When it comes to savings, every person wants to earn high returns on its deposits. Deciding which banking product is best for us is a tough task. There are various deposit schemes started by banks in which a person can invest money as per his convenience. Fixed Deposit or FD is one of those scheme, in which the user invests his money for a long time in a lump sum. Similarly, Recurring Deposit or RD is a kind of bank account in which the customer has to deposit a fixed sum of money in short … [Read more...]

Money is an essential element for any business, because it fulfills the short term and long term requirement of funds. It is nt possible for the owner to bring all the money himself, so he/she take recourse to loans and advances. Loans refer to a debt provided by a financial institution for a particular period while Advances are the funds provided by the banks to the business to fulfill working capital requirement which are to be payable within one year. The loan amount is required to be … [Read more...]

In any country's financial sector, banks play a crucial role in the overall economic development, by mobilizing savings of individuals and entities. They act as an intermediary amidst depositor and borrower. Besides lending money, banks provide various other value added services, that help in the smooth functioning of the economy. The Central bank, as the name suggest is the apex body, that regulates the entire banking system of the economy. The Central bank is not exactly same as a … [Read more...]

'Cheque' is an instrument which contains an unconditional order, drawn on a banker, directing to pay a certain sum of money to the person whose name is specified in the instrument. In contrast, 'Bill of Exchange' is a document contains an unconditional order, directing a person, to pay a certain amount to a specified person. A negotiable instrument is a written document, which entitles a certain amount and is transferable from one person to another, by simple delivery or by endorsement and … [Read more...]

Cash Credit (CC) is a loan account opened by the customer with the bank. The cash credit limit depends upon the assets' collateral. The limit is flexible, i.e. the banks have the authority to increase or decrease this limit. For this facility, banks charge interest on the actual amount used. Overdraft (OD) facility is for current account holders wherein the customer can draw excess amount than what is standing to their credit. This means that the bank permits the customer to debit his current … [Read more...]

We are all acquainted with banking terms, as we encounter them almost daily, especially after digitalization. Savings Account is one such account, that we all have. We use this account to save our money for the long term and earn a fixed rate of interest. On the other hand, there is a current account that corporates open with the purpose of performing frequent transactions. Now, you must be wondering - Why do we need to open a current account to perform transactions, when we can perform them … [Read more...]

When you spend money using your credit card, this means that you are not using your own money, rather you are taking a short-term loan. Credit history, paying capacity, income, and debts are the parameters that are taken into consideration while determining the maximum amount of credit. On the other hand, when you spend money using your debit card, it implies that you are spending the money you own, as it is directly linked to your current (checking) account or savings account, so once the … [Read more...]

An ATM card is a payment card, issued to the customers on request by the bank, that facilitates a customer to access automated teller machine and withdraw money any time. On the other hand, debit card is one that enables the cardholder to make electronic transfer of funds from the account associated with the card, while making a purchase. Nowadays, it is quite gruesome to carry a lot of money with us and also the fear of getting it robbed by the thieves, has forced people to keep a larger … [Read more...]

Repo Rate or repurchase auction rate is one at which the Reserve Bank of India, buys back Government Securities, from the commercial banks, based on the level of liquidity, the central bank wants to maintain in the country's economy. The central bank uses this as a tool to increase or decrease the supply of money in the economy. Marginal Standing Facility (MSF), is a window for banks, to take money on credit from the central bank, by pledging Government securities, in the case of emergency, … [Read more...]

In our monetary policy rate series, we have already discussed the CRR and SLR, Repo Rate and Reverse Repo Rate. So, in this session, we will go through the bank rate and MSF rate. The bank rate can be understood as the interest rate at which commercial banks borrow money from the central bank without any sale of securities. On the other hand, MSF Rate is the rate of interest at which commercial banks borrow funds overnight from the central bank, by giving government securities as … [Read more...]