Crack SBI PO Mains 2017 (Day-5): Types of Banks& Bank Accounts and its Functions:
Dear Readers, Dear Readers, SBI PO Mains Examination is approaching shortly and to Gear Up your preparation we have provided the “15 days Action Plan – Preparation Time Table for SBI PO Mains 2017”, based on the schedule here we have provided the Types of Banks& Bank Accounts and its Functions, kindly make use of it.
Types of Banks
There are Eight types of Banks in India, and they are given below.
1.) Savings Banks:
A savings bank is a financial institution whose primary purpose is to accept savings deposits. It may also perform some other functions. These banks are helpful for salaried people and low income groups. The deposits collected from the customers are invested in bonds, securities etc,. At present, most of the commercial banks carry out the functions of Savings Banks; Postal Department also performs the functions of savings bank.
2.) Commercial Banks:
A Commercial Bank is an institution which accepts deposits, makes business loans and offers related services. Commercial Banks also allow for a variety of deposit accounts, such as current, savings and time deposit. These institutions are run to make profit. Commercial Banks provide various services like collection cheques, bills of exchange, remitting money from one place to another place. In India, Commercial Banks have been established under Companies Act, 1956. In 1969, 14 Commercial Banks were nationalized by the Government of India.
3.) Industrial Banks/ Development Banks:
Development Banks are those financial institutions engaged in the promotion and development of industry, agriculture and other key sectors. These banks react to the socio-economic needs. They satisfy the developmental needs of the economy and their success is linked to the satisfactory growth of the economy. The main objective of these banks is to provide long term loans for expansion and modernization of industries. In India, such banks were established o a large scale after independence. They are Industrial Finance Corporation of India (IFCI), Industrial Credit and Investment Corporation of India (ICICI) and Industrial Development Bank of India (IDBI).
4.) Land Development Banks:
The Long term credit needs of the agricultural sector are met by another type of Cooperative institution called as Land Development Banks. The structure of these banks is a two-tier one-at the state level there are Central Land Development Banks and at the district or taluka level, there are primary Land Development Banks. In a few States, e.g Gujarat, Jammu and Kashmir and UP, the structure is unitary i.e., there are Apex Land Development Banks which operate directly through their own branches at the district level.
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 like Marwaries and Multanis even today run specialized indigenous banks.
6.) Central Bank:
Every country of the world has a Central Bank. In India, Reserve Bank of India; in USA
Federal Reserve and in UK, Bank of England are example of the Central Banks. These Central Banks are the bankers of the other banks. They perform specialized functions, i.e., issue of paper currency, work as bankers to governments, supervise and control foreign exchange. A Central Bank is a non-profit making institution. It does not deal with the public but it deals with the other banks. The principal responsibility of the Central Bank is thorough control on currency of a country.
7.) Co-operative Banks:
In India, Cooperative Banks are registered under the Cooperative Societies Act 1912. They generally give credit facilities to small farmers, salaried employees, small scale industries, etc. Cooperative banks are in rural as well as in urban areas. The functions of these banks are just similar to that of Commercial Banks.
8.) Foreign Banks:
Standard Chartered Banks, City Bank, HSBC are the examples of Foreign Banks working in India. These banks are mainly concerned with financial foreign trade. Following are the various functions of Exchange Banks.
· Remitting money from one country to another country
· Discounting of foreign bills.
· Buying and selling gold and silver.
· Helping import and export trade.
Types of Accounts and its Functions
Types of Bank Accounts:
· Fixed Deposit Account or Time Deposit Accounts
· Current Account or Demand Deposit Account
· Saving Account
· Recurring Deposit Account
· Demat Account
· CASA Account
Fixed Deposit Account or Time Deposit Accounts:
Cash is deposited in this account for a fixed period. This is not transferable. If the depositor stands in need of the amount before the expiry of the fixed period, he can withdraw the same after paying the penalty to the bank. This type of deposit attracts high rate of interest. Longer the period of deposit higher is the rate of interest. It is also called Time Liability of the Bank.
Current Account or Demand Deposit Account:
A depositor can deposit his funds any number of times he likes and can withdraw the same any number of times he wishes. Ordinarily businessmen deposit their funds in this account. No interest is paid by the bank on this account. The bank demands some charges from the depositors if the amount lying in the account falls below the minimum limit.
In this account, interest is given now on per day basis between 10th and 30th of every month.
Recurring Deposit Account:
Under this account, a specified amount is deposited every month for a specific period, such as, 12, 24, 36, or 60 months it can be even for 120 months. This amount cannot be withdrawn before the expiry of the given period except under exceptional circumstances. Interest on the amount deposited is also credited to the account of the depositor. Like time deposit account, interest paid on this account is higher than other accounts.
Demat refers to a dematerialized account. Demat account is just like a bank account where actual money is replaced by shares. Just as a bank account is required if we want to save money or make cheque payments, we need to open a demat account in order to buy or sell shares.
CASA stands for Current Account and Savings Account which is mostly used in West Asia and South-east Asia. CASA deposit is the amount of money that gets deposited in the current and savings accounts of bank customers. It is the cheapest and major source of funds for banks. The savings accounts portion pays more interest compared to current accounts.
The CASA ratio shows how much deposit a bank has in the form of current and saving account deposits in the total deposit.
A higher CASA ratio means higher portion of the deposits of the bank has come from current and savings deposit, which is generally a cheaper source of fund. Many banks don’t pay interest on the current account deposits and money lying in the savings accounts attracts a mere 3.5% interest rate.
Hence, higher the CASA ratio better the net interest margin, which means better operating efficiency of the bank.
How Is CASA different from term and demand deposits?
Current and saving accounts remain operational. Depositors don’t need to give prior notice to withdraw money, however, in case of term deposits, the money is locked in for a specific period. If a depositor wishes to withdraw the money before maturity, he may have to pay a fine. Usually, an overdraft facility is available with the current account deposit. Demand deposit gives you the facility to withdraw your money anytime.
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