Objectives : Describe the products offered by banks in deposit services, Describe credit products offered by banks in retail segment Identify various products in retail credits
Deposit Services : Deposit Services Current accounts A current account is the form of transactional account; a current account offers various flexible payment methods to allow customers to distribute money directly to others. Most current accounts come with a cheque book and offer the facility to arrange standing orders, direct debits and payment via a debit card. Current accounts may also allow borrowing via an overdraft facility. Savings accounts Savings accounts are accounts maintained by Banks that pay interest but cannot be used directly as money in the narrow sense of a medium of exchange (for example, by writing a check). These accounts let customers set aside a portion of their liquid assets while earning a monetary return. For the bank, money in a savings account may not be callable immediately and therefore often does not incur a reserve requirement freeing up cash from the bank's vault to be lent out with interest.
Fixed Deposit accounts A Fixed Deposit (also known as FD) is a financial instrument provided by Indian banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date . It may or may not require the creation of a separate account.The defining criteria for a Fixed Deposit is that the money cannot be withdrawn for the FD as against Recurring Deposit or Demand deposit before maturity. Some banks may offer additional services to FD holders such as loans against FD certificates at competent interest rates. Its important to note that banks may offer lesser interest rates under uncertain economic conditions. The interest rate varies between 4 and 11 percent Recurring Deposit accounts Recurring Deposits are a special kind of Term Deposits offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. It is similar to making FDs of a certain amount in monthly installments. This deposit matures on a specific date in the future along with all the deposits made every month. Thus, Recurring Deposit schemes allow customers with an opportunity to build up their savings through regular monthly deposits of fixed sum over a fixed period of time. The Recurring Deposit can be funded by Standing instructions--instructions by the customer to the bank to withdraw a certain sum of money from his Savings/ Current account and credit to the Recurring Deposit every month.
Loan or Credit Services : Loan or Credit Services Retail Loans Personal Overdrafts Credit Cards Business/Corporate Credit Working Capital Facilities Business Card Post-Sale Finance or Trade Finance
Retail Loans : Retail Loans Retail Loan – What is it? Availability Eligibility Margin Interest application Repayment – monthly or quarterly Unsecured and secured Charge
Personal Overdrafts : Personal Overdrafts Personal Overdraft – What is it? Availability Eligibility Margin Interest application Repayment Unsecured and secured
Credit Cards : Availability For purchases / withdrawals Credit limit Amount up to which the cardholder can make purchases or withdrawals Repayment monthly or in installments
Fee Based Services : Module 2 Fee Based Services
Objectives : Objectives In this session, you will be able to: Appreciate the various Fee based services offered by banks in their role as provider of financial services
Banks as a Provider of Fee based Services : Banks as a Provider of Fee based Services Services provided by banks as provider of allied services: Distribution Collection of taxes and bills DeMAT accounts Safe keeping Advisory services
Distribution : Distribution In banking, distribution of products of third parties have assumed great importance as a result of: Generation of fee income Ability to provide single umbrella service Ability to create exit barrier
Distribution (Contd.) : Products offered by banks within distribution service : Mutual Fund Units Insurance products Government bonds Gold coins Mobile phone recharge Shares of organisations offering public issues Distribution (Contd.)
Collection of Taxes and Bills : Collection of Taxes and Bills Products offered by banks within the collection service: Taxes Utility bills
DeMat Accounts : DeMat Accounts A depository is like a bank, however, depository holds customers’ securities and not money The account opened with a depository participant (DP) is called a DeMat account Dematerialisation is the process of converting physical shares into electronic form Rematerialisation is the process of converting securities from electronic form into physical form
DeMat Accounts (Contd.) : DeMat Accounts (Contd.) Physical securities are transferred on basis of transfer deeds, DeMat securities get transferred electronically Each security (or share of a particular company) has a unique identification number called ISIN (International Securities Identification Number) through which the securities are recognised
DeMat Accounts (Contd.) : DeMat Accounts (Contd.) Transfer Instruction For Delivery (TIFD) or delivery slip given by the seller to his DP Shares will be transferred out of seller’s DeMat account into the buyer’s DeMat account The entire clearing process is put through a central depository At present there are two depositories registered with SEBI: Central Depository Services Limited (CDSL) National Security Depository Limited (NSDL)
Summary : Summary In this session, you learned that: The services provided by banks under the role of provider of allied services are: Distribution Collection of taxes and bills DeMAT accounts Safe keeping Advisory services
Summary (Contd.) : Summary (Contd.) The products offered by banks within distribution service are: Mutual Fund Units Insurance products Government bonds Gold coins Mobile phone recharge Shares of organisations offering public issues The products offered by banks within the collection service are: Taxes Utility bills
Objectives : Objectives In this session, you will be able to: Appreciate the various fee based services offered by banks in their role as providers of financial services
Safekeeping : Safekeeping Safe Deposit Vaults: Safekeeping facility is a traditional function of banks Lockers provided at very reasonable rates Rents are charged as per size of the locker and are payable in advance Lockers can be hired by individuals, firms, limited companies, associations, and societies Lockers are rented out for a minimum period of one year
Safekeeping (Contd.) : Safekeeping (Contd.) Safe Custody: Banks accept sealed packets for safekeeping in their strong rooms for which a receipt is issued Articles are returned upon the customer handing over the receipt Not offered any more as a matter of course Banks deposit the duplicate keys of branches for safe custody with other banks in the area for use in emergencies
Advisory Service : Advisory Service The product offered by banks within the advisory service is investment advice Investors need professional assistance for following purposes: To select the right investment options To track the performance of the investments To track the performance of the organisations in which investments have been made
Banking Channels : Banking Channels Banking Channels: ATMs POS terminals Internet banking Phone banking Mobile banking Branch banking Migrating from branch banking to other channels - Advantages: Convenience to customers Cost effective to banks