Welcome dear students! Today we are going to learn about Bank Transactions from Class 10 Social Science. In this chapter, we will explore the meaning of banks, the role of banks and post offices in financial transactions, the characteristics of banks, the different types of accounts you can open, the methods to open them, and the advantages of having bank accounts. [CHECKPOINT]
Banks developed about two hundred years ago. The nature of banks has changed as time has changed. The term bank is related to financial transactions. Banks are financial institutions which use the money deposited by customers as investments and agree to return it whenever they require. Banks advance loans to customers and charge interest on them. They also exchange the money of different countries. The development of any country depends on its banking system. Banks advance money to agriculture, industries, traders, and all other sections of society, which are the main organs for national development and accelerate economic growth. [CHECKPOINT]
Now, let us understand what a bank is. The term bank is derived from the old Italian word Banco or from the French word Banque, both meaning a Bench or money exchange table. A banking company may be defined as a company which transacts business with finance. It accepts deposits from the public and lends it to those who need it in the form of loans. It receives money from those who want to save their money in the form of deposits and lends it to those who require it in the form of loans. The services of banks are called Banking. A bank repays the deposits in the form of cheques, drafts, or in some other forms. [CHECKPOINT]
Let us move on to the characteristics of banks. There are eleven key characteristics. First, dealing with money. Banks are financial institutions which deal with the money of the public. Second, individual, firm, or company. A bank may be a person, firm, or a company. Banking company means the institution that deals with money. Third, acceptance of deposits. Banks accept deposits from the public. These deposits are returned whenever the customers demand it or after a prescribed period. Banks provide security to these deposits and act as custodians of public deposits. Fourth, lending loans. Banks advance loans to the industrial sector, agricultural sector, education, house construction, and for other purposes. [CHECKPOINT]
Fifth, payment and withdrawal. Banks facilitate customers to withdraw their deposits in the form of cheques or drafts. Sixth, agency and utility services. Banks provide various banking facilities including general utility services and agency services. Seventh, profit and service orientation. A bank is a profit seeking institution having a service oriented approach. Eighth, ever increasing functions. Banks continuously expand and diversify their functions, services, and activities. Ninth, connecting link. Banks act as connecting links between depositors and borrowers by collecting surplus money and lending it to those in need. Tenth, banking business. The main activity is accepting deposits and lending money. It is not a subsidiary to any other business. Eleventh, name identity. Banks always add the word bank to their names, for example, Canara Bank, State Bank of India, and Union Bank. This enables customers to know they are dealing with a money institution. [CHECKPOINT]
Next, we will learn about the functions of banks. There are ten primary functions. One, accepting deposits from the public and others. Two, lending money to the public and other institutions. Three, transferring money from one place to another through remittances. Four, collecting money by cheques, drafts, and bills. Five, discounting of bills. Six, hiring safe deposit lockers. Seven, conducting foreign exchange transactions. Eight, keeping valuables in safe custody. Nine, issuing letters of credit and guarantee. Ten, conducting government transactions for both state and central governments. [CHECKPOINT]
The relationship between bankers and customers falls under two broad categories. The first is the general relationship, which includes the primary relationship of debtor and creditor, the subsidiary relationship of trustee and beneficiary, and the agent and principal relationship. The second is the special relationship, which includes the obligation to honour cheques and the obligation to maintain secrecy of accounts. Banks also offer various services. These include credit cards, personal loans, home and vehicle loans, mutual funds, business loans, safe deposit lockers, debit cards, trust services, and signature guarantees. [CHECKPOINT]
Now let us discuss banking transactions involving banks and post offices. Any activity involving money or exchange of money in an account is viewed as a bank transaction. Banks keep customer money as deposits and lend it as bank loans. They collect interest on these loans, and out of that interest, a part is given to depositors as their income. Banks invest customer money in national and international business to increase funds. All banking transactions in India are controlled by the Reserve Bank of India, which is known as the Mother of Banks, Bankers Bank, or Central Bank of India. The Reserve Bank of India formulates the monetary policy followed by all banks. Today we have the State Bank group, 12 nationalised banks, 21 private banks, and 46 foreign banks. The network consists of 162904 bank branches. There are also rural banks, regional banks, government banks, and private banks. [CHECKPOINT]
A recent development is the inclusion of post offices into the banking fold. The Indian Postal Department plans to start the Indian Post Payment Bank with a network of over 1.55 lakh post offices across India. 90 percent of them are in semi urban and rural areas. The department already provides financial services including the Post Office Savings Bank, National Savings Certificate, Kissan Vikas Patra, Monthly Recurring deposits, Postal Life Insurance, pension payment, and money transfer. The Postal Department is promoting a capital investment of 1000 crore rupees for bank transactions, set up as a subsidiary with the Postal Department. [CHECKPOINT]
Let us look at the types of banks. There are different types, each specialised in different activities. The important types are: one, Central Bank or Reserve Bank of India. Two, Commercial Banks. Three, Industrial Development Banks. Four, Land Development Banks or Agriculture Banks. Five, Indigenous Banks, also known as money lenders or Sahukars. Six, Co operative Banks. [CHECKPOINT]
Generally, four kinds of accounts can be opened in a bank. First is the Savings Bank Account. This is generally opened by salaried persons or those with fixed regular income, and is also available to students, senior citizens, and pensioners. It encourages saving and pooling funds. There is no restriction on the number and amount of deposits. Money can be withdrawn by cheque or withdrawal slip. Second is the Current Account. It is opened by businessmen with large regular transactions. Amounts can be deposited or withdrawn any number of times daily. Banks generally do not give interest but collect service charges. Third is the Recurring Deposit Account. Opened for future requirements like weddings or buying land or cars. Deposits are made monthly. After the period, the total is repaid with interest. Fourth is the Term Deposit Account. Opened for a fixed period by depositing a particular sum. The term may be a month, six months, one year, five years, or ten years. The amount cannot be withdrawn before expiry. The interest rate is higher depending on the term. [CHECKPOINT]
Now, let us learn the procedure to open a bank account. It takes seven easy steps. Step one: decide the type of account you want to open, such as savings, current, recurring deposit, or term deposit. Step two: approach the bank of your choice and meet the officer to inform them of your wish to open an account. They will provide the required forms and instructions. Step three: fill up the bank account form with your name, address, age, occupation, and other details. Make two or three specimen signatures on the specimen signature card, which should not be changed later. For joint accounts, sign jointly and provide separate specimen signatures. Submit passport size photographs for identification. [CHECKPOINT]
Step four: give a reference or introduction from an existing account holder or a respectable person, who will sign in the introduction column to safeguard the bank's interest. Step five: submit the fully filled form along with required documents like address proof, Permanent Account Number Card, Aadhaar card, Elector Photo Identity Card, and Ration card. Step six: the bank officer verifies all particulars and documents. If satisfied, he clears the proposal form. Step seven: make the initial deposit using a pay in slip or challan. The bank then issues a passbook, cheque book, and pay in slip book for savings accounts, a fixed deposit receipt for term deposits, a pay in slip book and cheque books for current accounts, and a passbook and pay in slip book for recurring deposit accounts. [CHECKPOINT]
Do you know this? A joint account is an account which is opened and operated by two or more persons. Opening a bank account has several advantages. It facilitates safe custody of money, helps in making payments and collecting money, enables holders to get advances and loans, ensures smooth financial transactions, and provides safe deposit locker facilities. [CHECKPOINT]
Let us examine bank operations. Bankers provide savings bank facilities to build savings, focus on mobilising deposits and lending, and accept no deposit less than 10 rupees. Cheques or drafts drawn only in favour of the account holder are accepted. Cash can be withdrawn via cheques, withdrawal slips, or Automated Teller Machine debit cards. Account holders can give standing instructions for periodical payments like insurance premiums, income tax, electricity, telephone, and water bills. Interest is calculated monthly on the minimum balance and credited monthly, quarterly, half yearly, or yearly, generally in April and October or February and July. Accounts may be transferred between branches on request. For closure, the request must state the reason, and the passbook, unused cheque leaves, and Automated Teller Machine debit card must be surrendered, with the Automated Teller Machine card cut into two pieces across the magnetic strip. [CHECKPOINT]
Now we will solve the exercises from your textbook. Exercise one asks you to fill in the blanks with suitable words. Question one: The word Bank has been derived from the French word Banque. Question two: The Bankers Bank is the Reserve Bank of India. Question three: An example for a nationalised bank is State Bank of India or Union Bank. Question four: The National saving certificates are issued by the Post Office Savings Bank. Question five: The type of account where any number of transactions can be made with the Bank is the Current Account. Question six: The deposits for a fixed term can be deposited in the Term Deposit account. [CHECKPOINT]
Exercise two requires answering questions after discussion. Question seven: What is a bank? A bank is a financial institution which transacts business with finance, accepts deposits from the public, and lends it to those who need it in the form of loans. Question eight: List out the characteristics relating to bank transactions. The characteristics are: dealing with money, being an individual firm or company, acceptance of deposits, lending loans, facilitating payment and withdrawal, providing agency and utility services, having a profit and service orientation, ever increasing functions, acting as a connecting link between depositors and borrowers, focusing on banking business as the main activity, and adding the word bank to their name identity. Question nine: What are the functions of a bank? The functions are accepting deposits, lending money, transferring money, collecting money by cheques drafts and bills, discounting bills, hiring safe deposit lockers, conducting foreign exchange transactions, keeping valuables in safe custody, issuing letters of credit and guarantee, and conducting government transactions. [CHECKPOINT]
Question ten: Explain the relation between the bank and its customers. The relationship falls into general and special categories. General includes primary debtor and creditor, subsidiary trustee and beneficiary, and agent and principal relationships. Special includes the obligation to honour cheques and maintain account secrecy. Question eleven: The number of saving bank account holders is increasing. Give reasons. This is because savings accounts are opened to encourage people to save money and pool their savings, there is no restriction on the number and amount of deposits, and it provides a safe environment for salaried persons, students, senior citizens, and pensioners to manage their finances. Question twelve: What are the advantages of opening a bank account? The advantages include safe custody of money, help in making payments and collecting money, access to advances and loans, smooth financial transactions, and safe deposit locker facilities. [CHECKPOINT]
Exercise three covers activities. Activity one: Make a list of the names of the banks which you know. You should list banks such as State Bank of India, Canara Bank, Union Bank, Punjab National Bank, Bank of Baroda, and other private banks like HDFC Bank, ICICI Bank, and foreign banks. Activity two: Visit the branch of a bank and collect information regarding the periodical interest banks offer to term deposit accounts. You will find that interest rates vary by term, with longer terms like five or ten years offering higher rates, and banks generally credit this interest monthly, quarterly, half yearly, or yearly. Exercise four is a project: Prepare a report on how to open a bank account by visiting a branch and meeting its officer, and open your account if you need. Follow the seven steps we discussed earlier, from deciding the account type to submitting documents and making the initial deposit. [CHECKPOINT]
Thank you for listening! Keep revising and practicing. Goodbye! [CHAPTER_COMPLETE]