BANKING AND

INSURANCE
SERVICES
Banking - Introduction
The word of bank is derived from the Italian word banco signifying a bench.
The term bankrupt and broke is similarly derived from banca rotta.
Which refers to an out of business bank, having its bench physically broken.
Money lenders in orthern Italy originally did business in open areas or big open rooms with
each lender working from his own bench or table.
Meaning of Bank
Bank is fnancial institution and a fnancial intermediary that accepts deposits
and channels those deposits into lending activities, either directly by loaning
or indirectly through capital markets.
A bank is a connection beteen customers that have capital defcits and
customers ith capital surpluses.
Defnition of Banking

!ection " #b$ of the Banking %egulation Act
&'(' defnes )Banking* as
+)Accepting for the purpose of lending and
investment, deposits of money from the public
+
repayable on demand or otherise
+and ithdraable by che,ue, draft, order or
otherise*
-raditional !ervices

Acceptance of deposits

Advancing of loans

.redit .reation

Investment of /unds
Acceptance of deposits
-ime 0eposits
+ /i1ed 0eposits
+ %ecurring 0eposits
+ .ash .ertifcates
0emand 0eposits
+ !avings 0eposits
+ .urrent 0eposits
Advancing of loans
2verdraft
.ash .redit
0iscounting of Bills
3oans and Advances
4ousing /inance
5ducational 3oan
3oans against !hares6!ecurities
3oans against !aving .ertifcates
.onsumer 3oans and Advances
.redit .reation
Investment of /unds
Modern !ervices

Agency /unctions

7eneral 8tility !ervices

Agency /unctions

.ollection of che,ues, dividends and interests

9ayment of rent, insurance premiums

0ealing in foreign e1change

9urchase and sale of securities

Act as a trustee, e1ecutor, attorney, etc.

Act as a correspondent

9reparations of Income--a1 returns

7eneral 8tility !ervices
!afety 3ocker facility
9ayment Mechanism or Money
-ransfer
-ravellers: .he,ue
.ircular notes or .ircular 3etters of
.redit
3etters of credit
Acting as %eferees
9rovides trade information
A-M facilities
.redit cards
7ift .he,ues
Accepting Bills
Merchant Banking
Advice on /inancial Matters
/actoring !ervice
.ore Banking !ervice
Internet Banking !ervice
Automated -eller Machine !ervice
5 Banking !ervice
-elebanking !ervice
!tanding Instructions
%ecent -rends in Banking
!ervices

5lectronic 9ayment !ervices 5 .he,ues

%eal time 7ross !ettlement #%-7!$

5lectronic /unds -ransfer #5/-$

5lectronic .learing !ervice #5.!$

9oint of !ale -erminal

5lectronic 0ata Interchange #50I$

.redit .ards
Bank Marketing
9roduct
9romotion
0elivery system
9eople and 9rocesses
Insurance -
Introduction

; A promise of compensation for specifc potential
future losses in e1change for a periodic payment.

; Insurance is designed to protect the fnancial ell-
being of an individual, company or other entity in the
case of une1pected loss.
<hat is insurance=
-he defnition of insurance can be made from to points>

/unctional defnition.

.ontractual defnition.
FUNCTIONAL DEFINITION

Insurance is a co-operative device to spread the loss caused by

a particular risk over a number of persons ho are e1posed to it
and ho agree to insure themselves against the risk.
Contractua
Defnition
In the ords of ?ustice -indall,
)Insurance is a contract in hich
a sum of money is paid to the
assured as consideration of
insurer@s incurring the risk of
paying a large sum upon a given
contingency.*
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Insurance is a social device to accumulate funds to
meet unknon and uncertain losses.
Insurance provides protection against the possible
losses and also provides for capital for development of
nation.# funds received as premium ill be pooled and
deployed in various approved pro?ects of the
government$
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.over uncertainty of loss

9rotection against the possible loss that may occur on a future

date

!pread the risk to various people ho insure ith them

collecting premiums

Aot only they cover loss they also prevent loss by distributing
monetary risk to many people
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9rinciples

!hould be a contract

8tmost good faith

Insurable interest

Indemnity#actual amount not e1ceeding the

amount of policy$

.ontribution#only applicable to marine and fre

insurance$

.ausa pro1ima# nearest cause$

%educing loss#insurer reduce liability of claim$

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3ife Insurance
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3ife insurance is a ritten contract
beteen the insured and the insurer, that
provides for the payment of the insured
sum on the date of the maturity of the
contract or on the unfortunate death of the
insured, hichever occurs earlier.
3ife Insurance can be termed as an agreement beteen the
policy oner and the insurer, here the insurer for a
consideration agrees to pay a sum of money upon the
occurrence of the insured individual:s or individuals: death or
other event, such as terminal illness, critical illness or maturity
of the policy.
<hat is 3ife Insurance=
EF
Insurance in India can be traced back to the Gedas. /or
instance, yogakshema, the name of 3ife Insurance
.orporation of India:s corporate head,uarters, is derived
from the %ig Geda.
Bombay Mutual Assurance !ociety, the frst Indian
life assurance society, as formed in &HFD.
2ther companies like 2riental, Bharat
and 5mpire of India ere also set up
in the &HFD-'Ds.
4istory of 3ife Insurance
EH
It as during the sadeshi movement in the early EDth
century that insurance itnessed a big boom in India ith
several more companies being set up.
By the mid-&'"Ds, there ere around &FD insurance
companies and HD provident fund societies in the country:s
life insurance scene. 4oever, in the absence of regulatory
systems, scams and irregularities ere prevalent in most of
these companies.
As a result, the government decided to nationaliIe the life
assurance business in India. -he 3ife Insurance .orporation of
India as set up in &'"J to take over around E"D life
insurance companies.
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/or years thereafter, insurance remained a
monopoly of the public sector. -he sector as fnally
opened up to private players in EDD&.
-he Insurance %egulatory K 0evelopment Authority,
an autonomous insurance regulator set up in EDDD,
has e1tensive poers to oversee the insurance
business and regulate in a manner that ill
safeguard the interests of the insured.
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!"# to "a$e a Life In%urance&

9rotection

3i,uidity

-a1 %elief

Money hen you need it

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-ypes of 3ife Insurance
Te
r'
L
ife
In
%
u
ra
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c
e
Increasing60
ecreasing term
policies
.
onvertible -erm
A
ssurance 9olicy
3evel -erm
3ife Insurance
%ene
able term
life Insurance
E
n
(
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)
'
e
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t In
%
u
ra
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c
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Coint life endo

m
ent plan

M
oney back endo
m
ent plan

M
arriage endo
m
ent plan
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e
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o
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ife
In
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2
rdinary
hole life plan

3im
ited paym
ent
hole life plan
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!um assured is payable only in the event of death during the term.
In case of survival, the contract comes to an end at the end of term.
-erm 3ife Insurance can be for period as long as (D years and as short as & year.
Ao refund of premium
Aon-participating policies
3o premium as only death risk is covered.
-erm 3ife Insurance
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Increa%ing Ter' In%urance

3ife insurance cover under

this plan goes on increasing
periodically over the term in
a predetermined rate. #%iders$
Decrea%ing Ter' In%urance

-he sum assured decreases ith the

term of the policy. Aormally decreasing
term assurance plan is taken out for
mortgaged protection, under hich
outstanding loan amount decreases
as time passes as also the sum assured.
-ypes of -erm Insurance
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Con$erti-e ter' a%%urance .oic#

Under this plan a policyholder

is entitled to exchange the term
policy for an endowment
insurance or a whole life policy.

Conversion can be done at any

time during the term except last
2 years.
Le$e Ter' Life In%urance

The sum assured throughout the term of the policy does not change.
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Rene)a-e Ter' Life In%urance

<ith reneable term insurance, the insurance

companyautomaticallyallos you to rene your coverage
after the term of the policy is over #generally " to ED years$
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5ndoment insurance plans is an investment oriented plan
hich not only pays in the event of death but also in the event
of survival at the end of the term.
Is a contract underritten by a life insurance company to pay a
/i1ed term plus Accumulated profts that are declared annually.
Minimum age at entry > &Eyears
Ma1imum age at entry> J"years
Ma1imum age at maturity > F"years
5ndoment Insurance
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/oint Life En(o)'ent *an0

8nder this plan, to lives can be insured under one contract.

-he sum assured is payable at the end of the endoment term or death of either of the
to.
1one# Back En(o)'ent *an0

In this plan, there is an additional advantage of receiving a certain amount of money at

periodic intervals during the policy term.
-ypes of 5ndoment Insurance
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1arriage En(o)'ent *an0

-his plan has the specifc condition that the sum assured is
payable only after the e1piry of the term even if death of the life
assured takes place earlier.
E(ucationa En(o)'ent *an0

-hese plans are specially designed to meet educational e1pense

of children at a future date. If the insured parent dies before the
date of maturity the installment is paid in lump sum ith
immediate eNect hich helps to meet the educational e1penses.
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<hole life plans are another type of endoment plan, hich cover
death for an indefnite period.
<hen the policy holder dies, the face value of the policy, knon
as a (eat" -eneft, is paid to the person or persons named in the
life insurance policy #the benefciary or benefciaries$.
It can be ith or ithout profts.
If you cancel the policy after a certain amount of time has passed,
the insurance company ill surrender the cash value to you.
9ermanent#<hole$ 3ife Insurance
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23 Or(inar# !"oe Life *an0
.
-his is a continuous premium payment plan. -he insured pays premium
throughout his life. It provides dual facility of protection plus savings.
43 Li'ite( *a#'ent !"oe Life *an0
.
It provides the same beneft as above but premiums are paid for a limited
period. 9remiums are suOciently higher to cover the risk.
-ypes of <hole 3ife Insurance
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!ince last fe years insurance companies have started oNering risk
cover plans like limited payment hole life, and endoment
assurance plan from the age of &Eyears and money back plan from
age of &L years#completed$.
Ae plans have been specifcally designed for children here the
risk of the child starts much earlier say F years.
.hildren@s 3ife Insurance
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9olicies on the lives of children are taken out by
other elders. After some time hen the child
becomes ma?or and is competent to contract, the
child may assume the onership of the policy. -he
policy is then said to Pvest@ in child.
-he date on hich this happens is called the
Ptesting date@.
-he risk begins hen the child attains &H years of
age. -his is called the Pdeferred date@ and the
period beteen the deferred date and the date of
commencement of policy is called the Pdeferred
period@.
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It has emerged as one of the fastest
groing insurance products.
It is a combination of an investment
fund# such as mutual fund$ and an
insurance policy.
-he premium amount is invested in the
stock market and returns better income on
the maturity period.
8nit 3inked 9lans
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Better for long-term investment option.
83I9s generally provide higher returns as large
portion of the funds are invested in e,uities.
-here is also Qe1ibility and the assured can choose
levels and e1tent of cover needed.
-here is also option of sitching over from one fund
to another if it does not seem to be proftable.
83I9s can be classifed as
+8nit linked e,uities, bonds, real estate K money market
instruments
+5,uity linked only in e,uities
+Inde1 linked e,uity, bonds or money market instruments.
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3ife insurance claim can arise either>
2n the maturity of the policy 1aturit# Cai'
2n death of the policy holder Deat" Cai'
!urvival up to specifed period during the term Sur$i$a -eneft%
9olicy .laim
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In case of 5ndoment type of 9olicies, amount is payable at the
end of the policy period.
0ischarge /orm K 9olicy 0ocument
2n receipt of these to documents post dated che,ue is sent by
post so as to reach the policyholder before the due date
-he gross amount consists of Ba%ic %u' a%%ure( and
-onu% if any.
Maturity .laim
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!ame as maturity claims, sum assured becomes payable on
e1piry of full term but on survival of the insured.
In policies like, money back plan for &" years term, &6(
th
of
the sum assured becomes payable on the life assured on
surviving " year, further &6(
th
becomes payable after
additional " years and rest balance at the end of &" years.
!urvival .laims
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E -ypes>

9remature death claim ithin L years

2ther claim after L years

Inti'ation of (eat" is to be given by a proper person in riting.

&. 2riginal 9olicy Bond
E. 0eath .ertifcate
L. 9roof of relationship ith the deceased person
In case of Accidental 0eath
9ostmortern %eport, /I% .opy , /inal 9olice %eport is also re,uired
0eath .laim
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!uicide or attempted suicide or intentional

self-inQicted in?ury

8nder inQuence of drugs or alcohol,

narcotics or psychotropic substance not
prescribed by a Medical 9rofessional.

<ar, Invasion, .ivil <ar, %iots, %evolution

or any ar like operation.

.riminal or unlaful act

!ervice in the military or police

/lying activity other than as a paying

passenger.

%acing vehicle.
51clusions in Accident
Benefts
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An additional sum e,ual to the sum assured ill be paid in monthly
installments spread over&D years.
/uture premiums are aived
Ma1. limit of additional beneft is ",DD,DDD or &D,DD,DDD depending upon the
insurer.
9ermanent disability benefts
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*re5con(ition for granting %uc" -eneft are0
+ 0isability should be solely and directly as a result of accidental
in?ury.
+ 0isability must be permanent
+ In?ury and disability must occur before the insured attains JD years
of age.
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Ta6 -eneft fro' Life
In%urance *oicie%

-he Indian Income -a1 Act, make buying insurance )cheaper*

as ell as an eOcient investment for long term savings.

On *re'iu'%0

!ection HD0 of the Insurance Act is an eNective ay for the

salaried person to reduce ta1 liability through life insurance
policy.

Investments in 3ife Insurance premium is sub?ect to rebate.

9remium>
9aid by an individual in respect of>
himself6herself,
his6her spouse, and
any of his6her children.

Premium amount paid should not exceed 20%

of the sum assured.

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7o) 1uc" Life In%urance
Co$erage S"ou( Be *urc"a%e(&

-he %ule of -humb is-

.overage should e,ual to J to &D times annual
income.

-he other %ule is-

.overage to cover his family consumption need.
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GET
INSURED
T"ank 8ou
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Genera in%urance or non-life insurance policies,
including automobile and homeoners policies, provide
payments depending on the loss from a particular
fnancial event.

7eneral insurance typically comprises any insurance
that is not determined to be life insurance.
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4ealth insurance
Business insurance
Automobile insurance
/ire insurance
Marine insurance
9ersonal accident insurance
Gehicle insurance
Miscellaneous insurance., etc.
7EALT7 INSURANCE
Cust like one looks to safeguard ones ealth, these policies
ensure guarding the insurer:s health against any calamities that
may cause long term harm to ones life and even hamper ones
earning ability for a lifetime. !ome e1amples of this type of
policy are mediclaim policy, personal accident, group accident,
traOc accident, etc.
Bu%ine%% In%urance
%isks of loss of profts6business, goods, plant and
machinery are most profound in case of business.
8nder this head they cover the most idely used
policies that cover a business from any loss of the
above kind. !ome of these policies are burglary
insurance, shopkeepers insurance, key-man insurance,
marine insurance, public liability insurance, orkmen
compensation insurance, air transit insurance, fdelity
guarantee insurance etc.
Auto'o-ie In%urance
Auto 9olicy is re,uired to be taken to cover the risks that
arise to the oner, vehicle and third party. -his includes
the .ompulsory Gehicle 9olicy #In India, by the Motor
Gehicles Act, every car oner is re,uired to covered
against Act risks$ and the .omprehensive Gehicle 9olicy.
FIRE INSURANCE
-his policy is re,uired to be taken to
prevent any loss of profts 6 property
from incidental fre. 5g> fre insurance
and fre conse,uential loss policy.
Meaning and 0efnition of
Insurance
-ypes of Insurance
3ife Insurance
9roducts of 3ife Insurance
7eneral Insurance
-ypes of 7eneral Insurance