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people still remain poor. In this paper it uses data on the Indian
rural branch expansion program to provide importantevidence
on this case. In between 1977 and 1990 the Indian Central
Bank compulsorily announced that commercial banks can open a
branch in a location with one or more bank branches only if it
opens four in places with no bank branches. It is shown that in
between 1977 and 1990 this rule caused banks to open
relatively more rural branches in Indian state with lower
initial financial development. Reverse is true outside this
period and we exploit this fact to identify the impact of
opening a rural bank on output and poverty . The estimates
suggest that the Indian rural branch
expansion
program
significantly lowered rural poverty
and increased nonagricultural output.
BANKING
A bank is a financial institution that creates credit by lending
money to a borrower, thereby creating a corresponding deposit on
the bank's balance sheet. Lending activities can be performed
either directly or indirectly through capital markets. Due to their
importance in the financial system and influence on national
economies, banks are highly regulated in most countries. Most
nations have institutionalized a system known as fractional
reserve banking under which banks hold liquid assets equal to
only a portion of their current liabilities. In addition to other
regulations intended to ensure liquidity, banks are generally
subject to minimum capital requirements based on an
international set of capital standards, known as the Basel Accords
BANK MEANING
A bank is a financial institution which deals with money and
credit. it accept deposits and lends money to those who are in
need of it.itb helps to transfer money from one place to another
BANK DEFINITIONS
According to Herbert L. Hart, the banker is a person or a
company carrying on the business of receiving money and
HISTORY OF BANK
Banking begins with the first prototype banks of
merchants of the ancient world, which made grain loans to
farmers and traders who carried goods between cities. This began
around 2000 BC in Assyria and Babylonia. Later, in ancient Greece
and during the Roman Empire, lenders based in temples made
loans and added two important innovations: they accepted
deposits and changed money. Archaeology from this period in
ancient China and India also shows evidence of money lending
activity.
The origins of modern banking can be traced to medieval and
early Renaissance Italy, to the rich cities in the north like
Florence, Lucca, Siena, Venice and Genoa. The Bardi and Peruzzi
families dominated banking in 14th-century Florence, establishing
branches in many other parts of Europe. One of the most famous
Italian banks was the Medici Bank, set up by Giovanni di Bicci de'
Medici in 1397. The earliest known state deposit bank, Banco di
San Giorgio (Bank of St. George), was founded in 1407 at Genoa,
Italy]
TYPES OF BANKS
Commercial banks: the term used for a normal bank to
distinguish it from an investment bank. After the Great
Depression, the U.S. Congress required that banks only engage
in banking activities, whereas investment banks were limited
to capital market activities. Since the two no longer have to be
under separate ownership, some use the term "commercial
bank" to refer to a bank or a division of a bank that mostly
deals with deposits and loans from corporations or large
businesses.
institutions
that
These deposits accounts are one of the most popular deposits for
individual accounts. These accounts not only provide cheque
facility but also have lot of flexibility for deposits and withdrawal
of funds from the account. Most of the banks have rules for the
maximum number of withdrawals in a period and the maximum
amount of withdrawal, but hardly any bank enforces these.
However, banks have every right to enforce such restrictions if it
is felt that the account is being misused as a current account. Till
24/10/2011, the interest on Saving Bank Accounts was regulared
by RBI and it was fixed at 4.00% on daily balance basis.
However, wef 25th October, 2011, RBI has deregulated Saving
Fund account interest rates and now banks are free to decide the
same within certain conditions imposed by RBI. Under directions
of RBI, now banks are also required to open no frill accounts (this
term is used for accounts which do not have any minimum
balance requirements). Although Public Sector Banks still pay
only 4% rate of interest, some private banks like Kotak Bank and
Yes Bank pay between 6% and 7% on such deposits. From the FY
2012-13, interest earned upto Rs 10,000 in a financial year on
Saving Bank accounts is exempted from tax.
Current Account
All Banks in India (including SBI, PNB, BoB, BoI, Canara Bank, ICICI
Bank, Yes Bank etc.) offer fixed deposits schemes with a wide
range of tenures for periods from 7 days to 10 years. These are
also popularly known as FD accounts. However, in some other
countries these are known as "Term Deposits" or even called
"Bond".
The term "fixed" in Fixed Deposits (FD) denotes the
period of maturity or tenor. Therefore, the depositors
are
savings.
4. Bank accounts are cheaper
Banks and credit unions generally offer their account holders free
or low-cost services:
Cashing checks: Using a check cashing outlet really adds
up. You can deposit and cash your checks at the institution
where you have a bank account for free.
Paying bills: Without a bank account, you probably rely on
check cashing outlets, telephone bill pay or money orders
all of which have attached feesto pay your bills. With a
checking account, you can write checks for free or pay online
at a low cost.
Transferring/wiring money: If you use a money transfer
company to wire money to another persons account, you
will pay a fee, usually a percentage of the amount of the
transfer. Depending on the amount you want to transfer, this
fee can be expensive. If you wire from your bank account to
another persons account, your bank will usually charge a
flat rate that is generally lower than the money transfer
company.
Accessing cash: When you need cash but dont have a bank
account, you may decide to use a credit card to get a cash
advance from an ATM. The credit card company will charge
you a transaction fee and interest. If you have a bank
account and an ATM or debit card, you can access your
money from your own banks ATM for free. Although you can
access your money from any ATM, you will likely pay a
transaction fee if you use an ATM other than your bank.
5. Bank accounts can help you access credit
Banks and credit unions can help you access credit to acquire a
7. Consultancy
Modern commercial banks are large organizations. They can
expand their function to consultancy business. In this function,
banks hire financial, legal and market experts who provide
advices to customers in regarding investment, industry, trade,
income, tax etc.
8. Bank Guarantee
Customers are provided the facility of bank guarantee by modern
commercial banks. When customers have to deposit certain fund
in governmental offices or courts for specific purpose, bank can
present itself as the guarantee for the customer, instead of
depositing fund by customers.
9. Remittance of Funds
Banks help their customers in transferring funds from one place to
another through cheques, drafts, etc.
10. Credit cards
Credit card are cards that allow their holders to make purchases
of goods and services in exchange for the credit cards provider
immediately paying for the goods or service, and the card holder
promising to pay back the amount of the purchase to the card
provider over a period of time, and with interest.
11. ATMs Services
ATMs replace human bank tellers in performing basic banking
functions such as deposits, withdrawals, account inquires. Key
advantages of ATMs include:
24 hour availability
Elimination of labor cost
Convenience of location
12. Debit cards
Debit cards are used to electronically withdraw funds directly from
the cardholders accounts. Most debit cards require a Personal
Identification Number (PIN) to be used to verify the transaction.