BANKING STRUCTURE IN INDIA

BANKING STRUCTURE IN INDIA

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Reserve Bank of India (RBI)

The country had no central bank prior to the establishment of the RBI. The RBI is the supreme monetary and banking authority in the country and controls the banking system in India. It is called the Reserve Bank’ as it keeps the reserves of all commercial banks.

Scheduled  & Non –scheduled Banks

A scheduled bank is a bank that is listed under the second schedule of the RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have to fulfill certain conditions such as having a paid up capital and reserves of at least 0.5 million and satisfying the Reserve Bank that its affairs are not being conducted in a manner prejudicial to the interests of its depositors. Scheduled banks are further classified into commercial and cooperative banks. Non- scheduled banks are those which are not included in the second schedule of the RBI Act, 1934. At present these are only three such banks in the country.

Commercial Banks

Commercial banks may be defined as, any banking organization that deals with the deposits and loans of business organizations.Commercial banks issue bank checks and drafts, as well as accept money on term deposits.  Commercial banks also act as moneylenders, by way of installment loans and overdrafts.Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit. These institutions are run to make a profit and owned by a group of individuals.

Scheduled Commercial Banks (SCBs):

Scheduled commercial banks (SCBs) account for a major proportion of the business of the scheduled banks. SCBs in India are categorized into the five groups based on their ownership and/or their nature of operations. State Bank of India and its six associates (excluding State Bank of Saurashtra, which has been merged with the SBI with effect from August 13, 2008) are recognised as a separate category of SCBs, because of the distinct statutes (SBI Act, 1955 and SBI Subsidiary Banks Act, 1959) that govern them. Nationalised banks  and SBI and associates  together form the public sector banks group IDBI ltd. has been included in the nationalised banks group since December 2004. Private sector banks include the old private sector banks and the new generation private sector banks- which were incorporated according to the revised guidelines issued by the RBI regarding the entry of private sector banks in 1993.

Foreign banks are present in the country either through complete branch/subsidiary route presence or through their representative offices.

Types of Scheduled Commercial Banks

Public Sector Banks

These are banks where majority stake is held by the Government of India.
Examples of public sector banks are: SBI, Bank of India, Canara Bank, etc.

Private Sector Banks

These are banks majority of share capital of the bank is held by private individuals. These banks are registered as companies with limited liability. Examples of private sector banks are: ICICI Bank, Axis bank, HDFC, etc.

Foreign Banks

These banks are registered and have their headquarters in a foreign country but operate their branches in our country. Examples of foreign banks in India are: HSBC, Citibank, Standard Chartered Bank, etc

Regional Rural Banks

Regional Rural Banks were established under the provisions of an Ordinance promulgated on the 26th September 1975 and the RRB Act, 1976 with an objective to ensure sufficient institutional credit for agriculture and other rural sectors. The area of operation of RRBs is limited to the area as notified by GoI covering one or more districts in the State.

RRBs are jointly owned by GoI, the concerned State Government and Sponsor Banks (27 scheduled commercial banks and one State Cooperative Bank); the issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and 35% respectively.

BANKER AS AGENT

BANKER AS AGENT

A banker acts as an agent of his customer and performs a number of agency functions for the convenience of his customers. For example, he buys or sells securities on behalf of his customer, collects cheques on his behalf and makes payment of various dues of his customers, e.g.. insurance premium, etc. The range of such agency functions has become much wider and the banks are now rendering large number of agency services of diverse nature. For example, some banks have established Tax Services Departments to take up the tax problems of their customers.

Banker-Customer Relationship

The relationship between banker and customer is mainly that of a debtor and creditor. However, they also share other relationships.

Some of the important relationships they share are depicted below.

The banker-customer relationship is that of a:

1. Debtor and Creditor,
2. Pledger and Pledgee,
3. Licensor and Licensee,
4. Bailor and Bailee,
5. Hypothecator and Hypothecatee,
6. Trustee and Beneficiary,
7. Agent and Principal,
8. Advisor and Client, and
9. Other miscellaneous relationships.

Discussed below are important banker-customer relationships.

1. Relationship of Debtor and Creditor

When a customer opens an account with a bank and if the account has a credit balance, then the relationship is that of debtor (banker / bank) and creditor (customer).

In case of savings / fixed deposit / current account (with credit balance), the banker is the debtor, and the customer is the creditor. This is because the banker owes money to the customer. The customer has the right to demand back his money whenever he wants it from the banker, and the banker must repay the balance to the customer.

In case of loan / advance accounts, banker is the creditor, and the customer is the debtor because the customer owes money to the banker. The banker can demand the repayment of loan / advance on the due date, and the customer has to repay the debt.

A customer remains a creditor until there is credit balance in his account with the banker. A customer (creditor) does not get any charge over the assets of the banker (debtor). The customer's status is that of an unsecured creditor of the banker.

The debtor-creditor relationship of banker and customer differs from other commercial debts in the following ways:

1. The creditor (the customer) must demand payment. On his own, the debtor (banker) will not repay the debt. However, in case of fixed deposits, the bank must inform a customer about maturity.
2. The creditor must demand the payment at the right time and place. The depositor or creditor must demand the payment at the branch of the bank, where he has opened the account. However, today, some banks allow payment at all their branches and ATM centres. The depositor must demand the payment at the right time (during the working hours) and on the date of maturity in the case of fixed deposits. Today, banks also allow pre-mature withdrawals.
3. The creditor must make the demand for payment in a proper manner. The demand must be in form of cheques; withdrawal slips, or pay order. Now-a-days, banks allow e-banking, ATM, mobile-banking, etc.

2. Relationship of Pledger and Pledgee

The relationship between customer and banker can be that of Pledger and Pledgee. This happens when customer pledges (promises) certain assets or security with the bank in order to get a loan. In this case, the customer becomes the Pledger, and the bank becomes the Pledgee. Under this agreement, the assets or security will remain with the bank until a customer repays the loan.

3. Relationship of Licensor and Licensee

The relationship between banker and customer can be that of a Licensor and Licensee. This happens when the banker gives a sale deposit locker to the customer. So, the banker will become the Licensor, and the customer will become the Licensee.

4. Relationship of Bailor and Bailee

The relationship between banker and customer can be that of Bailor and Bailee.

1. Bailment is a contract for delivering goods by one party to another to be held in trust for a specific period and returned when the purpose is ended.
2. Bailor is the party that delivers property to another.
3. Bailee is the party to whom the property is delivered.

So, when a customer gives a sealed box to the bank for safe keeping, the customer became the bailor, and the bank became the bailee.

5. Relationship of Hypothecator and Hypothecatee

The relationship between customer and banker can be that of Hypothecator and Hypotheatee. This happens when the customer hypothecates (pledges) certain movable or non-movable property or assets with the banker in order to get a loan. In this case, the customer became the Hypothecator, and the Banker became the Hypothecatee.

6. Relationship of Trustee and Beneficiary

A trustee holds property for the beneficiary, and the profit earned from this property belongs to the beneficiary. If the customer deposits securities or valuables with the banker for safe custody, banker becomes a trustee of his customer. The customer is the beneficiary so the ownership remains with the customer.

7. Relationship of Agent and Principal

The banker acts as an agent of the customer (principal) by providing the following agency services:

• Buying and selling securities on his behalf,
• Collection of cheques, dividends, bills or promissory notes on his behalf, and
• Acting as a trustee, attorney, executor, correspondent or representative of a customer.

Banker as an agent performs many other functions such as payment of insurance premium, electricity and gas bills, handling tax problems, etc.

8. Relationship of Advisor and Client

When a customer invests in securities, the banker acts as an advisor. The advice can be given officially or unofficially. While giving advice the banker has to take maximum care and caution. Here, the banker is an Advisor, and the customer is a Client.

9. Other Relationships

Other miscellaneous banker-customer relationships are as follows:

• Obligation to honour cheques : As long as there is sufficient balance in the account of the customer, the banker must honour all his cheques. The cheques must be complete and in proper order. They must be presented within six months from the date of issue. However, the banker can refuse to honour the cheques only in certain cases.
• Secrecy of customer's account : When a customer opens an account in a bank, the banker must not give information about the customer's account to others.
• Banker's right to claim incidental charges : A banker has a right to charge a commission, interest or other charges for the various services given by him to the customer. For e.g. an overdraft facility.
• Law of limitation on bank deposits : Under the law of limitation, generally, a customer gives up the right to recover the amount due at a banker if he has not operated his account since last 10 years.

So, these were some important banker-customer relationships.

What Precautions to honor Cheque

What Precautions to honor Cheque

The relation between a banker and his customer is that of a debtor and creditor. Money deposited with a banker is always belongs to the customer and the bank obliged to return its equivalent to the customer or to any person to his order on demand. This obligation has been imposed on the bank by sec. 31 of the N.I. Act. 1881. Wherein it is stated that “The drawee of a cheque having sufficient funds of drawer in his hands, properly applicable to the payment of such, must pay the cheque when duly required to do so, and in default of such payment, must compensate the drawer for any loss or damage caused by such default”.

Precautions to honor Cheque

Analysis of sec.31 of the N.I.Act.1881 reveals that a banker should be very cautious both at the time of honoring as well as dishonoring his customer’s cheque. Thus, in order to safeguard it’s as well as the customer’s interests, the paying banker has to observe the following precautions before honoring a cheque:

1. Precaution regarding “Form of the Cheque”

The cheque should be in proper form. According to banking practice the cheque must be drawn in the printed forms supplied by the banks and the bank reserve the right of dishonoring a cheque in case it is not in the prescribed form. Beside this, the cheque should not contain any condition, as a cheque is an unconditional order to pay on a specified banker.

2. Precaution regarding “Branch”

The paying banker should see whether the cheque is drawn on the branch where the account is maintained. If it is drawn on another branch, without any prior arrangement, the banker can safely return the cheque.

3. Precautions regarding “Account”

Even in the same branch, a customer might have opened two or more accounts. For each account, a separate checkbook would have been issued. Hence, the paying banker should see that the cheque of one account is not used for withdrawing money from another account.

4. Precaution regarding ‘Date’

Before honoring a cheque, the paying banker must see whether there is a date on the instrument. If it is undated it cannot be regarded as a valid instrument. If a cheque is ‘ante dated’, it may be paid if it has not become stale by that time. A cheque becomes stale after six months of its issue and requires drawer’s revalidation/confirmation. The paying banker should also not honor a cheque containing future date. A future dated cheque is known as post-dated cheque and it should not be honored before its ostensible date.

5. Precaution regarding ‘Amount’

The banker should see whether the amount stated in the cheque, both in words and figures, agree with each other. If the amount is stated only in figures the banker should not honor it. However, if the amount is stated only in words, the banker may honor it. If there is any difference between the amount in figures and words, the banker can return the cheque, since, the amount is not certain. On the other hand, sec. 18 of the N.I. Act, 1881 permits the banker to honor the cheque to the extent of the amount stated in words. However, in practice, if the difference is insignificant, payment of the smaller amount sometimes made. But, usually the paying banker returns the cheque under such circumstance with a return memo containing the remarks “words and figures differ” since, there is an audit objection to the practice of honoring such cheque.

6. Precaution regarding “Funds of the Customer”

There should be sufficient balance/funds in the account of the customer to meet the cheque. Cheque has to be paid in full and not in part and therefore, if the funds are not sufficient to honor the cheque in full, the paying banker is justified in returning it. The paying banker, however, honor the cheque if he has an O/D arrangement with the customer to that extent or more than the amount of deficit.

The cheque should be paid in chronological order of their receipt by the bank. The date of their issue or serial number is not significant in this respect. Therefore, in case of inadequacy of funds, the cheque will be paid in the order in which they are received by the bank to the extent of the funds permit and the rest will be dishonored. When several cheque are received at the same time (for example, cheque received by post) the usual practice is to honor the cheque of bigger amount unless it is for tax liability etc. where the cheque is honored first though it must be of a smaller amount. In case of two or more cheque of equal amount, the bank has the discretion to honor any of them to the extent the funds of the drawer permit.

7. Precaution regarding “Drawer’s Signature”

Before honoring any cheque, a paying banker is required to compare the drawer’s signature on the cheque with that of his specimen signature. If the banker fail to do so and pays a cheque containing forged signature of the drawer, then, the payment will not be a ‘payment in due course. When there is a joint account, both or all the signatures on the cheque should be genuine. If any one of the signatures is forged the bank should not make payment.

If the signature has been too, skillfully forged for the banker to find it out, even then the banker is liable. However, if the customer facilitates the forgery of his signature by his conduct, then the banker will be relieved from his liability.

8. Precaution regarding “Material Alteration”

A paying banker should be very cautious in finding out the alterations that may appear on a cheque. A banker will be held liable for paying any materially altered cheque. If there is any material alteration, the banker should return it with a memorandum “Alteration requires drawer’s confirmation”. A materially altered cheque can only be honored if the alteration is confirmed by the drawer by means of his full signature. However, in case a cheque is materially altered and the banker makes payment, he shall be discharged form liability only when he proves the following:

(i) The alteration could not be detected with reasonable care, prudence & scrutiny, and

(ii) The payment had been made in due course.

9. Precaution regarding “Crossing”

Before honoring any cheque the paying banker must find out whether the cheque is open or crossed. If it is an open one, the payment may be made at the counter. If the cheque is a crossed one, the payment should be through a collecting banker. If it is specially crossed, the payment must be specifically made to that banker in whose favor it has been crossed. If there are ‘A/C payee’ and ‘Not Negotiable’ crossing, the paying banker need not worry, as they are directions to the holder and to the collecting banker.

10. Precaution regarding “Endorsement”

Before honoring a cheque, the banker must verify the regularity of endorsement, if any, that appears on the instrument. An order cheque requires endorsement for delivery as well as payment. If there is ‘per pro endorsement’, the banker must find out the existence of authority. Failure to do so constitutes negligence on the part of the paying banker.

11. Precaution regarding “Mutilated Cheques”

A cheque is said to be mutilated when it is torn into two or more pieces. Such a cheque should not be paid unless the banker is satisfied that mutilation was unintentional and it also requires confirmations of the drawer.

12. Precaution regarding “Legal Bar”

The existence of legal bar like garnishee order limits the duty of the banker to pay a cheque. So, the paying banker should be cautious while paying cheque against any account on which any legal bar is imposed.

13. Precaution regarding “banking hours”

The paying banker should make payment of only such cheques which have been presented (to it for payment) during the banking hours on a business/working day. Payment outside the banking hours does not amount to payment in due course. However, a banker is justified in extending the time during peak days, for those, who are still waiting for enchasing a cheque.

1. 14. Minor Precautions

A paying banker should look into the following minor details also, before honoring a cheque:

a) He must see whether there is any order of the customer not to pay a cheque.

b) He must see whether there is any evidence of misappropriation of money. If so, the cheque should be returned.

c) He must see whether he has got any information about the death or bankruptcy or insanity of his customer. Failure to note those instructions will land him on trouble.

Statutory Protection to Paying Banker

01. Protection in case of order cheque :

In case of an order cheque, Section -85(1) provides statutory protection to the paying banker as follows : "Where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is discharged by payment in due course".However, two conditions must be fulfilled to avail of such protection.

(a) Endorsement must be regular : To avail of the statutory protection, the banker must confirm that the endorsement is regular.

(b) Payment must be made in Due Course : The paying banker must make payment in due course. If not, the paying banker will be deprived of statutory protection.

02. Protection in case of Bearer Cheque :

Section -85(2) provides protection to the paying banker in respect of bearer cheques as follows : "Where a cheque is originally expressed to be payable to bearer, the drawee is discharged by payment in due course to the bearer thereof, notwithstanding any endorsement whether in full or blank appearing thereon and notwithstanding that any such endorsement purports to restrict or exclude further negotiation". This section implies that a cheque originally issued as a bearer cheque remains always bearer. In other words it retains its bearer character irrespective of whether it bears endorsement in full or in blank or whether any endorsement restricts further negotiation or not. So the banks are not required to verify the regularity of the endorsement on bearer cheque, even if the instruments bears endorsement in full. The banker shall free from any liability (discharged) if he makes payment of an uncrossed bearer cheque to the bearer in due course. If such cheque is a stolen one and the banker makes its payment without the knowledge of such theft, he will be discharged of his obligation and will be protected under Section -85(2).

03. Protection in case of Crossed cheque :

The paying banker has to make payment of the crossed cheques as per the instruction of the drawer reflected through the crossing. If it is done, he is protected by Section -128. This section states "Where the banker on whom a crossed cheque is drawn has paid the same in due course, the banker paying the cheque and (in case such cheque has come to the hands of the payee) the drawer thereof shall respectively be entitled to the same rights, and be placed in if the amount of the cheque had been paid to and received by the true owner thereof".

It is clear that the banker who makes payment of a crossed cheque is by the Section -128 given protection if he fulfils two requirements (a) That he has made payment in deuce course under Section -10 i.e. in good faith and without negligence and according to the apparent tenor of the cheque, and (b)That the payment has been made in accordance with the requirement of crossing (Section -126), i.e. through any banker in case of general crossing and through the specified banker in case of special crossing.

Thus, the paying banker is free from any liability on a crossed cheque even if the payment was received by the collecting banker on behalf of a person who was not a true owner. For example, a cheque in favour of X is stolen by Y. He endorses it in his own favour by forging the signature of X  and deposits it in his bank for collection . In this case, the paying banker shall be discharged if he makes payment as mentioned above and shall not be liable to pay the same to X, the true owner of the cheque.

The drawer of the cheque is also discharged since protection is also granted to him under this Section. There is, however, one limitation to the protection granted under this Section. If the banker cannot avail of the protection granted by other Section of the Act, the protection under Section -128 shall not be available to him.

For example, if the paying bankers makes payment of a cheque crossed with (a) Irregular endorsement or (b) A material alteration or (c) Forged signature of the drawer, he loses statutory protection granted to him under the Act for these lapses on his part. Hence he cannot avail of the statutory protection under Section -1289, even if he pays the cheque in accordance with the crossing.

Collecting Banker as Holder for Value-Explain

A collecting banker is holder for value if he gives the value of the cheque in any form to its customer before collecting the proceeds of the cheque deposited by the latter. He does not remain an agent of the customer, but becomes the owner of the cheque in his own right since he has paid value for it, and has acquired the ownership right in good faith. In such a situation, the banker is called holder for value and he is also the holder in due course.

According to Paget, a banker becomes an holder for value in the following ways:

(a) by lending further on the strength of the cheque;

(b) by paying the amount of the cheque or part of it in cash or in account before it is cleared;

(c) by agreeing that the customer may draw before the cheque is cleared;

(d) by accepting the cheque in avowed reduction of an existing overdraft;

(e) by giving cash over the counter for the cheque at the time it is deposited in for collection.

In the above circumstances, the banker becomes the holder for value. Further, if he proves that he gave value for a cheque in good faith, he will be able to resist any claim by the true owner provided that

(a) the cheque was not tainted with forgery,

(b) he had no notice of any previous dishonour or of any defect in the title of his customer,

(c) the cheque was not crossed ‘not negotiable’

(d) the cheque was not overdue for the purpose of negotiation, and

(e) the cheque was regular on the face of it in all respects.

If the cheque is dishonored, the collecting banker can use all the previous parties after giving them the notice of dishonor. The banker undertakes a risk also when he acts as a holder for value. He will be in a difficulty if last, but one endorsement proves to be a forged one. The banker will be liable to the true owner of the cheque. However, he can recover the amount from his customer.

Duties and Responsibilities of a Collecting Banker

The duties and responsibilities of a collecting banker are discussed below:

1. Due care and diligence in the collection of cheque.

2. Serving notice of dishonor.

3. Agent for collection.

4. Remittance of proceeds to the customer.

5. Collection of bill of exchange.

1. Due Care and Diligence in the Collection of Cheques:

The collecting banker is bound to show due care and diligence in the collection of cheques presented to him. In case a cheque is entrusted with the banker for collection, he is expected to show it to the drawee banker within a reasonable time. According to Section 84 of the Negotiable Instruments Act, 1881, “Whereas a cheque is not presented for payment within a reasonable time of its issue, and the drawer or person in whose account it is drawn had the right, at the time when presentment ought to have been made, as between himself and the banker, to have the cheque paid and suffers actual damage, through the delay, he is discharged to the extent of such damage, that is to say, to the extent to which such drawer or person is a creditor of the banker to a large amount than he would have been if such cheque had been paid.”

In case a collecting banker does not present the cheque for collection through proper channel within a reasonable time, the customer may suffer loss. In case the collecting banker and the paying banker are in the same bank or where the collecting branch is also the drawee branch, in such a case the collecting banker should present the cheque by the next day. In case the cheque is drawn on a bank in another place, it should be presented on the day after receipt.

2. Serving Notice of Dishonour:

When the cheque is dishonoured, the collecting banker is bound to give notice of the same to his customer within a reasonable time.

It may be noted here, when a cheque is returned for confirmation of endorsement, notice must be sent to his customer. If he fails to give such a notice, the collecting banker will be liable to the customer for any loss that the customer may have suffered on account of such failure.

Whereas a cheque is returned by the drawee banker for confirmation of endorsement, it is not called dishonour. But in such a case, notice must be given to the customer. In the absence of such a notice, if the cheque is returned for the second time and the customer suffers a loss, the collecting banker will be liable for the loss.

3. Agent for Collection:

In case a cheque is drawn on a place where the banker is not a member of the ‘clearing-house’, he may employ another banker who is a member of the clearing-house for the purpose of collecting the cheque. In such a case the banker becomes a substituted agent. According to Section 194 of the Indian Contract Act, 1872, “Whereas an agent, holding an express or implied authority to name another person to act in the business of the agency has accordingly named another person, such a person is a substituted agent. Such an agent shall be taken as the agent of a principal for such part of the work as is entrusted to him.”

4. Remittance of Proceeds to the Customer:

In case a collecting banker has realised the cheque, he should pay the proceeds to the customer as per his (customer’s) direction. Generally, the amount is credited to the account of the customer on the customer’s request in writing, the proceeds may be remitted to him by a demand draft. In such circumstances, if the customer gives instructions to his banker, the draft may be forwarded. By doing so, the relationship between principal and agent comes to an end and the new relationship between debtor and creditor will begin.

5. Collection of Bills of Exchange:

There is no legal obligation for a banker to collect the bills of exchange for its customer. But, generally, bank gives such facility to its customers. In collection of bills, a banker should examine the title of the depositor as the statutory protection under Section 131 of the Negotiable Instruments Act, 1881.

Thus, the collecting banker must examine very carefully the title of his customer towards the bill. In case a new customer comes, the banker should extend this facility to him with a trusted reference.

From the above discussion, there is no doubt to say that the banker is acting as a mere agent for collection and not in the capacity of a banker. If the customer allows his banker to use the collecting money for its own purpose at present and to repay an equivalent amount on a fixed date in future the contract between the banker and the customer will come to an end.

Modern Banks

Modern Banks

1. Advancing of Loans

Banks are profit oriented business organizations. So they have to advance loan to the public and generate interest from them as profit.

After keeping certain cash reserves, banks provide short-term, medium-term and long-term loans to needy borrowers.

2. Overdraft

Sometimes, the bank provides overdraft facilities to its customers through which they are allowed to withdraw more than their deposits. Interest is charged from the customers on the overdrawn amount.

3. Discounting of Bills of Exchange

This is another popular type of lending by the modern banks. Through this method, a holder of a bill of exchange can get it discounted by the bank, in a bill of exchange, the debtor accepts the bill drawn upon him by the creditor (i.e., holder of the bill) and agrees to pay the amount mentioned on maturity.

After making some marginal deductions (in the form of commission), the bank pays the value of the bill to the holder. When the bill of exchange matures, the bank gets its payment from the party, which had accepted the bill.

4. Cheque Payment

Banks provide cheque pads to the account holders. Account holders can draw cheque upon the bank to pay money. Banks pay for cheques of customers after formal verification and official procedures.

5. Collection and Payment Of Credit Instruments

In modern business, different types of credit instruments such as the bill of exchange, promissory notes, cheques etc. are used. Banks deal with such instruments. Modern banks collect and pay different types of credit instruments as the representative of the customers.

6. Foreign Currency Exchange

Banks deal with foreign currencies. As the requirement of customers, banks exchange foreign currencies with local currencies, which is essential to settle down the dues in the international trade.

7. Consultancy

Modern commercial banks are large organizations. They can expand their function to consultancy business. In this function, banks hire financial, legal and market experts who provide advice to customers in regarding investment, industry, trade, income, tax etc.

8. Bank Guarantee

Customers are provided the facility of bank guarantee by modern commercial banks. When customers have to deposit certain fund in governmental offices or courts for a specific purpose, a bank can present itself as the guarantee for the customer, instead of depositing fund by customers.

9. Remittance of Funds

Banks help their customers in transferring funds from one place to another through cheques, drafts, etc.

10. Credit cards

A credit card is cards that allow their holders to make purchases of goods and services in exchange for the credit card’s provider immediately paying for the goods or service, and the card holder promising to pay back the amount of the purchase to the card provider over a period of time, and with interest.

11. ATMs Services

ATMs replace human bank tellers in performing basic banking functions such as deposits, withdrawals, account inquiries. Key advantages of ATMs include:

• 24-hour availability
• Elimination of labor cost
• Convenience of location

12. Debit cards

Debit cards are used to electronically withdraw funds directly from the cardholders’ accounts. Most debit cards require a Personal Identification Number (PIN) to be used to verify the transaction.

13. Home banking

Home banking is the process of completing the financial transaction from one’s own home as opposed to utilizing a branch of a bank. It includes actions such as making account inquiries, transferring money, paying bills, applying for loans, directing deposits.

14. Online banking

Online banking is a service offered by banks that allows account holders to access their account data via the internet. Online banking is also known as “Internet banking” or “Web banking.”

Online banking through traditional banks enable customers to perform all routine transactions, such as account transfers, balance inquiries, bill payments, and stop-payment requests, and some even offer online loan and credit card applications. Account information can be accessed anytime, day or night, and can be done from anywhere.

15. Mobile Banking

Mobile banking (also known as M-Banking) is a term used for performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA),

16. Accepting Deposit

Accepting deposit from savers or account holders is the primary function of a bank. Banks accept deposit from those who can save money but cannot utilize in profitable sectors. People prefer to deposit their savings in a bank because by doing so, they earn interest.

17. Priority banking

Priority banking can include a number of various services, but some of the popular ones include free checking, online bill pay, financial consultation, and information.

18. Private banking

Personalized financial and banking services that are traditionally offered to a bank’s rich, high net worth individuals (HNWIs). For wealth management purposes,

HNWIs have accrued far more wealth than the average person, and therefore have the means to access a larger variety of conventional and alternative investments. Private Banks aim to match such individuals with the most appropriate options.

what is branch banking and definition .Difference between Branch Banking and Unit Banking

What is Branch Banking?

Branch Banking is still an integral part of Indian banking system as most Indians still believe in cash transactions and prefer to visit banks in person for routine banking operations. Bank branches are the face of the banks where customers can visit and talk to the officials for getting better insights into new policies, investment schemes, other banking services etc. On top of it, the personal touch in every service leaves a great impact on the minds of customers. However, banking in India has changed its facets and ways of doing business over the years especially after the onslaught of technology and its manifestations. People have started to drift towards latest modes of banking like e-banking, mobile-banking etc. 

Definition of Branch Banking

Branch Banking has been defined under the provisions of Section 23 of the Banking Regulation Act, 1949 that banks can either open new branches or shift the location of existing branches. The banks have to seek a prior approval of RBI to open a new branch in India or abroad or in the same city or village where a branch already operates. RBI will grant such permission after it is satisfied about the financial condition of the demanding bank, robustness of its management, capital structure and general public interest behind such a move.

The Banking Regulations Act,  1949, defines a ‘branch’ or ‘branch office’ of a banking company as a place where bank deposits are received, cheques cashed, money lent, any or all banking services are carried out. These exclude the bank call centres as they are typically calling facilities which do not have any customer interaction. A branch will include a full-fledged specialised branch, a satellite or mobile office, an extension counter, administrative office, control office, service branch, credit card centre etc.

Difference between Branch Banking and Unit Banking

The local bank you walk into every day for your financial service needs is either a branch bank or unit bank in nature. On many key points, the branch banking, and unit banking system differs from each other.

Banking systems encourage either small, independent banks or banks that are theoretically independent but are in fact owned by a bank holding company.

The unit banking of a particular locality utilizes its resources for the development of its own locality only and does not transfer them to other localities like branch banking.

Branch banking refers to a single bank which operates through various branches in a city or in different locations or out of the cities.

Branch Banking vs. Unit Banking

Branch Banking	Unit Banking
About	A bank that is connected to one or more other banks in an area or outside of it. Provides all the usual financial services but is backed and ultimately controlled by a larger financial institution.	Single, usually small bank that provides financial services to its local community. Does not have other bank branches elsewhere.
Stability	Typically very resilient, able to withstand local recessions (e.g., a bad harvest season in a farming community) thanks to the backing of other branches.	Extremely prone to failure when local economy struggles.
Operational Freedom	Less	More
Legal History	Restricted or prohibited for most of U.S. history. Allowed in all 50 states following the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.	Preferred form of banking for most of U.S. history, despite its tendency to fail. Proponents were wary of branch banking's concentration of power and money.
Loans and advances	Loans and advances are based on merit, irrespective of the status .	Loans and advances can be influenced by authority and power.
Financial resources	Larger financial resources in each branch.	Larger financial resources in one branch
Decision-making	Delay in Decision-making as they have to depend on the head office.	Time is saved as Decision-making is in the same branch.
Funds	Funds are transferred from one branch to another.Underutilisation of funds by a branch would lead to regional imbalances	Funds are allocated in one branch and no support of other branches.During financial crisis,unit bank has to close down.hence lead to regional imbalances or no balance growth
Cost of supervision	High	Less
Concentration of power in the hand of few people	Yes	No
Specialisation	Division of labour is possible and hence specialisation possible	Specialisation not possible due to lack of trained staff and knowledge
Competition	High competiton with the branches	Less competition within the bank
Profits	Shared by the bank with its branches	Used for the development of the bank
Specialised knowledge of the local borrowers	Not possible and hence bad debits are high	Possible and less risk of bad debts
Distribution of Capital	Proper distribution of capital and power.	No proper distribution of capital and power.
Rate of interest	Rate of interest is uniformed and specified by the head office or based on instructions from RBI.	Rate of interest is not uniformed as the bank has own policies and rates.
Deposits and assets	Deposits and assets are diversified,scattered and hence risk is spead at various places.	Deposits and assets are nt diversified and are at one place,hence risk is not spread.