This presentation intends to introduce students about Banking and its various functions

1. Introduction to
Banking
PRESENTED BY
DR.B.SUBHA
ASSISTANT PROFESSOR
KRISTU JAYANTI COLLEGE AUTONOMOUS
BANGALORE

2. What is Banking?
 accepting and
safeguarding money
owned by other
individuals and entities,
 lending out this money in
order to earn a profit.
 widened and now various
other services are also
offered by banks

3. Profit of Bank

4. Primary Function of Bank
 1.Accepting
Deposits
Fixed Deposits
Current Deposits
Saving Deposits
Recurring
Deposits

5. Fixed Deposits
 Depositing money for a
specified period of time.
 Investment period may be
short or long term
 Fixed Tenure
 Higher rate of Interest.
 No withdrawal of money
before maturity
 In Emergencies withdrawal is
possible

6. Saving Deposit
 Basic Type of Bank
Account
 Deposit Money
 Keep it safe
 Withdraw funds with
some limitations.
 Earn interest
 Enjoy Maximum
Benefits.

7. Current Accounts
 Individual, businessmen or
corporates
 significantly higher number of
transactions with banks on a
regular basis.
 No interest from bank
 Maintain high minimum
balance
 Non maintenance of minimum
balance
 Penalty
 Single business no multiple
account.

8. Recurring Deposit
 Regular Income people
 Deposit fixed Amount
 Deposit every month
 Minimum Deposit –Rs 100
 Maximum Deposit-No Limit
 Period of deposit-Minimum 1year to
maximum 10 years.
 Penalty charges for non deposit of
monthly amount
 Earn interest
 Interest differs based on category,
tenure
 Senior higher interest
 Long term higher interest

9. Primary Function
2. Granting
Loans
Overdraft
Cash Credit
Term Loan

10. Overdraft
 An overdraft lets you borrow
money through your current
account or savings account by
taking out more money than
you have in the account.
 Overdraft Limit
 Withdraw money till assigned
limit.
 Charges interest higher than
cash credit
 Short term credit
 Limit based on repayment
history

11. Cash credit
 Need to open separate bank account called cash credit
Account.
 Businessmen can claim not individuals
 Granted to customers to bridge working capital gap.
 Customers have to provide some form of collateral as
security
 Cash credits are tax deductible
 Cash credit is short term credit
 Interest rate is lower while comparing to overdraft

12. Previous Session Topics
Meaning of Bank
Banking Functions
Types of Functions
Forms of deposits
Forms of loans

13. Term Loan
 Term loan is a loan approved and disbursed by a bank
 for a fixed amount that shall be repaid in regular payments
 such as Equated Monthly Instalments (EMIs) over a defined
period of time
 Term loans can be offered in both fixed and floating rate of
interest.
 Tenure 1 to 10 years
 Tenure is decided at the time of loan application
 Example Home loan, educational loan ,car loan

14. Months Payment ( Rs)EMI Principal( Rs) Interest (7%) Balance( Rs)
0 10,000(principal)
1 1200 500 700 9500
2 1165 500 665 9000
3 1130 500 630 8500
4 1095 500 595 8000
5 1060 500 560 7500
6 1025 500 525 7000
7 990 500 490 6500
8 955 500 455 6000
9 920 500 420 5500
10 885 500 385 5000
11 850 500 350 4500
12 815 500 315 4000
13 780 500 280 3500
14 745 500 245 3000
15 710 500 210 2500
16 675 500 175 2000
17 640 500 140 1500
18 605 500 105 1000
19 570 500 70 500
20 535 500 35 0
17350 10000 7350 0

15. Secondary Function
 1.Agency function
 Periodic payment
 Buying and selling
securities
 Collection of cheques
 Transfer of funds

16. Agency function – Periodic Payment
Bank itself make monthly
payment from your accounts
Insurance premium, rent, salary
Customer authorizes bank

17. Buying and selling of shares
Behalf of customer bank
undertakes
Function of buying and selling
securities
Clear writing instruction

18. Collection Of Cheques
 the Bank
undertakes
collection of
cheques
deposited by its
customers,

19. Collection of cheque
CUSTOMER
COLLECTING
BANK(HDFC)
Paying Bank
(SBI)

20. Transfer of fund
Cheques
Bank Draft
Electronic mode of
transfer

21. Cheques
 Document that orders bank to pay a specific sum of money
 From a person’s account
 To the person whom the cheque has been issued.
 Safe ,secure and convenient payment mode.
 Fear of theft is minimized

22. Bank draft
Instrument like cheque used to make payment
Cheque is issued by an individual
Bank draft or demand draft is issued by bank
Bank draft is guaranteed by the issuing bank
On customers request ,bank issues bank draft after ensuring the
customer has sufficient payment in his account.
Cheque is drawn by individual, but bank draft is drawn by bank
Demand draft or bank draft is the secured form of payment for
the payee.

23. Secondary Function: Utility function
 1.Locker Function
Depositing gold
Jewellery, important
documents
Hired by individual,
company
Sizes small ,medium, large
Rental Charges

24. Utility Function: 2.Underwriting of
Shares
 Acts as underwriters to many companies
 Bank underwrites securities from the issuer then turns
around to sell
 Securities in the market
 Underwriters can sell the securities with more price in the
market than the price it purchased from the issuer.
 Risk is minimized for issuer
 Underwriters charge fees.

25. STRUCTURE OF INDIAN BANKING

26. Banker Customer Relationship-
General Relationship
Debtor and creditor
Creditor and Debtor
Bailee and Bailor
Lessor and Lessee
Principal and Agent
Trustee and Beneficiary
Mortgage and Mortgagor

27. Debtor and Creditor
Customer is having a deposit account
like saving deposit, fixed, or current
account
Banker is the debtor
Customer is the creditor
Dignified debtor
Demand by means of cheques or ATM

28. Creditor and debtor
Banks gives loans and other
credit facility
Bank is the creditor
Customer is the debtor

29. Bailee and Bailor
Bank offers a service called safe custody
Bank will keep the customers documents and
valuables safely
When bank accepts the documents and keep
it safe
Banker - Bailee
Customer – Bailor.

30. Lessor and Lessee
Bank-Lessor
Customer-Lessee
Bank Keep you valuables safely in the locker.
Annual rent
Bank will provide a key for your locker
Kept in joint custody
Bank is not liable in case of any loss.
Customer is Lessee and the banker is the Lessor.

31. Principal and Agent
Bank - principal
Customer -agent
Arrangement in which customer appoints
banker to act on his behalf.
Example bank purchases shares on behalf of
its customers.

32. Trustee and Beneficiary
Banker acts as an Trustee
Customer is the beneficiary
Bank accepts valuables for safe custody-
Trustee
Customer is getting benefits-Beneficiary.
Trustee is the person who holds property for
the benefits of somebody else.

33. Mortgage and Mortgagor
Banker –Mortgagee
Customer-Mortgagor
Customer executes mortgage deed.
Mortgage-Customers immovable
property is taken as collateral by bank.