Banking
A banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money. The customer has the option of making the transactions through various channels offered by the Bank.
Banking Channels
- A branch is a retail location where a bank or financial institution offers a wide array of face-to-face service to its customers.
- An ATM is a computerized telecommunications device that provides a financial institution's customers with a method of making financial transactions in a public place without the need of a human clerk or bank teller. Most banks now have more ATMs than branches; and ATMs are providing a wider range of services to a wider range of users. For example, ATMs enable you to deposit cash, withdraw money, make balance inquiry, obtain a bank statement and so on.
- Phone Banking is a service provided by a bank that allows its customers to make transactions over the telephone. A user-friendly automated service menu offers convenient access, coupled with security, to your account, as all your transactions are protected by an ATM PIN – the personal password to your bank account and credit-card account – and a TPIN for your Demat Account. For any other assistance, the phone banking officers would take it up and help resolution.
- Internet Banking is a service used for performing transactions, accessing bank accounts, making payments, etc. over the Internet through a bank’s secure website.
- Mobile banking is a service that allows a bank’s customers to check their accounts on their mobiles. The mobile banking alert facility informs you promptly of the significant transactions in your accounts. It keeps you updated wherever you go. The mobile banking request facility enables you to ask for your account information.
Some Basic Banking Terms
Account balance: The balance in an account at the beginning of each business day; includes all deposits and withdrawals that were posted from the previous night, whether or not funds have been collected.
Automatic funds transfer: An arrangement that moves funds from one account to another automatically on a pre-arranged schedule; for example, every pay day or once a month.
Bill pay: A service of online banking that allows you to pay your bills online. In addition, you can elect to receive e-bills – electronic versions of your paper bills – from your credit card
Bounced cheque: A cheque that a bank returns unpaid because there are not enough funds available in the account, the specimen signature does not tally, there are alterations on the cheque or some such disqualifying reason.
Fixed deposit: A time deposit that is payable at the end of a specified term. FDs generally pay a fixed interest rate and generally offer a higher interest rate than other types of deposit accounts. Terms can range from seven days to ten years.
Compound interest: Interest that is calculated not only on the principal balance in the account, but also on the accumulated interest. The more frequently interest is compounded, the higher the effective yield.
Electronic funds transfer (EFT): Any transfer of funds initiated by electronic means, such as an electronic terminal, telephone, computer, ATM or magnetic tape.
Linked accounts: Any account linked to another account at the same bank so that funds may be transferred between the accounts electronically.
Stop payment: When you ask a bank not to pay a cheque that you have written or release payment that you have authorized. Stop payments are generally placed on lost or stolen cheques or on cheques related to disputed purchases. Stop payment orders generally expire after six months and a fee usually applies.
Deposit Insurance and Credit Guarantee Corporation
Deposit Insurance and Credit Guarantee Corporation (DICGC) is a body that operates a deposit insurance system.
Q1. What does DICGC insure?
In the event of a bank collapse, DICGC protects bank deposits that are payable in India. The DICGC insures all deposits such as savings, fixed, current and recurring deposits.
Q2. What is the maximum deposit amount insured by DICGC?
Currently, the deposits of every depositor in a bank are insured up to a maximum of Rs.1,00,000 (Rupees one lac) for both principal and interest amount held by him.
Q3. How will I know whether my bank is insured by DICGC or not?
DICGC while registering the banks as insured banks, furnishes them with printed leaflets for display. The leaflets give information pertaining to the protection afforded by the Corporation to the depositors of the insured banks. In cases of doubt, a depositor should make specific enquiries from the bank’s officials in this regard or visit DICGC’s website at the web address www.dicgc.org.in.
Q4. What is the ceiling on the amount of insured deposits kept by one person in different branches of a bank?
The deposits kept by one person in different branches of a bank are aggregated for the purpose of insurance cover and currently a maximum amount of Rupees one lakh is paid.
Q5. Does DICGC insure just the principal deposit amount or both principal and accrued interest?
DICGC insures principal and interest up to a maximum amount of Rupees one lac. For example, if an individual had deposit(s) with principal amount of Rs.95,000 plus accrued interest of Rs.4,000, the total amount insured by the DICGC would be Rs.99,000. However, if the principal amount were Rupees one lac, the accrued interest would not be insured, not because it is the interest but because the amount was over the insurance limit.
Q6. Can deposit insurance be increased by depositing funds into several different accounts all at the same bank?
No. All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks, they would be insured separately.
Q7. Are deposits in different banks insured separately?
Yes. If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.
