'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...]

Business organizations need funds in order to meet their monetary requirement. Funding provided by banks for this purpose can either be long term or short term. Nowadays individuals/entities choose short term loan facility, in the form of cash credit and overdraft. Cash Credit is a type of facility provided by the bank or financial institution in which, a company can withdraw an amount more than what he holds to his credit against the security of stock. On the contrary, Bank Overdraft is … [Read more...]

Before going to open an account in a bank, one should be clear in mind, as to which type of account is best suits their requirement. If a person wants to open an account to keep his/her savings to fulfill their future needs and desires to earn income from such savings then nothing is better than a saving bank account. However, if an individual or entity, wishes to open an account that can be operated end number of times, during a working day, then current account or checking account is … [Read more...]

The difference between debit card and credit card is same as debit differs from credit. Debit means 'deduct' and so when an individual makes use of debit card, he is deducting money from the bank account linked to the card. The individual is able to spend that much amount of money, which is present in his bank account and not more than that. A debit card is like a cheque, from which money is subtracted from his/her personal savings/current account. Conversely, credit refers to money received … [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...]

Bank Rate is defined as the rate at which the central bank is ready to purchase the financial instruments, that are covered under section 49 of the RBI Act. It helps in maintaining the overall credit situation in the country. It is not the same thing as MSF Rate. MSF stands for Marginal Standing Facility availed by the banks only when the excess SLR of their net demand and time liabilities has been exhausted. In this facility, banks are required to pay interest, at a rate which is 100 bps … [Read more...]

Repo rate or otherwise known as repurchase auction rate, is introduced by RBI to increase the flow of money in the market, i.e. when there os lack of liquidity in the economy and the interest rate is rising, the country's central bank will buy Government securities and the amount if paid to the bank, which improves overall credit. On the other hand, Reverse repo rate is a fixed cut-off rate, at which the government securities are sold by the central bank at the auction. It assists bank in … [Read more...]

Cash Reserve Ratio, or popularly known as CRR is a compulsory reserve that must be maintained with the Central Bank. Every banking company is required to maintain a specific percentage of their net demand and time liabilities as cash balance with the Reserve Bank of India. On the other hand, Statutory Liquidity Ratio, shortly called as SLR also an obligatory reserve to be kept by the banks, as prescribed securities, based on a certain percentage of net demand and time liabilities. The … [Read more...]

Banker's Cheque or say pay order is an instrument, generally non-negotiable, issued by the bank on behalf of the customer, containing an order to pay a specified sum to the specified person, in the same city. On the other hand, demand draft is a financial instrument, used by people for the purpose of transferring money from one place to another. Whether it is a banker's cheque or a demand draft, the validation period of the two instruments is 3 months, i.e. after the expiry of three months, … [Read more...]