WHAT IS BANKING?

Banking can be defined as the business activity of accepting and

safeguarding money owned by other individuals and entities, and
then lending out this money in order to earn a profit. However,
with the passage of time, the activities covered by banking business
have widened and now various other services are also offered by
banks. The banking services these days include issuance of debit
and credit cards, providing safe custody of valuable items, lockers,
ATM services and online transfer of funds across the country /
world.

It is well said that banking plays a silent, yet crucial part in our
day-to-day lives. The banks perform financial intermediation
by pooling savings and channelizing them into investments
through maturity and risk transformations, thereby keeping the
economys growth engine revving.


VARIOUS TYPES OF ACCOUNTS:-
- Current Account
Current Accounts are basically meant for businessmen 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. Most of the current account are opened in the names of
firm / company accounts. Cheque book facility is provided
and the account holder can deposit all types of the cheques and
drafts in their name or endorsed in their favour by third
parties. No interest is paid by banks on these
accounts. Where as, banks charges certain service charges, on
such accounts.
- Savings account
A savings account allows you to accumulate
interest on funds youve saved for future needs.
Interest rates can be compounded on a daily,
weekly, monthly, or annual basis. Savings
accounts vary by monthly service fees, interest
rates, method used to calculate interest, and
minimum opening deposit. The account is likely
to have a limited number of free transactions.

-Recurring Deposit Account
These are popularly known as RD accounts and are special kind of
Term Deposits and are suitable for people who do not have lump
sum amount of savings, but are ready to save a small amount every
month. Normally, such deposits earn interest on the amount
already deposited (through monthly installments) at the same rates
as are applicable for Fixed Deposits / Term Deposits. These are
best if you wish to create a fund for your child's education or
marriage of your daughter or buy a car without loans or save for the
future.

-Fixed Deposit Account
Fixed Deposit Account refers to a type of savings account or
certificate of deposit where deposits are made for a specified
period of time and that pay out a fixed rate of interest. Fixed
Deposit Accounts require that the funds be left in the account
until the maturity date, incurring penalties for early withdrawal.
These types of accounts are ideal as a store of wealth for
individuals, businesses and financial institutions, earning a
higher rate of interest on liquid assets than regular savings
and checking accounts. The term Fixed Deposit is used in
India and Southeast Asia and its equivalent in the United
States is Time Deposit or CD, while in the United Kingdom the
equivalent term is a Bond, and in Australia and Canada the
investment product is known as a Term Deposit.

BENEFITS OF BANKING:
- Provide a measure of security for your funds. Instead of
worrying about the safety of keeping your money at
home (or carrying large amounts of cash with you),
- Can help you save money. If you currently pay to cash
checks, pay bills and buy money orders at a check-
cashing store, depending on how much you pay per
check or money order or bill, you can likely pay much
less to maintain a checking account at a local bank or
credit union.
- Can help you establish a credit record. A good credit
record means that you have a better chance of qualifying
for a loan, and getting a better (meaning lower) interest
rate on a loan. That means that you will be able to pay
less money (in interest) for the amount of any money you
have to borrow.
- Provide you with additional convenience. Bank accounts
enable you to use checks, credit cards or debit cards to
pay bills; pay bills online and even the ability to pay bills
by phone.

WHAT ARE AGENCY SERVICES?

Banks perform certain agency functions for and on behalf of
their customers:
(i) Remittance of Funds: Banks help their customers in
transferring funds from one place to another through cheques,
drafts, etc.
(ii) Collection and Payment of Credit Instruments: Banks
collect and pay various credit instruments like cheques, bills of
exchange, promissory notes, etc.
(iii) Execution of Standing Orders: Banks execute the standing
instructions of their customers for making various periodic
payments. They pay subscriptions, rents, insurance premium,
etc. on behalf of their customers.
(iv) Purchasing and Sale of Securities: Banks undertake
purchase and sale of various securities like shares, stocks,
bonds, debentures etc. on behalf of their customers. They
work as a broker.
(v) Collection of Dividends on Shares: Banks collect dividends,
interest on shares and debentures of their customers.
(vi) Income Tax Consultancy: Banks may also employ income-
tax experts lo prepare income-tax returns for their customers
and to help them to get refund of income-tax.
(vii) Acting as Trustee and Executor: Banks preserve the wills
of their customers and execute them after their death.
(viii) Acting as Representative and Correspondent: Sometimes
the banks act as representatives and correspondents of their
customers. They get passports, travelers tickets, book vehicles,
plots for their customers and receive letters on their behalf.

WHAT ARE UTILITY SERVICES?

Banks provide many general utility services as given below:
(i) Locker Facility: Banks provide locker facility to their
customers. The customers can keep their valuables and
important documents in these lockers for safe custody.
(ii) Traveller's Cheques: Banks issue traveller's cheques to help
their customers lo travel without the fear of theft or loss of
money. With this facility, the customers need not take the risk
of carrying cash with them during their travels.
(iii) Letter of Credit: Letters of credit are issued by the banks
to their customers certifying their creditworthiness. Letters of
credit are very useful in foreign trade.
(iv) Collection of Statistics: Banks collect statistics giving
important information relating to industry, trade and
commerce, money and banking. They also publish journals
and bulletins containing research articles on economic and
financial matters.
(v) Underwriting Securities: Banks underwrite the securities
issued by the government, public or private bodies. Because of
its full faith in banks, the public will not hesitate in buying
securities carrying the signatures of a bank.
(vi) Gift Cheques: Some banks issue cheques of various
denominations (say of Rs. 11, 21, 31, 51.101, etc.) to be used on
auspicious occasions.
(vii) Acting as Referee: Banks may be referred for seeking
information regarding the financial position, business
reputation and respectability of their customers.
(viii) Foreign Exchange Business: Banks also deal in the
business of foreign currencies. Again, they may finance foreign
trade by discounting foreign bills of exchange

PROCEDURES AND FORMALITIES OF
OPENING A FIXED DEPOSIT ACCOUNT
Fixed Deposit Account being opening by:
- A person in his/her own name
- Two or more persons in their joint names
- Proprietary concerns, Partnership firms and Limited Companies
To open an account:
Persons desiring to open a Fixed deposit Account must attend the
bank, they will be furnished with a copy of the rules and a form of
an application to open an account. The application form should be
duly filled in and signed as per the requirements mentioned
therein. Accounts opened by Individuals and Proprietary firms with
the Bank would carry a nomination and the depositor(s) shall at the
time of opening the account nominate an individual of his/her/their
choice and submit the application along with the nomination form
annexed to the account opening form duly filled in and signed.
Nomination in two or more names/proportionate nomination is not
allowed. The nomination can be changed any time by submitting the
prescribed form to the bank.
Along with the applications, only in case of new customers to the
bank every party to the account is required to furnish a CROP
(Customer's Record of Profile) form duly filled in and signed to
comply with Know Your Customers norms as prescribed by RBI.
This form would be updated every year by the customer. Bank will
normally accept the following documents for identification and
address proof (present gas connection papers, telephone bill,
electricity bill, voters ID card, driving license, passport)
For a partnership account: A copy of the partnership deed
attested by all the partners. If partners have not written down a
partnership deed they can open an account with the bank furnishing
a declaration to that effect to the bank.
For a limited company:
- A true copy of the certificate of incorporation
- A true copy of the Certificate of commencement of business
- A copy of the Memorandum and Articles of Association made up
to date.
- A copy of the Board Resolution passed at a meeting of the Board
of directors, duly certified by the Secretary of the Company
for opening the account and conduct of operations thereon.
The resolution should clearly state the name of the bank,
persons authorized to open and operate the account and carry
on such other transactions as dealing with securities, powers to
draw, accept, endorse etc., a specimen copy of the resolution is
available in the banks account opening form.
CLOSING AN ACCOUNT BEFORE MATURITY:
Fixed Deposit Account can be closed before the original term
of the FD. In the event of the Fixed Deposit being closed
before completing the original term of the deposit, interest will
be paid at the rate applicable on the date of deposit, for the
period for which the deposit has remained with the Bank. In
case of premature withdrawal the deposit may be subject to
penal rate of interest as prescribed by the Bank on the date of
deposit.
CLOSING AN ACCOUT ON MATURITY:
The deposit is said to matured when the period for which it
has been placed is over. The deposit is said to be matured
when the period for which it has been placed is over. On
maturity, the depositor must instruct the bank to renew if he
wants so. Bank at their own cannot do so. If the depositor
neither renews nor claims the deposit amount, the deposits
will be designated as and, overdue deposit in the books of
bank. If the depositor does not make a demand, the bank
cannot close the deposit and repay the depositor. If the
depositor does not want to renew it, he can ask for it to be
paid to him either by cross check/draft or just credit it to his
account with the bank.