payments of
cheques, and manipulation of accounts, now they want to play safe and to full fill the
subjective banks open new accounts only after getting full discloser of customer
2. Safety against wrongful overdraft granted: At the time of opening an account although
the bank may not intend to grant an overdraft to the prospective customer, at times n
overdraft may be granted inadvertently. In such a case the amount can be realise only if
the customer is a respectable solvent party.
3. Enquiries about the customer: Under a common practise a banker has to answer
enquiries from his fellow banker. Therefore a banker should retain sufficient
information about his customer regarding the latters financial soundness and nature of
business in which he is engaged.
4. Passport-size photograph: The bank now a day, in order to prevent impersonation and
easy identification insist upon the prospective customers to affix their passport size
photograph on the application forms at the time of opening of accounts.
5. Specimen signature: At the time of opening a new account the customer is required to
give his specimen signature at the place provided for specimen signature on the account
opening form which is kept as record by the bank. Customer is required to put his
specimen signature in the presence of authorised officer, who will attest his signature.
6. Mandate for the operations of the account: The banker must get from his customer a
mandate if the customer indents operations on his account by another person so
authorised. The mandate should clearly states the power delegated to the person so
authorised. He power to draw and endorse cheques does not give him powers to accept
bills or overdraw the account.
7. Proof of address of account holder: Complete and full address of customer is also
demanded at the time of account opening. Banker records his address in the books of
account so that customer can be easily traced in case of any fraud committed by him.

Any one of the following can be accepted as proof of residential status:

Driving licence
Voter identity card
Aadhar card
Family card
8. Opening of account: Customer is also required to give some amount while opening
account. After fulfilling all the formalities, when customer deposits some money in his
new account, account is said to be open. Banker credits the amount deposited in his
name. customer has to deposit the minimum prescribed amount and there is no limit on
maximum amount to be deposited but PAN should be obtained if amount is more than
9. Issue of cheque book: Cheque book is issued only on the request of customer. If
customer wants cheque facility i.e. he wants to make payments by cheque then he has to
deposit minimum amount as per requirement and chequebook will be issued to
customer. These cheques are serially numbered.
10. Issue of passbook: A passbook is also supplied to customers which contains summary
of all deposits, withdrawals, incidentals charges. Customer is expected to show
passbook at the time of each deposit and withdrawal.
11. Issue of pay-in slips & withdrawal forms: Pay-in slips and withdrawal forms are also
supplied to customer without any cost.
12. Nomination: According to Bank Regulation Act, 1949. The name of nominee must be
mentioned. The whole amount standing to the credit of deceased depositor and all the
articles left in lockers will be given to the nominee.

Functions of commercial bank


A:PRIMARY FUNCTIONS: These functions are also known as acid test functions
of commercial banks.
1. Accepting Deposits: Deposits are the major source of funds for banks. The
main function of commercial banks is accepting deposits from public. This
function is important because banks mainly depend on the funds deposited
with them by the public. The bank accepts deposits from those who have
surplus and provide loans to those who require it. Bank accepts deposits by
mobilising the savings of public. Commercial banks pay interest on the
deposits to mobilise the savings and to hold deposits.
People can deposit their cash balances in either of the following bank
accounts as per their requirement.
a) Fixed deposit account: In this type of account money is deposited for
a fixed period of time. The depositor can withdrew his money after
the expiry of that period. The bank pays the higher rate of interest
depending upon the length of the time period and amount of
deposits. These are also known as term deposits.
b) Current deposit account: These kinds of accounts are generally
maintained by the businessman. In this account a depositor can
deposit and withdrew his money any number of times. No interest is
paid by bank on current deposit account.
c) Saving deposit account: This account is meant for small savings.
There is a limit on total weekly withdrawals. Banks pays interest on
this account. But the rate of interest is less than the rate of interest of
fixed deposit account.
d) Recurring deposit account: Under this type of account a specified
amount is deposited every month for a specified period e.g. for 12,
24, 36 or 60 months. The amount cannot be withdrawn before the
expiry of the given period.
2. Advancing loans: Another primary function of commercial bank is to advance
loans to the people who require it. A certain part of cash received by bank is
kept in the reserve and the remaining money is given as loan. Generally, bank
advance loans for productive purposes against approved security. The amount
of loan is less that the value of security.
Bank advances following types of loans


a) Money at call
b) Overdraft
c) Cash credit
d) Discounting of Bills
e) Credit to Government
3. Creation of credit: This function is also one of the most important functions
of commercial bank. When a bank advances a loan, it does not need to lend
cash but opens an account in favour of the customer and credits the amount to
the account. It creates a claim against itself which is acceptable by the public
for settlement of debts. As these claims, against the bank are accepted by the
public for settlement of their debts, it is an important part of money supply. In
this process the bank creates money.
4. Cheque system of payment of Funds : A cheque as a negotiable instrument is
the most popular credit instrument used by the customer to make payments.
The cheque system was evolved in very early stage of banking and now it has
become the main credit instrument in the banking world. Though a cheque, the
customer directs the bank to make payment to the payee.
a. Agency Functions :
Commercial banks act as agents of their customer in following ways:

Collection and payment of credit

Purchase and sale of Securities
Trustee and Executor
Remittance of Money
Representation and Correspondence
Bullion Trading
General Utility Functions:

Commercial banks provide many more utility services in addition to agency services which
are as follows:

Locker Facilities
Acting as a referee
Issuing letter of credit
Acting as Underwriters
Acting as Information Bank
Issuing of Travellers Cheque
Issuing of Gift Cheque
Dealing in Foreign Exchange
Merchant Banking Services

1. Mobilisation of savings: Banks plays the role of intermediaries as it collects
the money from people which from their savings and invest it in productive
activities. In this way the bank mobilise the savings into investment for the
circulation of money.
2. Extension of banking services in rural areas: Commercial banks have Open
their branches in rural areas and small towns to provide banking facilities to
the people living therein. Banks also give loans at low rate of interest to
finance programme meant for rural development and removal of
3. Providing loans to weaker section: Banks give loans to the weaker section of
the society at low rate of interest.
4. Assistance to capital markets: Bank also take part in capital market by
giving long term loans to industry, agriculture, small scale industry, trader,
transporter etc.

Automatic Teller Machines (ATM) cum Debit Cards

Credit Cards
Mail Transfer and Telegraphic Transfer
Tele Banking
Internet Banking


Banker collects deposits from public by offering different types of bank accounts being suited
to their needs. As soon as the customer opens an account with the bank the Banker-Customer
relationship established. The basic function of the bank is to accept the deposits and lending
loans. For this purpose the bank offers the following types of account to the customer.
TERM DEPOSIT ACCOUNTS: It refers to deposit accepted by bank which is repayable after
a fixed period of time. In other words we can say that deposits which are not repayable on
demand is known as Term deposit accounts.
Following Accounts can be known as Term Deposit accounts
a) Fixed Deposit Account
b) Recurring Deposit Account.



DEMAND DEPOSIT ACCOUNTS: It refers to deposit accepted by bank

which is repayable on demand of the customer. In other words we can say
that deposits which can be paid at the demand of the customer is known as
Demand deposit accounts.

Following Accounts can be known as Demandhhh deposit accounts:

a) Saving Deposit Account
b) Current Deposit Account.
Bank Accounts are classified into four different types. They are,
1) Current Account
2) Savings Account
3) Recurring Deposit Account
4) Fixed Deposit Account
Current Account
Current account is mainly for business persons, firms, companies, public enterprises etc and
are never used for the purpose of investment or savings.These deposits are the most liquid
deposits and there are no limits for number of transactions or the amount of transactions in a
day. While, there is no interest paid on amount held in the account, banks charges certain
service charges, on such accounts. The current accounts do not have any fixed maturity as
these are on continuous basis accounts.
Savings Account
Savings Account is meant for saving purposes. Any individual either single or jointly can
open a savings account. Most of the salaried persons, pensioners and students use Savings
Account. The advantage of having Savings Account is Banks pay interest for the savings. The
saving account holder is allowed to withdraw money from the account as and when required.
The rate of interest ranges between 4% to 6% per annum in India. There is no restriction on
the number and amount of deposits. But withdrawals are subjected to certain restrictions.
Some banks recommend to maintain a minimum amount to keep it functioning.


Recurring Deposit Account

Recurring deposit account or RD account is opened by those who want to save certain
amount of money regularly for a certain period of time and earn a higher interest rate. In RD
account a fixed amount is deposited every month for a specified period and the total amount
is repaid with interest at the end of the particular fixed period.
The period of deposit is minimum six months and maximum ten years. The interest rates vary
for different plans based on the amount one saves and the period of time and also on banks.
No withdrawals are allowed from the RD account. However, the bank may allow to close the
account before the maturity period.
These accounts can be opened in single or joint names. Banks are also providing the
Nomination facility to the RD account holders.
Fixed Deposit Account
In Fixed Deposit Account (also known as FD Account ), a particular sum of money is
deposited in a bank for specific period of time. Its one time deposit and one time take away
(withdraw) account. The money deposited in this account can not be withdrawn before the
expiry of period.



1) Home Loan-Home loan as name suggest is the loan against buying property. Every
individual currently have dreams to have their own home. To make affordable best option is
home loan. Again there are sub-categories of home loans which are as below.
2) Personal Loan -It is the loan granted to fulfill your expenses which ranges from buying
some expensive electronic gadgets to booking your air tickets Yes people used to use this
facility for anything they can. They forget that usually rate of interest on such loans will be
higher than other types of loans. But still to have something in advance end up them to
borrower of such type of loans. Here we may find two types of loans
Secured Loans-Where you provide some collateral as a safety against loans.
Unsecured Loans-In such type of loans borrower collateral not required.
3) Car Loan or Vehicle Loan- This is usually used to meet your financial requirement when
one is planning to have his dream car or bike. It is usually a secured loan where collateral is
your vehicle and in case of default lender may recover it by taking back your vehicle. But
some lenders offer unsecured loans where your credit score matters more.
4) Education Loan- This is actually a handy tool for parents who not planned well for their
kids higher education. For a detailed view on this visit my earlier post Know all about
Education Loan features .
5) Gold Loan- This was one of the easiest and fastest way of loan when gold rate was at its
peak. But currently lot of lenders may not feel it better collateral due to falling in gold price,
especially gold loan companies. Recently RBI banned any gold loans against gold ETFs and
gold mutual funds. Eventhough it forms easiest and fastest way of getting loan but better to
look for risks involved in it, especially when you are dealing with NBFCs.
6) Loan against Insurance Policies- You can use your insurance investment as either
collateral or take loan from insurer itself if that policy is eligible for loan. Usually loans will
be available after 3 years of policy period. You will get loan easily on your policy from
insurer. But other method to take loan is to pledge your policy document with banks and take
loan on that. LIC will offer you loan on your policy with the interest rate of 10%, which I
think competitive pricing compare to other type of loans.
7) Loan against Bank FDs- This is one form of loan where your collateral is your bank FD
itself. Suppose you have bank FD of around Rs.10,00,000 then you are usually eligible to get


loan upto Rs.8,00,000. But interest rate will 1-2% higher than your FD rate. But still this
form of loan is also fastest and best way.
8) Loan from PPF or EPF- You can avail loan from PPF when one satisfies certain
conditions. For detailed view on the same visit my old post PPF-Loan and Withdrawal .
You can avail loan from EPF too. But you can avail loan from EPF only for special purposes
like purchase of plot, medical treatment, education or marriage of children, construction or
purchase of house, re-payment of home loan, renovation of home or pre-retirement. But all
are not eligible to take loans. Their are certain conditions like minimum years of completion,
age or proof you need to produce. So it seems bit lengthy procedure.
9) Loan against Shares or Mutual Funds- Few lenders offer loan against your investment
value of shares or mutual funds. But you will not get more value from this. Reason is, both
the investments (if mutual fund is of equity oriented) then fluctuation in values will be high.
Hence to protect their loan amount usually lenders offer less loan.
10) Loan from unrecognized sector- This is one of the easiest but costliest way of fulfilling
your financial dream. Usually interest rate will be in the range of 20%-30% but you can get it
immediately. Such type of loans are useful who are running out of time and not have any
source also to fund their financial requirements. But looking at this option is costly affair.
Hence it is highly advisable to avoid such funding. ) Home Loan-Home loan as name suggest
is the loan against buying property. Every individual currently have dreams to have their own
home. To make affordable best option is home loan. Again their are sub-categories of home
loans which are as below.
Banks are one of the most important part of any country. In this modern time money and its
necessity is very important. A developed financial system of the country ensures to attain
development. A modern bank provides valuable services to a country. To attain development
there should be a good developed financial system to support not only the economic but also
the society. So, a modern bank plays a vital role in the socio economic matters of the country.
Some of the important role of banks in the development of a country is briefly showing
I- Promote Saving Habits among People


Bank attracts depositors by introducing attractive deposit schemes and providing rewards or
return in the form of interest. Banks providing different kinds of deposit schemes to its
customers. It enables to create banking habits or saving habits among people.

II- Capital Formation and Promoting of Industries

Capital is one of the most important part of any business or industry. It is the life blood of
business. Banks are increase capital formation by collecting deposits from depositors and
convert these deposits in to loans advances to industries.
III- Easiness of Trade and Commerce Functions
In this modern era trade and commerce plays vital role between any countries. So, the money
transaction should be user friendly. A modern bank helps its customers to sent funds to
anywhere and receive funds from any where of the world. A well developed banking system
provides various attractive services like mobile banking, internet banking, debit cards, credit
cards etc. these kind of services fast and smooth the transactions. So, bank helps to develop
trade and commerce.
IV- Generate Employment Opportunities
Since a bank promote industry and investment, there automatically generate employment
opportunity. So, a bank enables an economy to generate employment opportunity.
V- Promote Agricultural Development
Agricultural sector is one of the integral part of any economy. Food self sufficiency is the
major challenge and goal of any country. Modern bank promote agricultural sector by
providing loans and advances with low rate of interest compared to other loans and advances
VI- Implementation of Monitory Policy
Monitory policy is a important policy of any government. The major aim of monitory policy
is to stabilize financial system of the country from the dangerous of inflation, deflation, crisis

VII- Balanced Development

Modern banks spreading its operations throughout the world. we can see number of big banks
like citi bank, Baroda bank etc. It helps a country to spread banking activities in rural and
semi urban areas. With the spreading of banking operations around the country, helps to attain
balanced development by promoting rural areas.

Latest RBI Bank Rates in Indian Banking - 2016

SLR Rate



Repo Rate

Reverse Repo Rate

Base Rate






9.3% - 9.7%

RBI Repo Rate Trend Chart

Repo (Repurchase) rate also known as the benchmark interest rate is the rate at which the
RBI lends money to the banks for a short term. When the repo rate increases, borrowing from
RBI becomes more expensive. If RBI wants to make it more expensive for the banks to
borrow money, it increases the repo rate similarly, if it wants to make it cheaper for banks to
borrow money it reduces the repo rate.
Reverse Repo rate is the short term borrowing rate at which RBI borrows money from
banks. The Reserve bank uses this tool when it feels there is too much money floating in the
banking system. An increase in the reverse repo rate means that the banks will get a higher
rate of interest from RBI. As a result, banks prefer to lend their money to RBI which is
always safe instead of lending it others (people, companies etc) which is always risky.
Repo Rate signifies the rate at which liquidity is injected in the banking system by RBI,
whereas Reverse Repo rate signifies the rate at which the central bank absorbs liquidity from
the banks. Reverse Repo Rate is linked to Repo Rate with a difference of 0.5% between them.
CRR - Cash Reserve Ratio - Banks in India are required to hold a certain proportion of their
deposits in the form of cash. However Banks don't hold these as cash with themselves, they
deposit such cash(aka currency chests) with Reserve Bank of India , which is considered as
equivalent to holding cash with themselves. This minimum ratio (that is the part of the total


deposits to be held as cash) is stipulated by the RBI and is known as the CRR or Cash


When a bank's deposits increase by Rs100, and if the cash reserve ratio is 9%, the banks will
have to hold Rs. 9 with RBI and the bank will be able to use only Rs 91 for investments and
lending, credit purpose. Therefore, higher the ratio, the lower is the amount that banks will be
able to use for lending and investment. This power of Reserve bank of India to reduce the
lendable amount by increasing the CRR, makes it an instrument in the hands of a central bank
through which it can control the amount that banks lend. Thus, it is a tool used by RBI to
control liquidity in the banking system.
SLR - Statutory Liquidity Ratio - Every bank is required to maintain at the close of
business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid
assets in the form of cash, gold and un-encumbered approved securities. The ratio of liquid
assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). RBI is
empowered to increase this ratio up to 40%. An increase in SLR also restricts the bank's
leverage position to pump more money into the economy.
Net Demand Liabilities - Bank accounts from which you can withdraw your money at any
time like your savings accounts and current account.
Time Liabilities - Bank accounts where you cannot immediately withdraw your money but
have to wait for certain period. e.g. Fixed deposit accounts.
Call Rate - Inter bank borrowing rate - Interest Rate paid by the banks for lending and
borrowing funds with maturity period ranging from one day to 14 days. Call money market
deals with extremely short term lending between banks themselves. After Lehman Brothers
went bankrupt Call Rate sky rocketed to such an insane level that banks stopped lending to


MSF - Marginal Standing facility - It is a special window for banks to borrow from RBI
against approved government securities in an emergency situation like an acute cash shortage.
MSF rate is higher then Repo rate. Current MSF Rate: 7%.
Bank Rate - This is the long term rate(Repo rate is for short term) at which central bank
(RBI) lends money to other banks or financial institutions. Bank rate is not used by RBI for
monetary management now. It is now same as the MSF rate. Current bank rate is 7%.

Cheque is an important negotiable instrument which can be transferred by mere hand
delivery. A cheque is a payment instrument that is issued by a bank account holder for
making payments to an individual or company and cash withdrawals from the bank. Apart
from that, it also facilitates funds transfer to another bank account. For instance, you can
make cash payment for a utility bill or you can do it by writing a cheque. The biggest benefit
of a cheque is that it allows high value transactions which may become a bit cumbersome if
hard cash was used instead.
"Cheque is an instrument in writing containing an unconditional order, addressed to a banker,
sign by the person who has deposited money with the banker, requiring him to pay on
demand a certain sum of money only to or to the order of certain person or to the bearer of
Parts of a Cheque
1. Drawee, the financial institution where the cheque can be presented for payment
2. Payee
3. Date of issue
4. Amount of currency
5. Drawer, the person or entity making the cheque
6. Signature of drawer
7. Machine readable routing and account information
Different Kinds / Types of Cheques
1. Bearer Cheque
When the words "or bearer" appearing on the face of the cheque are not cancelled, the cheque
is called a bearer cheque. The bearer cheque is payable to the person specified therein or to
any other else who presents it to the bank for payment. However, such cheques are risky, this
is because if such cheques are lost, the finder of the cheque can collect payment from the
bank. The issuer of the cheque would just fill the name of the person to whom the cheque is
issued, writes the amount and attaches his signature and nothing else. This type of issuing a

cheque is also called bearer type cheque also known as open cheque or uncrossed cheque.
The cheque is negotiable from the date of issue to three months. The issued cheque turns stale
after the completion of three months. It has to be revalidated before presenting to the bank.

2. Order Cheque
When the word "bearer" appearing on the face of a cheque is cancelled and when in its place
the word "or order" is written on the face of the cheque, the cheque is called an order cheque.
Such a cheque is payable to the person specified therein as the payee, or to any one else to
whom it is endorsed (transferred).
3. Uncrossed / Open Cheque
When a cheque is not crossed, it is known as an "Open Cheque" or an "Uncrossed Cheque".
The payment of such a cheque can be obtained at the counter of the bank. An open cheque
may be a bearer cheque or an order one.
4. Crossed Cheque
Crossing of cheque means drawing two parallel lines on the face of the cheque with or
without additional words like "& CO." or "Account Payee" or "Not Negotiable". A crossed
cheque cannot be encashed at the cash counter of a bank but it can only be credited to the
payee's account.
5. Anti-Dated Cheque
If a cheque bears a date earlier than the date on which it is presented to the bank, it is called
as "anti-dated cheque". Such a cheque is valid upto three months from the date of the cheque.
6. Post-Dated Cheque
If a cheque bears a date which is yet to come (future date) then it is known as post-dated
cheque. A post dated cheque cannot be honoured earlier than the date on the cheque.
7. Stale Cheque
If a cheque is presented for payment after three months from the date of the cheque it is
called stale cheque. A stale cheque is not honoured by the bank.

Local Cheque: A local cheque is a type of cheque which is valid in the given city and a given
branch in which the issuer has an account and to which it is connected. The producer of the
cheque in whose name it is issued can directly go to the designated bank and receive the
money in the physical form. If a given citys local cheque is presented elsewhere shall attract
some fixed banking charges. Although these type of cheques are still prevalent, especially
with nationalised banks, it is slowly slated to be removed with at par cheque type.
At par cheque: With the computerisation and networking of bank branches with its
headquarters, a variation to the local cheque has become common place in the name of at par
cheque. At par cheque is a cheque which is accepted at par at all its branches across the
country. Unlike local cheque it can be present across the country without attracting additional
banking charges.
Bankers cheque: It is a kind of cheque issued by the bank itself connected to its own funds. It
is a kind of assurance given by the issuer to the client to alley your fears. The personal
account connected cheques may bounce for want of funds in his account. To avoid such
hurdles, sometimes, the receiver seeks bankers cheque.
Travelers cheques: They are a kind of an open type bearer cheque issued by the bank which
can be used by the user for withdrawal of money while touring. It is equivalent to carrying
cash but in a safe form without fear of losing it.
Gift cheque: This is another banking instrument introduced for gifting money to the loved
ones instead of hard cash.
Cheques per se have been around since the inception of banking system. The cheque
transactions are one of the safest ways of conducting business. Although cheque is going to
be still the mainstay of banking transactions, it leaves a good amount of paper usage.


Banks are important in economic developers of the country, each person will be depending in
one or other form on bank, banks are main source for the creation, issues & circulation of
currencies in any nation. Hence in recent economy every individual is aware of the bank
facility & services.