CBSE Class 12 Banking Operations

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ACCOUNTING FOR BUSINESS II

BANKING (OPERATIONS)

PERSONAL BANKING SERVICES

Personal banking is similar to retail banking. The essence is that the products and services of the bank are tailored to meet individual banking and ancillary needs, including everything from a checking account to investment advice. The different products available through personal banking include checking accounts, savings accounts, CDs, check cards with rewards, different types of loans, and personal lines of credit, credit cards, personal trust and private banking services, mortgage programs, investment management, discount brokerage, insurance services and advisory services. Insurance, investment advice, and wealth management are high end products offered in personal banking.

The most prominent feature in personal banking today is technology- enabled, customized products and services like anywhere banking, ATMs, and the delivery of services through channels like a telephone and the Internet. The idea is that the customer need not come to the branch for their services and that everything should be delivered to the customer at his convenience. The bank will provide single window service, meaning that customers can visit one counter for any banking need.

Personal banking is quickly catching up in almost all the countries in the world and is expected to contribute significantly to the bank’s total revenue. Almost 15-20% of the customers contribute up to 90% of the banks business, so proper service to these customers will deepen the financial relationships. Everyone with a personal bank account needs to be very cautious and pay close attention to all aspects of their account. People should promptly review their bank statement, avoid having to pay unnecessary fees and bank charges, avoid leaving discarded bank documents behind, avoid banking online in public places, and periodically change their password.

DEPOSITS

It is the taking of deposits and granting of loans that single out a bank. These are the core activities of a bank. Initially, all accounts are opened with a deposit of money by the customer and hence these accounts are called deposit accounts. Public deposits comprise the major proportion of a bank working funds which are used primarily to make loans and advances and to purchase securities. The banker solicits deposits from the members of the public belonging to different walks of life, engaged in numerous economic activities.

The nature of banking facility sought by them, therefore, varies widely, e.g., some want to earn interest, some want their money to be safe; others use banking facilities for conducting business. As a result, different types of accounts with various facilities and privileges are offered by banks to their customers. Banks accept various types of deposits, which are generally categorized as demand or time deposits.

Demand deposits: Demand deposits are those where customers expect to be able to withdraw money at anytime. These include savings deposits and deposits in current accounts.

Saving deposits: As saving accounts are meant to encourage saving habit, organizations whose purpose is profit are not allowed to open such accounts. Interest is paid on a half-yearly basis in these accounts. A minimum balance is stipulated by each bank. A balance amount above the minimum stipulated amount is eligible for a 3.5 per cent interest rate in India at present.

Current deposits: Since this account is to meet the transaction needs of the customer, there is no restriction on the number of transaction in the account or in the type of customers eligible to open these accounts. Account holders are not entitled to any interest from the bank.

Time deposits: These are also called as fixed deposits or term deposits. These are repayable after the expiry of a specified period varying from 7 days to 120 months. Any deposit which is not repayable on demand is a time deposit. They are a genuine saving medium. The banker can utilize such amounts more profitably since he knows before hand when this money will be demanded. As a result, a much higher rate of interest is offered to the customer on such deposits.

Loans:

The basic function of a commercial bank is to make loans and advances out of the money which comes to it from the public by way of deposits. Direct loans and advances are given to all types of persons, particularly to businessmen and investors against personal security, gold and silver and other movable and immovable assets. Banks, sometimes, also lend money at concessionary rates of interest to priority sector industries, small borrowers, students, disabled persons, etc.

Commercial banks usually lend money in the following forms:

Cash credit: A cash credit is an arrangement


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