BANK - PEOPLE'S MONEY!

 Bank:

A bank is a financial institution which lends the loans to customers and accept the deposits. From the deposits received by the general public (interest is payable to holders) , vast amount of money is available to these financial institutions which in turn be used to lend money to people, businesses and so on. As all deposit holders won't come to bank to withdraw their amount on the same day, problem won't arise. However certain amount is specifically kept aside according to RBI (Reserve Bank of India) regulations. The difference between the interest received from lending loans and interest paid to deposit holders is the source of major income to banks which is also known as Spread. They also provide services of payments to clients having different bank accounts as well. 

Along with the primary functions like accepting deposits and lending loans, there are other services provided.

- Gold loans can be obtained by providing gold as collateral

- Locker facilities to safeguard valuable items

- Various mutual funds and insurance policies 

Central Bank (RBI) -

It is a regulatory body which oversees the functions of banks and if they are maintaining accordingly.

So as mentioned before certain amount should be kept aside to meet emergency needs of deposit holders 

1) Cash Reserve Ratio (CRR)-

Percentage of total deposits to be kept aside as cash.

2) Statutory Legal Requirements (SLR)-

Percentage of total deposits to be kept as liquid assets other than cash like gold.

Types of banks:

1)Commercial Banks

Main functions include accepting deposits and lending loans (are commercially driven)

2) Central Bank

Not just overseeing the functions of commercial bank, the primary one is issuing money. No other institutions have permission to issue money except 1rupee note (which will be issued by ministry of finance). This money will be issued only with accordance to Gold reserves. In a managed floating exchange rate system in determining market forces of demand and supply, RBI intervene to influence the currency value. It also has foreign exchange reserves maintained.

3)Regional Rural Banks(RRB)

These are accessible and primarily focused towards rural areas. In order to obtain credit for the purpose of agriculture and other non farming activities like diary, poultry so on as small farmers can't utilise lending facilities from the commercial banks.

4)Cooperative banks

This is operated and owned by the members rather than government, but government extends its help.

While these are official banks, in rural areas importantly to help women; Self Help Groups (SHG) existence started. Women from the same neighborhood could pool their saving amounts. From that amount loans could also be taken with minimum interest charges.

Types of deposits in banks -

1) Savings account

Normal general account for simple transactions. Deposit holders won't receive any interest for this type as amount is not maintained and they can withdraw any time they want. These are also known as on demand deposits.

2)Current account

A special feature in this type is the provision of bank overdraft facilities, which means even if the person doesn't have sufficient bank balance, bank pays it instead. Interest is payable to bank by person who availed the OD

3)Fixed Deposits

Generally large amount is deposited to receive interest either monthly, quarterly, semi annually or annually. It can last from 7 days to 10 years. But usually a deposit with minimum 5 years generate good interest. Senior citizens get extra interest rate. These deposits can't be withdrawn, instead they should be completely broken.

4)Recurring deposits

Depositing equal amount every month, this also generates interest to the holders. But periodically, regular amount should be deposited.