QNA - Lecture notes 5 PDF

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BANKING CHAPTER QUESTION AND ANSWERS Section - A One mark questions ( Answers in a sentence each) 1.

State any one importance of Banking system. Banking system offers many facilities to the people like Core banking, Electronic Fund Transfer, Tele-banking, Anywhere banking, Mobile banking etc.

2.

State any one function of a Bank. Bank accepts deposits from the public for the purpose of lending or investments.

3.

Why are pay-in-slips used in Banks ? Pay-in-slips are used to deposit cash or cheques into the Bank account of the account holder.

4.

Mention any one need of Bank. Bank is needed to transfer funds from place to place by means of Bank drafts and cheques.

5.

Name any one type of Bank account. Savings Bank account.

6.

Mention any one use of Core-Banking. Core baking is useful to conduct banking business any where and at any time.

7.

Give any one advantages of Tele Banking. Tele banking is useful to get information about Bank balance available.

8.

State any one facility under Anywhere Banking. Anywhere banking facilitates to operate customers account from any branches of the bank at any place and at any time.

9.

State any one services of Mobile Banking. Mobile banking helps for easy transfer of funds from one branch to another branch within no time.

10. Give a difference between Current account and Savings Bank account. Bank provides no interest to Current account holders. Bank provides 3% to 4% interest to Savings bank a/c holders. 11. State a difference between Current account and Fixed Deposit account. Bank provides Overdraft facility to the Current account holders. Bank does not provide such overdraft facility to the Fixed Deposit account holders. 12. Mention a difference between Savings Bank account and Fixed Deposit account S.B account is suitable for low and middle income group of people. F.D. account is suitable for wealthy people and small investors. 13. Expand EFT. Electronic Fund Transfer. 14. Give expansion form of SMS. Short Messaging Services. 15. Expand ATM. Automated Teller Machine. Section - B Two marks questions (Answer in not more than two sentences each) 1.

Give the meaning of Banking. 1

The Indian Banking Regulation Act of 1949 defines Banking as “Accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.” Banking refers to performing several activities such as collection of cheques, drafts and bills, remittance of funds, acceptance of safe custody deposits which are known as subsidiary services. 2.

What do you mean by Bank ? “Bank is a financial institution which accepts deposits from public for the purpose of lending or investments and provides various utility services to the customers as well as to the public.”

3.

State any two point of importance of bank. 1. Provides safety and Security :- Banks provides complete safety and security to the amount deposited by the depositors. The depositors may be free from the fear of theft and robbery of their money. 2. Provide interest and promote saving habits :-Banks provides higher and attractive rate of interest on the deposits and there by promotes the saving habits of the people.

4.

What is Tele Banking ? Tele banking is one of the popular technological developments in banking system. Telebanking refers to telephone banking under which a number of banking services or facilities offered by bank to the customers by using telephone.

5.

What is Overdraft ? Overdraft is a type of facility offered by bank to the Current account holders. Under this facility current a/c holder is allowed to withdraw over and above of his deposits in his account. It is a temporary arrangement to the current account holders.

6.

What is EFT ? EFT is a scheme introduce by RBI as per the recommendations of SHARE Committee. EFT is a system by which money can be transfer from one account to another account at any time from any where electronically. The use of pay-in-slips, cheques and drafts are converted into electronic form and there by amount can easily be either debited or credited to the customer account within no time.

7.

What is Core banking ? Core banking is one of the technological developments in banking system. Core banking is type of banking in which a person who opens a bank account in a branch of a bank, will become a customer not only of that branch, but he becomes a customer of all branches of bank and can conduct banking transactions anywhere and at anytime. Thus he can deposit and withdraw cash from any where with the branches of same bank.

8.

What is Anywhere banking ? It is one of the banking facilities extended under core banking system. Under this facility, a bank customer can operate his account from any branches of the bank at any place and at any time. It is considered as 24x7 services. In this system customer can operate his a/c from any branches of the bank in one city (inter-city) between different cities (intra-city). It includes Tele-banking, Mobile banking, ATM, etc.

9.

What do you mean by Mobile Banking ? Mobile banking is a latest development in banking service. Mobile banking is a type of banking facility under which a customer can conduct banking transactions with his bank by using his mobile phone. Mobile banking works through SMS (Short Messaging Service) technology. Mobile banking works through a set of text messages appears on the mobile phone screen. 2

10. State any two features of Core banking. 1. Under core banking system a customer will be remain as a bank’s customer rather than a branch customer. 2. In this system a customer can transact banking business anywhere and at any time. 11. Write any two types of Bank account. 1. Savings Bank account 2. Current account 12. Give the meaning of Current account. Current account is a type Demand Deposit Bank account opened with the object of operating business Bank transactions continuously. Usually, this type of account is opened by Business people so as to conduct their transactions smoothly. 13.

Give the meaning of Savings bank account. Savings Bank account is kind of demand deposit Bank account opened with the object of saving the money out of the earnings of the people. Usually, this type of account is opened by students, salaried people, agriculturists, lower and middle income groups.

14. Give the meaning of Fixed deposit account. Fixed deposit account is a type of term deposit bank account opened with the object of investing money on bank deposits at higher rate of interest. Usually, this type of account is opened by wealthy people and small investors who want safety for their investments. 15. Give the meaning of Recurring deposit account. Recurring deposit a/c is a type of term deposit bank account in which deposits are made every month regularly and withdrawn at the end of some period. In this account, account holder deposits fixed amount every month and withdrew entire amount in lump sum at the end of certain period. 16. State any two features of Savings Bank account. 1. Low interest rate :- Banks provide lower interest rate on this type account. Usually, the interest rate ranging from 3% to 4% and it may vary from Bank to Bank. 2. Deposits and withdrawals : Pay-in-slips are used to deposit money or cheques into the bank. Similarly, cheques or debit card are used to withdraw money from the bank. 17. State any two features of Current account. 1. No interest : Bank do not provide any interest to this type of account. Instead of providing interest, Bank collects some charges to these account holders for providing various services. 2. Deposits and withdrawals : Pay-in-slips are used to deposit money or cheques into the bank. Similarly, cheques or debit card are used to withdraw money from the bank. 18. State any two features of Fixed deposit account. 1. High interest rate : This type of account carries high rate of interest ranging from 4% to 10%. The longer the period of deposits, the higher the rate of interest is the basic principle to provide interest. 2. Deposits and withdrawals : One time deposit and one time withdrawal is rule of this type of a/c. Deposits are made into bank by using pay-in-slips and withdrawals are made after certain period by producing fixed deposit receipts. 19. State any two features of Recurring deposit account. 1. Interest rate : RD account carry higher rate of interest than SB account but lower than Fixed Deposit account 2. Deposits and withdrawals : Deposits are made regularly every monthly and a fixed amount is given to the customers in lump sum at the end of certain period along with interest. 3

20. Write any two differences between S.B. account and Current account. Point of Current account Savings Bank account Difference Bank provide interest to Savings Bank provide no interest to 1. Interest rate Current account Bank account Current account is suitable for Savings Bank a/c is suitable for business people who conducts low and middle income group who 2. Suitability large no. of bank transactions want to save money out of their earnings. 21. State any two differences between Current a/c and F.D. a/c. Point of Current account Fixed Deposit account Difference Bank provide higher rate of Bank provide no interest to this 1. Interest rate type of account interest to this type of account Current account is suitable for F.D. account is suitable for business people who conduct wealthy people and small investors 2. Suitability large no. bank transactions who want safety for their investments. 22.

State any two differences between S.B. account and F.D. account Point of S.B. account Fixed Deposit account Difference 1. Interest rate Bank provide lower rate of Bank provide higher rate of interest to Savings Bank account interest to Fixed deposit account 2. Suitability S.B. a/c is suitable for low and F.D. a/c is suitable for wealthy middle income group who want people and small investors who to save money out of their want safety for their investments earnings

23. State any two features of Electronic Fund Transfer. 1. EFT scheme provides facility for quick transfer of funds from one bank branch to another bank branch both inter-city (from one city to another) and intra-city (within a city). 2. Under this system depositor and receiver of funds may be different branch customers. 24. State any two advantages of Tele Banking. 1. Tele banking saves precious time of customers and bankers. 2. It is useful to urban customers who have problems like transport bottleneck, traffic jam, lack of time etc. 25. Mention any two facilities under Anywhere banking. Facilities offered under anywhere banking : 1. Account balance enquires . 2. Cash deposits. 3. Cash withdrawals 4. Enquires about debits and credits. 26. Give two services of Mobile banking. 1. National and International transfer of funds :- Mobile banking facilitates easy transfer of funds from one branch to any other branches of the bank. 2. Request for cheque books :- A customer can send request to bank for obtaining cheque book. 4

Section – C 5 Marks questions ( Answer in not more than 15 lines each) 1. Write any five features of Savings Bank Account. Features of Savings Bank account 1. Low interest rate :- Banks provide lower interest rate on this type a/c. Usually the interest rate ranging from 3% to 4% and it may vary from Bank to Bank. 2. Deposits and withdrawals : Pay-in-slips are used to deposit money or cheques into the bank. Similarly, cheques or debit card are used to withdraw money from the bank. 3. Who can open the a/c ?: Any person including minor can open this type of account by depositing minimum amount. Nowadays, we can open this type of account with zero balance so as to enjoy banking facility. As such, you students can also open this type of a/c to get your scholarship amount. 4. Restrictions : Bank imposes no restriction on amount of deposits. But there are restrictions on number of withdrawals on the amount to be withdrawn in a day. 5. Pay-in-slips, Cheque books & Pass book :- Bank gives pay-in-slips for deposit of money into bank, cheque book for withdrawal and payments from banks and pass book which gives details about deposits, withdrawals and available balance. Now a days Bank provide ATM card for the withdrawal of money. 2. Write any five features of Current Account. Features of Current account 1. No interest : Bank do not provide any interest to this type of account. Instead of providing interest, Bank collects some charges to these account holders for providing various services. 2. Deposits and withdrawals : Pay-in-slips are used to deposit money or cheques into the bank. Similarly, cheques or debit card are used to withdraw money from the bank. 3. Who can open the a/c ?: Generally these type of account opened by such persons who want to conduct transactions continuously. For ex: Business people, Companies, Government etc. 4. Restrictions : Bank imposes no restriction on the number of deposits and number of withdrawals in a day. 5. Overdraft facility : Bank provide overdraft facility to this type of account under which account holder is allowed to withdraw over and above his deposit in the account. 6. Pay-in-slips, Cheque books & Pass sheets :- Bank gives pay-in-slips for deposit of money into bank, cheque book for withdrawal and payments to third parties and pass sheets which gives details about deposits, withdrawals and available balance. 3. Write any five features of Fixed Deposit Account. 1. High interest rate : This type of a/c carries high rate of interest ranging from 4% to 10%. The longer the period of deposits, the higher the rate of interest is the basic principle to provide interest. 2. Deposits and withdrawals : One time deposit and one time withdrawal is rule of this type of a/c. Deposits are made into bank by using pay-in-slips and withdrawals are made after certain period by producing fixed deposit receipts. 3. Who can open the account?: Generally this type of a/c opened by wealthy people and small investors who have surplus of money and wishes to deposit for long period. 4. Restrictions : Bank do not allow frequent deposits and withdrawals for this type of a/c. That means ‘one time deposit & one time withdrawal’ is the rule of this type of a/c. 5. Facilities : Bank provides loan facility on pledging the fixed deposit receipt in the same bank.

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6. Pay-in-slips, Cheque books & Pass book : No pay-in-slip, Cheque books and Pass books are issued to the a/c holder of this a/c. However FD receipts are issued which is used for withdrawal in lump sum at the end of certain period. 4. Write any five features of Recurring Deposit Account. 1. Interest rate : This type of a/c carry higher rate of interest than SB a/c but lower than FD account 2. Deposits and withdrawals : Deposits are made regularly every monthly and a fixed amount is given to the customers in lump sum at the end of certain period along with interest. 3. Who can open the a/c ?: Generally, this type of account is opened by such people who have regular monthly income. For example salaried people. 4. Restrictions : In this type a/c deposits are made regularly every month and single withdraw is allowed at the completion of certain periods. That means “Many time deposits and one time withdrawal” is the basic principle of this type of account. 5. Facilities : Bank provides loan facilities on amount deposited by account holder. 6. Pay-in-slips, Cheque books & Pass book : No pay-in-slips and cheque book are issued but pass book is issued to this a/c holder. 5. Write any five differences between Current account & Savings Bank account. Differences between Current account & Savings Bank account. Point of Current account Savings Bank account Difference Bank provide no interest to Current Bank provide interest to Savings 1. Interest rate account Bank account. Current a/c is suitable for business S.B. account is suitable for low people who conducts large number and middle income group who 2. Suitability of bank transactions want to save money out of their earnings. Bank imposes no restrictions on Bank imposes some restrictions on 3. Restrictions the no. of deposits and withdrawals the no. of deposits and in this type of account withdrawals in this type of a/c Current a/c holders enjoy overdraft Savings bank account holders does 4. Facility facility not enjoy such overdraft facility. Withdrawals from Current account Withdrawals from Savings Bank 5.Operation by are allowed only by cheques and account are allowed not only by cheques not by withdrawal forms. cheques and even by using withdrawal forms. 6. Write any differences between Current account & Fixed deposit account. Differences between Current a/c and F.D. a/c Point of Current account Fixed Deposit account Difference Bank provide no interest to Bank provide higher rate of 1. Interest rate Current account interest to Fixed deposit account Current account is suitable for F.D. account is suitable for business people who conduct large wealthy people and small investors 2. Suitability number bank transactions who want safety for their investments. Bank imposes no restrictions on Bank allows single withdrawal 3. Restrictions the number of deposits & withonly after certain period. drawls to the Current a/c holders 6

4. Facility 5.Operation by cheques

Current account holder enjoys overdraft facility Withdrawals from this type of a/c are allowed only by cheques and not by any receipts.

F.D account holders do not enjoy such overdraft facility. Withdrawals from this type of a/c are allowed only by FD receipts and not by using any withdrawal forms.

7. Write any differences between Savings Bank Accounts.& Fixed Deposit Accounts. Differences between S.B. a/c and F.D. a/c Point of S.B. account Fixed Deposit account Difference Bank provide lower rate of interest Bank provide higher rate of 1. Interest rate to Savings Bank account interest to this type of a/c S.B. Savings Bank account is F.D. a/c is suitable for wealthy suitable for low and middle people and small investors who 2. Suitability income group who want to save want safety for their investments money out of their earnings Bank imposes some restrictions on Bank allows single withdrawal the no. of deposits and only after certain period. 3. Restrictions withdrawals to Savings Bank account Withdrawals are made by cheques Withdrawals are made not by 4.Withdrawals and withdrawal forms. using cheques but by producing by Cheque FD receipts. S.B a/c has to be opened by proper FD a/c can be opened even without 5. Introduction introduction by existing customers. any introduction. 8. Explain the procedure of opening a new Bank account Procedure of opening Bank account Following procedure is followed to open a new Bank account: 1. Filling up of account opening form : First of all the banker asks the applicant to fill up the account opening form. The prospective customer should fill up all details such as name, address, type of a/c he wants to open, nominee details, pan card no. etc. He should also give address proof and pan card zerox copy and passport size photograph to open a new bank a/c. 2. Obtaining introduction or reference : Secondly, the bank asks for proper introduction of respectable person known to the banker. This introduction is necessary to open S.B. a/c and Current a/c only and not for F.D. a/c and R.D. a/c. This introduction helps the banker to open a/c in the name of genuine persons and prevents to open falls a/c. 3. Obtaining Specimen signature : If the banker is satisfied with introduction, he permits the prospective customer to open an a/c by obtaining 3 specimen signature on a specimen signature card. This specimen signature helps banker for cross verification of customer signature at the time of withdrawal of cash by cheque. 4. Obtaining Mandate : If the customer wants to...