Defination of Bank

A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses.

                         

Different Types of Banks - What are Various Kinds of Banks ?

Type 1. Saving Banks

Saving banks are established to create saving habit among the people. These banks are helpful for salaried people and low income groups. The deposits collected from customers are invested in bonds, securities, etc. At present most of the commercial banks carry the functions of savings banks. Postal department also performs the functions of saving bank.

Type 2. Commercial Banks

Commercial banks are established with an objective to help businessmen. These banks collect money from general public and give short-term loans to businessmen by way of cash credits, overdrafts, etc. Commercial banks provide various services like collecting cheques, bill of exchange, remittance money from one place to another place.

In India, commercial banks are established under Companies Act, 1956. In 1969, 14 commercial banks were nationalised by Government of India. Thepolicies regarding deposits, loans, rate of interest, etc. of these banks are controlled by the Central Bank.

Type 3. Industrial Banks / Development Banks

Industrial / Development banks collect cash by issuing shares & debenturesand providing long-term loans to industries. The main objective of these banks is to provide long-term loans for expansion and modernisation of industries.

In India such banks are established on a large scale after independence. They are Industrial Finance Corporation of India  IFCI), Industrial Credit and Investment Corporation of India (ICIC and Industrial Development Bank of India (IDBI.

Type 4. Land Mortgage / Land Development Banks

Land Mortgage or Land Development banks are also known as Agricultural Banks because these are formed to finance agricultural sector. They also help in land development.

In India, Government has come forward to assist these banks. The Government has guaranteed the debentures issued by such banks. There is a great risk involved in the financing of agriculture and generally commercial banks do not take much interest in financing agricultural sector.

Type 5. Indigenous Banks

Indigenous banks means Money Lenders and Sahukars. They collect deposits from general public and grant loans to the needy persons out of their own funds as well as from deposits. These indigenous banks are popular in villages and small towns. They perform combined functions of trading and banking activities. Certain well-known indian communities likeMarwaries and Multani even today run specialised indigenous banks.

Type 6. Co-operative Banks

In India, Co-operative banks are registered under the Co-operative Societies Act, 1912. They generally give credit facilities to small farmers, salaried employees, small-scale industries, etc. Co-operative Banks are available in rural as well as in urban areas. The functions of these banks are just similar to commercial banks.

Type 7. Exchange Banks

Hong Kong Bank, Bank of Tokyo, Bank of America are the examples of Foreign Banks working in India. These banks are mainly concerned with financing foreign trade.

Following are the various functions of Exchange Banks :-

1. Remitting money from one country to another country,
2. Discounting of foreign bills,
3. Buying and Selling Gold and Silver, and
4. Helping Import and Export Trade.

What is E-Banking ? Online Banking

E-banking refers to electronic banking. It is like e-business in banking industry. E-banking is also called as "Virtual Banking" or "Online Banking".

E-banking is a result of the growing expectations of bank's customers.]

E-banking involves information technology based banking. Under this I.T system, the banking services are delivered by way of a Computer-Controlled System. This system does involve direct interface with the customers. The customers do not have to visit the bank's premises.

Popular services covered under E-Banking

The popular services covered under E-banking include :-

1. Automated Teller Machine
2. Credit Cards,
3. Debit Cards,
4. Smart Cards,
5. Electronic Funds Transfer (EFT) System,
6. Cheques Truncation Payment System,
7. Mobile Banking,
8. Internet Banking,
9. Telephone Banking, etc.

Advantages of E-Banking

The main advantages of E-banking are :-

1. The operating cost per unit services is lower for the banks.
2. It offers convenience to customers as they are not required to go to the bank's premises.
3. There is very low incidence of errors.
4. The customer can obtain funds at any time from ATM machines.
5. The credit cards and debit cards enables the Customers to obtain discounts from retail outlets.
6. The customer can easily transfer the funds from one place to another place electronically.

The main features of current account are as follows:- The main objective of current bank account is to enable the businessmen to conduct their business transactions smoothly. There is no restriction on the number and amount of deposits. There is also no restriction on the withdrawals. Generally bank does not pay any interest on current account. Nowadays, some banks do pay interest on current accounts. Current account is of continuing nature and as such there is no fixed period.

Current bank account is opened by businessmen who have a number of regular transactions with the bank, both deposits and withdrawals. It is also known as Demand Deposit. 
 

Current account can be opened in co-operative bank and commercial bank. Incurrent account, amount can be deposited and withdrawn at any time without giving any notice. It is also suitable for making payments to creditors by using cheques. Cheques received from customers can be deposited in this account for collection.

In India, current account can be opened by depositing Rs.500 (US $ 11) to Rs.1,000 (US $ 22). The customers are allowed to withdraw the amount with cheques and they generally do not get any interest. In India Co-operative bankmay allow interest upto 1%.

Current account holder get one important advantage of overdraft facility.

Features of Current Bank Account

The main features of current account are as follows:-

1. The main objective of current bank account is to enable the businessmen to conduct their business transactions smoothly.
2. There is no restriction on the number and amount of deposits. There is also no restriction on the withdrawals.
3. Generally bank does not pay any interest on current account. Nowadays, some banks do pay interest on current accounts.
4. Current account is of continuing nature and as such there is no fixed period.

Advantage of Current Bank Account

The advantages of current account are as follows:-

1. Current account enables businessmen to conduct his business transactions smoothly.
2. The businessmen can withdraw any amount at any time from their current accounts. There are also no restrictions on withdrawals.
3. The businessmen can make direct payment to their creditors with the help of cheques.
4. The bank collects money on behalf of its customers and credits the same to their accounts.
5. Current account enables the account holder to obtain overdraft facility.
6. The creditors of the account holder can get credit-worthiness information of the account holder through inter bank connection.
7. Current account facilitates the industrial progress of the country. Without the help of this account, businessmen would have difficulties in running their business.

What is Recurring Deposit Account ? Meaning

Recurring deposit account is generally opened for a purpose to be served at a future date. Generally opened to finance pre-planned future purposes like, wedding expenses of daughter, purchase of costly items like land, luxury car, refrigerator or air conditioner, etc. 
 

Recurring deposit account is opened by those who want to save regularly for a certain period of time and earn a higher interest rate.

In recurring deposit account certain fixed amount is accepted every month for a specified period and the total amount is repaid with interest at the end of the particular fixed period.

Features of Recurring Deposit Account

The main features of recurring deposit account are as follows:-

1. The main objective of recurring deposit account is to develop regular savings habit among the public.
2. In India, minimum amount that can be deposited is Rs.10 at regular intervals.
3. The period of deposit is minimum six months and maximum ten years.
4. The rate of interest is higher.
5. No withdrawals are allowed. However, the bank may allow to close the account before the maturity period.
6. The bank provides the loan facility. The loan can be given upto 75% of the amount standing to the credit of the account holder.

Advantage of Recurring Deposit Account

The advantages of recurring deposit account are as follows:-

1. Recurring deposit encourages regular savings habit among the people.
2. Recurring deposit account holder can get a loan facility.
3. The bank can utilise such funds for lendingto businessmen.
4. The bank may also invest such funds in profitable areas.

What is a Cheque ? Meaning

Cheque is an important negotiable instrument which can be transferred by mere hand delivery. Cheque is used to make safe and convenient payment. It is less risky and the danger of loss is minimised.  

Definition of a Cheque

"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 instrument."

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.

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 six 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 six months from the date of the cheque it is called stale cheque. A stale cheque is not honoured by the bank.

What are Features of Cheques ? Characteristics of Checks

1. Cheque is an instrument in writing..

A cheque must be in writing. It can be written in ink pen, ball point pen, typed or even printed. Oral orders are not considered as cheques.

2. Cheque contains an unconditional order

Every cheque contains an unconditional order issued by the customer to his bank. It does not contains a request for payment. A cheque containing conditional orders is dishonoured by the bank.

3. Cheque is drawn by a customer on his bank

A cheque is always drawn on a specific bank mentioned therein. Cheque drawn by stranger are of no meaning. Cheque book facility is made available only to account holder who are supposed to maintain certain minimum balance in the account.

4. Cheque must be signed by customer

A cheque must be signed by customer (Account holder) . Unsigned cheques or signed by persons other than customers are not regarded as cheque.

5. Cheque must be payable on demand

A cheque when presented for payment must be paid on demand. If cheque is made payable after the expiry of certain period of time then it will not be a cheque.

6. Cheque must mention exact amount to be paid

Cheque must be for money only. The amount to be paid by the banker must be certain. It must be written in words and figures.

7. Payee must be certain to whom payment is made

The payee of the cheque should be certain whom the payment of a cheque is to be made i.e. either real person or artificial person like joint stock company. The name of the payee must be written on the cheque or it can be made payable to bearer.

8. Cheque must be duly dated by customer of bank

A cheque must be duly dated by the customer of bank. The cheque must indicate clearly the date, month and the year. A cheque is valid for a period of six months from the date of issue.

9. Cheque has 3 parties : Drawer, Drawee & Payee

1. Drawer : A drawer is a person, who draws a cheque.
2. Drawee : A drawee is a bank on whom a cheque is drawn.
3. Payee : A payee is a person in whose favour a cheque is drawn.

trument in writing