Banking Core Banking Terminology

Core Banking Terminology 

Various type of Bank Accounts-

There are mainly three type of Banking accounts in India-

1. Demand Deposits
2. Time Deposits
3. Non-Resident Deposits

1. Demand Deposit-

• In these types of accounts money payable on Demand.
• It includes saving accounts and current accounts.

(a) Saving account-

• There are mainly three types of saving accounts in Indian banks- (i) Basic Savings Bank Deposit Accounts (BSBDA) and (ii) Basic Saving Bank Deposit Accounts Small scheme (iii) Normal Saving Bank Account

(i) Basic Savings Bank Deposit Accounts (BSBDA)-

• According to RBI guidelines August 2012, All Banks are required to convert the existing 'no-frills' accounts’ into 'Basic Savings Bank Deposit Accounts'.
  No Frills Account- These accounts were introduced by RBI in November 2005 to provide banking facilities to poor section of society. These accounts had the facility of ‘nil’ or very low minimum balance.
• An individual can open only one BSBDA account in one bank.
• These accounts are normal Banking accounts available to all customers.
• There are no restrictions for age and income criteria of the individual for opening BSBDA.
• KYC norms are applicable for these accounts.
• Jan Dhan accounts under Pradhan Mantri Jan Dhan Yojana comes under this category.

 (ii) Basic Saving Bank Deposit Accounts Small scheme-

• When persons do not have any of the ‘official valid documents’ can open ‘small accounts’ with banks.
• Total deposit money by a person in such accounts should not exceed one lakh rupees in a year.
• Withdrawal money limit in the account is ten thousand rupees in a month.
• Any time maximum balance in the account should not exceed fifty thousand rupees.
• These accounts are valid for a period of 12 months initially which may be extended by another 12 months if the person provides proof of having applied for an Officially Valid Document.
• Small Accounts can only be opened at CBS linked branches.

(iii) Normal Saving Bank Account-

• In these types of accounts facilities and minimum balance varies from bank to bank.
• In these type accounts, we have salary account, student account etc.

(b) Current Account-

• People engaged in Business prefer these types of accounts.
• In these accounts, any number of transactions are permitted per day.
• For providing these facilities banks take charges from the customers.
• Banks also provide overdraft facility to the customers.

2. Time Deposits-

• In these types of accounts, money is deposited for a specific period.
• In these Interest rate given by bank is more than the saving account.
• Interest rate slightly higher for senior citizen (60 + years)
• It includes Recurring Deposit and Fixed Deposit.

(a) Fixed Deposit-

• In these type of deposits, Banks accept deposits varying from 7 days to maximum of 10 years.
• Interest rate varies from bank to bank.
• Pre-withdrawal facility available with some fines.

(b) Recurring Deposit-

• In these type of accounts, banks accept a fixed amount from a customer in fixed instalments in regular interval of time.
• Deposit period varies from six months to ten years.

3. Non-Resident Deposits-

• These accounts are only held by Non-resident Indians.
• Currently, there are three types of Non-Resident Deposits accounts in India-

(a) Foreign currency Non-Resident (Banks)- FCNR (B)-

• These accounts only can open and maintain in the foreign currency.
• These accounts can be opened in following currencies viz., US dollar, Pound Sterling, Euro, Japanese Yen, Canadian Dollar and Australian Dollar.
• Only Term deposit is allowed.
• These accounts are non-taxable in India.
• In these accounts, principal amount and the interest are fully repatriable.
  Repatriable- Defined as sending or bringing money back to the foreign country.

(b) Non-Resident External Rupee Account (NRE)-

• These accounts held in Indian Rupee.
• Term deposits and Saving Deposits are allowed.
• These accounts are also non-taxable in India.
• In these accounts, principal amount and the interest are fully repatriable.

(c) Non-Resident Ordinary Rupee Account (NRO)-

• Anyone Individual residing outside India is eligible.
• If Indian resident migrated abroad can shift his account to this category.
• Term deposits and Saving Deposits are allowed.
• These accounts are taxable in India.
• In these accounts, the principal amount is non-repatriable.
• Interest amount can be repatriable.

Other Accounts-

DEMAT Account-

• DEMAT stands for De- materialised.
• These accounts used to transact shares in electronic format.

Nostro Account-

• These accounts are held by Indian Banks in foreign Banks in foreign currency.
• Example- Punjab National Bank has an account in Bank of America in dollars.

Vostro Account-

• These accounts are held by foreign banks in India in Indian Rupees.
• Example- Bank of America has an account in Punjab National Bank in Indian Rupees.

Escrow Account-

• It is the temporary pass through an account held by third parties during the transaction between two parties.

GILT Account-

• These accounts are maintained by investors with the Primary dealers for holding their Government securities and Treasury bills in the Demat form.

 

Cheque

• A cheque is a dated and signed document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued.
• The Cheque is a type bill of exchange as per Negotiable Instruments Act 1881.
• Drawer- The person/Account holder who writes the check
  Payee- Person on which name cheque is written
  Drawee- In cheque drawer order their bank to draw money from his account. Bank which hold drawer account is known as drawee.
• Validity- 3 months from the date of issue
  Note: From April 1, 2012 RBI reduced validity for Cheques, Drafts, Pay orders from 6 months to 3 months.
• MICR (Magnetic Ink Character Recognition) code is a character-recognition technology used mainly by the banks to ease the processing and clearance of cheques
• This code is printed at the bottom of cheques and includes the document type indicator, bank code, bank account number, cheque number, cheque amount, and a control indicator.

Types of Cheques-

1. Bearer Cheque-

• In this type of cheque, person who bears the cheque is authorised to collect amount of money.
• This type of cheque are endorsable.
  Example: Drawer- Ram, Payee- Shyam
  Shaym can endorse it to his friend Mohan. Mohan can collect amount from Bank.
• No identification is required at the time of presenting the cheque to the Bank.

2. Order Cheque-

• In this type of cheque only that person whose name is written (by issuer) on the cheque, is authorised to collect the amount.
• A Bearer cheque will become order cheque if after payee name the word “Or Bearer” is replaced by the word “Or Order”.
• Identification is required at the time of presenting the cheque to the Bank.

3. Blank Cheque-

• In this type of cheque drawer put his/her sign on the cheque and left all other columns empty.

4. Ante-Dated Cheque-

• If Cheque issue by drawer prior to date of signing a cheque, this type of cheque is known as Anti-Dated cheque.
• Example-
  Suppose Today’s date is 28/07/2017
  If we issue a check today and put a date 28/06/2017, this type of cheque is known as Anti-Dated Cheque.

5. Post-Dated Cheque-

• If the cheque issued by drawer to the payee for the upcoming withdrawn date, this type of cheque is known as Post-Dated cheque.
• Example-
  Suppose Today’s date is 28/07/2017
  If we issue a check today and put a date 28/08/2017, this type of cheque is known as Post-Dated Cheque.

6. Stale Cheque-

• If any cheque issue by a drawer does not get withdrawn from the bank till three months, then this type of cheque is known as stale cheque.

7. Crossed Cheque-

• If two parallel line made on the front part of the cheques, this type of cheque is known as crossed cheque.
• In this type of cheque payee cannot withdraw money in cash but money can transfer in payee account.
• This type of cheque are endorsable.

8. Open (Uncrossed) Cheque-

• When a cheque is not crossed and payable at the counter of the bank on presentation of the cheque.

9. Self-Cheque-

• A self-cheque is written by drawer as pay self to receive the money in the physical form from the branch where he holds his account.

10. Mutilated Cheque-

• In this type of cheque, cheque is torn into two or more pieces such cheque is Mutilated Cheque.
• If it is presented for payment, such a cheque the bank will not make payment against such a cheque without getting confirmation of the drawer.

11. GIFT Cheque-

• This type of cheque issued by banks with small extra charges, when customer demands for Gift cheque.
• Example: Honour Gift cheque in Cricket match.

12. Pay yourself cheque-

• These are type of crossed cheque to the bank asking the bank deduct money from his account into bank’s own account for the purpose buying banking products like drafts, pay orders, fixed deposit receipts etc.

13. Traveller cheque-

• These type of cheques are used for withdrawal of money while traveling.
• These cheques can be encashed abroad where foreign currency is normally acceptable.

14. Local Cheque-

• This type of cheque is valid in the given city and a given branch in which the drawer has an account.

15. Outstation Cheque-

• If local cheque is presented in other city, it shall attract some fixed banking charges.

  16.  At par cheque-

• In this type of cheque, it is accepted at all its branches across the country.

  17.  Banker’s cheque-

• These type of cheques are issued by the bank itself and guarantees a payment.
• These cheques are not dishonoured as the money will be paid to bank beforehand.