1. Lieberman & Hall; Introduction to Economics, 2005 1 Can you imagine a world without currency? Imagine a country without international trade? How long Barter system succeed ? How business men manage finance in ancient times?............. NO ! a lot of problems… then coin introduced and currency came in to exist.

2. Lieberman & Hall; Introduction to Economics, 2005 2 Is it safe to keep money in our house? NO…………………. Then people think about an organization where they can Invest and borrow money safe?

3. Lieberman & Hall; Introduction to Economics, 2005 3 Exactly! It is BANK…………… Now we going to discuss about Commercial Banks and its various services.

4. Lieberman & Hall; Introduction to Economics, 2005 4 MEANING OF BANKS BANKS: A company which collect money from the public in the form of deposits and lends the same to borrowers. According to the Banking Regulation Act,1949, Banking means accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdraw able by Cheque,draft,order or otherwise.

5. Lieberman & Hall; Introduction to Economics, 2005 5 Types of banks Central Bank RBI is the central bank of India. It does not deal directly with the public. It accept deposit from other banks and lends money to them. So therefore known as Bankers bank. lender of last resort,controler of credit and the right to issue bank notes. Commercial Banks Commercial banks are those banks which accept deposits from the public and give loans to customers. They generally provide short term financial assistance to business men and traders. Accepting deposit and giving loans are the main functions of commercial banks. They pay interest on deposits and charge higher interest on loans.SBI is the largest commercial bank in our country.

6. Lieberman & Hall; Introduction to Economics, 2005 6 Types of banks Exchange banks: Exchange banks provide foreign exchange and other facilities to importers and exporters.Their main function is financing foreign trade. They handle foreign exchange transactions in India. City bank, Bank of America, Hong kong bank are some examples.

7. Lieberman & Hall; Introduction to Economics, 2005 7 Types of banks Industrial banks: These banks provide long term and medium term loans to industrial concerns. They provide not only finance but technical and administrative assistance. They also underwrite shares debentures issued by industrial enterprises Eg: IFCI,IDBI,SFC’s etc

8. Lieberman & Hall; Introduction to Economics, 2005 8 Types of banks Agricultural banks: These bank provide financial assistance to farmers. They grant both short term and long term loans to agricultorists.They play a vital role in the development of agriculture and rural economy. They grant long term loans against mortgage of land. They are therefore called land mortgage banks.

9. Lieberman & Hall; Introduction to Economics, 2005 9 Types of banks Cooperative Banks: These banks are organised on the principles of cooperation. They are formed in both villages and cities. Rural cooperative banks provide credit facilities to farmers and activities.Urban co-operative banks encourage savings and grant loans to their members. Co operative banks encourage self help among low income group of people.

10. Lieberman & Hall; Introduction to Economics, 2005 10 Types of banks Post office savings banks: These banks are run by post offices. They accept savings deposits from the public. But they do not grant loans. They offer banking facility even in small towns and villages where commercial banks are not found. New trends…………….

11. Lieberman & Hall; Introduction to Economics, 2005 11 Functions of commercial banks 1)Accepting deposits: collect money from the public and encourage savings habit 2)lending money: lend money to business men and other borrowers. collected money is utilised for granting loans to public. 3)Agency functions:ie a) collection of cheques,bills etc b)Realisation of Accounts ie house rent divident c) Payment of premium d) purchase and sale of securities e) Transfer of funds f) Acting as a trustee, executer and administrator g) Providing guarantee on behalf of their customers

12. Lieberman & Hall; Introduction to Economics, 2005 12 Functions of commercial banks 4) General utility functions: a) safe custody of valuables b) issue letters of credit/ travellers cheque to…importers c) underwriting of capital issues d) providing credit information e) Advice on financial matters.

13. Lieberman & Hall; Introduction to Economics, 2005 13 Types of bank deposits Fixed deposits: In a fixed deposit, a lump sum is deposited for a specified time period.eg :1 year 2 year etc..The deposit is repayable after the expiry of the fixed period. The customer is not allowed to withdraw the deposit before the expiry of the specified period. But he can borrow against the security of the deposit. Fixed deposit ais also known as Time deposits’ or long term deposits.

14. Lieberman & Hall; Introduction to Economics, 2005 14 Types of Bank deposits Recurring deposits: In these deposits,the account holder is required to deposit a specified sum of money every month. Money is deposited in regular installments for a specified time period. At the end of the period customer can withdraw money with interest like education,marriage,buying car ….

15. Lieberman & Hall; Introduction to Economics, 2005 15 Types of bank deposits Savings deposits: saving purpose.any time withdrawel,Atm card credit card. internet banking etc… Current deposits: current deposits made by business firms. Over draft facility is provided for them. current deposits also called demand deposits because they are payable on demand by the depositor.

16. Lieberman & Hall; Introduction to Economics, 2005 16 Types of Bank lending 1) Cash credit: It is an arrangement where by the bank allows the borrower to borrow money up to a specified limit. The bank places the specified amount to the credit of the borrower. The borrower draws the money as and when required. Interest is charged only for the withdrawal amount.

17. Lieberman & Hall; Introduction to Economics, 2005 17 Types of bank lending 2) Over draft: it is a temporary arrangement under which a depositor is allowed to draw by cheque more than the amount to his credit up to a specified limit. only current account holder get the benefit. This facility is provided against the security of some assets or personal guarantee of the borrower.

18. Lieberman & Hall; Introduction to Economics, 2005 18 Types of bank lending 3)Discounting of bills: In this method, the bank purchases bills of exchange at the face value less the interest at current rate till the due date. The owner of the bills can get cash immediately and need not wait for payment of discounted bills from the drawee. 4)Loans and advances. Loans granted against the securities.

19. Lieberman & Hall; Introduction to Economics, 2005 19 OPENING A BANK ACCOUNT Form filling

20. Lieberman & Hall; Introduction to Economics, 2005 20 Opening a Bank Account Specimen signature

21. Lieberman & Hall; Introduction to Economics, 2005 21 Opening a Bank Account Reference: introduce to the bank by some one having an account with the bank. Deposit: After these formalities the customer makes the initial deposit in cash.

22. Lieberman & Hall; Introduction to Economics, 2005 22 Opening a Bank Account Passbook

23. Lieberman & Hall; Introduction to Economics, 2005 23 Advantages of Bank Account Safety of money Payment facility Collection facility

24. Lieberman & Hall; Introduction to Economics, 2005 24 Habit of savings Loans and advances. ….obtain loans Safe custody of valuables …locker Credit information Other services like purchase and sale of securities.

25. Lieberman & Hall; Introduction to Economics, 2005 25 Cheques and their crossing It contains, date, amount payable in words and figures, name of the payee, signature of the drawer etc…

26. Lieberman & Hall; Introduction to Economics, 2005 26 Types of cheque Bearer cheque: it is payable to the bearer Order cheque: it is payable to the person named in it or to his order. Account payee cheque: such cheque is payable only to the account of the person named in it. No payment on such a cheque can be made on the counter.

27. Lieberman & Hall; Introduction to Economics, 2005 27 Crossing of a cheque Crossing a cheque is the process of drawing two parallel lines across the top left hand corner with or with out certain words. Its advantages;1) prevent payment to wrong person, 2) Assure safe payment,3) it facilitate tracing of the recipient of money. 4) it assure safety in circulation.

28. Lieberman & Hall; Introduction to Economics, 2005 28 Crossing of a cheque Special crossing; if the name of the banker is also mentioned within the two parallel lines with or without the words ‘Not Negociable’,A/C payee only etc…

29. Lieberman & Hall; Introduction to Economics, 2005 29 When can a bank refuse payment of a cheque(Dishonour of cheque) 1)When the balance is insufficient in the account. 2)Post dated cheque 3) Cheque is not properly drawn. forget to write date etc.. 4) Customer stopped payment of cheque 5)When the signature is not tally with specimen signature 6)When court prohibit. 7)When bank has received notice of the customer's death or insolvency etc…

30. Lieberman & Hall; Introduction to Economics, 2005 30 Bank around us.

31. Lieberman & Hall; Introduction to Economics, 2005 31 Functions & services of commercial banks Functions of commercial banks Primary function Subsidiary function Accepting deposit Lending money Agency function Utility function 1.Savings deposit 2.Current deposit 3.Fixed deposit 4.Recurring deposit 1.Over draft 2.Cash credit 3.Discounting bills 4.Loans and advances 1.Collection of Cheques& Bills. 2.Realisation of Accounts 3.Premium payment 4.purchase& sale of securities 5.Transfer of funds 6.Providing guarantee 1.Safe custody of valuables 2.Issuing letters of credit 3.Underwriting of capital issues 4.Providing credit information 5. Advice on financial matters.