2. What is Banking?
accepting and
safeguarding money
owned by other
individuals and entities,
lending out this money in
order to earn a profit.
widened and now various
other services are also
offered by banks
4. Primary Function of Bank
1.Accepting
Deposits
Fixed Deposits
Current Deposits
Saving Deposits
Recurring
Deposits
5. Fixed Deposits
Depositing money for a
specified period of time.
Investment period may be
short or long term
Fixed Tenure
Higher rate of Interest.
No withdrawal of money
before maturity
In Emergencies withdrawal is
possible
6. Saving Deposit
Basic Type of Bank
Account
Deposit Money
Keep it safe
Withdraw funds with
some limitations.
Earn interest
Enjoy Maximum
Benefits.
7. Current Accounts
Individual, businessmen or
corporates
significantly higher number of
transactions with banks on a
regular basis.
No interest from bank
Maintain high minimum
balance
Non maintenance of minimum
balance
Penalty
Single business no multiple
account.
8. Recurring Deposit
Regular Income people
Deposit fixed Amount
Deposit every month
Minimum Deposit –Rs 100
Maximum Deposit-No Limit
Period of deposit-Minimum 1year to
maximum 10 years.
Penalty charges for non deposit of
monthly amount
Earn interest
Interest differs based on category,
tenure
Senior higher interest
Long term higher interest
10. Overdraft
An overdraft lets you borrow
money through your current
account or savings account by
taking out more money than
you have in the account.
Overdraft Limit
Withdraw money till assigned
limit.
Charges interest higher than
cash credit
Short term credit
Limit based on repayment
history
11. Cash credit
Need to open separate bank account called cash credit
Account.
Businessmen can claim not individuals
Granted to customers to bridge working capital gap.
Customers have to provide some form of collateral as
security
Cash credits are tax deductible
Cash credit is short term credit
Interest rate is lower while comparing to overdraft
13. Term Loan
Term loan is a loan approved and disbursed by a bank
for a fixed amount that shall be repaid in regular payments
such as Equated Monthly Instalments (EMIs) over a defined
period of time
Term loans can be offered in both fixed and floating rate of
interest.
Tenure 1 to 10 years
Tenure is decided at the time of loan application
Example Home loan, educational loan ,car loan
21. Cheques
Document that orders bank to pay a specific sum of money
From a person’s account
To the person whom the cheque has been issued.
Safe ,secure and convenient payment mode.
Fear of theft is minimized
22. Bank draft
Instrument like cheque used to make payment
Cheque is issued by an individual
Bank draft or demand draft is issued by bank
Bank draft is guaranteed by the issuing bank
On customers request ,bank issues bank draft after ensuring the
customer has sufficient payment in his account.
Cheque is drawn by individual, but bank draft is drawn by bank
Demand draft or bank draft is the secured form of payment for
the payee.
23. Secondary Function: Utility function
1.Locker Function
Depositing gold
Jewellery, important
documents
Hired by individual,
company
Sizes small ,medium, large
Rental Charges
24. Utility Function: 2.Underwriting of
Shares
Acts as underwriters to many companies
Bank underwrites securities from the issuer then turns
around to sell
Securities in the market
Underwriters can sell the securities with more price in the
market than the price it purchased from the issuer.
Risk is minimized for issuer
Underwriters charge fees.
26. Banker Customer Relationship-
General Relationship
Debtor and creditor
Creditor and Debtor
Bailee and Bailor
Lessor and Lessee
Principal and Agent
Trustee and Beneficiary
Mortgage and Mortgagor
27. Debtor and Creditor
Customer is having a deposit account
like saving deposit, fixed, or current
account
Banker is the debtor
Customer is the creditor
Dignified debtor
Demand by means of cheques or ATM
28. Creditor and debtor
Banks gives loans and other
credit facility
Bank is the creditor
Customer is the debtor
29. Bailee and Bailor
Bank offers a service called safe custody
Bank will keep the customers documents and
valuables safely
When bank accepts the documents and keep
it safe
Banker - Bailee
Customer – Bailor.
30. Lessor and Lessee
Bank-Lessor
Customer-Lessee
Bank Keep you valuables safely in the locker.
Annual rent
Bank will provide a key for your locker
Kept in joint custody
Bank is not liable in case of any loss.
Customer is Lessee and the banker is the Lessor.
31. Principal and Agent
Bank - principal
Customer -agent
Arrangement in which customer appoints
banker to act on his behalf.
Example bank purchases shares on behalf of
its customers.
32. Trustee and Beneficiary
Banker acts as an Trustee
Customer is the beneficiary
Bank accepts valuables for safe custody-
Trustee
Customer is getting benefits-Beneficiary.
Trustee is the person who holds property for
the benefits of somebody else.
33. Mortgage and Mortgagor
Banker –Mortgagee
Customer-Mortgagor
Customer executes mortgage deed.
Mortgage-Customers immovable
property is taken as collateral by bank.