(1) Acceptance of Deposits : Banks accept some unutilized amount from the public as deposits. The bank pays interest to the depositor. The biggest responsibility of a bank is to maintain the confidence of the depositors/savers. Banks accept different types of deposits. On which the interest rate is different.
Banks accept deposits mainly in four ways:
(i) Savings Account
(ii) Current Account
(iii) Recurring Account
(iv) Fixed term account
(2) Depositing : Banks accept deposits through various types of accounts. Thus, of the money received by the bank through deposits Elsewhere does piranha. Bank accepts deposits and gives interest to savers. So it lends money to needy individuals at a rate higher than the rate of interest paid to depositors. Banks do not earn from the difference in interest rates. The Bank lends as follows:
(a) By Loan : Bank gives loans for long term or short term. Some types of loans require a closing. While in some types of loans, the conclusion is not required. Such loans are given to traders and individuals or entrepreneurs. Against which the bank takes security of the same amount. Nowadays, loans like home loan, car loan, education loan, cash-credit, machinery loan, gold loan, personal loan etc. are also available.
(b) Through Overdraft and Cash-Credit : When the current account holder withdraws more than the amount deposited in the account within the pre-approved limit and for a short period of time, it is called overdraft. The duration of overdraft is short; But when the time of overdraft is fixed, it is known as cash-credit.
(3) Investing: If the bank’s capital and deposits received cannot be raised and invested, the bank does not get adequate returns. The important function of the bank is to invest this amount elsewhere. It is imperative to make this investment in a safe place with proper calculations. Bank reserves are required by RBI regulations to keep some amount of total deposits in government securities. On which the interest rate is low. It is imperative to arrange money in the bank in such a way as to get immediate cash by disposing of investments in emergency and emergency situations. Banks mostly invest in government securities or other viable entities.
(4) Inter-banking transactions: One of the main functions of a bank is inter-bank transactions. Every bank has to face cash crunch for very short period of time i.e. twenty four hours or less. At this time, if there is unused money lying in other banks, it is given to the needy bank immediately. This arrangement is done by an agency appointed by the Central Bank. As such, the process of giving or receiving money is done through an intermediary bank. Neither the borrower nor the lender come into contact with each other. In this way the problem of banks is solved. Thus, the amount that is demanded and received immediately is known as CALL MONEY. Interest has to be paid on the amount thus obtained. This rate of interest is determined based on the demand for money in the market. This rate of interest is fixed based on demand and supply. Which is known as CALL MONEY RATE.
