TN State Board 11th Commerce Important Questions Chapter 12 Functions of Commercial Banks
What is Mobile Banking?
Most of the commercial banks have designed computer programs palled apps which can be downloaded in smart phones. With this app in the smart phone a customer can operate his account transactions from anywhere. This service is known as mobile banking.
Briefly explain the need for Debit card.
ATM card is also called debit card. This card is more useful in purchase of goods and services anywhere in India, if the shop maintains a swiping machine facility. VISA card and Maestro card services are offered by Visa Corporation and Mastercard both from the USA. RuPay cards services were launched in March 2012 by the National Payments Corporation of India.
Briefly explain the term – Credit card.
Banks issue credit cards to customers and other eligible persons. With this card, the holder can purchase goods and services on credit at any shop in India. If the dues are paid within the stipulated time no interest is charged. The credit limit is fixed by the issuing bank based on the income of the card holder.
What do you mean by ATM?
A customer can withdraw money anytime, anywhere in India from the ATM machine using the ATM card given by his/her bank. The machine also shows the balance available in the customers’ account, provides statement print of the few past transactions, etc.
Write a note on – ECS.
ECS was launched by the RBI in 1995. It is an electronic method of fund transfer from a bank to another bank. ECS credit can be used to credit salary, dividend, interest, pension etc. and ECS debit is used to debit monthly telephone bills, electricity bills, equated monthly installments (EMI) payments in the clearing house.
What is E-Banking?
This reduces cost and time and makes banking service convenient to the customers. It is operated through Internet. This service is a substitute for drafts, cheques and other paper based transfer of funds.
Write a short note on RTGS.
Real Time Gross Settlement systems:
It was launched by the RBI in 2013. The transactions are settled on real time basis. Gross settlement means the transaction is settled between one bank and another bank without adding any other transactions.
Briefly explain the Diversified banking services of commercial banks.
Competition in the banking industry has reduced their profits. Therefore the commercial banks started identifying and offering new and diversified financial services. They are purely other than banking services. Providing all such banking and other financial services is also called universal banking.
Explain – NEFT.
National Electronic Fund Transfer: This was launched by the RBI in 2005. Under this electronic funds transfer system, bulk transfer of transactions are settled in . batches during specific timings across India. Individuals and institutions which maintain accounts with a NEFT enabled bank branch are eligible for using NEFT. Transactions do not occur under real time basis. Once in every half hour from 8.00 am to 7.30 pm. 23 settlements are allowed in a day.
What do you mean by Core Banking Solutions?
‘CORE’ stands for ‘Centralized Online Real time Exchange’. In the centralized server of the bank, all the details of all the accounts of all the branches of the bank are available. A customer can withdraw money through cheque at any branch of that bank throughout the world. Similarly anyone can deposit money into the account. Entry of the transactions is recorded in the centralized server of the bank in real time and can be seen in all the branches of the bank. This facility is called core banking solutions.
Discuss the various primary functions performed by the commercial banks.
The primary functions of a commercial bank are of three types. They are:
(a) Accepting Deposits,
(b) Granting Loans and Advances , and
(c) Creation of Credit.
(a) Accepting Deposits:
The basic deposit accounts offered by commercial banks are listed below. In these days banks compete with each other to attract customers by adding facilities to these deposit accounts. Broadly deposit accounts can be classified into demand deposits and time deposits.
(i) Demand Deposits:
These deposits are repayable on demand on any day. This consists of savings deposits and current deposits.
(ii) Savings Deposits: General public deposit their savings into this account. This account can be opened in one individual’s name or more than one name.
(iii) Current Deposits:
This account is suitable for business institutions. Individuals too can open this account. A higher minimum balance should, be kept in this account. If not penal interest is charged. No interest is paid for’the balance in this account. Some banks have started offering interest on these account balances.
They include fixed deposits and recurring deposits which are repayable after a period.
(v) Fixed Deposits (FD):
Certain amount is deposited for a fixed period for a fixed rate of interest. FDR (fixed deposit receipt) is given to the depositor. Rate of interest is higher than savings account. On the date of maturity the principal along with interest for the fixed period is paid.
(vi) Recurring Deposits (RD):
Certain sum is deposited into the account every month for one year or five years or the agreed period. Interest rate is more than savings deposits and almost equal to fixed deposits. At the end of the period the deposited amounts along with interest .are returned to the customer.
(b) Granting Loans and Advances:
The second primary function of commercial banks is lending money in order to earn interest income.
It is a credit facility extended mostly to current account holding business community customers. It is an arrangement reached between the banker and the credit worthy customers.
(ii) Cash Credit:
It is a secured credit facility given mostly to business institutions. Stock in hand, raw materials, other tangible assets, etc. are provided as collateral. A certain sum is allowed as credit for a short period.
(iii) Discounting of Bills:
Business customers approach banks to discount the commercial bills of exchanges and provide money.
Short term and medium term loans are provided by commercial banks against eligible collaterals to business concerns. It is a definite sum of money lent for a definite period. It is repayable in one lump sum or in installments.
- Housing Loan,
- Consumer Loan,
- Vehicle Loan,
- Educational Loan,
- Jewel Loan.
(C) Creation of Credit:
Apart from the currency money issued by the RBI, the credit money in circulation created by commercial banks influence economic activities of a country to a large extent. Credit money of commercial banks is far greater in volume than the currency money.
Explain the various secondary functions of commercial banks.
Apart from the basic or primary functions commercial banks render various other services which are known as secondary functions. These services can be broadly classified into agency services and general utility services.
I. Agency Functions:
Banks act as agents of customers and provide certain services. They are called Agency Functions which are as follows:
(i) Transfer of Funds:
Banks issue demand drafts, bankers’cheques, travelers’cheques, etc. and help in transfer of funds from one place to another.
(ii) Periodic Payment of Premiums, Rent, etc:
After instruction from the customers, banks undertake the monthly payment of insurance premium, rent, telephone bill, etc. from the accounts of customers.
(iii) Collection and Payment of Cheques:
On behalf of customers bank collect the cheques deposited into the accounts of customers from other banks and deposit cash in the customers’ accounts. Similarly cheques issued by a customer is honoured and the amount paid as directed by the customer.
(iv) Acting as Executors, Trustees and Attorneys:
Banks act as executors of will of the customers and implement their will after their death.
(v) Conduct Share Market Transactions:
A Demat account should be opened with Depository Participant and that demat account should be linked with savings bank account by the customer.
II. General utility functions:
In addition to primary, secondary and agency functions, commercial banks offer some services for the general welfare of the customers. They are called general utility services. They are as follows.
- issue of demand drafts and bankers’ cheques.
- Accepting Bills of Exchange on behalf of Customers.
- Safety lockers.
- Letters of credit.
- Travellers cheques.
- Gift cheques.
In all ATM Centers, there are one or two machines, sometime it may be four or five. All ATM machines have some amount of money inside the box. In this way lot of currency notes are locked day by day. Think about the alternate way for avoiding this locking of currency notes. Debate about the security problem in E-Banking system of services.
I want to go to bank of India. First I asked regarding how to open bank account. How to operate bank account. What is the minimum balance. How to take money from the bank. How to use ATM cards. Operate E-Banking system. How will you get credit card.
When you want loan:
We want to get loan. First of all open bank account. Operate bank account atleast one year correctly. Want to get loan bank will check our credit worthiness, our monthly salary or by way of getting monthly income. The eligibility to get loan. To show our all our ID proofs and address proofs, pan card etc. Bank also want to check our credit score. Then only get bank loans. Surety want to give against loan.
Field visit – nearest – collect information about rate of interest payable on Savings deposit, Fixed deposit, Current deposit and Recurring deposit. Collect photo copies of the various cards used in our day- to-day life. Nowadays debit card, credit card, smart cards and other cards are used for day to day purposes. In future how many cards we may use for our purposes.
- Commercial banks: Canara bank, Punjab National Banks, Industrial banks.
- Industrial Banks: IDBI; Industrial Development Bank of India. ICICI: Industrial Credit and Investment Corporation of India.
- Co-operative banks: Central co-operative bank, Agricultural co-operative bank. .
- Foreign bank: Standard charter bank. HSBC.
A person forgot his password of Debit card, How to get password? Give guidelines to him.
Forget his password:
Banker asked his customer his registered phone number. Then from bank we can get one time password (OTP) through the registered phone number and get password easily.
Customer can get new password from bank manager. The manager will guide properly and help the customer to get new password.
Using ATM card and customer registered phone number he can get password.
Choose the Correct Answer:
Electronic banking can be done through:
(b) Mobile phones
(d) All of the above
(d) All of the above
Minimum how much amount can be transferred through RTGS?
(a) Any amount
(c) 2 lakh
(d) 5 lakh
(c) 2 lakh
The largest commercial bank of India:
In which kind of account, it is compulsory to deposit certain amount at certain time?
(a) Saving deposit
(b) Fixed deposit
(c) Current deposit
(d) Recurring deposit
(d) Recurring deposit
Which of the following is not a type of advance provided by commercial bank?
(a) Collecting and supplying business information
(c) Cash credit
(d) Discounting of bills
(a) Collecting and supplying business information
Samacheer Kalvi 11th Commerce Notes Chapter 12 Functions of Commercial Banks
→ Banks play a very important role in economic development. Banking is considered to be the nerve centre of trade, commerce and business in a cquntry. It plays vital role in distributing the money for the development of trade, industry and commerce.
→ Bankers are not only dealers in money but also leaders in economic development. Bank is an institution which deals in money and credit.
→ Banks which help for the development of trade and commerce are called commercial banks. The commercial banks may be owned by government or owned by private sector functions of commercial banks can be classified into two categories.
(a) Primary or Banking functions.
(b) Secondary or Subsidiary functions.
→ Primary function includes accepting deposits and making loans and advances. Secondary functions includes agency functions and utility functions or services.