Banking Services Practice Flashcards

Vocabulary-style flashcards covering the primary functions, secondary functions, and deposit types of commercial banks as detailed in the lecture transcript.

Acceptance of Deposits

The primary function of a commercial bank which involves mobilizing savings from the household sector through Fixed, Current, Savings, and Recurring Deposits.

Advancing Loans

A primary function where banks provide funds to businessmen and entrepreneurs against security like gold, silver, or stocks.

Overdraft

An agreement allowing an account holder to withdraw more than the balance to his credit up to a certain limit.

Cash Credit

An account where the bank credits a loan amount against security, but the borrower pays interest only on the specific amount of credit availed.

Discounting Bills of Exchange

A lending type where the bank pays the holder the present price of a bill after deducting a commission, providing a liquid asset that can be rediscounted with the central bank.

Money at Call

Loans granted for a very short period, generally not exceeding $7$ days, usually to dealers or brokers in stock exchange markets.

Term Loan

A bank loan made for a fixed term of years at a fixed rate of interest, normally repayable by instalments.

Consumer credit

A personal debt taken for the purchase of goods and services; credit cards are one form of this credit.

Creation of Credit

A unique function where a bank grants a loan by crediting the borrower's account rather than paying cash, thereby creating a deposit.

Remittance of Funds

A service providing facilities to transfer money from one place to another using bank drafts, mail transfers, or telegraphic transfers.

Agency Services

Functions performed by banks on behalf of customers, including the collection of credit instruments and the purchase or sale of securities.

Standing Orders

Instructions from customers for banks to make periodic payments such as subscriptions, rents, or insurance premiums.

Trustee and Executor

A role where banks preserve the 'Wills' of their customers and execute them after their death.

General Utility Services

Services provided to the community including locker facilities, traveller's cheques, and the collection of statistics.

Letter of Credit

A document issued by banks certifying a customer's creditworthiness, which is particularly useful in foreign trade.

Underwriting Securities

The process where banks underwrite shares and debentures issued by the Government or private companies.

Current Deposits

Also known as demand deposits; these are withdrawable at any time and generally do not allow interest, mainly used by businessmen.

Savings Deposits

Accounts for small savings where interest is allowed (e.g., SBI rate of $2.75\%$ p.a.) but there are restrictions on the amount withdrawn at one time.

Fixed Deposits

Also known as time deposits; these cannot be withdrawn before a fixed period of $7$ days to $5$ years, offering interest rates at SBI between $4.5\%$ and $6.10\%$ p.a.

Recurring Deposits

A type of deposit where a fixed amount is deposited once a month for a certain period, with SBI interest rates ranging between $5.8\%$ and $6.25\%$ p.a.