Basics of Banking

What is saving?
When income is more than expenses, then we have surplus money known as savings

Why should we save?
We should save regularly so that it can be used in times when our expenditure is more than our income and we need more money.

What are the advantages of having a bank account?
Money saved at home does not grow. The best way to save is to deposit the money in a bank account because
1.    Money is safe
2.    Money grows with interest
3.    Transparency in transaction
4.    Nominee gets money
5.    Can get Govt. financial assistance through A/c.

How can we open a saving bank account?
We can open an account by fill a latest photograph and submitting documents to comply the “Know Your Customer” (KYC) norms.

What is remittance?
Banks transfer our money from one place to another and from person to person if we have a bank account, We can also receive money in our bank account from our relatives working at distant places.

What is interest?
Interest is the amount our money earns when we save our money

Different types of deposit account?
Savings deposit account is for depositing our day to day surplus. We can withdraw our money whenever we need it.
Current deposit is basically meant for businessmen and is never used for the purpose of investment or savings. No interest is paid and certain service charges are taken on such accounts.
Term deposit account is for depositing for period suitable to our needs. This may earn interest at higher rate than saving account, We can also withdraw before the due date but in that case we will get less interest.
Recurring deposit account is for depositing an amount periodically say every day or every week or every month for a certain period.

What is a bank loan?
A bank loan is an extension of credit, to a consumer or business, in the form of borrowed funds which has to be paid back with interest.

Why we take loans from a bank?
Bank is a better source of finance money lenders than other informal sources even if, at times, it may take little longer to borrow from them. It is a safe, reliable, transparent institution which can help us by lending money on suitable terms with less interest.

Why banks take time in giving loans?
The banks collect deposits from public and lend this depositors’ money as loans to the people who need it. To protect the depositors’ money, they have to ensure the proper utilization of the money by the borrower. Hence banks undertake proper  scrutiny of the loan proposals before sanctioning the loans. It is actually in the interest of the depositors as well as the borrowers.

Types of loans:
Banks give loans for various purposes like housing, education, agriculture and related activities, starting a business enterprises, consumption loans, etc. Thus banks meet all types of loan requirements.

Getting a loan from a bank:
We have to submit a loan application to the bank indicating the purpose. The bank will verify the details, evaluate our repaying capacity and then sanction us the loan which we will have to repay along with the interest in installments as indicated by the bank.

Do we have to offer some guarantee for the loan?
For small loans no guarantee will be required. But for higher amounts we will have to offer some guarantee. This can be in the form of the asset which we will be creating with our bank loan or in the form of other collateral securities like land, house etc., depending upon the type of loan.