How a bank works? -Banking Awareness-

How a Bank works? 

Banking Awareness-

HOW BANK WORKS: ASSETS AND LIABILITY

LIABILITIES:
Current Account Deposit: 0%

Saving Account Deposit: 4%

Fixed/Recurring Account Deposit 8%-9%

Bulk Deposit

The average interest of all these deposits put together is COST OF FUNDS, should be as low as possible.

CA/SA- Should be more.

But CA/ SA are volatile deposit (can withdraw anytime)

FD- have fixed terms, Banks can plan their activities (Stable deposit)



Assets: The internal /income which banks get is yield/income.

· Home Loan

· Mortgage Loan

· Co-operate Loan

· Personal Loan





Net Interest Margin (NIM) = ≥ 3

With this NIM –Banks have to pay (SALARY, RENT ON PREMISES, and PAY FOR OPERATION AND PROFIT)

This is known as Viable Banking.

Banks require the NIM of 3% to ensure profitability.




TYPES of ACCOUNT

SAVING ACCOUNT

Age≥ 18

10-18 (with some restrictions)

< 10 (Minor, with guardian)

Minimum balance- No FRILL ACCOUNT (BSBDA- BASIC SAVING BANK DEPOSIT ACCOUNT)

PMJDY

Rate: calculated on Daily Basis taking into account minimum balance available (SA rate are 4%)



CURRENT ACCOUNT

-Overdraft

-Nomination (×)



Why new generation Private Sector banks have more numbers of current accounts then Public Sector banks.

· Improved Hospitality

· Personalized Service

· Portfolio Management

· Technology Up-gradation



CASA RATIO =  Fixed Deposit/Recurring Deposit/Bulk Deposit:

TIME DEPOSIT
· No withdraw before agreed period

· Penalty of withdraw before

· No Cheque Book



FIXED DEPOSIT

UPTO 10 Years

NOMINATION

Interest Rate HIGHER -For Senior

TIME ∝Interest rate

Loan Facility -Available

But if interest income > 10,000

Bank will deduct TDS

If you are not income tax payee then you have to give bank a 15 G Form.

FIXED DEPOSIT

· STANDARD FD- (Interest in every 3/6/12 months)

· CUMULATIVE FD

Interest Rate varies with time and age not with the amount of deposit.

RECURRING DEPOSIT:

Deposit at regular interval

TDS



BULK DEPOSIT

Amount > 1 Crore

Rate> FD Rate

Ø Corporate

Ø High Network Individuals( HNI)



Amount 500 Crore – 10%

Amount 1000 Crore – 12 %





Priority Sector Lending

· Sectors

· Agriculture

· Small-scale industry

· Small Business, Small Enterprise

· Micro Credit

· Education Loan



Priority Sector Lending (PSL)

Commercial Bank must provide loan – 40%

18% -Agriculture

Penalty for not achieving PSL Target

INDIAN BANK – deposit shortfall amount with NABARD under RIDF (Rural Infrastructure Development Fund)

FOREIGN BANK - deposit shortfall amount with SIDBI under IDF (Industrial Development Fund)

NEFT-(National Electronic Fund Transfer)

Max- 50,000/Transaction

Indo-Nepal Remittance Facility Scheme-

Monday-Friday – 8 a.m. to 7 p.m.

Saturday – 8 a.m. to 1 p.m.

RTGS (Real Time Gross Settlement)

Min: 2 Lakhs/Transaction ( Real Time –Upto 2 Hrs)

DeMat – Dematerialized Account

DPs – Depository Participants

Buy/Sell- Stocks

PAN





IMF- 189 Members (Nauru)

IMF – July -22-1944 initially 45 members

WORLD BANK (American)

IBRD- International Bank for Reconstruction and Development

IDA- International Development Association

Asian Development Bank – 1966

SWIFT –Society for Worldwide Interbank Financial Telecommunication.

NOSTRO Account- [Our Account with you in foreign currency].

VOSTRO Account- [Your Account with us in Indian currency].

LORO Account- [Third Party Account]

NOSTRO – is a current account that a bank holds with another bank, in a foreign country such account is operated in the currency of a foreign country.

VOSTRO – Current Account for foreign bank in a domestic bank.

LORO- is used when NOSTRO and VOSTRO account by a bank other than account maintaining Banks and the tank with which the account is maintained.

CHEQUE

Drawer-Owner

Payee- Receiver

Drawee- Bank

Post Dated – Date later then today

You can’t cash it until today’s date, after 3 month –stale cheque

ANTI-DATED

It is regular cheque

Dated earlier then today and can be cashed immediately

Stale Cheque: If any Change issued by holder doesn’t get withdrawn from the bank till 3 month.

Cross Cheque:

Not in Cash

Endrossed

Account pay cheque

When 2 along with cross made and word account payee written between these lines.

Can’t be endorsed

Engrossment:

Sec. 15 –Negotiable Instrument Act- 1881

There can be any number of endorsement