Introduction to Banking

The transactions done with a bank and the services it offers to its customers is collectively
known as banking. Banking consists of many activities that can be done through a number of
financial institutions that accept deposits from individuals and other entities, and then use
this money to offer loans and to invest and earn profit. Banking can be done online, offline,
or both ways. A bank is a financial institution licensed to receive deposits and offer loans.
Banks also provide financial services, such as safe deposit boxes, currency exchange,
and wealth management. While you can make banking transactions both in a brick-and-
mortar location and an online presence, a new breed of banking only maintains an online
presence. Online-only banks often offer consumers higher interest rates and lower fees.
Convenience, interest rates, and fees are the driving factors in consumers' decisions of which
bank to do business with.

History Of Banking
The history of banking began with the first prototype banks, that is, the merchants of the
world, who gave grain loans to farmers and traders who carried goods between cities. This
was around 2000 BCE in Assyria, India and Sumeria. Later, in ancient Greece and during
the Roman Empire, lenders based in temples gave loans, while accepting deposits and
performing the change of money. Archaeology from this period in ancient
China and India also shows evidence of money lending.
In India, modern banking originated in the middle of the 18th century.

 The first banking institution was the Bank of Hindustan established in 1770 and
it was the first bank at Calcutta under European management. It was
liquidated in 1830-32.
 In 1786 General Bank of India was set up but it failed in 1791.

Calcutta developed as a banking hub since it was India’s busiest port for trade, mostly
because of the British Empire’s trade.

 The British East India Company granted the Bank of Calcutta, Bank of Bombay,
and Bank of Madras licenses to establish the three Presidency banks. For long
years, they operated in India as if they were central banks.
 The Bank of Calcutta established in 1806 immediately became the Bank of
Bengal.
 These three banks joined in 1921 to become the Imperial Bank of India.
 Later, in 1955, the Imperial Bank of India was nationalized in 1955 and was
named The State Bank of India, which is currently the largest Public sector
Bank.
 Before the Reserve Bank of India was founded in 1935 under the Reserve Bank
of India Act, of 1934, the presidency banks and their successors served as
quasi-central banks for a long time.
  Consequently, the State Bank of India is the country’s oldest bank.

Types of Banks
Functions of a Bank

1. To establish as an institution for maximizing profits and to conduct overall economic

activities.

2. To collect savings or idle money from the public at a lower rate of interests and lend these
public money at a higher rate of interests.

3. To create propensity of savings amongst the people.

4. To motivate people for investing money with a view to bringing solvency in them.

5. To create money against money as an alternative for enhancing supply of money.

6. To build up capital through savings.

7. To expedite investments.

8. To extend services to the customers.

9. To maintain economic stability by means of controlling money market.

10. To extend co-operation and advices to the Govt. on economic issues.

11. To assist the Govt. for trade& business and socio-economic development.

12. To issue and control notes and currency as a central bank.

13. To maintain and control exchange rates as a central bank.

E- banking and its benefits
E-banking is a system that uses the internet and a telecommunication network to provide
consumers with a variety of online banking services. This is a service that allows consumers
to log into their bank accounts and do various financial activities over the internet. It’s
sometimes referred to as online banking, virtual banking, or internet banking. E-banking is a
secure, simple, and quick electronic service that allows consumers to do banking
transactions from any location without having to visit a bank branch. 
Convenience- This is one of the most essential advantages of internet banking that
outweighs any disadvantages. Making transactions and payments at the touch of a button
without having to leave the house or workplace is a convenience that no one wants to give
up. 

Mobility- In recent years, e-banking has taken a step forward in the form of mobile internet
banking, which provides customers with unlimited mobility and allows them to conduct
financial transactions while on the go.

Saving of time and increased comfort- E-Banking transactions can be completed 24 hours a
day, seven days a week, without the need for a physical visit to the bank.

E-banking also allows you to check and print balance inquiries, view transaction histories,
transfer cash, pay online utility bills, and make online purchases, among other things.
Customers can also seek many forms like mortgage, auto, and equity, home, personal loans
and students through E-banking.

Speed- Because the response time for this type of transaction is so quick, customers can
literally wait until the last minute to send payments.

Types of Bank accounts

One major aspect of the banking industry is the provision of bank accounts. There are
various types of bank accounts which can be opened in any Public or Private sector banks.

1. Savings Account
2. Current Account
3. Recurring Deposit Account
4. Fixed Deposit Account

Savings Account
As the name suggests, the savings accounts can be opened by an individual or jointly by two
people with an aim to save money. 
The main benefit of opening a savings bank account is that the bank pays you interest for
opening this type of account with them. 

 There is no limit to the number of times the account holder can deposit money in
this account but there is a restriction on the number of times money can be
withdrawn from this account. 

Current Account

The second type of bank account is the current bank account. These accounts are not used
for the purpose of savings.

 This type of bank account is mostly opened by businessmen. Associations,

Institutions, Companies, Religious Institutions and other business-related works, the
current account can be opened

Recurring Deposit Account

Recurring Deposit account or RD account is a form of account wherein the account holder
needs to deposit a fixed amount every month until it reaches the fixed maturity date. 

 Any individual or an Institution can open a recurring deposit account either

separately or jointly
 Periodic or monthly instalments that need to be added can be as low as Rs.50/- or
may vary from bank to bank

Fixed Deposit Account

FD or a fixed deposit account is another type of bank account that can be opened in any
Public or Private sector bank.

 It is a one-time deposit and one time take away account. Under this type of account,
the account holder needs to deposit a fixed amount of sum (as per their wish) for a
fixed time period