Banking basics

Banking basics

Banking basics
Banking is defined in Sec.5(b) of Banking Regulations Act (BRA) 1949 as “Accepting for the purpose of lending or investment deposits of money from public repayable on demand or otherwise & withdrawable by cheque, draft, order or otherwise.
Banking Company (defined in Sec.5(c ) of BRA 1949) means any company which transacts the business of banking in India.
Banker (defined in Sec.3 of N.I. Act 1881) includes any person acting as a banker and any post office saving bank.
Deposits:- Repayable on demand:- Savings Bank Deposits , Current Deposits. (CASA) , Flexi Deposit. Cheque book provided.
Repayable otherwise than on demand:- Recurring Deposits, Fixed Deposit, Reinvestment Plan, Regular Income cum Recurring Deposit (RIRD) etc.Lending:-
(A) Fund Based Lending:-
1) Loans – Demand (Repayable within 35 months) & Term Loans
2) Overdraft Facility
3) Cash Credit Facility against pledge or hypothecation of goods, against hypothecation of book-debts or against assignment of supply Bills (Bills drawn for goods and services supplied to Govt. or Semi-Govt. departments
4) Bills Purchased / Discounted.
(B) Non Fund Based Facilities:-
1) Letters of Credit (L/Cs)
2) Guarantees
3) Co-acceptance Limits
Investments:-
SLR Investments (Presently 24% of Demand & Time Liabilities)
Investments in approved Govt. & Semi-Govt. Securities classified as
i. Held to Maturity (HTM)
ii. Held For Trading (HFT)
iii. Available For Sale (AFS)
Banking Business:- (Sec.6 of BRA 1949):- Activities in addition to Banking Business
1. Primary Functions:-
a) Agency Functions:-
i. Collection of Cheques & Bills
ii. Sale and purchase of securities. ( Bank-Agent, Customer – Principal)
b) Remittance of Funds:-
Through Demand Draft (DD), Mail Transfer (MT), Telegraphic Transfer (TT), Real Time Gross Settlement (RTGS), National Electronic Fund Transfer (NEFT)
c) Trustees & Executors
d) Execution of Standing orders / Instructions,
e)…