Indian Banking
The first bank in India was the “Bank of Hindustan” established in 1770. The bank started its operations in Kolkata. The General Bank of India was established in 1786. In 1860, the Government of India under the British rule passed Joint Capital Company Act under which Banks can be established under Limited Liability. Under this the first three banks were established are Allahabad Bank (1865), Alliance Bank of Shimla (1881) and Awadh Commercial Bank (1881). Allahabad Bank is the oldest joint stock bank in India. Awadh Commercial Bank established in Faizabad is the first entirely indian joint stock bank. The first fully indigenous bank in India was the Punjab National Bank. Punjab National Bank is established in Lahore in 1894. Inspired by the Swadeshi Movement, more banks were established between 1906 and 1911. Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India are some of the banks established during the Swadeshi Movement and have survived to the present. The period between 1913-1917 is known as Banking Crisis because of World War I. The Reserve Bank is the central bank of India. The Reserve Bank came into existence in 1935 on the recommendations of the Hilton Young Commission of 1926. The Reserve Bank, known as the “Bankers’ Bank”, had an authorized capital of Rs 5 crore. The Reserve Bank was nationalized on 1 January 1949. The Reserve Bank issues currency notes except for the one rupee denomination. The first nationalisation of banks took place on July 19, 1969. 14 banks were nationalised. Second nationalisation were made on April 15, 1980. Six banks were nationalised. In 1990, government gave licence for private banks. These came to be known as New Generation Banks. The first new generation bank is Global Trust Bank (which later amalgamated with Oriental Bank of Commerce). Banking Reforms was started in 1992-93 on the recommendations of Narasimham Committee. The Reserve Bank of India (Amendment) Act, 2006 was enacted in June 2006. The Banking Law (Amendment) Bill, 2012 was introduced to amend the Banking Regulation Act, 1949.
Reserve Bank of India
The Reserve Bank of India is often referred to as the country's bank, the central bank, and the bank of banks. It was established on April 1, 1935 and was nationalized on 1st January 1949. RBI was setup on the recommendations of Hilton Young Commission. The first governor of RBI is Sir Osbourne Arkall Smith (1935-37) and the first RBI Governor to sign in Indian Rupee is James Taylor. The first indian governor is C.D.Deshmukh (1943-49). He later became the Union Finance Minister. The Reserve Bank operates under the RBI Act and the Banking Regulation Act. The Reserve Bank also represents India in the International Monetary Fund. The headquarters of RBI is in Mumbai. The RBI has 22 regional offices at most state capitals and at a few major cities in India. The executive power is vested in the Governing Council, which consists of the Governor and 20 members. The Reserve Bank was the central bank of Myanmar until April 1947 and of Pakistan until June 1948! RBI is the member bank of the Asian Clearing Union. The two training colleges of RBI for its officers are Reserve Bank Staff College at Chennai and College of Agricultural Banking at Pune. The four Zonal Training Centres of RBI are Belapur, Chennai, Kolkata and New Delhi. Tiger, Palm tree is the symbol of RBI logo.
Main Responsibilities of RBI - The responsibilities of the RBI include issuing the necessary currency notes in the country, being responsible for foreign exchange, regulating the banking sector in the country and giving better instructions, acting as the bank, agent and advisor to the government, controlling loans, and acting as a bank to banks. Bank Rate, Open Market operations, SLR and CRR are the instruments of monetary policy of RBI. The main functions of RBI are issue of currency notes, banker to the government, banker's bank, custodian of foreign exchange reserves, to manage public debt and to stablise the value of money etc.
Commercial Banks
Commercial Banks are those profit seeking institutions which accept deposits from general public and advance money to individuals with the prime objective of earning profit in the form of interest, commission etc. The operations of all these banks are regulated by Reserve Bank of India. Commercial banks are classified into Scheduled and Non Scheduled Bank.
Scheduled Banks and Non-Scheduled Banks in India
Scheduled banks are commercial banks that operate under the regulations and rules of the Reserve Bank. They are included in the Second Schedule of the Reserve Bank of India Act, 1934. Non-Scheduled banks are banks that do not come under this schedule. Scheduled banks are required to deposit three to 15 percent of their various deposits as reserves with the Reserve Bank. They are required to submit accurate accounts to the Reserve Bank from time to time. The Reserve Bank has the power to cancel their licenses and impose fines if they violate the instructions. The Reserve Bank of India deals directly with scheduled banks only. Schedule Banks enjoy certain privileges such as free or concessional remittance and borrowing facilities from the RBI. In return Schedule Banks must maintain an average daily balance of cash reserves with the RBI at rates stipulated by it and must submit periodical returns to the RBI.
Conditions to be included into a Schedule Bank are,
i. It must have a paid up capital and reserves for an aggregate value of at least Rs 5 lakhs.
ii. It must satisfy the RBI that its affairs are not conducted in a manner detrimental to the interest of its depositors.
iii. It must be a corporation and not a partnership or a single owner firm.
Scheduled banks are categorized into public sector banks and private sector banks. Scheduled banks include the State Bank of India and its associate banks, nationalized banks, regional rural banks, foreign banks, some cooperative banks, and old and new private banks.
Non-Scheduled Banks are banks that are not listed in the Second Schedule of the RBI Act, 1934 and have a reserve capital of less than Rs. 5 lakhs. They are subject to the statutory cash reserve requirement. But they are not required to keep them with the RBI, they can keep these balances with themselves. Non-Scheduled Banks are banks that are not eligible to borrow from RBI for normal banking purposes except in emergency or extraordinary circumstances. All local area banks are called Non-Scheduled Banks.
TYPES OF BANKS IN INDIA
Based on their activities, banks are mainly classified into four categories - Commercial banks, Cooperative banks, Development banks, and Specialized banks.
I. COMMERCIAL BANKS
As of March 2024, India's commercial banking sector consisted of 12 public sector banks (PSBs), 21 private sector banks (PVBs), 43 Regional Rural Banks (RRBs), 45 foreign banks (FBs), 12 Small Finance Banks (SFBs), 6 Payments banks (PBs) and 2 Local Area Banks (LABs). Out of these 142 commercial banks, 138 were classified as scheduled banks, while four were non-scheduled.
Public Sector Banks
Public sector banks are banks that are owned by the government. The majority of the shares of public sector banks are owned by the government. All public sector banks are scheduled banks. However, not all scheduled banks are public sector banks. In addition to banking activities, public sector banks are responsible for the utilization of government funds and project implementation to the maximum extent. Allahabad Bank is the first public sector bank in the country. The bank started its operations in 1865. Punjab National Bank was the first Indian bank to be started entirely with Indian capital. Central Bank of India was the first Indian bank to be started entirely under the control and ownership of Indians. Canara Bank was the first Indian bank to receive ISO certification. Union Bank in the public sector was inaugurated by Gandhiji. The three phases of bank nationalization led to major changes in India. After the third phase of bank nationalization, the number of public sector banks in India increased to twelve.
1. Central Bank of India
2. Bank of Baroda
3. Bank of India
4. Punjab National Bank - Punjab National Bank, which started operations in Lahore in 1895, was the first bank in India to be fully controlled by Indians. The bank, which started operations in Lahore, was fully funded by the freedom fighters who led the Indian Swadeshi movement. The bank was founded under the leadership of Lala Lajpat Rai. The bank, which started operations in New Delhi as a microfinance institution, is currently the second largest public sector bank in India. This achievement was achieved with the merger of banks after April 1, 2020. In 1969, PNB was nationalized along with 13 other banks in India. In the history of PNB, it has acquired Bhagwan Das Bank, Universal Bank of India, Hindustan Commercial Bank, New Bank of India, Nedungadi Bank, Oriental Bank of Commerce, and United Bank of India. Currently, PNB has about 5,000 branches in India and abroad. New Delhi is the headquarters of Punjab National Bank.
5. UCO Bank
6. Union Bank
7. Canara Bank
8. Bank of Maharashtra
9. Indian Bank
10. Indian Overseas Bank
11. Punjab and Sind Bank
12. State Bank of India - SBI is established as Bank of Calcutta in 1806. It became Bank of Bengal in 1809. In 1921, the three presidency Banks (Bengal, Bombay and Madras) amalgamated to form Imperial Bank of India. The first Presidency Bank is Bengal Presidency Bank (1806). In July 1, 1955, Imperial Bank was nationalised and named as State Bank of India. It headquarters is at Mumbai. SBI is the largest public sector bank in India. It is the largest commercial bank in india in terms of branches and also the world's second largest bank in terms of branches. SBI has the highest number of branches in India. SBI is also the first bank in india to introduce Core Banking System.
Private-sector banks
Private sector banks are banks where the majority of the bank's equity is owned by a private company or a group of individuals. They comply with the central bank guidelines yet have a unique financial system. New generation banks emerged as a result of the economic liberalization in the country after the 1990s. These are private banks of international standing. UTI Bank (now Axis Bank) was the first new generation bank to start operations in India. Examples of these include ICICI, HDFC, Kotak Mahindra Bank, Yes Bank, etc. All of them operate according to the regulations and rules of the Reserve Bank of India. There are 21 private banks in India as of 1 April 2024.
1. Axis Bank
2. Bandhan Bank
3. CSB Bank
4. City Union Bank
5. DCB Bank
6. Dhanlaxmi Bank
7. Federal Bank
8. HDFC Bank
9. ICICI Bank - ICICI Bank is founded in 1994. It is Headquartered in Mumbai. India's largest private sector bank is ICICI. ICICI Bank is one of the Big Four banks of India, along with State Bank of India, Punjab National Bank and Bank of Baroda. It is the second largest bank in India in terms of assets and market capitalization. It is also the first indian bank of New York Stock Exchange.
10. IDBI Bank - The Industrial Development Bank of India was established on July 1964. Its Headquarters is at Mumbai. It is the apex bank for industrial finance in India. In September 2004, RBI incorporated IDBI as a Scheduled Bank.
11. IDFC First Bank
12. IndusInd Bank
13. Jammu & Kashmir Bank
14. Karnataka Bank
15. Karur Vysya Bank
16. Kotak Mahindra Bank
17. Nainital Bank
18. RBL Bank
19. South Indian Bank
20. Tamilnad Mercantile Bank
21. Yes Bank
Rural Banks/Regional Rural Banks (RRB)
Regional Rural Banks or Grameen Banks were established in 1975 with the aim of agro-industrial development in rural areas. The first regional rural bank in India is called Prathama Grameen Bank and was established on 2nd October 1975. It is sponsored by Syndicate Bank. They were established as subsidiary banks of nationalized banks. 50 percent of the shares of Grameen Banks are held by the Central Government, 15 percent by the State Government and 35 percent by the sponsoring bank. The objectives of Grameen Banks are the development of backward areas and supporting the traditional employment sector. Like other banks, all types of transactions are carried out in these banks. The government's goal is to merge the number of Grameen Banks with the parent institution and bring the number of Grameen Banks to 16. Kerala Grameen Bank was formed by merging South Malabar Grameen Bank and North Malabar Grameen Bank under Canara Bank. There are 43 regional rural banks in India as of 1 January 2025.
1. Andhra Pradesh Grameena Vikas Bank
2. Andhra Pragathi Grameena Bank
3. Chaitanya Godavari Grameena Bank
4. Saptagiri Grameena Bank
5. Arunachal Pradesh Rural Bank
6. Assam Gramin Vikash Bank
7. Dakshin Bihar Gramin Bank
8. Uttar Bihar Gramin Bank
9. Chhattisgarh Rajya Gramin Bank
10. Baroda Gujarat Gramin Bank
11. Saurashtra Gramin Bank
12. Sarva Haryana Gramin Bank
13. Himachal Pradesh Gramin Bank
14. Ellaquai Dehati Bank
15. Jammu And Kashmir Grameen Bank
16. Jharkhand Rajya Gramin Bank
17. Karnataka Gramin Bank
18. Karnataka Vikas Grameena Bank
19. Kerala Gramin Bank
20. Madhya Pradesh Gramin Bank
21. Madhyanchal Gramin Bank
22. Maharashtra Gramin Bank
23. Vidarbha Konkan Gramin Bank
24. Manipur Rural Bank
25. Meghalaya Rural Bank
26. Mizoram Rural Bank
27. Nagaland Rural Bank
28. Odisha Gramya Bank
29. Utkal Grameen Bank
30. Puduvai Bharathiar Grama Bank
31. Punjab Gramin Bank
32. Rajasthan Marudhara Gramin Bank
33. Baroda Rajasthan Kshetriya Gramin Bank
34. Tamil Nadu Grama Bank
35. Telangana Grameena Bank
36. Tripura Gramin Bank
37. Aryavart Bank
38. Baroda UP Bank
39. Prathama UP Gramin Bank
40. Uttarakhand Gramin Bank
41. Bangiya Gramin Vikash Bank
42. Paschim Banga Gramin Bank
43. Uttarbanga Kshetriya Gramin Bank
Foreign Banks in India
Foreign banks are institutions that provide various services and products to clients belonging to their home country and other countries. These banks have branches across the globe and support enterprises, companies, and other conglomerates. Foreign banks in India as on 2024 are 44. HSBC, Standard Chartered Bank, Abudhabi Commercial Bank, American Express Bank, BNP Paribas, DBS Bank, Bank of America, Citibank, Deutsche Bank, UBS etc are some of the foreign banks in India. The largest banking group in the world is HSBC (The Hongkong and Shanghai Banking Corporation). The largest bank in terms of capital market is ICBC (Industrial and Commercial Bank of China).
Small Finance Banks in India
The role of small finance banks is to accept deposits and provide loans to small business units, farmers, weaker sections, unorganized sector units, etc. Capital Small Finance Bank, the first small finance bank in India, was established in 2016. ESAF is the first small finance bank in Kerala. ESAF Small Finance Bank was established in March 2017. It was granted scheduled status by the Reserve Bank of India in 2018. As of 31st December 2024, there are 12 small finance banks in India.
1. AU Small Finance Bank
2. Capital Small Finance Bank
3. Equitas Small Finance Bank
4. ESAF Small Finance Bank
5. Jana Small Finance Bank
6. North East Small Finance Bank
7. Shivalik Small Finance Bank
8. Suryoday Small Finance Bank
9. Ujjivan Small Finance Bank
10. Unity Small Finance Bank
11. Fincare Small Finance Bank
12. Utkarsh Small Finance Bank
Payments Banks in India
The main objective of a payments bank is to promote small savings. It targets low-income families, small businesses, and those in the unorganized sector. Like commercial banks, it can accept deposits but cannot provide loans. The limit for deposits is set at Rs 2 lakh (from April 2021). The capital requirement is Rs 100 crore. 25 percent of the branches should be in rural areas where banking services are not available. Payments banks will have facilities to pay bills such as telephone bills, ATM facilities, debit card facilities, etc. They do not fully provide the services provided by other banks. Post Bank of India, which was started by the Department of Posts, is an example of a payments bank. As of 1 April 2024, there are 6 Payment Banks in India.
1. Airtel Payments Bank
2. India Post Payments Bank - India Post Payments Banks (IPPBs) were launched in September 2018, centered around post offices. Its aim is to provide banking services to all villages. India Post Payments Bank can also provide all the services provided by commercial banks.
3. Fino Payments Bank
4. Paytm Payments Bank
5. Jio Payments Bank
6. NSDL Payments Bank
Local Area Banks
Local Area Banks are non-scheduled banks having twin objectives of providing an institutional mechanism for the promotion of rural and semi-urban savings and for giving credit for economic activities in local areas. They were formed as a Public Limited Company in the private sector. They are promoted either by individuals, corporates, trusts or societies. As of 1 April 2024 there are 2 Local Area Banks. They are
1. Coastal Local Area Bank Ltd
2. Krishna Bhima Samruddhi LAB Ltd
II. COOPERATIVE BANKS
The cooperative movement has a strong influence in India. This can be seen in the banking sector as well. Cooperative banks operate at three levels: State Cooperative Bank, District Cooperative Bank, and Primary Service Cooperative Bank. There are also agricultural and rural development banks and urban banks in the cooperative sector. Cooperative banks are controlled by their respective governing bodies. The Department of Cooperatives of the state government supervises them.
State Cooperative Banks: The highest level of cooperative sector in the state. Financial assistance to district cooperative banks and primary cooperative banks. There are 34 state co-operative banks in India.
District Cooperative Banks: Operate in various centers of the district. Provide assistance and advice to primary cooperative banks. There are a total of 352 district Central Co-operative in India.
Primary Cooperative Banks: Operate in villages. Promote the saving habit of villagers. Provide loans to villagers at low interest rates.
III. DEVELOPMENT BANKS
Development banks are banks that provide long-term loans for the technological upgradation and modernization of industries. These banks are designed to meet the financial needs of development-oriented industries. They are a mechanism for providing long-term financial support to meet the overall financial needs of the infrastructure development sector. These banks provide long-term loans to private business companies and public sector units. Some examples of national development banks are,
1. Industrial Development Bank of India (IDBI) - The Industrial Development Bank of India was established on July 1964. Its Headquarters is at Mumbai. It is the apex bank for industrial finance in India.
2. Small Industries Development Bank of India (SIDBI) - SIDBI is a wholly owned subsidiary of IDBI. Its headquarters is at Lucknow. SIDBI started its operation from 2nd April 1990. It was established for promoting, financing, and assisting in development of industries in the small scale sector.
3. Industrial Reconstruction Bank of India (IRBI)
4. Industrial Credit and Investment Corporation of India (ICICI) - ICICI Bank is founded in 1994. It is Headquartered in Mumbai. India's largest private sector bank is ICICI.
5. Infrastructure Development Finance Company (IDFC)
6. Industrial Finance Corporation of India (IFCI)
IV. SPECIALIZED BANKS
Specialized banks are banks that provide finance to specific economic sectors such as agriculture, industry, real estate, and rural development. Some examples of Specialized banks are,
1.Tourism Finance Corporation of India Ltd (TFCI) - Tourism Finance Corporation of India Ltd is a premier public financial institution which commenced operations in 1989 with core objective of providing finance and advisory services to the tourism, hospitality, social/urban infra - education, real estate, manufacturing, healthcare, logistics and so on.
2. National Bank for Agriculture and Rural Development (NABARD) - The full name of NABARD is National Bank for Agriculture and Rural Development. It is the apex institution of Rural Credit. It was established on July 12, 1982 for the agricultural and rural development sectors. It was established by the merger of Agriculture Credit department and reconstruction of Agriculture and Development Corporation of the Reserve Bank of India. The Reserve Bank and the Central Government have equally divided the share capital of NABARD. The headquarters of this bank is in Mumbai. NABARD is responsible for providing refinancing assistance to the State Cooperative Banks and Grameen Banks, as well as for examining them. NABARD was established on the recommendations of Shivraman Committee.
3. National Housing Bank (NHB) - The National Housing Bank is an apex financial institution for housing. It was set up as wholly owned subsidiary of the Reserve Bank of India. Its Headquarters is at New Delhi. The bank started its operations from July 8, 1988. Regulator and Supervisor of Housing Finance Companies (HFCs) in the country. The main activity is extending financial assistance to eligible institutions in the housing sector by way of refinance and direct finance.
4. Housing Development Finance Corporation (HDFC)
5. Export-Import Bank of India (Exim Bank) - The Export-Import Bank of India was founded in 1982. Its headquarters is at Mumbai. It was set up for financing, facilitating and promoting foreign trade in India.
Some Terms Related to Banks
■ ATM and CDM Machines - ATM is an abbreviation for Automated Teller Machine. This machine that dispenses money was first installed by HSBC Bank in India. CDM is Cash Deposit Machine. Through CDM machines, we can deposit money. They are also widespread today.
■ Cash Reserve Ratio (CRR) - Cash Reserve Ratio is the Certain percentage of the total bank deposits has to be kept in the current account with RBI.
■ Bank Rate - Bank Rate is the rate at which central bank of the country (In India, it is RBI) allows finance to commercial banks. Bank Rate is a tool, which central bank uses for short-term purposes.
■ Base Rate - The lowest interest rate that commercial banks can offer to customers is the Base Rate.
■ Repo (Repurchase) Rate - Repo rate is the rate at which the RBI lends short-term money to the banks against securities. When the repo rate increases borrowing from RBI becomes more expensive.
■ Reverse Repo Rate - Reverse Repo Rate is the rate at which banks park their shortterm excess liquidity with the RBI. The banks use this tool when they feel that they are stuck with excess funds and are not able to invest anywhere for reasonable returns.
■ Statutory Liquidity Ratio - SLR refers to that portion of total deposits of a commercial bank which it has to keep with itself in the form of cash reserves. SLR is an effective instrument of credit control with Reserve Bank of India. By varying the SLR, the RBI controls the expansion and contraction of credit. If SLR is reduced, the lendable resource with the scheduled commercial banks gets correspondingly increased and vice-versa.
■ Clearing House - Clearing House is the place where transactions between banks are carried out centrally on a daily basis. They are the place where each bank exchanges the checks and bills it receives with the other bank.
■ Lead Bank Scheme - Under the Lead Bank Scheme, a bank adopts a district for developmental purpose. On the basis of the recommendations of Gadgil study group and Nariman Committee, the lead bank scheme was introduced in 1969.
■ Core Banking - Networking of branches, which enables Customers to operate their accounts, and avail banking services from any branch of the Bank.
■ Internet Banking (E-banking) - Any user with a personal computer and a browser can get connected to his bank's website to perform any of the virtual banking functions. In Internet Banking System, the bank has a centralized database that is web-enabled. It is also known as Online Banking.
■ Real Time Gross Settlement Systems (RTGS) - RTGS are specialist fund transfer system where transfer of money or securities takes place from one bank to another on a "real time" and on "gross" basis. Settlement in "real time" means payment transaction is not subjected to any waiting period.
■ Digital Banking - With the advent of the internet and mobile apps, the number of people who visit banks in person has decreased to 10 percent, according to statistics. Today, 35 percent of people conduct banking transactions using mobile apps, 23 percent using computers, 21 percent using ATMs, and 11 percent over the telephone. To access mobile banking services, a mobile number must be linked to a bank account. Most financial transactions, such as paying various bills, making recharges, booking tickets, buying goods online, transferring funds, applying for a cheque book, and getting a mini statement of the account, can be done through a mobile phone without going to the bank.
■ Banking Ombudsman - It was introduced under Section 35A of the Banking Regulation Act, 1949 by RBI with effect from June 14th 1995 for giving solution for customer's complaints. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India. All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.
■ Negotiable Instrument - Negotiable instrument is a document with a signature given to a person or to someone else designated by him for the payment of a specified amount of money. e.g. checks.
■ Merchant Banker - Merchant banks are those that provide financial advice and services to industrialists and others for a fixed fee. Merchant banker is a financial intermediary who has acquired special expertise in transferring and mobilizing capital from those who have it to those who need it.
■ Locker facility - Locker facility is a facility for customers to keep their valuables (gold, land paper deeds) safe.
■ Branch Banking System - Bank branches open and operating anywhere in the country are called Branch Banking System. Bank branches operating only within a certain area is a Unit Bank. Chain Banking is formed by families or individuals. Special services provided by the bank for the employees of any organization or other is called Group Banking.
■ Banking Correspondents - Non-banking financial institutions responsible for providing banking services to the public is called Banking Correspondents
■ Venture Capital - Financial assistance provided to startup companies by novice entrepreneurs who do not have much experience or tradition is called Venture Capital.
■ Capital Market and Money Market - Capital Market is the market for borrowing and lending long-term capital and Money Market is the market for borrowing and lending short-term funds.
■ Treasury Bill Market - The market where treasury bills are bought and sold.
■ Arbitrage - Arbitrage is the speculative activity that requires a great deal of specialized skill and practicality.
■ Savings Account - Savings bank accounts are where you can deposit money and withdraw it when needed. Each bank requires a certain amount as a minimum balance in such accounts. This varies in rural and urban areas. Interest starts from three percent depending on the daily balance in the account. The customer will also get a check book and debit card. Checks can be used to transfer money. Similarly, you can use a debit card to withdraw money from your own SB account. ATMs and internet banking can be used for this. Zero balance accounts are also now available to attract more customers to the bank.
■ Fixed Deposits - Fixed deposits are also called term deposits. These are deposits that earn higher interest. They can be invested for both short and long term. Long-term deposits earn higher interest than short-term deposits. Senior citizens get higher interest on fixed deposits. They can also get loans of up to 90 percent against the collateral of fixed deposits. The bank charges two percent more interest on the loan amount than the interest rate received on the deposit. The owner can withdraw the deposited amount in case of emergency with certain conditions.
■ Current Account - Current accounts are intended for traders, merchants, and institutions who have to make more transactions. They do not earn interest. Some banks charge a special charge called 'folio charge' on current accounts. A current account is an account that allows you to deposit and withdraw money many times in a day. Depositing money in a current account is called a current deposit. Current accounts are mostly used by industrialists and traders.
■ Recurring Deposit - A recurring deposit is a scheme where a fixed amount is deposited every month for a fixed period. The deposit that is paid without fail and completes the term period will get the interest of fixed deposits. A permanent deposit is a similar investment to a recurring deposit. Permanent deposits are deposits that banks collect through collection agents. The interest on these deposits is low. The money is returned only after the term period. The bank pays a commission to the agents who collect these deposits. The amount collected on a day must be paid to the bank the next day.
■ Bank Loans - Banks provide loans to the needy against certain collateral received from the public. The interest rate charged on loans is higher than that paid on deposits. The interest rate on different types of loans also varies. The collateral accepted by banks for lending is physical assets (gold, property paper, etc.), fixed deposit certificates, and salary slips.
