Modern banking descriptive Question Answers:

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Modern banking descriptive Question Answers:
Central Banks:
Commercial Banks:
Industrial Banks or Financial Institutions:
Exchange Banks (Authorized Dealers in Foreign Exchange):
Co-operative Banks:
Land-mortgage Banks (Presently known as Agriculture and Rural Development Banks):
Indigenous Banks:
Savings Banks:
Supranational Banks:
International Banks:

Branch Bank is a type of banking system under which the banking operations are carried with the help of branch net
the branches are controlled by the Head Office of the bank through their zonal or regional offices.
Advantages of Branch Banking: Branch banking system has the following advantages:
1. Economies of Large Scale operations:
2. Economy of Cash Reserves: 
3. Proper use of capital: 
4. Economy of Costs: 
5. Risks-spreading Economy:
Disadvantages or Demerits of Branch Banking: Branch banking generally suffers from the following limitations:
1. Danger of Mismanagement:
2. Delays in Decision-making:  
3. Lack of Personal Contact: 
4. High operating and maintenance expenses:

Functions of NABARD:
1. To serve as an apex financing agency for the institutions providing investment and production credit for promotin
developmental activities in rural areas;
2. To take measures towards institution building for improving absorptive capacity of the credit delivery system, inc
monitoring, formulation of rehabilitation schemes, restructuring of credit institutions and training of personnel;
3. To coordinate the rural financing activities of all institutions engaged in developmental work at the field level and
with the Government of India, the State Governments, the Reserve Bank and other national level institutions concern
policy formulation; and
4. To undertake monitoring and evaluation of projects refinanced by it.
5. NABARD gives high priority to projects formed under Integrated Rural Development Programme (IRDP).
6. It arranges refinance for IRDP accounts in order to give highest share for the support for poverty allevia­tion progr
by Integrated Rural Development Programme.
7. NABARD also gives guidelines for promotion of group activities under its programs and provides 100% refinance
for them.
8. It is setting linkages between Self-help Group (SHG) which are organized by voluntary agencies for poor and nee
areas.

1.) Cheque is issued by customer, whereas Demand draft is issued by the bank.

2.) In cheque payment is made after presenting cheque to bank, while in DD is given after making payment to bank.

3.) Cheque can bounce due to insufficient balance . DD cannot be dishonored as amount is paid before hand.

4.) Payment of cheque can be stopped by drawee, whereas payment cannot be stopped in DD.

5.) A cheque can be paid to bearer or order. While, DD is paid to person on order.

6.) In cheque drawer and payee are different person. In DD, both parties are banks.

7.) A cheque needs signature to transfer amount, While DD does not require individuals signature to transfer fund, it
have the signature of banker with his ID no.

Monetary Implications of Modern Banking Operations

Neutral Money. Here, the money supply is so adjusted that it increases or decreases along with increase or decreas
production. ...
Full Employment. To create more employment opportunities, industries are encouraged with cheap credit. ...
Price Facility. ...
Correcting adverse balance of payment. ...
Exchange Rate facility

Different Types of deposit accounts

Savings Bank Account
Current Deposit Account
Fixed Deposit Account
Recurring Deposit Account

The primary functions of a commercial bank can be classified into two as below:
Accepting Deposits, and
Lending Money.
 Generally banks accept the following types of deposits:
Current Deposits.
Savings Deposits.
Fixed Deposits.
Recurring Deposits
Different types of lending by commercial banks:
Personal Loans: Most banks offer personal loans to their customers and the money can be used for any expense lik
bill or purchasing a new television. ...
Credit Card Loans: ...
Home Loans: ...
Car Loans: ...
Two-Wheeler Loans: ...
Small Business Loans: ...
Payday Loans: ...
Cash Advances:

Miscellaneous Functions of commercial banks:

1. Banks provide safety vaults and lockers to their customers for safe custody of their valuable articles and documen
2. Banks also issue letters of credit like circular notes and travellers’ cheque, etc., to be used by the customers in dist
3. The banks also provide various kinds of business and trade information which may be beneficial to their customer
4. The banks give correct information to their customers about the credit of other customers and also about the finan
position and status of their customers whenever it is necessary.
5. The transactions made between two customers through bank act as a third party guarantee and a proof, in case of d
arising out subsequently.

There are several general utility services that commercial banks offer like:

Issuing traveler cheques.
Offering locker facilities for keeping valuables in safe custody.
Issuing debit cards and credit cards

Functions of central bank:

(1) Bank of Issue, (2) Banker, Agent and Advisor to Government, (3) Custodian of Cash Reserves, (4) Custodian of
Balances,
(5) Lender of Last Resort, (6) Clearing House, (7) Controller of Credit, and (8) Protection of Depositor’s Interest.

Departments of the Reserve Bank of India

Banking Department: ...
Issue Department: ...
Department of Currency Management: ...
Department of Expenditure and Budgetary Control: ...
Department of Government and Bank Accounts: ...
Exchange Control Department: ...
Department of Banking Operations and Development: ...
Industrial Credit Department:

Effectiveness of Bank rate policy

The bank rate policy signifies manipulation of the rate of discount by the central bank in order to influence the credit
in the economy. ... If the bank rate is raised, its immediate effect is to cause an increase in bank's deposit and lending

Functions of central bank as a banker to government:

Central bank functions as a banker to the government—both central and state governments. It carries out all banking
of the government. Government keeps their cash balances in the current account with the central bank. Similarly, cen
bank accepts receipts and makes payment on behalf of the governments.

RBI has authority to regulate and administer the entire banking and financial system. Some of its supervisory functio
given below.
Granting license to banks
The RBI grants license to banks for carrying its business. License is also given for opening extension counters, new
even to close down existing branches.
Bank Inspection
The RBI grants license to banks working as per the directives and in a prudent manner without undue risk. In additio
can ask for periodical information from banks on various components of assets and liabilities.
Control over NBFIs
The Non-Bank Financial Institutions are not influenced by the working of a monitory policy. However RBI has a rig
directives to the NBFIs from time to time regarding their functioning. Through periodic inspection, it can control the
Implementation of the Deposit Insurance Scheme
The RBI has set up the Deposit Insurance Guarantee Corporation in order to protect the deposits of small depositors.
deposits below Rs. One lakh are insured with this corporation. The RBI work to implement the Deposit Insurance Sc
case of a bank failure.

Procedure for opening a bank account:

Obtain one application form; Fill up the form and sign at appropriate places
Along with the application form, you have to submit the following:
two passport size photos
photocopy of address proof - any one of the following: voter id card; driving licence; passport; AADHAAR card
photocopy of identity proof - anyone of the following: voter id card, driving licence; passport; AADHAAR card
opening cash
Submit the application form along with the enclosures to the deposit section; the officer will verify the details and th
will permit opening of an account

Special Type of Customers

Lunatics.
Illiterate persons.
Married women.
Executors and administrators:
Trustees.
Joint accounts.
 Partnership firm.
Joint stock companies.

Precautions to be taken by banker to open minor's account

If the age of minor is less than 10 years then the account should b jointly opened with some guardian but if the age o
in between 10 and 18 years then it can be operated by the minor.
when the minor becomes major (18 years) then the account should be converted into regular saving account.
the bank should know and inform the minor about the daily and monthly spending limits, which is different in differ
the banker must inform all the rules applicable to the account to the guardian of the minor.
all the RBI guidelines must be followed by the banker.

Conseqences of wrongful dishonor of cheques:

A payer bank is liable to its customer for damages caused by the wrongful dishonor of an instrument. The bank's liab
limited to actual, provable damages including any potential consequential damages

Duties of a banker while honouring customers cheques:

The paying banker is responsible to his customer and is under a duty to make payment of the cheques to the right per
accordance with the instructions of the drawer. If he dishonours the cheque wrongfully or honours the cheques carel
negligently he subjects himself to heavy liabilities.