Functions of  Bank in India
functions of bank

Functions of Bank in India

Various Functions of Banks

There are various functions of  banks, some of them are given below. Commercial banks render various utility services to their customers, which are as follows:

Accepting deposits is one of the major activities of the Banks. Banks are also called custodians of Public money. The money is accepted as deposit for safekeeping. However, since the Banks use this money to earn interest from people who need money. Banks share a part of this interest with the depositors.

Savings Account

As the name denotes, this account is ideal for parking your temporary savings. This account gives you a nominal rate of interest and you can withdraw money as and when the need arises. The position of account is depicted in a small book called ‘Pass book.’ Rate of interest on Savings account is fixed by RBI and is currently 4%.

Features of Savings account

  1. This account can be opened with a minimum amount as may be specified by the banks from time to time.
  2. Money can be deposited as many times, as a depositor desires.
  3. Any person including a minor (but not a commercial artificial person) can open this account by depositing the required amount.
  4. This account can also be opened in joint names.
  5. In case of joint accounts, deposits can withdraw money either individually or jointly as desired by the depositors jointly.
  6. The depositor can also avail of the cheque facility, in some cases debit card and ATM facility.
  7. Restrictions on withdrawals are imposed to discourage the habit of expenses.
  8. Interest is calculated on the minimum balance on a specified date.

Documents required opening an account

  1. Duly filled-up Application Form.
  2. Introduction from an existing account holder of the same branch.
  3. Passport Size photographs- in case of joint accounts, photographs of all the account holders.
  4. Photocopy of PAN card (If not available then Form 60)
  5. Copy of Identity Proof (Voter ID card, Driving license, etc)
  6. Address proof (Ration card, Voter id card, electricity bill etc)

Current Account

Current account is an account with minimum no. of restrictions. You need this account when you make a number of deposits and withdrawals in a single day and many of the deposits are drawn on outstation banks for commercial purposes. Banks accept deposits in current account and allow unlimited withdrawals subject to a minimum balance. This minimum balance differs from bank to bank. No interest is payable on a current account.

Features of current account

  1. The depositors can freely operate this account.
  2. There is no restriction, which limits the number of withdrawals.
  3. Banks grant overdraft facility on current account subject to sanction of the bank authority.
  4. Businessmen can make payments to their creditors by drawing cheques in creditors’ favour.
  5. Payments received from debtors by cheques can be deposited in the current account with the bank.
  6. The bank can collect all payments and credits them to the account of the concerned person.
  7. Cheques, bills and Hundies can be discounted by bank through this account.

Documents required opening an account

  1. Duly filled-up Application forms.
  2. Introduction from an existing account holder of the same branch.
  3. Passport size photograph- (owners of the organisation-partners, proprietor, etc.)
  4. In case of limited Company- a copy of the resolution.
  5. Photocopy of PAN Card (if available).
  6. Copy of constitutional deed (e.g. Partnership deed, Memorandum and Articles of Association, etc).
  7. Copy of Trade license.
  8. Any other documents as desired by the banks.

Fixed Deposits account

The term ‘fixed’ here denotes tenure. Fixed Deposit, therefore, presupposes a length of time for which the depositor decides to keep the money with the Bank and the rate of interest payable to the depositor is decided by this tenure. Rate of interest differs from Bank to Bank. Generally, the rate is highest for deposits for 3-5 years.

This, however, does not mean that the depositor loses all his rights over the money for the duration of the tenor decided. Deposits can be withdrawn before the period is over. However, the amount of interest payable to the depositor, in such cases goes down.

Features of fixed deposit account

  1. Banks allow a higher rate of interest to attract fixed deposits.
  2. The rate of interest depends with the period of deposit.
  3. The period of deposit varies from three months to five years or even more.
  4. Customers deposit money in such an account with a view to earn high interest subject to TDS.
  5. A customer can take a loan against the fixed deposit certificate.

Documents required opening an account

  1. Duly filled-up Application forms.
  2. Passport-size photographs – in case joint accounts, photographs of all the account holders.
  3. Photocopy of Pan Card.
  4. Copy of identity proof (Voter ID card, driving license, etc).
  5. Any other documents as desired by the banks.

Bank Charges

  1. Minimum balance: Every savings account, depending on the class of the account holder has to maintain a minimum balance in their account (e.g. some banks are offering lower minimum balance to pensioners and senior citizens, rural area). If the customer fails to maintain the stipulated minimum balance, this account will be liable to be charged. The amount depends on the rules of the bank concerned.
  2. Cheque bounce charges: If any cheques drawn by the account holder on his account (inward cheques) or deposits a cheque to be collected (Outward Cheques) which dishonored due to any reason for which the bank is not liable, the customer’s account will be liable to be charged by an amount as stipulated by the rules of the bank.
  3. Inoperative charges: If any account holder fails to operate his account for a period as stipulated by the bank, then his account will be liable to be charged by an amount as stipulated by the bank.
  4. Cheque collection charges: If any person deposits any outstation cheques, then the amount realized will be reduced by the postal & other collection charges.
  5. High Value Cheques: High value cheques are those cheques, which are generally above Rs. 1,00,000 and within the same clearinghouse. The collection charges will be as per the bank rules.
  6. Cheque book charges: None of the cheque books are provided free to the customers, so that the price may be realized from the account of the customer.