Finance for Everyone — Unit II: Detailed In-

Depth Notes (Point Form)

Banking Services (DU VAC — based on the SOL study material)

How to use this: Every point below is a complete sentence, arranged in the order of the
textbook's Unit-II (Lesson 1: Introduction to Banking and Insurance; Lesson 2: Finance from Banks
and Electronic Banking). The most exam-worthy definitions, classifications, and lists are
highlighted. Unit 2 carries 10 marks in the end-semester exam, second only to Unit 1.

PART A — TYPES OF BANKS

1. Reserve Bank of India (RBI) — The Central Bank

• The RBI is the central bank of India and is also called the "Banker's Bank" because it
acts as banker to all other banks.
• Its functioning is regulatory in nature, supervising the functioning of the entire banking
sector in India.
• It plays a key role in the formation of monetary policy and the foreign exchange
mechanism.
• It deals only with banks and the government, and has no direct dealings with the
general public, unlike all other banks.
• The RBI is the only authority entrusted with issuing currency in India.
• Key issues under its supervision include customer care, disclosure of banks' financial
positions, and overall banking sector stability.

2. Commercial Banks
• A commercial bank is a financial institution that primarily accepts deposits from
individuals and offers various lending and financial services.
• They offer fundamental banking services to consumers and to small and medium-sized
enterprises, including loans, certificates of deposit, savings accounts, and overdrafts.
• They generate revenue by lending the money deposited with them and charging
interest on those loans.
• The range of lending products includes business loans, vehicle loans, housing loans,
personal loans, and education loans.
• They are companies established under special Acts and can be domestic or foreign in
nature.
• Commercial banks are divided into two categories: Scheduled Banks and Non-
Scheduled Banks.
• Scheduled Banks are banks listed in the 2nd Schedule of the Reserve Bank of India
Act, 1934, and are further categorised into private, foreign, and multinational banks;
cooperative banks also fall here if they meet certain criteria.

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• Non-Scheduled Banks are those not listed in the 2nd Schedule, and there are about
1,458 non-scheduled banks in India per the textbook.

3. Regional Rural Banks (RRBs)

• RRBs are financial institutions designated as scheduled commercial banks and
established specifically to cater to the banking needs of rural areas within each state.
• They serve people in rural areas and the socioeconomically disadvantaged sections of
society.
• They are established by the government — national, state, or union territory level — and
their area of operation is predefined, limited to the state or UT in which they are
formed.

4. Public Sector Banks (PSBs)

• PSBs are banks where the government holds more than 50% of the bank's capital,
making them majority government-owned.
• The government regulates the financial standards of these institutions.
• Depositors generally view them as safer because of government ownership, so PSBs hold a
substantial share of bank customers.
• The State Bank of India (SBI) is recognised as India's largest public sector bank.

5. Private Sector Banks

• These banks are owned and managed privately, with private shareholders holding the
major stake.
• Unlike public sector banks, their priority is profitability, not economic welfare, though they
must still follow RBI rules and regulations.
• Examples include ICICI Bank and HDFC Bank.

6. Cooperative Banks
• The word "cooperative" means an autonomous association of people working together
to meet their economic, social, or cultural objectives through a jointly owned and controlled
entity, with mutual trust as the binding factor.
• They operate on the same lines as other banks but on a "no profit, no loss" basis.
• They are registered under the Cooperative Societies Act, 1912, and are also regulated
by the RBI.
• They can be rural or urban in nature, and are often backed by individual states (e.g.,
Rajasthan State Cooperative Bank, Maharashtra State Cooperative Bank).

7. Foreign Banks
• Foreign banks are incorporated in a foreign country but operate branches in India.
• They must abide by the rules of their home country as well as the RBI's rules in
India.
• They are neither government-owned nor registered in India.
• Examples include HSBC, Barclays, and Standard Chartered.

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8. Development Banks
• Development banks came into being after independence to promote lagging sectors of
the economy and are therefore known as "Specialised Financial Institutions."
• They provide extended (long-term) funding for projects requiring significant capital
investment and long repayment periods, such as irrigation systems, mining, heavy industry,
and urban infrastructure.
• There are four types of development banks: Industrial, Agricultural, Export-Import,
and Housing.

9. Export-Import Bank (EXIM Bank)

• Established for the sole purpose of providing finance to promote foreign trade.
• The Export-Import Bank of India functions as an apex bank to finance entities engaged
in export and import through commercial banks.

10. Housing Bank

• Provides finance for the housing sector and related activities such as the construction of
houses, plots, and house repairs.
• The National Housing Bank (NHB) was established to provide housing finance through
commercial banks and other agencies.

PART B — BANKING PRODUCTS AND SERVICES

11. Core Role of Banks

• The main task of scheduled banks is attracting deposits from investors and using that
money to run their organisations.
• A person deposits money and earns interest, while another borrows money and pays
interest — the difference (interest spread) is the bank's primary income.
• The bank therefore acts as the custodian of other people's money.

12. Eight Banking Services

• Facility of Loans: banks advance loans to a wide range of entities, from individuals to
large multinationals, and the interest earned is their main source of income.
• Overdraft Facility: allows a current-account holder to withdraw money even when the
balance is low, resulting in a negative (overdrawn) balance up to a predetermined limit.
• Discounting of Bills: allows businesses to speed up payment for their services and meet
operational needs without seeking outside funding, by selling their bills to the bank at a
discount.
• Encashing Cheques: banks let savings and current account holders cash cheques, and
under Core Banking Solution (CBS) cheques can be encashed at any branch; some
banks offer multi-city cheque books.
• Collecting and Paying Instruments of Credit: banks act as custodians, collecting credit
instruments such as promissory notes and bills on behalf of customers.
• Exchange of Foreign Currency: banks convert local currency to foreign currency and
vice versa for customers dealing in international trade.

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• Consultancy: originally for High-Net-worth Individuals (HNIs), most banks now offer
financial consultancy to customers interested in investments, stock markets, bank
assurance, and tax management.
• Utility Bills Payment: banks facilitate the payment of bills and taxes such as telecom,
water, and electricity bills.

PART C — TYPES OF BANK DEPOSIT ACCOUNTS

13. Savings Bank Account

• It is the most suitable account for Indian individuals with limited income seeking a safe
and secure future.
• It can be opened with a small initial amount, and a minimum balance must be
maintained.
• The account holder earns quarterly interest at a rate that varies by bank and RBI
directives.
• It is a basic account type that lets you deposit money safely, with anytime access through
digital or in-person withdrawals.
• Foreign individuals can also open one but only jointly with an Indian, and KYC norms
must be fulfilled.

14. Term Deposit (Fixed Deposit)

• A term deposit is another name for fixed deposit, where funds are deposited for a fixed
period ranging from one month to about three years.
• It carries a higher interest rate than savings accounts because the bank is reasonably
sure the money will not be withdrawn during the term.
• No withdrawals are allowed during the fixed period.
• The bank uses these deposits to lend to other entities, earning the interest spread.

15. Current Account

• It is used by large entities such as business houses, companies, and commercial
institutions that need to make many transactions.
• It has no limit on the number of withdrawals or deposits, made through cheque or
online.
• It earns no interest because of its high liquidity and fluidity.
• It comes with extra services like EFT, wire transfer, net banking, and doorstep
banking.
• Other interested parties can use the account to gauge the creditworthiness of the
account holder.

16. Recurring Deposit (RD)

• It is most suitable for those who want a fair return on a regular saving habit.
• The depositor pays a pre-decided amount every month for a specified period.
• At the end of the term, the depositor gets a lump sum amount.

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• Interest is calculated on a quarterly compounded basis.

PART D — DOCUMENTATION FOR OPENING AN ACCOUNT

17. PAN Card

• Permanent Account Number (PAN) is a ten-digit alphanumeric number issued on a
laminated card by the Income Tax Department.
• It is used to identify taxpayers in India and to track and cross-verify their transactions.
• It was introduced to facilitate linking of various documents, taxes, assessments, tax
demands, and tax arrears relating to any entity.
• It has helped to curb tax evasion and to widen the number of taxpayers.

18. Address Proof

• Before opening an account, banks ask for address proof to verify the customer's identity.
• Valid address proof documents include the passport, driving licence, voter ID card,
NREGA job card, Aadhaar card, utility bills less than two months old, bank/post-
office statement, or property tax bill.
• If documents are not updated, property/municipal tax receipts, pension payment
orders (PPOs), or employer accommodation letters may also serve as valid proof of
address.

19. KYC Norms

• KYC stands for "Know Your Customer" and is a mechanism to verify a customer's
identity before opening an account.
• It establishes the genuineness of the customer.
• It requires periodic updating, with the bank contacting the customer at intervals to
refresh details.

PART E — VARIOUS TYPES OF LOANS

20. Education Loan

• With higher education becoming expensive, students take education loans to meet the
shortfall in fees and other expenses.
• Financial institutions and NBFCs offer competitive interest rates on these loans.
• By location, an education loan can be domestic or foreign.
• By course, it can be for secondary, senior secondary, undergraduate, or
postgraduate studies.
• It can also be split into loans for career enhancement, loans against a third-party
guarantee, and loans against property/security.
• Primary documents include KYC documents, marksheets (10th, 12th, graduation,
entrance exams), admission letter, fee structure, and the co-applicant's KYC and
income proof in some cases.

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• The borrower can claim tax benefits under Section 80E of the Income Tax Act on the
interest paid.
• Normally a grace period of 6 months after completion of the course is given before
repayment begins.
• The maximum repayment period is 8 years from the date of taking the loan.

21. Consumer Durable Loan

• A consumer durable loan is offered for buying consumer durable products — products
with a life of at least 3 years.
• It is not backed by any security or collateral.
• The borrower's credit history is not significant; the ability to pay back (income) is
more important.
• Eligibility: age usually between 21 and 60 years, and monthly income of ₹18,000–
₹20,000 or above.
• The rate of interest is very high and approval is quick.
• The maximum limit is ₹5 lakh and the maximum period is 36 months.
• Instalment loans are the most common type and are paid back in periodic instalments on
a preset timetable.
• Secured consumer durable loans require an asset as collateral, whereas unsecured
loans do not, and unsecured loans therefore carry higher interest rates.

22. Vehicle Loan

• Vehicle loans are classified into personal vehicle loans and commercial vehicle loans.
• Personal vehicle loans cover new or used bikes, scooters, and cars for personal use, do
not need any guarantor, and are available for up to 60 months.
• Commercial vehicle loans are taken by businesses or self-employed individuals for
commercial purposes, also for new or used vehicles.
• New commercial vehicle loans: banks may fund 100% of the chassis (base frame).
• Old commercial vehicle loans: for used vehicles up to 15 years old, available to a wide
range of borrowers from sole proprietors to large corporations.
• Processing charges range from 2% to 4% of the loan amount and are non-refundable.
• Repayment tenure for commercial vehicle loans ranges from 6 to 60 months (5 years),
with EMIs as a popular option.

23. Home Loan

• A home loan is taken to own a dwelling in one's own name and frees up critical savings
for other uses such as children's education.
• Easy availability — most banks and NBFCs offer attractive housing loan schemes.
• Multi-purpose — covers buying a new flat or building, constructing on a plot, renovation,
or extending an existing house.
• Lower interest rate because home loans are secured loans; top-up loans are also
available if needed.
• Fast loan processing — lenient eligibility criteria and minimal documentation allow quick
approval and disbursal.

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• Long tenure — repayment can extend up to 30 years, allowing affordable EMIs.
• Tax benefits — deduction of up to ₹1.5 lakh on principal under Section 80C and ₹2
lakh on interest under Section 24B; the Union Budget 2020 added an extra ₹1.5 lakh
deduction under Section 80EEA for houses costing up to ₹45 lakh.
• Balance transfer facility lets you refinance an existing home loan with another bank
offering better terms.
• Top-up loan facility allows borrowing an additional sum over the existing home loan for
any personal or business use.
• Eligibility criteria: age between 18 and 70 years; minimum monthly income around
₹20,000; credit score of 750 or above; loan-to-value ratio up to 90% of property
value; and at least 2 years of work experience.

24. Short-Term, Medium-Term, and Long-Term Loans

• Short-term loans are granted for a period of up to 1 year.
• Medium-term loans are for periods above 1 year and up to 3 years.
• Long-term loans are for periods above 3 years and can extend up to 25 years.
• All loans must be repaid with interest within the agreed period under a written
agreement.
• Short-term loans are taken to tide over an immediate fund need or for capital
expenditure, and they carry a lower interest rate than longer-term loans.
• Merchant cash advances give cash against future credit-card sales, with a portion of
each sale going to the lender until repaid.
• Credit line is a pre-set credit limit a business can draw upon and repay through monthly
payments.
• Payday loans are short-term loans adjusted against the next salary, taken in emergencies,
with very high interest rates.
• Online loans are disbursed online once approved, transferred straight to the borrower's
account, and are also short-term.
• Advantages of short-term loans include lower interest, quick funding, easy approval,
and less documentation.

PART F — FINANCING THE BUSINESSES (LESSON 2)

25. Microfinance
• Microfinance is a method of finance tailor-made for small business enterprises that
lack access to traditional financial institutions and their products.
• Its goal is to make small businesses self-sufficient and self-dependent.
• A leading example is the Micro Units Development Refinance Agency (MUDRA), which
gives collateral-free loans in the non-farm sector under three categories.
• Shishu: loans up to ₹50,000.
• Kishor: loans between ₹50,000 and ₹5 lakh.
• Tarun: loans between ₹5 lakh and ₹10 lakh.

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26. Bank Overdraft (OD)
• The overdraft facility is offered to account holders and is most suited for businesses
needing emergency funds.
• It is a quicker process than applying for a loan, requires less documentation, and
carries a lower interest rate than a standard loan.
• It is an extended credit facility that allows account holders to withdraw money even
when their balance reaches zero, helping them meet short-term working capital needs.
• If the borrower defaults on payment, the interest rate increases.
• It is an unsecured loan of two types: Authorised OD (a prior written agreement exists
between borrower and lender) and Unauthorised OD (no prior agreement when the
balance hits zero).

27. Cash Credit

• Cash credit is a short-term credit given by banks to small and large business entities to
take care of their working capital needs.
• Repayment must be made within 12 months, since the credit is short-term in nature.
• It is backed by collateral and carries a lower interest rate than overdraft.

28. Mortgage
• Mortgage is usually applicable to immovable assets like property, and it is a security
given by the borrower to ensure repayment of a loan.
• There is no transfer of ownership, only a transfer of interest to secure timely
payment.
• The two parties are the mortgagor (borrower) and the mortgagee (lender); the money
is called mortgage money, and the document is the mortgage deed.
• Simple mortgage: the mortgagor undertakes to repay, failing which the debt can be
realised by selling the asset via court.
• Mortgage by conditional sale: if the debt remains unpaid by a certain date, the sale
becomes absolute; if paid, the sale is void or the buyer transfers the property back.
• Usufructuary mortgage: property is given as collateral and the lender may use the rent
or profits from it to recover the loan, with an agreement between the parties.
• English mortgage: the mortgagor agrees to repay on a certain date; the property is
transferred to the mortgagee with a provision to transfer it back once repayment is
complete.

29. Reverse Mortgage

• Reverse mortgage is a loan especially suited for senior citizens (above 60) who own
property and need funds.
• The borrower receives funds against their property in a periodic manner for a certain
period from the bank.
• It is called "reverse" because the bank pays the borrower periodically, rather than the
borrower paying the bank.
• The property serves as security for the loan.

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• Required documents include proof of identity, proof of residence, employer identity
card, property papers, six months of bank statements, and one year's loan
account statement if any.

30. Hypothecation
• Hypothecation is the pledging of goods against a debt without delivering them to
the lender.
• It is widely used in the vehicle finance industry — the vehicle is purchased, and the
same vehicle becomes security for the loan.
• The possession of the asset remains with the borrower (hypothecate) while the
ownership stays with the lender (hypothecator) until repayment is complete.
• In case of default, the lender can seize the asset.
• It is usually applicable to moving (movable) assets.
• It is defined under Section 172 of the Indian Contract Act, 1872 and Section 2(1)(n)
of the SARFAESI Act, 2002.

31. Pledge
• Pledge is the bailment of goods as security against a debt for the performance of an
obligation or repayment.
• The lender (pledgee) takes actual possession of the asset, unlike hypothecation.
• The pledgee retains possession until the entire loan amount is received.
• In case of default, the pledgee can sell the goods and adjust the proceeds against
outstanding dues.

PART G — AGRICULTURAL AND ALLIED FINANCING

32. Scope of Agricultural Loans

• Agriculture is a primary sector and includes not only farming but also forestry, animal
husbandry, poultry, fisheries, aquaculture, floriculture, horticulture, and
sericulture.
• Government policy initiatives have led the banking sector to offer agricultural loans at
competitive rates.
• Loans are offered for farm mechanisation, harvester combines, minor irrigation, and
through primary credit societies and Self-Help Groups (SHGs).
• Popular farm loans include crop loans, Agri loans, solar pump loans, tractor loans,
and land development loans.
• SBI, India's leading bank, offers allied-activity loans starting from 10.3% p.a., with crop
loans against gold ornaments at 7.25%, tractor loans at 10–10.6%, MUDRA at 9.75%,
and dairy/poultry/irrigation/land-development loans at 10.6%.
• Example schemes include SBI Kisan Credit Card, SBI Krishak Uthan Yojana,
NABARD's National Livestock Mission, and Karur Vysya Bank's Green Card/Green
Harvester.

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PART H — NEW TECHNOLOGIES AND INITIATIVES IN BANKING

33. Cashless Banking

• The Government of India introduced cashless banking because manufacturing and
handling cash is costly and risky.
• Bank cards (debit and credit cards) are the most popular cashless payment method.
• USSD (Unstructured Supplementary Service Data) is tailormade for people without
smartphones or internet — payments can still be made.
• QR Code stands for Quick Response — consumers scan the merchant's QR code with a
smartphone camera to complete the transaction.
• Mobile wallets are fast, risk-free, and convenient, allowing users to transact and store
e-money by linking the wallet to their bank account and paying via phone number, email,
unique code, or QR code.

34. E-Banking (Electronic Banking)

• E-banking means banking via electronic means — also called virtual banking or online
banking — using the telecom network for banking work via computer or mobile.
• Mobile banking (M-banking) allows account transactions, bill payments, loan
applications, and balance checks through a PDA or cellphone.
• Electronic Clearing System (ECS) is an automated provision where bills like credit card
bills are debited directly from the savings account, so the user does not miss
payments.
• Smart cards store data on a microchip or microprocessor, can be used for both
transactions and identification, and use encrypted exchanges that cannot be hacked.
• Electronic Fund Transfer (EFT) is the electronic transfer of money between accounts in
the same or different banks via computer-based frameworks, without direct intervention of
bank staff.
• Telephone banking allows customers to perform non-cash financial transactions via the
telephone, without visiting a branch or ATM.
• Internet banking (web/online banking) lets account holders access account information
through the web, performing transactions such as bill payments, balance enquiries, stop-
payment requests, and loan applications.
• Home banking lets a customer transact from their own house, providing convenience,
24×7 access, and reduced paperwork for the bank.

35. Checking Counterfeit Currency

• Counterfeit currency means currency produced without the sanction of the
Government of India, deliberately to deceive — also called Fake Currency Notes
(FCNs).
• Several features identify a genuine note: in colour-printed fakes the security thread is
missing and the ink quality is inferior.
• The Mahatma Gandhi watermark is visible against light; in fake notes the watermark is
thicker.
• A security thread is embedded in ₹5–₹50 notes, carrying the word "Bharat".

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• The denomination value is visible as an image on notes from ₹20 to ₹500.
• Raised printing can be felt on touching the RBI Governor's signature on ₹20–₹500
notes.
• Figures and alignment are perfect on genuine notes; observing gaps between figures
reveals fakes.
• Ink smudges and broken lines on a note suggest it is fake.
• Typography of "Reserve Bank of India" is smooth on real notes and thicker on fakes.

36. CIBIL (Credit Information Bureau India Ltd.)

• CIBIL stands for Credit Information Bureau India Ltd. and provides credit-related
information about individuals and companies regarding loans and credit cards.
• It is the first credit bureau formed in India.
• It receives records from registered financial institutions periodically.
• It then analyses the data and issues a Credit Information Report that helps banks and
lending institutions filter loan applications.
• The report includes the borrower's history of debt obligations and track record of
repayment.

37. ATM (Automated Teller Machine)

• Popularly called "Any Time Money," ATM stands for Automated Teller Machine.
• It is a machine that helps manage the account holder's money, allowing payments and
deposits without visiting a bank branch.
• The user can access their account to check the latest balance.
• For transactions, either a debit card or credit card is used, with PIN authentication
required in certain cases.

38. Net Banking

• Net banking is internet banking offered by banks for customer convenience.
• It allows access to bank information and real-time fund transfers via the internet.
• It avoids the hassle of physical visits, travel, parking, and queues at branches.
• Benefits include convenience, 24×7 access, real-time information, and quick
tracking of transactions.
• The account holder can register for it offline or online.

39. RTGS (Real Time Gross Settlement)

• RTGS provides immediate, real-time transfer of funds and/or securities.
• It is an electronic route of fund transfer and a continuous process of settling
payments.
• Transactions are handled individually and not grouped together (gross settlement).
• It is primarily for huge bank-to-bank transfers, operated under the watchful eye of the
RBI.
• Once completed, transactions cannot be reversed.

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40. NEFT (National Electronic Funds Transfer)
• NEFT is a nationwide platform for making payments by electronic transfer.
• It is easy to use and avoids the risks and inconvenience of physical transfer.
• It is gaining popularity due to the spread of online banking.
• To use it, the IFSC code, the name of the account holder, account number, and the
name and branch of the receiving bank must be provided.

41. IMPS (Immediate Payment Service)

• IMPS, also called the Immediate Payment System, is a service by banks for quick
electronic funds transfer through mobiles.
• It started as a pilot mobile payment system and now offers instant transfers via mobile
banking or SMS.
• To use IMPS, the customer must first register with the bank's IMPS service.
• It is convenient and very quick.

42. Electronic Clearing Service (ECS)

• ECS transfers funds electronically and is used for periodic, repetitive transactions
such as telephone, electricity, and water bills.
• It is quicker than the physical transfer of cash.
• It has two variants: ECS Credit and ECS Debit.

43. Electronic Fund Transfer (EFT) — Summary

• EFT uses computer networks for transactions between accounts in the same or different
banks.
• Customers can use mobiles or the internet to transfer funds from anywhere.
• It is secure, safe, and avoids the physical transfer of cash and its associated risks and
mistakes.
• The three main routes for EFT are NEFT, RTGS, and IMPS.
• Electronic Clearing Houses process these transactions.

44. Debit Cards

• A debit card is a cashless payment method that debits money directly from the
customer's account when used.
• It can be used to buy products and services, make payments, or withdraw cash from
ATMs.
• Unlike credit cards, the customer cannot spend more than what is available in their
account.
• Debit cards usually do not carry fees or charges for use.

45. Credit Cards

• A credit card is also a payment card but, unlike a debit card, the issuing authority gives
the user a line of credit.
• The user promises to pay back the amount along with applicable charges.
• The card issuer enters into agreements with sellers to accept the card as payment.

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• The seller uses electronic verification to confirm that the card is valid and acceptable.

46. App-Based Payment System

• Customers use apps on mobiles or computers to pay for everyday items and durables.
• The process: the app sends the card information to the payment gateway, which forwards
it to the card-issuing bank, then to the payment network (Visa, MasterCard, etc.).
• After verification of credentials and terms, an authorisation code is sent and the money is
transferred to the seller's account.
• All this happens in a few seconds, depending on internet speed.
• Two kinds of products can be bought — virtual goods and physical goods — and money
can also be transferred between accounts.

47. Bank Draft and Pay Order

• A bank draft (Demand Draft / DD) is a negotiable instrument where the bank itself
stands as guarantor for payment when it is presented.
• A DD has no risk of dishonour because payment is made in advance.
• It can be made at any branch by paying cash, even if the customer does not have an
account at that branch.
• It can be realised at any branch of the issuing bank anywhere in the country.
• For amounts above ₹50,000, a copy of the PAN card must be attached.
• A pay order (banker's cheque) is similar to a DD but can only be realised in the city
in which it was issued.

PART I — HANDLING BANKING COMPLAINTS

48. Filing a Banking Complaint

• If a customer is dissatisfied with a bank service, a complaint can be filed on plain paper
or through the portal.
• The complainant must approach the Banking Ombudsman.
• The complaint must include contact details of the complainant and the bank, the
facts of the case, any loss suffered, and the relief required.
• This step is taken only when the bank has rejected the complaint, not responded, or
delayed beyond the RBI's specified period.
• Customers can also contact the Digital Complaint Management System Portal for
banking, NBFC, or digital-related issues.

49. Banking Ombudsman

• The Banking Ombudsman Scheme was introduced by the RBI in 1995 to protect
consumers against unfair practices by banks.
• The RBI appoints officers to act as Banking Ombudsmen for the speedy resolution of
complaints against banks.
• If the bank does not reply within 30 days, or if the customer is unhappy with the reply,
the customer can file a complaint with the Banking Ombudsman.

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 QUICK REVISION GLOSSARY

• Bill Discounting: the bank takes a bill from the borrower, deducts a discount, and pays
the balance immediately.
• Collateral: any asset given as security to the bank to ensure repayment; can be seized in
case of default.
• Consumer Durable Products: goods expected to last a long time after purchase
(furniture, appliances, etc.).
• Cooperative Banks: small member-owned banks operating for the benefit of their
members.
• Demand Draft (DD): a negotiable instrument backed by the bank itself, so it cannot
bounce.
• CBS: Core Banking Solution — lets customers transact at any branch of a bank.
• KYC: Know Your Customer — the customer-identification mechanism mandated for banks.
• NBFC: Non-Banking Financial Company.
• Scheduled Bank: a bank listed in the 2nd Schedule of the RBI Act, 1934.

LIKELY EXAM QUESTIONS (from the textbook's own self-

assessment)

• Long-answer: explain why the RBI is called the "Banker's Bank"; describe the different
types of banks in India; explain the various types of deposit accounts; explain the eight
banking services; discuss the various types of loans; discuss the financing options banks
offer to businesses (microfinance, OD, cash credit, mortgage, reverse mortgage,
hypothecation, pledge); explain the new technologies and initiatives in banking; explain the
role of the Banking Ombudsman.
• Short-answer / define: RBI, scheduled vs non-scheduled banks, cooperative banks, KYC,
PAN, mortgage vs hypothecation vs pledge, NEFT vs RTGS vs IMPS, ECS, bank draft vs pay
order, CIBIL, MUDRA loans.
• Distinguish: current account vs savings account; term deposit vs recurring deposit; new vs
used commercial vehicle loans; bank draft vs pay order; debit card vs credit card.

Source: "Finance for Everyone," Unit II (Lessons 1–2), Department of Distance & Continuing
Education, School of Open Learning, University of Delhi.

Finance for Everyone — Unit II | Page 14 of 14