Maharashtra Board Class 11 Secretarial Practice Chapter 11 Correspondence with Banks Solutions

11Th Secretarial Practice Chapter 11 Exercise Correspondence With Banks Practical Problems Solutions Maharashtra Board

Correspondence With Banks 11Th Secretarial Practice Chapter 11 Solutions Maharashtra Board

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 11 Correspondence with Banks Textbook Exercise Questions and Answers.

Class 11 Secretarial Practice Chapter 11 Exercise Solutions

1A. Select The Correct Answer From The Options Given Below And Rewrite The Statements.

 

Question 1. A company usually opens _______ account in a bank.
(a) Current
(b) Saving
(c) Recurring
Answer: (a) Current
In simple words: A company primarily uses a current account for its daily business transactions, which allows for frequent and unlimited deposits and withdrawals.

🎯 Exam Tip: Understanding the primary bank account types used by different entities (companies, individuals) is crucial for identifying correct answers in MCQs.

 

Question 2. Bank is a _______ institution.
(a) financial
(b) social
(c) cultural
Answer: (a) financial
In simple words: A bank is fundamentally a financial institution that deals with money, credit, and other financial services.

🎯 Exam Tip: Accurately identifying the core nature of a bank is essential for basic financial knowledge and for questions related to its functions.

 

Question 3. The appointment of banker is usually made by the _______.
(a) Board of Directors
(b) Secretary
(c) Chairman
Answer: (a) Board of Directors
In simple words: For a company, key decisions like appointing a banker are typically made by its Board of Directors through a resolution.

🎯 Exam Tip: Knowledge of corporate governance and decision-making bodies within a company is important for questions on administrative appointments.

 

Question 4. Resolution for opening Bank Account is passed in the _______ meeting.
(a) Board
(b) Statutory
(c) Annual General
Answer: (a) Board
In simple words: A company's decision to open a bank account requires formal approval, which is typically done by passing a resolution at a Board meeting.

🎯 Exam Tip: Recognize the legal and procedural requirements (like Board resolutions) for significant corporate actions, especially those involving financial institutions.

 

Question 5. Bank provides overdraft facility to _______ account holder.
(a) Current
(b) Saving
(c) Fixed Deposit
Answer: (a) Current
In simple words: Overdraft facilities, which allow drawing more money than available, are generally offered to current account holders due to their frequent transaction needs.

🎯 Exam Tip: Differentiate between the features and facilities offered by banks for various account types, as this is a common area for examination.

 

Question 6. _______ is used for depositing cash into a bank account.
(a) Pay-in-slip
(b) Withdrawal slip
(c) Cheque
Answer: (a) Pay-in-slip
In simple words: A pay-in-slip is a standardized form used to record details of cash or cheques being deposited into a bank account.

🎯 Exam Tip: Familiarity with common banking instruments and their specific uses (deposit, withdrawal, payment) is crucial for practical understanding.

 

Question 7. Borrowing/Accepting and lending money are considered as _______ functions of bank.
(a) Primary
(b) Secondary
(c) Agency
Answer: (a) Primary
In simple words: The core activities of a bank involve accepting deposits (borrowing from the public) and granting loans (lending money), which are its primary functions.

🎯 Exam Tip: Clearly distinguish between the primary and secondary functions of commercial banks to accurately answer questions on banking operations.

 

Question 8. Withdrawals are not permitted from the _______ deposit account.
(a) Fixed
(b) Current
(c) Savings
Answer: (a) Fixed
In simple words: Fixed deposit accounts are designed for long-term savings, where money is locked in for a specific period and cannot be withdrawn freely before maturity.

🎯 Exam Tip: Understand the liquidity and withdrawal restrictions associated with different types of bank deposits to score well on related questions.

 

Question 9. _______ account is suitable to salaried people.
(a) Savings
(b) Current
(c) Fixed
Answer: (a) Savings
In simple words: Savings accounts are ideal for salaried individuals as they allow for regular deposits, limited withdrawals, and earn a modest interest, promoting saving habits.

🎯 Exam Tip: Relate different bank account types to their typical users and their specific needs (e.g., salaried individuals, businesses) to correctly identify suitability.

 

Question 10. Generally Interest is not paid on _______ deposit account.
(a) Current
(b) Saving
(c) Fixed
Answer: (a) Current
In simple words: Current accounts are primarily for high-volume transactions by businesses and typically do not earn interest, unlike savings or fixed deposit accounts.

🎯 Exam Tip: Remember that interest rates and their applicability vary significantly across different bank accounts, with current accounts usually offering no interest.

 

Question 11. A deposit which is kept for fixed period in bank is called _______ deposit.
(a) Fixed
(b) Current
(c) Recurring
Answer: (a) Fixed
In simple words: A fixed deposit involves depositing a lump sum of money for a predetermined period, earning a higher interest rate compared to a savings account.

🎯 Exam Tip: Clearly define and distinguish between fixed deposits, recurring deposits, and other deposit types based on their term and withdrawal conditions.

1B. Match The Pairs.

 

Question 1.

Group 'A'	Group 'B'
(a) Lost cheque	(1) Board of Directors
(b) Appointment of Banker	(2) Higher rate of interest
(c) Cash credit	(3) Used for depositing cash and cheque
(d) Fixed Deposit Account	(4) Stop Payment
(e) Savings Account	(5) Restrictions on withdrawals
(f) Pay-in-slip	(6) Separate Account
(g) Overdraft facility	(7) Current Account
	(8) Recurring Account
	(9) Shareholders
	(10) No interest is paid
	(11) Used for withdrawing amount from the account
	(12) Long term credit facility
	(13) Certain restrictions on withdrawals
	(14) Dealing in foreign exchange

Answer:

Group 'A'	Group 'B'
(a) Lost cheque	(4) Stop Payment
(b) Appointment of Banker	(1) Board of Directors
(c) Cash credit	(6) Separate Account
(d) Fixed Deposit Account	(2) Higher rate of interest
(e) Savings Account	(5) Restrictions on withdrawals
(f) Pay-in-slip	(3) Used for depositing cash and cheque
(g) Overdraft facility	(7) Current Account

In simple words: This matching exercise connects banking terms and facilities (Group A) with their corresponding definitions or characteristics (Group B), reinforcing understanding of banking concepts.

🎯 Exam Tip: For matching questions, understand the unique features of each item in Group A and carefully identify its best-fit description or related concept in Group B.

1C. Write A Word Or A Term Or A Phrase That Can Substitute Each Of The Following Statements.

 

Question 1. A slip is used for depositing cash and cheque in the Bank account.
Answer: Pay-in-slip
In simple words: A pay-in-slip is a document used to record details of funds being deposited into a bank account.

🎯 Exam Tip: Accurately identifying banking terminology based on its function is key to answering one-word substitution questions.

 

Question 2. Permission to withdraw excess amount from Current Account.
Answer: Overdraft
In simple words: Overdraft is a facility allowing current account holders to withdraw more money than they have in their account, up to a pre-set limit.

🎯 Exam Tip: Understand specific credit facilities offered by banks, like overdrafts, and their conditions, particularly for current account holders.

 

Question 3. Separate loan account under which the short-term loan facility is given by the bank to the business.
Answer: Cash credit
In simple words: Cash credit provides a short-term loan facility to businesses, allowing them to withdraw funds up to a specified limit against security.

🎯 Exam Tip: Distinguish between different short-term credit facilities provided by banks to businesses, such as cash credit, based on their nature and conditions.

 

Question 4. The short-term credit facility is given by the bank to the current account holder.
Answer: Overdraft
In simple words: An overdraft is a short-term credit specifically granted to current account holders, enabling them to withdraw funds beyond their account balance.

🎯 Exam Tip: Note the type of account holder that is eligible for specific credit facilities; overdrafts are primarily for current accounts.

 

Question 5. The account is generally opened by the business organization.
Answer: Current Account
In simple words: Business organizations typically open current accounts to manage frequent and high-volume transactions without withdrawal limits.

🎯 Exam Tip: Connect the characteristics of different bank accounts with the entities that commonly use them (e.g., businesses for current accounts, individuals for savings accounts).

 

Question 6. The request of Secretary to the bank not to make the payment of the cheque.
Answer: Stop payment request
In simple words: A stop payment request is an instruction given to the bank by an account holder to prevent the payment of a specific cheque.

🎯 Exam Tip: Understand the procedures and terminology associated with managing issued cheques, including actions like stopping payment.

 

Question 7. The type of account for which a higher rate of interest is paid to bank depositors.
Answer: Fixed Deposit Account
In simple words: Fixed Deposit Accounts offer a higher rate of interest because the money is deposited for a fixed period, providing stability to the bank.

🎯 Exam Tip: Remember that the interest rate typically increases with the tenure and reduced liquidity of the deposit type, such as in fixed deposits.

 

Question 8. The slip is used for withdrawing money from Savings Account.
Answer: Withdrawal Slip
In simple words: A withdrawal slip is a form used by account holders to request cash from their bank account.

🎯 Exam Tip: Differentiate between bank slips used for deposits (pay-in-slip) and withdrawals (withdrawal slip).

 

Question 9. Negotiable Instrument which can be discounted with the bank.
Answer: Bill of exchange
In simple words: A bill of exchange is a written order that can be discounted with a bank, allowing the holder to receive funds before its maturity date.

🎯 Exam Tip: Familiarize yourself with various negotiable instruments and their functionalities, especially how they can be used for financing through banks.

1D. State Whether The Following Statements Are True Or False.

 

Question 1. Joint Stock Company opens Current Account.
Answer: True
In simple words: Joint Stock Companies primarily use current accounts for managing their extensive and frequent business transactions.

🎯 Exam Tip: Relate the nature of a business entity (like a Joint Stock Company) to the most suitable type of bank account for its operations.

 

Question 2. Generally, no interest is paid by the bank on the Current Account.
Answer: True
In simple words: Banks typically do not pay interest on current accounts because they are designed for transaction convenience rather than savings and involve high liquidity.

🎯 Exam Tip: Understand the interest payment policies across different bank account types; current accounts are generally non-interest bearing.

 

Question 3. In cash credit, the customer's account is credited by the bank with the sanctioned amount.
Answer: True
In simple words: In a cash credit facility, the bank credits a separate loan account (not the regular current account) of the customer with the sanctioned amount, which can then be drawn upon.

🎯 Exam Tip: Differentiate between how funds are disbursed in various credit facilities; cash credit involves a separate, sanctioned credit limit.

 

Question 4. Board resolution is not required to open the Current Account with the bank.
Answer: False
In simple words: For a company, a Board resolution is mandatory to formally authorize the opening of a current account and designate authorized signatories.

🎯 Exam Tip: Emphasize the legal and procedural requirements for corporate banking, where formal resolutions are almost always necessary for account openings.

 

Question 5. The bank account of the company is operated by shareholders.
Answer: False
In simple words: A company's bank account is operated by authorized signatories, typically directors or designated employees, as per the Board's resolution, not directly by shareholders.

🎯 Exam Tip: Clarify the roles of different stakeholders in corporate financial management; shareholders own the company but do not operate its bank accounts.

 

Question 6. Overdraft facility is granted to Savings account holders.
Answer: False
In simple words: Overdraft facilities are typically provided to current account holders who require flexibility for business transactions, not generally to savings account holders.

🎯 Exam Tip: Understand the specific eligibility criteria for banking facilities; overdrafts are usually restricted to current account holders with good credit standing.

 

Question 7. Bank correspondence should be brief and to the point.
Answer: True
In simple words: Effective bank correspondence requires conciseness and clarity to ensure that messages are understood quickly and accurately.

🎯 Exam Tip: Highlight the principles of effective business communication, emphasizing brevity and directness in formal correspondence with banks.

 

Question 8. It is necessary to instruct the bank to stop the payment of a cheque that is lost.
Answer: True
In simple words: Instructing the bank to stop payment on a lost cheque is essential to prevent unauthorized encashment and potential financial loss.

🎯 Exam Tip: Stress the importance of immediate action and proper communication with the bank in cases of lost or stolen financial instruments.

 

Question 9. A bank overdraft facility is a long-term facility.
Answer: False
In simple words: Overdraft facilities are typically short-term credit arrangements designed to cover temporary cash flow gaps, not for long-term financing.

🎯 Exam Tip: Distinguish between short-term and long-term credit facilities provided by banks, noting that overdrafts fall under short-term categories.

 

Question 10. Banks grant long-term loans only.
Answer: False
In simple words: Banks offer a range of loan products, including both short-term loans (like cash credit or overdrafts) and long-term loans, catering to diverse customer needs.

🎯 Exam Tip: Understand the comprehensive range of financial services banks provide, which includes various types of loans with different tenures.

1E. Find The Odd One.

 

Question 1. Saving Deposit, Recurring Deposit, Cash Credit. Fixed Deposit
Answer: Cash Credit
In simple words: Cash Credit is a credit facility, whereas Saving Deposit, Recurring Deposit, and Fixed Deposit are all types of deposit accounts.

🎯 Exam Tip: Group related financial products and identify the one that belongs to a different category (e.g., credit vs. deposit products).

 

Question 2. Overdraft, Fixed Deposit, Discounting of Bills, Cash Credit
Answer: Fixed Deposit
In simple words: Fixed Deposit is a type of deposit account, while Overdraft, Discounting of Bills, and Cash Credit are all forms of credit or advance facilities offered by banks.

🎯 Exam Tip: Categorize banking services into core functions like deposits, loans, and advances to easily spot the "odd one out" in mixed lists.

1F. Complete The Sentences.

 

Question 1. A financial institution which receives deposits and lends money is called as _______.
Answer: Bank
In simple words: A bank serves as an intermediary that accepts money from savers and provides it to borrowers, facilitating economic activity.

🎯 Exam Tip: Grasp the fundamental definition of a bank based on its primary functions of deposit acceptance and lending.

 

Question 2. Accepting deposits and lending money are the primary functions of _______.
Answer: Commercial Bank/Bank
In simple words: These two core activities are the defining primary functions of any commercial bank.

🎯 Exam Tip: Reiterate the core functions of commercial banks to consolidate understanding of their role in the economy.

 

Question 3. A facility under which a customer can overdraw money from his account is called as _______.
Answer: Overdraft facility
In simple words: An overdraft facility allows a customer to draw more funds than available in their current account, up to an agreed limit.

🎯 Exam Tip: Understand and correctly name specific banking facilities based on their functional descriptions.

 

Question 4. Overdraft facility is given to _______.
Answer: Current Account Holder
In simple words: This facility is typically extended to businesses or individuals who operate current accounts, providing them with short-term liquidity.

🎯 Exam Tip: Link banking facilities to the specific types of customers or accounts for whom they are intended.

1G. Select The Correct Option From The Bracket.

 

Question 1.

Group 'A'	Group 'B'
(1) Overdraft	..............
(2) Primary Function	..............
(3) International Trade Transactions	..............
(4) ..............	Current Account

(Accepting Deposits, Current Account, Letter of Credit, Businessman)
Answer:

Group 'A'	Group 'B'
(1) Overdraft	Current Account
(2) Primary Function	Accepting Deposits
(3) International Trade Transactions	Letter of Credit
(4) Businessman	Current Account

In simple words: This exercise matches banking concepts and terms from Group A with their correct corresponding options from the given list, clarifying their relationships and uses.

🎯 Exam Tip: Carefully analyze each pairing, identifying the logical connection between the items in Group A and the available choices in the bracket for accurate matching.

1H. Answer In One Sentence.

 

Question 1. What is a Letter of Credit?
Answer: A letter of credit is a payment method generally used for international trade transactions. Letter of credit is issued by a bank on behalf of its client, promising to pay a certain amount of money to the seller, in case the buyer fails to pay it.
In simple words: A Letter of Credit (LC) is a bank's guarantee of payment from a buyer to a seller, often used in international trade to ensure transactions are completed securely.

🎯 Exam Tip: Focus on the purpose and key parties involved in a Letter of Credit - it's a bank's promise for international trade payment.

 

Question 2. Which facility is given to the Current Account holder?
Answer: Overdraft facility is given to Current Account Holder by the Bank.
In simple words: Current account holders are typically offered an overdraft facility, allowing them to withdraw funds exceeding their account balance up to a pre-approved limit.

🎯 Exam Tip: Remember that the overdraft facility is a specific privilege primarily associated with current accounts, providing short-term liquidity.

 

Question 3. What do you mean by stop payment of cheque?
Answer: When a cheque is issued by the company, there is a possibility of misplacement of the cheque or loss in transit. Then it is necessary to inform the bank to stop payment of such cheque.
In simple words: Stop payment of a cheque means instructing your bank to cancel the payment of an issued cheque, usually due to loss, theft, or an error.

🎯 Exam Tip: Understand the practical implications and importance of a stop payment order for safeguarding funds and preventing unauthorized transactions.

1I. Correct The Underlined Word And Rewrite The Following Sentences.

 

Question 1. Accepting deposits is the secondary function of Banks.
Answer: Accepting deposits is the primary function of Banks.
In simple words: Accepting deposits is a fundamental and primary function of banks, not a secondary one.

🎯 Exam Tip: Clearly differentiate between the primary and secondary functions of banks to avoid common conceptual errors.

 

Question 2. Businessman opens Fixed Deposit Account.
Answer: Businessman opens Current Account.
In simple words: Businesses typically open current accounts for high transaction volumes, whereas fixed deposit accounts are for savings over a fixed period.

🎯 Exam Tip: Connect the type of account with the typical user's transactional needs; businessmen require current accounts for daily operations.

 

Question 3. Under cash credit facility businessman/account holder can overdraw from his account.
Answer: Under an overdraft facility, a businessman/account holder can overdraw from his account.
In simple words: The ability to overdraw directly from one's existing account is known as an overdraft facility, distinct from a cash credit which involves a separate loan account.

🎯 Exam Tip: Accurately distinguish between credit facilities like cash credit and overdrafts based on how they operate and the account types they affect.

2. Explain The Following Terms/Concepts.

 

Question 1. Bank
Answer: A bank is a financial institution, in which people deposit their idle or surplus cash, and those who need funds borrow from banks.
In simple words: A bank is a financial entity that collects money from savers and provides it to borrowers, facilitating economic activity.

🎯 Exam Tip: Ensure your explanation of 'Bank' covers its core role as a financial intermediary for deposits and loans.

 

Question 2. Demand Deposits
Answer: The deposits which are repayable on demand are called Demand Deposits.
In simple words: Demand deposits are funds kept in a bank that can be withdrawn by the depositor at any time without prior notice.

🎯 Exam Tip: The key characteristic of demand deposits is their immediate accessibility, distinguishing them from time-bound deposits.

 

Question 3. Time Deposits
Answer: The deposits which are not repayable on demand are called Time Deposits.
In simple words: Time deposits are funds held in a bank for a fixed period, typically not withdrawable before maturity without penalty.

🎯 Exam Tip: Contrast time deposits with demand deposits by highlighting their fixed tenure and reduced liquidity, often earning higher interest.

 

Question 4. Savings Deposits
Answer: To encourage saving habit among the people, the bank allows depositors to open a savings account. There are restrictions on the frequency and amount of withdrawals.
In simple words: Savings deposits are accounts designed to encourage individuals to save, offering interest and limited withdrawal facilities.

🎯 Exam Tip: Emphasize that savings accounts balance accessibility with incentives for saving, typically with some withdrawal restrictions.

 

Question 5. Current Deposits
Answer: This account is normally opened by businessmen, firms, or companies. There is no limit on the amount or number of withdrawals.
In simple words: Current deposits are accounts primarily for businesses, allowing unlimited transactions without earning interest, focusing on liquidity for operations.

🎯 Exam Tip: Highlight the key features of current accounts: high liquidity, no interest, and suitability for business entities with frequent transactions.

 

Question 6. Recurring Deposits
Answer: The account which encourages the customers to make regular savings and to deposit a fixed sum of money for a specific period of time is called Recurring Deposits.
In simple words: Recurring deposits involve making regular, fixed-amount deposits over a set period, accumulating savings with interest.

🎯 Exam Tip: Note that recurring deposits are structured for disciplined, periodic savings, offering a method to build up a corpus over time.

 

Question 7. Fixed Deposits
Answer: Fixed Deposits are the deposits received for a fixed period. The rate of interest is high for fixed deposits. The longer the period of deposit, the higher is the rate of interest.
In simple words: Fixed deposits require a lump sum to be deposited for a specific duration, earning a predetermined, often higher, interest rate.

🎯 Exam Tip: Emphasize that fixed deposits offer higher interest rates due to the fixed tenure and lack of premature withdrawal flexibility.

 

Question 8. Loans
Answer: A loan granted for a specific time period against personal security, gold or silver, and other moveable or immovable assets is called a term loan.
In simple words: Loans are sums of money provided by banks for a defined period, usually against collateral, to be repaid with interest.

🎯 Exam Tip: Focus on 'loans' as a general term for funds borrowed for a specific period, often against security and with structured repayment.

 

Question 9. Advances
Answer: Advances is a credit facility provided by the bank to its customers. It differs from loans in the sense that loans may be granted for a longer period, while advances are for a shorter period.
In simple words: Advances are short-term credit facilities provided by banks, often for working capital needs, distinct from longer-term loans.

🎯 Exam Tip: The key differentiator for 'advances' compared to 'loans' is their generally shorter repayment period, often linked to business operations.

 

Question 10. Cash Credit
Answer: Under a cash credit facility, a bank allows the borrower to withdraw amounts up to the specified limit. Such credits are allowed against the security of stock of raw material, finished goods, etc.
In simple words: Cash credit is a short-term credit facility where a bank allows a business to borrow funds up to a set limit, often secured by inventory.

🎯 Exam Tip: Understand that cash credit provides revolving credit against current assets, allowing flexible withdrawals and repayments within the limit.

 

Question 11. Overdraft
Answer: It is a facility where the bank allows its customers to overdraw an amount up to a particular limit. Such facility is allowed against collateral securities like shares, FDR, LIC Policy, etc.
In simple words: An overdraft lets current account holders temporarily withdraw more money than they have, up to a sanctioned limit, often against security.

🎯 Exam Tip: Note that overdrafts, while flexible, are typically offered against some form of security and are usually for current account holders.

 

Question 12. Discounting of Bill
Answer: It is a short-term finance facility provided by the bank to its customers by allowing discounting of bills and making payment of bills before their due date.
In simple words: Discounting a bill means a bank pays the holder of a bill of exchange before its maturity date, deducting a small fee (discount).

🎯 Exam Tip: Understand discounting of bills as a short-term financing option where a bank provides immediate funds against a future receivable.

 

Question 13. Letter of Credit
Answer: A letter of credit is a payment method generally used for international trade transactions. Letter of credit is issued by a bank on behalf of its client, promising to pay a certain amount of money to the seller, in case the buyer fails to pay it.
In simple words: A Letter of Credit (LC) is a bank's written commitment to pay a seller on behalf of a buyer, ensuring payment in international trade if conditions are met.

🎯 Exam Tip: Focus on the security aspect of LCs in international trade, where the bank acts as a guarantor for payment between parties.

 

Question 14. Stop payments of cheque
Answer: When a cheque is sent by the Company, there is a possibility of misplacement of cheque or loss in transit. In that case, it is necessary to inform the bank to stop the payment of such cheques.
In simple words: This refers to an instruction given to the bank to prevent a previously issued cheque from being cashed or cleared, usually due to loss or error.

🎯 Exam Tip: Remember that stopping payment on a cheque is a critical safety measure if an issued cheque is compromised or needs to be voided.

3. Distinguish Between The Following.

 

Question 1. Current Account and Savings Account.

Basis	Current Account	Savings Account
1. Meaning	It is a type of bank account that is generally opened by the businessman to carry out their business activities.	It is a type of bank account which is opened by salaried and household people with an aim of saving their part of the income and earn interest.
2. Withdrawals	There are no restrictions on the number of withdrawals. They can withdraw money by cheque.	There are restrictions over the number of withdrawals. They can withdraw money either by cheque or by withdrawal slip.
3. Facilities	Such account holder gets the facilities of Passbook, Cheque Book, Statement of Account and Pay-in-Slip Book.	Such account holders get the facilities of Passbook, Cheque Book, and Pay-in-Slip Book.
4. Rate of Interest	Generally, no interest is allowed on the Current Account. If it is allowed it is a very nominal rate.	The rate of interest on the Saving Account is higher than the Current Account but less than fixed deposits.
5. Overdraft facility	Overdraft facility is allowed to Current Account holders.	Overdraft facility is not allowed to Saving Account holder.
6. Suitability	It is suitable for traders, business firms, and institutions.	It is suitable for salary earners, households, and fixed income groups.

In simple words: Current accounts are for businesses needing high liquidity and frequent transactions with no interest, while savings accounts are for individuals to save money, earning interest with withdrawal restrictions.

🎯 Exam Tip: When distinguishing, always use a clear basis of comparison and highlight contrasting features to demonstrate comprehensive understanding.

 

Question 2. Loan and Overdraft

Basis	Loan	Overdraft
1. Meaning	Amount granted for a specific period of time, against personal security, gold or silver, and other movable or immovable assets is called a loan.	Overdraft is a credit facility granted by the bank to Current account holders. Under an overdraft facility, the bank allows its customers to overdraw an amount up to a particular limit.

In simple words: Loans are typically for a specific, longer duration against various assets, whereas an overdraft is a short-term credit facility for current account holders allowing withdrawals beyond their balance up to a limit. This answer covers only the 'Meaning' as presented within the specified page range.

🎯 Exam Tip: Differentiate clearly between the fundamental nature of a 'loan' (term-bound, against security) and an 'overdraft' (flexible, short-term credit for current accounts). Note that for a complete answer, one would need to cover more comparison points like duration and security, which are outside the current page range.

Question 3. Fixed Deposit Account and Recurring Deposit Account.
Answer:

Basis	Fixed Deposit Account	Recurring Deposit Account
1. Meaning	Fixed Deposits are the deposits received for a fixed period of time.	A Recurring Deposit account is that account where depositors regularly deposit a fixed amount for a specific period of time.
2. Facilities	The bank gives a Fixed Deposit Receipt to the Fixed Deposit holders.	The bank gives a Pass Book and Pay-in-Slip book to Recurring Deposit holders.
3. Rate of Interest	The rate of interest allowed is higher. The longer the period of deposit, the higher will be the rate of interest.	The rate of interest is less than Fixed Deposit Account.
4. Suitability	It is suitable for those people having surplus income in hand.	It is suitable for fixed-income groups and lower-income groups.

In simple words: Fixed Deposits involve a lump sum for a set period with higher interest, while Recurring Deposits allow regular fixed deposits over time, encouraging consistent savings, both differing in interest rates and target depositors.

🎯 Exam Tip: When distinguishing between accounts, focus on key parameters like meaning, deposit patterns, interest rates, and target customers for a comprehensive answer.

4. Answer In Brief.

Question 1. What are the points to be kept in mind by a Secretary while corresponding with Banks?
Answer: The following precautions must be taken by the secretary while corresponding with banks:
• Prompt reply: For any correspondence with the bank, the reply must be sent without delay is the responsibility of a secretary.
• Brevity/Conciseness: Secretary should provide maximum information in minimum words. A letter should not be lengthy. Unnecessary details, irrelevant information or explanation, lengthy paragraphs should be avoided.
• Courtesy: The letter to the bank should show empathy, respect, and mutual understanding. It is helpful for getting favourable responses and built up goodwill for the organization.
• Accuracy: While corresponding with Bank 'Accuracy' and 'Perfectness' are very important. Whatever information or data provided must be accurate. No haphazard remarks or statements are to be made.
• Clarity: The secretary must provide true, factual updates and clear information about his organization to the banker. Clarity is required to avoid misunderstandings with bankers.
In simple words: A secretary must ensure bank correspondence is prompt, concise, courteous, accurate, and clear to maintain good relations and avoid misunderstandings.

🎯 Exam Tip: Remember these five "C"s (Promptness, Conciseness, Courtesy, Accuracy, Clarity) as essential elements for effective and professional bank correspondence.

Question 2. Under what circumstances will a secretary correspond with the Banks?
Answer: The following are the circumstances under which a secretary has to correspond with the banks:
(i) Letter for opening a Current Account with the Bank:
The decision of opening a Current account is taken in the Board meeting by passing a resolution. The Board instructs the secretary for opening a Current account. The Secretary has to write a letter to the Bank accordingly and enclose the necessary documents.
(ii) Letter requesting a bank to stop payment of cheque:
When cheques are sent by Companies, there are possibilities of misplacement of cheques or loss in transit. Thus, it is necessary to inform the bank to stop the payment of such cheques.
(iii) Letter requesting a Bank for granting an overdraft facility:
Certain credit facilities are provided by the Bank to their customers. The Bank allows a Current Account holder to withdraw excess amount than the available balance. Secretary has to correspond with the bank to prevail this facility.
(iv) Letter requesting bank to issue a letter of credit:
A letter of credit is a payment method generally used for international trade transactions. Letter of credit is issued by Bank on behalf of its client promising to pay a certain amount of money to the seller in case the buyer fails to pay it. Secretary has to correspond with the bank to obtain this letter of credit.
In simple words: A secretary corresponds with banks for various reasons including opening accounts, stopping cheque payments, requesting overdrafts, and obtaining letters of credit for business operations.

🎯 Exam Tip: Focus on the specific reasons for correspondence, linking each to a particular banking service or administrative need of the company.

Question 3. State the agency functions of Banks.
Answer: Agency functions of banks are part of secondary functions.
Following are the agency functions of the Bank:
• Bank collects the cheques and Bill of Exchange on behalf of the customers or account holders.
• Bank collects dividends, interest, and salary and credits the account holder's account.
• Bank makes payment of rent, insurance premium, electricity bill, etc.
• Bank act as a Depository Participant for purchase and sale of securities.
• Transfer of money.
• Fulfill standing instructions of depositors.
• The bank acts as a trustee, an executor of the will, and an attorney for the account holder.
• The bank acts as a Banker to the issue, Lead Manager, etc. for the companies.
In simple words: Agency functions of banks involve acting as an agent for customers by collecting and paying various dues, managing investments, and providing other financial services like fund transfers and acting as trustees.

🎯 Exam Tip: Remember that agency functions are "secondary" functions where the bank acts on behalf of its customers, managing their financial transactions and assets.

Question 4. State the utility functions of Banks.
Answer: Commercial Bank provides general utility services to their customers or account holders to attract customers.
Utility functions of Banks are as follows:
• Provide locker facility to customer utility function of banks are as follows.
• Provide a letter of credit facility to account holders for international business transactions.
• Helps to deal in Foreign Exchange.
• Provide Credit cards, Debit cards, and A.T.M. facilities.
• To assist in the purchase and sale of securities.
• Provide traveler's cheque to customers.
In simple words: Utility functions of banks are additional services provided to customers, such as locker facilities, credit/debit cards, foreign exchange, and assistance with securities, to enhance convenience and attract business.

🎯 Exam Tip: Distinguish utility functions from agency functions by focusing on services that add value and convenience (like lockers, cards) rather than acting as a direct agent for financial transactions.

Question 5. Explain the different types of Deposits.
Answer: The Bank accepts two types of deposits from the people.
(i) Demand Deposits:
Demand Deposits are deposits, where money is repaid by the bank on the demand made by the depositors or customers of the bank.
Such deposit accounts are:
(a) Savings Deposits:
As the name indicate this account is opened and operated by that person who have regular and fixed income e.g. salary. In order to 'save' something out of current income, this account is opened.
Features of this account are:
• It is mainly for saving purposes.
• Money can be withdrawn on demand.
• Minimum balance must be maintained.
(b) Current Deposits:
This account is opened by the businessman, firm, company, etc. for business purposes. There is no limit on the number of withdrawals. Generally, interest is not payable on this account. Overdraft facilities are also allowed to these depositors.
(ii) Time Deposits:
The deposits which are not repayable on demand are called 'Time Deposits'. These deposits are payable after a specific period of time.
• Fixed Deposits: In this deposit account, a certain sum is kept deposited for a fixed period. A higher rate of interest is paid on Fixed Deposit.
• Recurring Deposits: In this deposit account, the customer deposit's fixed amount on regular basis for a specific period. The money is deposited periodically. The rate of interest is more than Saving Deposits.
In simple words: Banks offer two main types of deposits: Demand Deposits (like Savings and Current accounts, withdrawable on demand) and Time Deposits (like Fixed and Recurring Deposits, withdrawable after a specific period and often offering higher interest).

🎯 Exam Tip: Clearly differentiate between demand and time deposits based on withdrawal flexibility and interest rates, and then describe the sub-types under each category.

5. Justify the following statements.

Question 1. The secretary has to correspond with the Banks under certain circumstances.
Answer: Following are the circumstance under which a secretary has to enter into correspondence with banks:
• Letter for opening a Current account with Bank.
• Letter requesting a bank to stop payment of the cheque.
• Letter requesting a bank for granting overdraft facility.
• Letter requesting a bank to issue a letter of credit.
• Letter to a bank enquiring about new banking facilities.
• Letter to the bank for a long-term loan.
• Thus, the secretary has to correspond with the Banks under certain circumstances.
In simple words: A secretary's correspondence with banks is crucial for managing a company's financial operations, including opening accounts, stopping payments, securing credit, and inquiring about new services.

🎯 Exam Tip: To justify this statement, list various practical scenarios where a secretary must interact with the bank, demonstrating the necessity of such correspondence.

Question 2. The secretary should observe certain precautions while corresponding with the Banks.
Answer: The following precautions must be taken by the secretary while corresponding with the banks:
• Secretary should give a prompt reply.
• Secretary should take care that the letter should not be lengthy.
• Unnecessary details should be avoided.
• Not to use any harsh or rude words while corresponding with the banker.
• Provide true factual updates and clear information about his organization to the bankers.
• Thus, the secretary should observe certain precautions while corresponding with the Banks.
In simple words: It is essential for a secretary to correspond with banks promptly, concisely, courteously, and with factual accuracy to maintain professional relations and avoid misunderstandings.

🎯 Exam Tip: Emphasize professionalism, clarity, and respect as core precautions, linking them to maintaining a good relationship and effective communication with the bank.

Question 3. The primary functions of Commercial Banks include-Accepting deposits and Lending funds.
Answer: The main object of a commercial bank is to accept deposits and lending money to customers or account holders:
• To encourage the people who have surplus funds.
• To encourage the saving habit among the people.
• To give support to businessmen for opening a current account.
• To encourage people to make regular savings.
• To lend loans and advances through various modes i.e. short-term loan, medium-term loan, long-term loan, overdraft facility, cash credit facility, and discounting of the bill of exchange, etc.
• Thus, the primary functions of Commercial Banks include-Accepting deposits and Lending funds.
In simple words: Commercial banks primarily function to accept deposits from the public to foster saving habits and then lend these funds through various loan and advance facilities to support economic activities.

🎯 Exam Tip: Focus on the dual core activities: mobilizing savings (deposits) and allocating capital (lending) to justify the primary functions of commercial banks.

Question 4. The Bank accepts two types of deposits from the public i.e. Demand and Time Deposits.
Answer:
• The basic aim of the bank is to pool the excess money to the bank and develop the habit of saving amount people.
• Bank accepts deposits in two forms i.e. Demand Deposits and Time deposits.
• Demand Deposits include - Current Deposits and Savings Deposits.
• Time Deposits includes - Fixed Deposits and Recurring Deposits
• Thus, the Bank accepts two types of deposits from the public i.e. Demand and Time Deposits.
In simple words: Banks accept deposits mainly in two forms: Demand Deposits, which can be withdrawn anytime (like savings and current accounts), and Time Deposits, which are held for a fixed period (like fixed and recurring deposits).

🎯 Exam Tip: Clearly define and provide examples for both Demand and Time Deposits, highlighting their key difference in liquidity and withdrawal conditions to justify the statement.

Question 5. There is a difference between Loans and Advances given by the Bank.
Answer:
• Bank lends money in two ways - i.e. Loans and Advance.
• The loan is granted for a specific period of time against personnel security, gold or silver, and other movable or immovable properties.
• Advances is a credit facility provided by the bank to its customers against collateral securities like - shares, Government shares, F.D.R., L.I.C. Policy, Stock of raw materials, or finished goods.
• Loans are granted for a longer period while Advances are granted for a shorter period.
• Loans may be short-term, medium-term, or long-term while advances are in form of overdraft, cash credit, and discounting of bills.
• Thus, there is a difference between Loans and Advances given by the Bank.
In simple words: Loans are typically for longer terms, granted against various securities, and repaid in installments, whereas advances are shorter-term credit facilities like overdrafts, often against specific collateral.

🎯 Exam Tip: When differentiating, focus on the duration of credit, the nature of security, and the repayment structure as primary distinctions between loans and advances.

Question 6. Overdraft facility is given only to current depositors.
Answer: Overdraft is a credit facility allowed to current account holders:
• Under an overdraft facility, the bank allows, customers, to withdraw an amount, up to a particular limit.
• The collateral securities are usually accepted for an overdraft facility.
• The rate of interest charged by commercial banks for overdraft is low.
• Overdraft facility is given only to existing current depositors because they have good relations with the Bank.
• Thus, an overdraft facility is given only to current depositors.
In simple words: Overdraft facility is extended exclusively to current account holders with good bank relations, allowing them to withdraw more than their balance up to a limit, usually against collateral and at a low interest rate.

🎯 Exam Tip: To justify this, highlight the operational nature of current accounts (frequent transactions, business focus) and the relationship aspect that makes overdrafts suitable primarily for them.

6. Attempt The Following.

Question 1. Write a letter to the bank for opening a Current Account.
Answer:
PRAGAT KRUSHI SEVA COMPANY LTD.
Registered office: Milind Sally Manjul,
Nashik Pune Highway, Sangamner
CIN: H353558 MH 2019 PLO 227244
Phone: 02425 - 223019
Fax: 02425 - 227230
Website: www.pragatksltd.com
Email: milinadkulkarni@gmail.com

Date: 10th March 2019.

Ref No. BlbRbl212019
The Bank Manager, IDBI Bank,
New Nagar Road,
Jantar Raja Maidan,
Sangamner.

Sub: Opening of Current Account.

Dear Sir,

The Board of Directors of a company have passed a resolution on 3rd March 2019 to open a Current Account in your bank in the name of the company i.e. “PRAGAT KRUSHI SEVA COMPANY LTD.” and to appoint you as the company's banker.

Please find enclosed herewith the following documents for the purpose of opening the Current Account of our company.

1. Account opening form duly filled, signed and dated.
2. Certified copy of Memorandum of Association.
3. Certified copy of Articles of Associations.
4. Certified copy of Incorporation Certificate.
5. Certified copy of Board resolution regarding opening a Current Account.
6. Specimen signature of two directors Mr. Maithily Kulkarni and Mr. Ajit Godse and the company secretary
7. Certified copy of the list of present Directors of the company.
8. Duly filled up Pay-in-slip along with Rs. 5,000 (Rupees Five thousand only) in cash as initial deposit.
9. Certified copies of PAN and TAN.

Thanking you,


Yours Faithfully,
for PRAGAT KRUSHI SEVA CO. LTD.
(Sign)
Company Secretary.
Encl: As above
In simple words: This letter informs the bank of a company's resolution to open a Current Account and formally requests the bank to open the account, enclosing all necessary documents and initial deposit.

🎯 Exam Tip: When writing a formal letter, ensure all company and bank details are accurate, the subject is clear, and a comprehensive list of enclosed documents is provided.

Question 2. Write a letter to the bank to stop the payment of the cheque.
Answer:
AVANI GLASS LIMITED COMPANY
Registered Office: Janata Raja Maidan,
Vidya Nagar, Sangamner.
CIN: B45453 MH 1992 PCL 123272
Phone: 02425 - 227244
Website: www.avaniglass.com
Fax: 02425 - 222340
Email: renukrushna@gmail.com

Date: 15th March 2019

Ref. No. B/PC/1/19-20
The Bank Manager,
New Nagar Road,
Sangamner.

Sub: Stop Payment of Cheque No 303592
Ref: Our Account No 30357090414

Dear Sir,

It is to bring to your notice, to stop payment of the Cheque no. 303592 dated 10th March 2019 of Rs. 75,000 (Rupee Seventy Five Thousand) issued by the company from Current Account no. 30357090414 in favour of Mr. Krushna Chaudhari, Nashik.

The said cheque is reported to be lost by the party. So we kindly request you to stop the payment of the said cheque.

We highly regret the inconvenience caused to you and wishing your kind co-operation in the above matter.

Thanking you,


Yours Faithfully,
for AVANI GLASS LIMITED COMPANY
(Sign)
Company Secretary.
In simple words: This letter requests the bank to stop payment of a specific cheque due to its loss, providing all necessary details like cheque number, date, amount, and beneficiary.

🎯 Exam Tip: Crucial details for a stop payment request include the cheque number, date, amount, payee, and the account from which it was issued. Always mention the reason for the stop payment.

Question 3. Letter requesting a bank to issue a Letter of Credit.
Answer:
B.K. INDUSTRIES LTD.
Registered Office: 240, Apeksh.
F.C. Road, Pune 4
CIN: B40418 MH 2010PIL 373078
Phone: 020 - 3070901
Fax: 020-3145402
Website: www.BKundu.com
Email: unvitkrusha@gmail.com

Date: 25th May 2019

Ref. No. BP/23/19-20
The Bank Manager,
Bank of Maharastra,
F.C. Road,
Pune - 4.

Sub: Issue of Letter of Credit.
Ref: Our Current Account No 020304147911

Dear Sir,

We are pleased to inform you that, we want to import printing machine from America.

As per the quotation received from Mark Industries, America we have to place an order along with a letter of credit.

We, therefore, request you to issue a letter of credit in favor of the said company USD 4,50,0000. This letter may be issued on the basis of the credit balance in our current account and as per the prevailing exchange rate.

Kindly issue the letter of credit and oblige. This will enable us to place an order at an early date.

Thanking you,


Yours Faithfully,
for B.K. INDUSTRIES LTD.
(Sign)
Company Secretary.
In simple words: This is a formal request to the bank to issue a Letter of Credit for an international import transaction, ensuring payment to the seller for goods purchased.

🎯 Exam Tip: When drafting a Letter of Credit request, include the purpose (import/export), the beneficiary's details, the amount, and the basis of issuance (account balance, exchange rate).

Question 4. Write a letter requesting the bank to grant an overdraft facility.
Answer:
JAI MATA GLASS AGENCIES LTD.
Registered Office: 285, M.G. Road,
Dwarka. Nashik.
Phone: 0253 - 27304580
Fax: 0253 - 283048800
Website: jaymata.com
Email: jaymata@gmail.com

Date: 10th January, 2019

Ref. No. BK/7/20-19
The Manager,
RDBI Bank
Dwarka, Nashik.

Sub: Request for overdraft facility
Ref: Account No. 00303540451

Dear Sir,

The Board of Directors in their meeting held on 2nd January 2019 has decided to request you to grant our company an overdraft facility up to Rs. 10 lakhs for a period of 5 months from March 2019 to July 2019.

We are the manufacturer of Tuffen glass and we have a large export order for which we need to have working capital to fulfill our daily needs.

We request you to accept our security of Fixed Deposit worth Rs. 10 lakhs with your bank.
We would also like to bring to your notice that we are being your customer for the last 10 years.
Expecting your early reply in favor of our overdraft facility.

Thanking you,


Yours Faithfully,
for JAI MATA GLASS AGENCIES LTD.
(Sign)
Company Secretary
In simple words: This letter is a formal request from a company to its bank for an overdraft facility, stating the required amount, duration, reason, and proposed security.

🎯 Exam Tip: For an overdraft request letter, clearly mention the desired limit, duration, the business need, and any collateral offered. Highlighting a long-standing customer relationship can also be beneficial.

Activity (Textbook Page No. 168)

Visit a Bank and collect the form of opening a bank account and find out. The detail to be filled in and Documents needed to open an account.
Answer: Yesterday, I visited the IDBI Bank of India, Sangamer Branch.
I collected the account opening form from Mr. Abhay Kulkarni Bank Officer.
The following are the details to be filled in in the Account opening form.
1. Branch Name
2. Date of opening account
3. Branch Address
4. Scheme Codes
5. Account Number
6. Type of Account
7. Full name in Capital Letter
8. Date of Birth
9. Occupation
10. PAN
11. Name of Guardian
12. Relationship with minor
13. Operating instruction
14. Facilities required
15. Statement of Account through
16. Other information
17. Declaration, if any
18. Specimen signature
19. Signature

Document required for opening a Bank Account.
1. Certified copy of Articles of Association and Memorandum of Association.
2. Certified copy of Board Resolution regarding the opening of a Current Account.
3. Specimen signature of Directors and Secretary.
4. List of Directors
5. Certificate of Incorporation.
In simple words: To open a bank account, one must fill out an application form with personal/company details and submit necessary documents like ID proof, address proof, and corporate documents if applicable.

🎯 Exam Tip: Understand that account opening involves providing comprehensive personal or corporate details and submitting valid identity and address proofs, alongside any specific corporate resolutions for companies.

There is no content within the specified page range (page 29-30) that adheres to the defined structure for questions and answers. The content primarily consists of navigation links, a search bar, and copyright information, which are to be ignored as per the "IGNORE AND SKIP" rules.