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Initially, there were only four types of bank accounts that were operating in India. These included the Current Account, Savings Account, Recurring Deposit Account and Fixed Deposit Account. But later with the advancement in the banking sector, various other types of bank accounts were introduced.
As the name suggests, the savings accounts can be opened by an individual or jointly by two people with an aim to save money.
The main benefit of opening a savings bank account is that the bank pays you interest for opening this type of account with them.
Given below are a few features of the Savings account:
The second type of bank account is the current bank account. These accounts are not used for the purpose of savings.
Some important pointers related to the current bank account have been discussed below:
This type of bank account is mostly opened by businessmen. Associations, Institutions, Companies, Religious Institutions and other business-related works, the current account can be opened
The savings account holders can get an ATM/Debit/Rupay Card if they want to
Savings bank account is further divided into two types: Basic Savings Bank Deposit Account (BSBDA) and the other one is Basic Saving Bank Deposit Accounts Small Scheme(BSBDS)
The savings bank account is mostly eligible for students, pensioners and working professionals
This type of bank account does not have any fixed maturity
Overdraft facility is available for current bank accounts
There is no interest that is paid on such accounts
There is no fixed number of times that money can either be deposited or withdrawn from such accounts
Internet banking is available
Recurring Deposit account or RD account is a form of account wherein the account holder needs to deposit a fixed amount every month until it reaches the fixed maturity date.
The features of the Recurring deposit account have been discussed below:
The range of months for which an RD account can be opened varies from 6 months to 120 months
The interest rate varies depending upon the bank you choose to open an account with
Nomination facility is also available for RC accounts
Passbook is issued for this type of bank account
Premature withdrawal of the amount is permitted, provided a sum of amount is deducted as penalty
FD or a fixed deposit account is another type of bank account that can be opened in any Public or Private sector bank.
The list of important things that need to be known with respect to the fixed deposit account has been mentioned below:
It is a one time deposit and one time take away account. Under this type of account, the account holder needs to deposit a fixed amount of sum (as per their wish) for a fixed time period
The amount deposited in FD account can only be withdrawn all at once and not in instalments
Banks pay interest on the fixed deposit account
The rate of interest depends upon the amount you deposit and for the time duration of the FD
Full repayment of the amount is available before the maturity date of FD
Shares and securities which can be held in electronic format constitute the DEMAT account. The DEMAT account also stands for Dematerialized Account.
Given below the points that need to be known by a candidate regarding the DEMAT Account:
There are only two depository organisations which manage this type of bank account in India. This includes: National Securities Depository Limited and Central Depository Services Limited
This helps facilitate easy trade of bonds and shares
Helps in conducting stress-free transaction of shares
KYC is required for opening the DEMAT Account
Transaction cost is reduced
Traders can work from anywhere
The transfer of securities can be done with reduced paperwork
To fulfil the bank requirements of a Non-Residential Indian or a Person of India Origin, the option of NRI account is available.
The NRI Accounts are further divided into three types:
NRO ( Non-Resident Ordinary Rupees) Account – This shall allow you to transfer your foreign earnings easily to India. It can be opened in the form of an FD/RD/Current/Savings account. These accounts can be opened by an individual or jointly opened
NRE ( Non-Resident External Rupees) Account – When an Indian citizen moves abroad to work there, his/her account needs to be converted into an NRE account. This account can be jointly opened with an Indian resident
FCNR ( Foreign Currency Non-Resident ) Account – This type of account can be opened to manage an international currency. It can only be in the form of Term deposit and can be withdrawn after the maturity period only.
To help manage the finances here are some excellent reason to have a bank account-
Bank accounts offer simplicity for transactions. one can easily withdraw money and make payments if they have a bank account.
Having bank accounts offers a safe treasury of your hard-earned money and even if the bank or the unions are close you are sure to get back your money.
Most banks and financial institutions offer the account holders free or low-cost services, hence bank accounts are cheaper.
It is an easy way to grow money. Most banks offer an interest rate when you put your money in a savings account. The interest will help your money grow over time.
It offers easy access to credits. Having a bank account is favourable as banks provide the facility to access credits to its customers for Personal loan, home loan, education loan etc.
1. Repo Rate
In India, it is the rate at which the Reserve bank of India lends money to commercial banks in need, with collateral. This situation usually arrives at the time of inflation. 40% is the current repo rate in India. Bank rate is similar to this but doesn’t require collateral to provide loans. The current bank rate is 4.25%.
2. Reverse Repo Rate
In India, it is the rate at which the reserve bank of India borrows funds from commercial banks. It is usually done to control the money supply in the market. The current reverse repo rate is 3.35%.
3. Statutory Liquidity Ratio
The Banks of India have to maintain a minimum percentage of cash, gold, and other securities, before lending loans to customers. This is called the Statutory Liquidity Ratio. This exists to control credit expansion in the country. The SLR rate is 18.50%.
4. Cash Reserve Ratio
In India, all the banks have to maintain a certain amount of funds with the Reserve Bank of India. This is called the Cash Reserve Ratio. It is usually increased when the RBI wants to control liquidity in the market. The current CRR rate is 3%.
5. Retail Banking
It is a service offered by many banks across the country. This allows every consumer to manage their accounts, enjoy access to their credits, and secure their money conveniently. This is also called consumer banking.
It is a cryptocurrency that can be sent from one person to another without any intermediaries. It is not administered by the RBI.
7. Call Money
It is a short term loan with usually higher interest. The maturity period of this is between 1 to 14 days. The lender can ask for the money anytime they want. If it is repaid within a day then it becomes call money. And if it is repaid after more than a day then it becomes notice money.
8. Capital Market / Money Market
The capital market deals with long term debts. It raises capital shares by dealing in shares, bonds, and other long-term investments. It is possible in primary and in secondary markets. The money market, on the other hand, deals with short term funds. The maturity period is usually less than 365 days.
9. Scheduled Bank
Reserve Bank of India Act, 1934 led to the formation of the Reserve Bank of India. This act has certain sections. The Second Schedule of the Act has banks listed in it called the Scheduled Banks. The banks not listed there are Non-Scheduled Banks.
10. Non Performing Assets
For banks in India, it is any loan that is overdue for more than 90 – 180 days. The interest or payment is missed and the loan becomes the default. The asset kept with the bank is not producing income anymore making it a non-performing asset.
11. Money Inflation
It refers to an increase in the money supply in the market reducing the purchasing power of the consumer. In easy words, the value of money drops, and fewer goods are consumed per unit currency.
Deflation on the other hand refers to a decrease in the money supply that increases the purchasing power of the consumer.
12. Negative Interest Rate
It is a policy that allows central banks to charge interest to commercial banks for depositing money with the central bank. This, in turn, allows commercial banks to charge interest for cash deposits by customers rather than paying interest. This situation usually occurs at the time of deflation.
13. Green Banking
It is an idea to promote environmentally friendly practices to reduce carbon footprint by banking activities. It aims to achieve banking and environmental sustainability.
14. Blockchain System
It is a system to record information in a difficult way to prevent hacking and cheating of the system. It uses a digital ledger that is distributed across a number of networks. As a result, the data is available in sections across multiple locations making it difficult to hack.
15. Balloon Mortgage
It is a type of loan that allows borrowers to make low payments in the initial period, but repayment of the balance amount in a lump sum at maturity. The last payment becomes Balloon payment because of a higher amount.
It is an act to steal the customer’s personal information. It is done by using a magnetic stripe of the card. This is illegal and comes under cybercrime.
17. Money Laundering
It is an illegal financial process that includes criminals concealing the origin of money. It is usually to cover up the black money generated by illegal activities.
It is a paper that instructs the bank to pay a specific amount from one account to another account to whom the cheque is issued.
19. Direct Credit
It is an electronic transfer of funds from the payer’s account to the payee’s account. Direct Debit, on the other hand, is an instruction to your bank that allows a third party to make a transaction from your account. It is usually for paying bills.
20. Cash Credit
It is a type of loan which is short term in nature and fixed in the limit. It is usually extended by a bank to a company to meet its working capital requirements. Overdraft, on the other hand, allows extension of loans for personal use as well even with the low account balance.
21. Bill of Exchange
It is a financial instrument that instructs the person to make a payment of a specified amount to the signatory of the note. They are usually a part of international trade.
22. Marginal Standing Facility
It is a scheme by the RBI that allows commercial banks to borrow money from the central bank overnight in emergencies like dry liquidity. But the interest rate is higher than the repo rate in this situation. The current IMF rate is 6.75%.
23. Minimum Reserve System of RBI
It is a system that makes it mandatory for the central bank to keep a minimum reserve of gold and foreign exchange. The current minimum reserve amount is Rs 200 crores for the RBI.
24. Core Banking Solutions
It is a software that allows customers to access their bank accounts from any of the member branch offices.
25. Unified Payment Interface
It is a system that allows real-time payments facilitating inter-bank transactions. It is monitored by the central bank and works instantly.
26. Micro ATMs
It’s a card swipe device directly connected to the main banking system. They are present at the locations where bank branches cannot reach.
27. Letter of Credit
It is a document by the bank that guarantees full payment by the buyer to the seller on time. In case the buyer fails, the bank covers the payment. It is an undertaking by the bank to the seller.
It is an agreement between banks and insurance companies. In this, the bank offers insurance benefits to its customers.
29. Banking Ombudsman
It is a judicial authority that allows customers to file complaints if they are not happy with banking services.
30. NOSTRO Account
It is an account that the bank has of foreign currency deposits with another bank of that country. It is to initiate foreign exchange and trade transactions.
31. VOSTRO Account
It is an account that a bank holds on behalf of another bank. The funds in this account are for foreign counterparts.
The Mumbai Interbank Offered Rate is the rate at which a bank offers a short term loan to other banks. The current MIBOR rate is 4.28%.
33. CASA Account
It is a combination of current and savings accounts. It offers features of both the accounts. CASA Account has a low-interest rate on the current account and above-average return on saving return.
34. RAFA Account
It is the ratio of deposits in Recurring Deposit Account Fixed Deposit Account of a bank.
35. DEMAT Account
It is an account that allows Indian citizens to deal with stocks and debentures listed in the stock market. Like normal accounts have money deposits, Demat accounts have stock deposits.
36. Legal Tender
It is a form of money that must be accepted ( by law ) as a payment of any monetary debt.
37. Currency Chest
It is a depository by the central bank of India. There are 4,075 currency chests in India. All the excess money of the country is kept here under custody.
It is a situation in which the person/company is unable to pay its debts on time.
After a person or company becomes insolvent, they can seek relief from some or all debts. This legal process is Bankruptcy.
It is the process of distributing the payments in smaller installments. And amortization of assets is allotting a price to an intangible asset.
41. Credit Crunch
It is a situation in which there is a sudden fall in the availability of loans from banks and other lenders.
42. External Commercial Borrowings
It is a transaction in which a non-resident of the country lends foreign currency loan to an Indian.
43. Small Finance Banks
It is a segment of banks to provide financial security to small businesses and industries.
44. Interest Rate Swap
It is a contract to exchange all future interest rates of a loan between two entities.
45. Public Credit Registry (PCR)
It is a public document that has financial information about all borrowers in India.
46. Off-Balance Sheet Exposure
This sheet includes all activities that do not involve lending or borrowing but generate fee income for banks.
47. Priority Sector Lending
According to this, all the banks have to offer a specified proportion to certain sectors like micro and small industries, agriculture, etc.
48. Credit Rating
It is a system to recognize an individual’s ability to pay back the loan according to his past dealings and transactions.
49. Prepaid Payment Instrument (PPI)
It is a method that allows the purchase of goods and services with the value stored in this instrument. Smart cards, mobile wallets, etc. come under this instrument only.
50. National Electronic Fund Transfer
It is a payment system that allows the transfer of funds from one bank account to another account or another branch. It involves one to one fund transfer in a specific time slot.
51. Real-Time Gross Settlement
It is a process that allows instant transfer of funds in real-time. This means that the transaction is on a gross basis.
52. Immediate Payment Services
It allows instant interbank payment through electronic fund transfer using mobiles or laptops.
By: Samar Thakur ProfileResourcesReport error
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