BANK AND ITS FUNCTIONS.

1. WHAT IS BANK AND BANKING?
• A BANK IS A FINANCIAL INSTITUTION DEALS
WITH DEPOSIT AND ADVANCES AND OTHER
RELATED SERVICES.
• IT RECIEVES MONEY WHO WANTS TO SAVE
AND LEND MONEY WHO WANT IT OR NEED IT.
• IF ANYONE HAS SURPLUS MONEY THEY
DEPOSIT IT INTO BANK.
• THESE FUNCTION WHEN PERFORMED BY
BANK , PROCESS IS CALLED
BANKING.

2. FUNCTIONS OF BANK
THERE ARE MAINLY TWO TYPES OF FUNCTION
OF BANK:
1- PRIMARY FUNCTIONS
2- SECONDARY FUNCTIONS
PRIMARY FUNCTIONS- THESE FUNCTION ARE
ALSO KNOW AS BANKING FUNCTION. THEY ARE
THE MAIN FUNCTION OF BANK. THESE ARE:
1) ACCEPTING DEPOSIT : THE BANK COLLECT
DEPOSIT FROM THE PUBLIC THIS CAN BE OF
DIFFERENT TYPE -

3. 1) SAVING DEPOSIT :
• THIS TYPE OF DEPOSIT ENCOURAGES SAVING
HABITS AMONG THE PUBLIC.
• RATE OF INTEREST IS LOW.
• WITHDRAWAL OF DEPOSIT ARE ALLOWED
SUBJECT TO CERTAIN RESTRICTION.
• SUITABLE TO SALARY AND WAGE EARNER.
• CAN BE OPENED IN SINGLE OR JOINED NAME.
2) FIXED DEPOSIT:
• LUMPSUM AMOUNT IS DEPOSITED AT ONE TIME
FOR A SPECIFIC PERIOD AND INTEREST IS
CHARGED ON IT.

4. • HIGHER RATE OF INTEREST, WHICH VARIES WITH
PERIOD OF DEPOSIT.
• WITHDRAWLS ARE NOT ALLOWED BEFORE THE
EXPIRY OF THE PERIOD.
• THOSE WHO HAVE SURPLUS FUND GO TO FIXED
DEPOSIT.
3) CURRENT DEPOSIT:
• IT IS AN ACCOUNT MAINTAINED BY BUSINESS MAN.
• WITHDRAWLS ARE FREELY ALLOWED.
• NO INTEREST PAID.
• ACCOUNT HOLDER CAN GET THE FACILITY OF
OVERDRAFT.

5. 4) RECURRING DEPOSIT:
• RECURRING DEPOSIT IS A SPECIAL KIND OF TERM
DEPOSIT OFFERED BY BANKS IN INDIA WHICH HELP
PEOPLE WITH REGULAR INCOMES.
• TO DEPOSIT A FIXED AMOUNT EVERY MONTH INTO
THEIR RECURRING DEPOSIT ACCOUNT AND EARN
INTEREST AT THE RATE APPLICABLE TO FIXED
DEPOSITS.
• WITHDRWALS ARE PERMITTED ONLY AFTER THE
MATURITY PERIOD.
2) GRANTING OF LOAN: BANK ADVANCES THE LOAN TO

6. • THE BUSINESS CUMMUNITY AND OTHER MEMBER
OF PUBLIC.
• RATE CHARGED IS HIGHER THEN WHAT IS PAID ON
PAID ON DEPOSIT.
• DIFFERENCE IN THE INTEREST RATE AND DEPOSIT
RATE IS ITS PROFIT.
THE TYPE OF BANK LOAN AND ADVANCES ARE :
1) OVERDRAFT:
• ADVANCES ARE GIVEN TO CURRENT ACCOUNT
HOLDER.
• NO SEPARATE ACCOUNT IS MAINTAINED
• A CERTAIN AMOUNT IS SANCTIONED AS OVERDRAFT
WHICH CAN BE WITHDRAWN WITHIN A CERTAIN
PERIOD OF TIME SAY 3 MONTHS OR SO.

7. • INTEREST IS CHARGED ON ACTUAL AMOUNT
WITHDRWAN.
• AN OVERDRAFT FACILITY IS GRANTED AGAINST A
COLLATERAL SECURITY.
• IT IS SANCTIONED TO BUSINESS MAN AND FIRM.
2) CASH CREDIT:
• CLIENT IS ALLOWED CASH CREDIT UPTO A SPECIFIC
LIMIT FIXED IN ADVANCE .
• IT CAN BE GIVEN TO CURRENT ACCOUNT AS WELL
AS WHO DON’T HAVE ACCOUNT WITH BANK.
• SEPARATE CASH CREDIT ACCOUNT IS MAINTAINED.
• GIVEN AGAINST THE SECURITY OF TANGIBLE ASSET.

8. 3) LOANS:
• IT IS BASICALLY GRANTING MONEY TO THE PUBLIC.
IT CAN BE FOR SHORT PERIOD (1 YEAR) MEDIUM
PERIOD (1-5 YEAR) LONG TERM (MORE THAN 5
YEAR).
• REPAYMENT CAN BE IN THE FORM OF
INSTALLMENTS SPREAD OVER A PERIOD OF TIME
OR IN LUMPSUM AMOUNT.
• INTEREST IS CHARGED ON THE ACTUAL AMOUNT
SANCTIONED WHETHER WITHDRAWN OR NOT.
• ROI MAY BE SLIGHTLY LOWER THAN WHAT IS
CHARGED ON OVERDRAFT AND CASH CREDIT.
4) DISCOUNTING OF BILL OF EXCHANGE

9. SECONDARY FUNCTION
1) AGENCY FUNCTION:
a) TRANSFER OF FUNDS.
b) COLLECTION OF CHEQUES.
c) PERIODIC PAYMENTS.
d) PORTFOLIO MANAGEMENT.
e) PERIODIC COLLECTION.
2) GENERAL UTILITY FUNCTIONS:
a) ISSUE OF DRAFT.
b) LOCKER FACILITY.
c) DEALING IN FOREIGN EXCHANGE.
d) SOCIAL WELFARE PROGRAMME.