Tuesday, 31 December 2019

Lendings-2 , Banking Fundamentals to Know for Students.

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Securities and mode of Charging

Various types of securities could be offered to the bank by the borrowers. These could be classified as immovable security and movable securities. 

Land and building including agricultural land, plant, and machinery embedded to earth, etc. come under the category of immovable securities or properties. Whereas finished goods / raw material, agricultural product, farm machinery, like tractors, power tillers, combine harvesters, vehicles, agricultural implements, gold ornaments, LIC policies, come under the category of movable securities. Accounts receivables, known as book debts, other trade receivables could also be taken as security. 

In the case of finished goods and raw materials, agricultural produce, farm machinery like - tractors, power tillers, Combine harvesters, vehicles, agricultural implements, gold ornaments, Life insurance policies, come under the category of movable securities.  

Few things to keep in mind before taking securities :  

1. The securities must be saleable. 
2. The value of security can be ascertained at any point in time.
3. The value is not subject to heavy fluctuations.
4. The title of security is easily transferrable.
The securities are classified as Primary and Collateral.

Primary Security - Main security over an advance like standing corps in the field, stock for cash credit, and machinery for term loans, etc.  
Collateral Security - Other than primary security lodged with the bank by the borrower or by a third party.  

Creating a Charge on Security:  

Land :( Including Agricultural land and Building)  
Mortgage: The nature of charge created on immovable properties like land or building while taking them as security to the advance granted by banks is known as a mortgage. Immovable properties are accepted by lending banks both as primary and collateral securities. 
A mortgage is a transfer of an interest in immovable property to secure an advance. Though the transfer of property act mentions six types of mortgages, banks are seen to prefer simple mortgage and mortgage of deposit or title deeds.  

The simple mortgage is created by a deed, which is required to be registered with the register of Assurances. Mortgage by deposit of title deeds is also called an equitable mortgage is created by depositing the document of title to the property by the mortgagor with the mortgage of govt. notified center.  

In the event of borrower’s default in repayment of the advance granted against immovable property, the lending bank may bring it for sale. However, it can do only by adopting an appropriate legal process. Normally banks have to file a suit before civil court for recovery if the amount due in the loan account is less than Rs 10 Lakh and before debt recovery tribunal if it is more than 10 Lakh. However, under the provisions of securitization and reconstruction of financial assets and enforcement of security interest (SARFAESI) act, 2002 banks can sell the immovable property under mortgage without intervention of court after observing certain formalities mentioned in the act. Because of the right to sale without the court's intervention, this type of security has gained importance now and viewed with favor by banks. 

Examining the title to the property

Before an immovable property is accepted as security, the title to the borrower over the said property should be examined by the banks lawyer to ascertain that the person in whose name the property stands has a good , valid , subsisting and marketable title over the property . It may also have to be ensured that the property is free from all legal complications.   

Saturday, 28 December 2019

Lendings - 1, Banking Fundamentals to Know for Students.

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Principles of Sound Lending: 

The business of lending is not without risk. The following points are to be kept in mind while taking a lending decision. 


a) Safety - Safety of the fund is the most important principle of good lending. When a banker lends certain monies, he has to ensure that the advance is safe and in secure hands. Because it is public money which banks lend hence, it has to take utmost care in lending it to someone else. The repayment of loans depends on three things 1> Capacity to pay 2> Willingness to pay 3> Income generation. Bank takes collaterals which can be used for repaying the debt by selling in case the loan is not paid.  

b) Liquidity - It is to be seen that money lend is not going to be locked up for a long time. The money should return to the bank as per the repayment schedule. banks are intermediaries for short term funds as seventy percent of the deposits are payable within a year, so the funds advanced should be, to a large extent for working capital and term loans of not above three years.  

c) Profitability: A fair return on investment is essential in the case of lending by banks. Banks are commercial organizations and profit earning is the motto of the banks to adequate dividends to their shareholders. An interest margin (spread), between lending and borrowing of three to four percent, is essential to meet the administrative expenses and leave some profit from reserve and distribution purposes. While looking at profitability, it is prudent for a banker to look at profitability against the totality of business undertaken by the customer instead of applying for the test of profitability against each component of the business of service offered. It is therefore advisable to have a customer profitability analysis (CPA) done when the banker is engaged in more than one service or business is undertaken for the same customer.

d) Loan for non-productive purposes cannot be granted  
e) By diversification of risk, it is meant that the banker should not grant advances to only a few borrowers or few activities undertaken in an era. The advances may be diversified in a good number of customers and purposes. Diversification will help avoid the concentration of advances in the hands of a few people or purposes or a limited geographical area.  

f) The security offered against the loans may consist of a large variety of Items. It may be a piece of land; building, gold ornaments, and Insurance policies, there may be cases where there is no security except the personal promise. The banker is aware that the security if accepted, must be adequate and readily marketable, whenever there is a need to fall back upon. It should be clean security without any legal complications. 

Friday, 27 December 2019

BC / BF - 11 , Banking Fundamentals to Know for Students.

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What is Know Your Customer (KYC)?

KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and address of the customers. This process helps to ensure that the banks' services are not misused. Banks have to complete the KYC procedure while opening accounts and it has to be updated periodically. To open a bank account, one needs to submit 'proof of identity and proof of address together with a recent photograph.
The Government of India has notified six documents as 'Officially Valid Documents (OVDs) as proof of identity. These six documents are:-

1) Passport,
2) Driving Licence,
3) Voters’ Identity Card,
4) PAN Card,
5) Aadhaar Card issued by UIDAI
6) NREGA Card.

You need to submit any one of these documents as proof of identity. If these documents also contain your address, then it would be accepted as 'proof of address'. If the document you submit as proof of identity does not contain your address, then you will have to submit another officially valid document that contains your address.

If I do not have any of the documents listed above to show my 'proof of identity', can I still open a bank account? Yes. You can still open a bank account known as 'Small Account' by submitting a recent photograph and putting your signature or thumb impression in the presence of a bank official 'Small Accounts' have certain limitations such as:
1) Balance in such accounts at any point in time should not exceed Rs.50,000.
2) Total credits in one year should not exceed Rs.1,00,000.
3)Total withdrawal and transfers should not exceed Rs.10,000 in a month.
4) Foreign remittances cannot be credited to such accounts.

Having a Bank Account is not enough. The job is only half done. Start using your bank account regularly and reap the associated benefits that come with it learn banking and its benefits and embark on the wonderful endless journey of banking!

Wednesday, 25 December 2019

BC / BF - 10 , Banking Fundamentals to Know for Students.

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ATM (Automated Teller Machine)

Through an Automated Teller Machine, bank customers can access their bank accounts for financial & non-financial transactions without having to go to their bank. Customers should observe the following Do's and Don'ts to keep their transactions safe and secure at ATMs:


1. Conduct all ATM transactions in complete privacy.        
2. Register your mobile number with the bank that issued the card. The bank will send you SMS alerts when an ATM transaction is made. If you find that an unauthorized transaction has been made, immediately report it to the bank.
3. Beware of any extra devices attached to the ATM. These may be placed to capture customer's data. If you see such a device, immediately, inform the security guard or the bank entity maintaining the ATM.
4. Be alert, Beware of strangers who try to make conversation with you or offer to help you operate the ATM.

Don’ts –

1. Never lend your card to anyone.
2. Do not write your PIN on the card.
3. Never share the PIN with anyone or seek help from somebody by handing over the card and revealing the PIN.
4. Never let anyone see the PIN while you are entering it at the ATM.
5. Never use a PIN that can be easily guessed, such as your birthday or telephone number.
6. Never leave the card in the ATM. n Remember that bank officials will never ask for card details or your PIN over the telephone - email. So, do not respond to any phone calls or emails from people claiming that they represent your bank. These are called vishing/phishing emails.

Grievance Redressal


Chief General Manager, Reserve Bank of India, Consumer Education & Protection Department, Central Office, 1st Floor, Amar The building, Perin Nariman Street, Mumbai 400001. The Banking Ombudsman does not charge any fee for filing and resolving customers' complaints.



1800 266 7575 / 1800 22 7575

Tuesday, 24 December 2019

BC / BF - 9 , Banking Fundamentals to Know for Students.

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Fraud protection
Financial fraud or scam is a growing problem in today’s world. Every year we hear new stories about people losing all their money by investing in illegal schemes. But this has not stopped others from falling prey to these schemes. This is because criminals are very creative and they keep changing their tactics to find new victims. You can keep your money safe by being aware of these risks. Do you know someone who is a victim?

The first step in protecting yourself against fraud or scam is knowing what it is and how to recognize various types of fraud or scams.

Types of fraud or scams Fraudsters and scamsters target people in a variety of ways: through email and on the telephone, when victims are making investments or by stealing personal information.

2.INVESTMENT FRAUD               

You receive an email that looks like it comes from a legitimate company, asking you to click on a link, but it takes you to a fake website. To be safe, never invest, donate or make purchases on the phone unless you can validate the company's existence.

Someone recruits you to invest in a business or to buy merchandise to sell. You are expected to recruit new members. After a while, new people stop joining. That's when the promoters vanish, taking your money with them.

"Congratulations! You've won the lottery/sweepstakes/big prize! All you have to do to claim your prize is to send a small fee or tax payment.” Legitimate contests don't charge fees for you to collect your prize.

Credit card and debit card fraud happens when someone uses your card, card information or personal identification number (PIN) without your permission. Never share your PIN with anyone.

Fraudsters can win your trust more easily if you're part of a group of people who share a common cause, such as a religious or social organization. Scammers may ask investors to keep the matter quiet.

If you experience any of these red flags, do not participate in the investment. Inform the appropriate authorities and also tell your family and friends about the attempted fraud and warn them to be careful.

Thursday, 19 December 2019

BC / BF - 8 , Banking Fundamentals to Know for Students.

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Pradhan Mantri Suraksha Bima Yojana (PMSBY) :

People who have a bank account can get benefits under this scheme. If you still do not have a bank account, go and open an account under the PMJDY. As you read in the previous section you do not need to put any money into this account? It is also very simple and easy. All you need is your Aadhaar card to open this account.

Once you have a bank account, and you are in the age group of 18 to 70, under the PMSBY you can get an accidental insurance cover of 2 lakh rupees by paying just 12 rupees per year. This will be automatically debited from your bank account once a year when you join the scheme. After joining the PMSBY if the policyholder meets with an accident amounting to death or disability, you or your family members will receive an amount of up to 2 lakh rupees as a benefit.

Remember that to join this scheme you need to have a bank account and agree to pay 12 rupees per year, which will be automatically debited from your account. So, go to your bank branch and avail of this scheme today.

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

If you have a bank account and you are in the age group of 18 to 50 years, you can join this scheme. This scheme will give you a life insurance cover of 2 lakh rupees if you pay just 330 rupees per year. Like the PMSBY, to join this scheme you have to visit your bank branch and agree to pay 330 rupees, which will be automatically debited from your bank account. After joining the scheme if the policyholder dies due to any reason, his/her family members will receive an amount of 2 lakh rupees.

If you are the sole breadwinner in your family, have you thought about what they will do if something happens to you? By joining this scheme you can ensure that they receive 2 lakh rupees. It will not take away their pain but it can help them a great deal. Ask your friends and if they have not yet joined the PMJJBY, ask them to do so.

Atal Pension Yojana (APY) : As the name suggests, this is a pension scheme under the National Pension System or NPS. Anyone between the ages of 18 and 40 years can join the APY and will receive a guaranteed minimum pension of 1,000 to 5,000 rupees per month at the age of 60. Not only this, if you decide to join APY before 31st December 2015, the Government of India will also contribute 50% or 1,000 rupees per year for a period of 5 years.

To join the APY, you need to have a bank account. Do you see how having a bank account can give you so many benefits? Open a bank account now and ask others to do the same. If you join the scheme early, say at the age of 18, you will need to pay only 42 rupees every month and when you become 60 years old, you will receive a guaranteed pension of 1,000 rupees every month. To join this scheme visit your bank branch or the nearest banking correspondent (Bank Mitra) center. When you join the APY, you are making sure that when old age comes you are prepared for it. You do not have to depend on your children for everything, because you will receive your own pension money each month. It is important to remember that if you join the scheme early you will need to pay less every month than if you join late. So stop waiting, go to your nearest bank branch today and ask them how to join the APY.

Wednesday, 18 December 2019

BC / BF - 7 , Banking Fundamentals to Know for Students.

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Financial Planning
Many of us think that financial planning is only about investing for retirement. It is – but it's also much more. Whether you're a college graduate, a young person, a housewife or a senior person, financial planning is how you think ahead to make sure you achieve your goals. Your goal may be to get out of debt, to balance your budget or to retire in style and comfort; without a plan, all you have to rely on is good luck. People who are well prepared usually have better luck.

Planning means that you try to choose the future you want instead of falling into a future you did not choose.  Also, if you have a plan you can adjust it when changes occur in your life. Because you know you are taking steps to manage your future, you will save more and worry less.

A financial plan can help you to:

1. Balance today's needs with your goals for the future
2. Make the best use of your financial resources
3. Adapt to change in your circumstances and needs
4. Save the money you need to achieve your goals
5. Prepare for unexpected emergencies
6. Protect what is most important to you
7. Prepare for retirement
8. Leave something for your family
9. Manage your taxes
10. Live your life with a sense of direction and security.

Begin your financial planning by answering three key questions:
1.   Where am I now?    
2.   Where do I want to go?    
3.   How do I get from here to there?

Government schemes
Pradhan Mantri Jan Dhan Yojana (PMJDY)

Opening a bank account under the PMJDY is simple and easy. It also offers a lot of benefits. Have you already opened an account? If not, visit the nearest bank branch or business correspondent (Bank Mitra) centre today and open your account. You do not need to put any money in this account? However, if you want a cheque book you will need to fulfil the minimum balance criteria of the bank. To open this account all you need is your Aadhaar card. If you do not have an Aadhaar card you need any one of the followings documents: Voter ID, NREGA Card, Driving Licence, PAN Card or Passport. If you do not have any of these documents, you still can open an account. Go to a Gazetted Officer and get a letter issued with your name, address and photograph on it. Remember that you do not have to pay any money to open this account.

When you open the account, you will be given a free RuPay debit card. This card can be used to withdraw money from your account at ATMs or can be used to make payments for purchases at stores and online. You must use this card at least once in 45 days; otherwise, you will not get many other free benefits of the scheme. If you successfully operate the account for 6 months, you will be eligible for an overdraft facility i.e. you can borrow 5,000 rupees from the bank. And if you pay back the bank in time, you will be eligible to borrow 15,000 rupees the next time. This will save you all the problems of borrowing money from the local moneylender and paying him an exorbitant interest. When you open this account, you will also get a life insurance cover of 30,000 rupees and accidental insurance cover of 1 lakh rupees, all for free.

By having a bank account you can now transfer money easily across the country. Also, government benefits such as old-age pension or LPG subsidies will be directly paid into your bank account. Having this account will also give you access to various other insurance and pension products.

If you know someone who does not have a bank account, encourage him/her to open an account under the PMJDY and receive all the benefits, free of cost.

Tuesday, 10 December 2019

BC / BF - 6 , Banking Fundamentals to Know for Students.

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Investing can be complex and it often has risks. But with knowledge, you can choose the level of complexity and risk that you are comfortable with.
Key factors You need to know at least three key factors about every investment: its return, the risk, and liquidity.

Return is the profit that an investor makes on an investment. It can come in two different forms: as income or as a capital gain.

Risk means uncertainty. You are not sure whether your investments will give high returns or you will lose your money. Risk and return go hand-in-hand which means that to get a higher return on your investments you will be exposed to more risk.

Liquidity is the ability to cash in or sell an investment quickly at or near the current market price. It affects the value of an investment. Listed stocks and government bonds are liquid because you can usually sell them easily.

1. If your goal is to make as much money as you can, you have to be ready to take some risks. You are likely to choose shares in companies with a potential for growing rapidly.

2. If your goal is to keep your money safe, or to provide money to live on, you would choose differently investments, such as guaranteed investments or bonds that pay a low but reliable return.
One easy way to see how personal factors affect investment choices is to think about your stage in life or, the phase of your life that you are in.

1. If you are young, you may be willing to take more risks because you are planning for the long term. If the value of your investments goes down, you'll have time to recover and your investments can grow over a long period of time.

2. If you are starting a new family, you want to provide security. You may still be planning for the long term, but you need to keep at least part of your money available to provide for shorter-term savings goals and emergencies or to make major purchases such as a family home. 

3. If your family is becoming more independent, you may have less need for short-term savings, and be able to save more for your retirement You may be at the peak of your earning years, with cash available for investments, but unwilling to invest your money in anything risky.

4. Once you have retired, you may be relying on your investments to provide a regular, reliable income to add to benefits such as your public or private pensions.

Investing goals: What you want from your investments depends on who you are. Your investment goals will be different from those of other people, and they will change as you go through life. Usually, you have a variety of goals at the same time. You may be looking for long-term growth in value but also want a secure and flexible fund for emergencies. Each household will have a variety of objectives and will need a different investment strategy for each.

It is never a good idea to put all your eggs in one basket. If you put all your money in one investment, it may rise or fall depending on a wide range of unpredictable factors. If you put your money into a range of investments and one or two loose money, the others may gain money to balance your investments. This is known as diversification. It is a way to reduce risk when you are making investments.

Equity is a part of a company, also known as stock or share. When you buy shares of a company, you basically own a part of that company and can expect to profit when the company profits. These shares are traded on stock exchanges, which facilitate the buying and selling of stocks, thus providing a marketplace. Investing in equities is riskier and definitely demands more time than other investments. For beginners, it’s better to invest in the share market via mutual funds which are professionally managed and are less expensive.

Mutual Funds
A mutual fund pools money from many investors and invests in stocks, bonds, short-term money market instruments, other securities or assets, or some combination of these investments. The combined holdings that the mutual fund owns are known as its portfolio. Each unit represents an investor’s proportionate ownership of the fund’s holdings and the income those holdings generate. Buying a mutual fund unit is simple and easy since these are sold by many banks, and the minimum investment amount is small. Before investing, it’s important to remember that if an offer is too good to be true, it probably is. Also, be sure that the product or company you are investing in is a registered entity engaged in a legitimate business.

Why invest?

Invest, so that your money will grow because of compound interest. If you keep your money with yourself, you risk losing purchasing power to inflation. Investing helps you achieve your financial goals. Invest so that you don’t have to rely on anyone.

Retirement and Pensions

After a full and productive working life, you look forward to a healthy, active and secure retirement. Whether you retire early or work well into your senior years, you want to know that you will be financially secure in your later life. 
Will you have enough money for your retirement?
If you're like most Indians, your younger and middle years are filled with numerous demands on your time and finances: raising children, buying and maintaining a home, enjoying festivities. You may be too busy to think about retirement, or you may find it hard to put money aside now for later.

Monday, 9 December 2019

BC / BF - 5 , Banking Fundamentals to Know for Students.

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What is a BC? How does a BC function?
Banks have been allowed to appoint local individual persons and others as business correspondents (BCs) to work as agents of the banks. The BC uses devices based on Information and Communication Technology (ICT) such as handheld machines, smartcard-based devices, mobile phones, etc. to carry out the banking transactions.

Is our money safe if we deposit it with a BC?
The BC is a way of providing banking service at our doorstep if the bank branch is far from our area. Depositing our money with the BC is as good as depositing it with a bank branch. The transactions are done through ICT – based devices and accounted in the books of the banks. Customers get immediate verification of their transactions because the BC issue a receipt on behalf of the bank.
Additionally, transactions because of the BC issues a receipt on behalf of the bank. Additionally, transactions through BCs are based on our biometrics or a PIN number and no one else can do the transactions in our account.

What services are provided through BCs?
BCs help you open and make transactions in saving deposit accounts with the inbuilt overdraft, fixed deposits, and recurring deposits. They also help us remit funds from our accounts and receive funds into our account. Besides, they provide credit for income-generating activities through Kisan Credit Cards for farming activities and General Credit Cards for non-farm activities.

Many people need to borrow money to buy a house or car or for their children’s education. This is called credit. Borrowing money is neither good nor bad. But financial experts often distinguish between good debt and bad debt. Good debt is an investment in something that creates value or produces more wealth in the long run. Examples are a loan to buy a house or an education loan for your children to pursue higher education. Bad debt is money taken to buy something that immediately goes down in value or to buy something that you can't repay on time. An example is a loan to buy a large television or a loan to pay your monthly expenses.
It's easy to spend without realizing how the debts are piling up. Sometimes, despite your best efforts, you find yourself with more debt than you can handle.
Although it may seem impossible, you can get out of debt. The first step in solving your financial problems is to admit that you have them and take control before they get out of hand.
Suppose you want to buy something and you don’t have money. The phone rings or you receive an email, offering to get you a loan. Don't fall for such pitches. Make a plan to save enough money so that you can buy what you want.

Why borrow within a limit?
v  When you borrow money, you have to pay interest on the borrowed amount.
v  Borrowing beyond your means will lead to a debt trap and it will be very difficult to get out of it.
v  When you borrow more than you can handle, you find it difficult to repay.
v  Borrowing within limits will help you build a good credit score because you can repay your loans.
v  Paying interest on the loans you have taken is an expense. If you borrow more, your expenses grow.

No one plans to get in an accident or become seriously ill. The chances of these things happening to you may be very small. So we may put off buying the insurance we need. But these things do happen. It's only when the event occurs that we realize that we may not be as well protected as we would wish. Insurance is a way to protect yourself and your loved ones from financial hardship in case losses occur.


Life Insurance : When you buy a life insurance policy, you name a beneficiary. Life insurance provides financial payment to your beneficiary upon your death.
It is generally recommended that you purchase  insurance with coverage worth 7 to 10 times your annual income in order to protect your family.

Vehicle insurance : Auto or vehicle insurance is mandatory if you own a vehicle. Depending on your policy, it covers losses that your vehicle causes to other people and of your own medical expenses if you meet with an accident. It also covers the cost of repairing or replacing your vehicle due to other types of damage or loss, such as vandalism, fire or theft.

Health insurance : In the recent past the cost of treatment has increased enormously. A simple visit to a doctor now costs anywhere between 300 and 3000 rupees, depending on where you live. If your treatment requires you to stay in the hospital for a few days, you will end up with a huge medical bill that can severely impact your savings. To avoid such financial shocks, we must insure ourselves. Every insurance company offers a medical insurance plan that covers basic medical care, including doctor’s visits and the costs of hospitalization.

Making a claim: A disaster happens. Your bike is stolen. You have met with an accident. It's time to make a claim. When you make a claim, you are officially asking the insurance company to pay you for the loss you have suffered under the terms of your insurance policy.
Contact your insurance broker, agent or company as soon as possible, because most companies have time limits within which you must submit your claim. Also, remember to provide all supporting documents when submitting your claim.

Banking & Finance Questions and Answers

Lendings-8 , Banking Fundamentals to Know for Students.

Blog on  Banking Technology for Common Customer  --  Click Here In States, where one of the minority communities notified is, in fact,...