Forensic accounting

Dr Kiran
• Forensic Accounting : types of banks,, bank
instruments-legal tenders, bank notes,,
FDRS, cheques/drafts, bank guarantee,
bonds and certificates, types of accounts,
credit debit/ATM card frauds, ledger entries
The development of the banking sector can be
divided into three stages:
• Phase I – Early Phase (1770 to 1969) which can
be subdivided into Pre Independence Period
(1786-1947) and Post Independence Period (1947-
1969)
• Phase II – Nationalization Phase (1969 to 1991)
• Phase III – Liberalization or Banking Sector
Reforms Phase (1991 – till date)
Pre-Independence Period
(1786-1947)
• The "Bank of Hindustan," established in 1770 in the
then-Indian capital of Calcutta, was the country's first
bank. However, this bank did not succeed and closed its
doors in 1832.
• During British rule in India, the East India Company
established three banks known as the Presidential Banks:
• The Bank of Bengal, the Bank of Bombay, and the Bank
of Madras.
• These three banks were eventually merged into a single
bank in 1921, which was known as the “Imperial Bank of
India.”
• The Imperial Bank of India was later nationalized and
renamed The State Bank of India, which is now the
largest public sector bank in India.
Post-Independence Period
(1947-1991)
• At the time of India's independence, all of the country's major banks
were privately led, which was a source of concern because people in
rural areas were still reliant on money lenders for financial
assistance.
• The Banking Regulation Act of 1949 was used to nationalize these
banks.
• The Reserve Bank of India, on the other hand, was nationalized in 1949.
• Following the formation of the State Bank of India in 1955, another 14
banks were nationalized between 1969 and 1991.
• Another six banks were nationalized in 1980, bringing the total to
twenty.
• Aside from the aforementioned 20 banks, seven SBI subsidiaries were
nationalized in 1959.
• Except for the State Bank of Saurashtra, which was merged in 2008,
and the State Bank of Indore, which was merged in 2010, all of these
banks were merged with the State Bank of India in 2017.
Liberalization Period
(1991-Till Date)
• To ensure the stability and profitability of the
Nationalised Public Sector Banks, the
Government decided to form a committee led
by Shri. M Narasimham to oversee the various
banking reforms in India.
• The introduction of private sector banks in India
was the most significant development.
• The Reserve Bank of India granted licenses to
ten private sector banks to establish themselves.
• Banking Regulation Act of India, 1949
defines Banking as “accepting, for the
purpose of lending or of investment of
deposits of money from the public,
repayable on demand or otherwise or
withdrawable by cheque, draft order or
otherwise.”
• The Reserve Bank of India Act, 1934
and the Banking Regulation Act, 1949,
govern the banking operations in India.
Banking Structure in India
• Banks can be broadly categorized as Commercial
Banks or Co-operative Banks.
• Banks which meet specific criteria are included
in the second schedule of the RBI Act, 1934.
These are called scheduled banks. They may be
commercial banks or co- operative banks.
• Scheduled banks are considered to be safer, and
are entitled to special facilities like re-finance
from RBI.
Classification of Banks in India
1) The RBI:
The RBI is the supreme monetary and banking
authority in the country and has the responsibility to
control the banking system in the country.
2) Public Sector Banks:
• State Bank of India and its Associates (8)
• Nationalized Banks (19)
• Regional Rural Banks Sponsored by Public Sector
Banks (196)
3) Private Sector Banks:
• Old Generation Private Banks (22)
• Foreign New Generation Private Banks (8)
• Banks in India (40)
4) Co-operative Sector Banks:
• State Co-operative Banks
• Central Co-operative Banks
• Primary Agricultural Credit Societies
• Land Development Banks
• State Land Development Banks
5) Development Banks:
Development Banks mostly provide long term finance for
setting up industries. They also provide short-term finance
(for export and import activities)
Industrial Finance Co-operation of India (IFCI)
Industrial Development of India (IDBI)
Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture and Rural Development
(NABARD)
Export-Import Bank of India
Types of Banks
Commercial Banks
• Any banking organization that deals with the
deposits and loans of businesses is referred to as a
commercial bank.
• Commercial banks issue bank checks and drafts
and accept term deposits.
• Through instalment loans and overdrafts,
commercial banks also serve as moneylenders.
• Commercial banks also provide a variety of deposit
accounts, including checking, savings, and time
deposits.
• These institutions are run for profit and are owned
by a group of people.
Commercial Banks are further divided into the following:
• Public Sector Banks - These are banks in which the Government of India
owns a majority stake. SBI, Bank of India, Canara Bank, and other
public sector banks are examples.
• Private Sector Banks - The majority of a bank's share capital is held by
private individuals. These banks are set up as limited-liability
corporations. Private sector banks include ICICI Bank, Axis Bank,
HDFC, and others.
• Regional Rural Banks - Regional Rural Banks were established in
accordance with the provisions of an Ordinance promulgated on
September 26, 1975, and the RRB Act, 1976, with the goal of ensuring
adequate institutional credit for agriculture and other rural sectors.
– RRBs can only operate in the areas that have been designated by
Gol as covering one or more districts in the state.
– RRBs are jointly owned by Gol, the relevant State Government, and
Sponsor Banks; the issued capital of an RRB is divided among the
owners in the proportions of 50%, 15%, and 35%, respectively.
• Foreign Banks - These banks are registered and have their headquarters
in another country, but they have branches in our country.
• Foreign banks in India include HSBC, Citibank, Standard Chartered
Bank, and others.
Small Finance Banks

• The Small Finance Bank (SFB) is a private

financial institution that primarily undertakes
basic banking activities
• such as deposit acceptance and lending to
unserved segments, small business units, small
and marginal farmers, micro and small
industries, and unorganized sector entities, but
without any geographical restrictions, unlike
Regional Rural Banks or Local Area Banks.
• Payment Banks
• A payment bank is a distinct type of bank that performs
only the limited banking functions permitted by the
Banking Regulation Act of 1949.
• Acceptance of deposits, payments and remittance services,
internet banking, and acting as a business correspondent for
other banks are examples of some oftheactivities.
• They are initially permitted to collect deposits of up to Rs
1 lakh per individual.
• They can help with money transfers as well as sell insurance
and mutual funds. Furthermore, they can only issue
ATM/debit cards, not credit cards.
• They are not permitted to establish subsidiaries to provide
non-banking financial services. More importantly, they are
not permitted to engage in any lending activities.
Co-operative Banks
• A cooperative bank is a financial entity that is owned and
operated by its members, who are also its customers.
• Co-operative banks are frequently formed by people who belong
to the same local or professional community or who share a
common interest.
• Co-operative banks typically offer a wide range of banking and
financial services to their members (loans, deposits, banking
accounts, etc).
• It is further divided into:
– Urban Cooperative Banks
– Rural Cooperative Banks
Non Banking Financial Institutions
• A Non-Banking Financial Company (NBFC) is a company
registered under the Companies Act, 1956.
• A non-banking financial company, also known as a non-banking
financial institution, provides financial services and products but
is not recognised as a bank with a full banking licence.
• NBFCs are not banks, but their activities include lending and
other activities such as providing loans and advances, credit
facilities, savings and investment products, trading in the money
market, managing stock portfolios, money transfers, and so on.
• NBFC Registration is required before NBFC activities can
begin.
• Their activities include hiring, leasing, infrastructure finance,
venture capital finance, housing finance, and so on.
• Deposits can be accepted by NBFC, but only term deposits and
deposits repayable on demand are not accepted.
• Some examples of well-known NBFCs are Kotak Mahindra
Finance, SBI Factors, Sundaram Finance, and ICICI Ventures.
Main function of commercial banks
A ) Acceptance of deposits
Fixed deposit account
Saving bank account
Current account
B ) Advancing of loan
• Cash credit
• Call loans
• Over draft
• Bills discounting
C) Agency function
• Collecting receipts
• Making payments
• Buy and sell securities
• Trustee and executor
D ) General utility function
• Issuing letters of credit, travelers cheques
Underwriting share and debentures
• Safe custody of valuables
• Providing ATM and credit card facilities
• Providing credit information
• The Indian banking system is divided into
"Scheduled Banks" and "Non-scheduled Banks."
• Schedule banks are those that are listed in the
Second Schedule of the RBI Act, 1934 and thus
meet the following requirements:
– a bank must have a paid-up capital and reserve of at
least Rs. 5 lakh and
– a bank must satisfy the Reserve Bank of India (RBI) that
its affairs are not conducted in a manner that is
detrimental to the interest of its deposits.
• Non-scheduled banks are those that are not listed in
the second schedule of the RBI Act, 1934 and thus do
not meet the requirements outlined in that schedule.
• The term "scheduled banks" refers to both
"scheduled commercial banks" and "scheduled
cooperative banks."
• The Scheduled commercial banks are further subdivided into
four groups:
– Public sector banks (also known as "nationalised banks" and
"State Bank of India (SBI) banks");
– Private sector banks (divided into "Old Private Sector Banks"
and "New Private Sector Banks" that emerged after 1991);
– Foreign banks in India; and
– Regional Rural Banks (that operate exclusively in rural areas to
provide credit and other facilities to small and marginal farmers,
agricultural workers, and small entrepreneurs).
• Foreign banks are present in the country either through full
branch/subsidiary presence or through representative offices.
• Except for foreign banks, these scheduled commercial banks are
registered in India under the Companies Act.
Role of RBI
• The RBI is the country's supreme monetary and banking authority,
and it controls the Indian banking system. It is known as the Reserve
Bank because it holds the reserves of all commercial banks.
• In accordance with the provisions of the Reserve Bank of India Act,
1934, the Reserve Bank of India was established on April 1, 1935.
• The Reserve Bank's Central Office was initially located in Calcutta, but
was permanently relocated to Mumbai in 1937. The Governor sits in
the Central Office, where policies are developed.
• Though originally privately owned, the Reserve Bank has been wholly
owned by the Government of India since its nationalisation in 1949.
• The RBI Nationalisation Act of 1949 has been amended several times
by the government in response to changing needs, and its functions
have been expanded.
• Its current functions
• Monetary policy formulation, implementation, and monitoring
are all part of it.
• The overarching goal is to maintain price stability while pursuing
growth
• It issues new currency notes and coins (except for rupee one or its
denominations, which are issued by the Ministry of Finance) as well
as exchanging or destroying those that are no longer fit for
circulation.
• This function also includes the responsibility for currency and coin
distribution (of those ones also which are issued by the Ministry of
Finance).
• The overarching goal is to maintain adequate supplies of quality
currency and coins.
• Itestablishesbroad parameters for banking operations within
which the banking and financial system operates.
• This function's overarching goal is to maintain public trust in the
system, protect depositors' interests, and provide cost-effective
banking services to the public.
• Itmanagesthe FEMA (Foreign Exchange Management Act,
1999), keeping the country's Forex (foreign exchange) reserves,
stabilizing the rupee exchange rate, and representing the
Government of India at the IMF and World Bank (and other
international financial agencies of which India is member).
• The goal of this function is to facilitate external trade and
payments, as well as to promote the orderly development and
maintenance of the country's foreign exchange market.
• It introduces and upgrades safe and efficient payment systems in
the country to meet the needs of the general public. The goal is
to keep the public's trust in the payment and settlement system.
As a banker of the Government and the banks,
it consists of three categories of functions:
• first, performing Merchant Banking functions for the central
and state governments; second, acting as their Bankers; and
third, maintaining banking accounts of the SCBs (scheduled
commercial banks) operating in the country (domestic,
foreign, public, and private).
• The broad objectives are to enable governments and banks to
mobilise enough liquidity for their operations, under which it
lends or manages government borrowing plans and provides
short-term and long-term loans to banks (as Lender of Last
Resort).
• As part of its developmental responsibilities, the
RBI established developmental banks such as IDBI,
SIDBI, NABARD, NEDB (North Eastern
Development Bank), Exim Bank, and NHB.
Types of bank accounts
Banks have two basic
types of accounts:
• current accounts
• savings accounts
Each bank may have its
own names for types of
accounts within these
categories but the basic
principles remain the
same.
Current account services

Most current accounts offer:

• Debit card
• Cashpoint card
• Statements
• Standing orders
• Direct Debits
• Cheque book
• Interest
• Overdraft
• Loans
Savings Account
• The savings accounts can be opened by an individual or jointly by two
people with an aim to save money.
• 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.
• The rate of interest that an account holder get varies from 4% to 6%
per annum
• There is no minimum balance that needs to be maintained for this type
of an account
• The savings account holders can get an ATM/Debit/Rupay Card .
• Savings bank account is further divided into two types: Basic Savings
Bank Deposit Account (BSBDA) and the other one is Basic Saving
Bank Deposit Accounts Small Scheme(BSBDS)
• The savings bank account is mostly eligible for students, pensioners
and working professionals
Current accounts

Current accounts are

used for day-to-day
transactions with money
coming in, such as
wages, and money going
out such as cash
withdrawals, bill
payments, debit card
transactions, cheques
etc.
Current 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
• There is no fixed number of times that money can either
be deposited or withdrawn from such accounts
• Internet banking is available
• This type of bank account does not have any fixed
maturity
• Overdraft facility is available for current bank accounts
• There is no interest that is paid on such accounts
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
• The range of months for which an RD account can be opened varies
from 6 months to 120 months
• The interest rate varies depending upon the bank you choose to open an
account.
• Nomination facility is also available for RC accounts
• Passbook is issued for this type of bank account
• Premature withdrawal of the amount is permitted, provided a sum of
amount is deducted as penalty
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
• The amount deposited in FD account can only be
withdrawn all at once and not in instalments
• Banks pay interest on the fixed deposit account
• The rate of interest depends upon the amount you deposit
and for the time duration of the FD.
• Full repayment of the amount is available before the
maturity date of FD
DEMAT Account
• Shares and securities which can be held in electronic format
constitute the DEMAT account.
• The DEMAT account also stands for Dematerialized Account.
• There are only two depository organisations which manage
this type of bank account in India.
• This includes: National Securities Depository Limited and
Central Depository Services Limited
• This helps facilitate easy trade of bonds and shares
• Helps in conducting stress-free transaction of shares
• KYC is required for opening the DEMAT Account
• Transaction cost is reduced
• Traders can work from anywhere
• The transfer of securities can be done with reduced paperwork
NRI Account
• To fulfil the bank requirements of a Non-Residential Indian or a Person
of India Origin, the option of NRI account is available.
• The NRI Accounts are further divided into three types:
• NRO ( Non-Resident Ordinary Rupees) Account – This shall allow
you to transfer your foreign earnings easily to India. It can be opened in
the form of an FD/RD/Current/Savings account. These accounts can be
opened by an individual or jointly opened
• NRE ( Non-Resident External Rupees) Account – When an Indian
citizen moves abroad to work there, his/her account needs to be
converted into an NRE account. This account can be jointly opened
with an Indian resident
• FCNR ( Foreign Currency Non-Resident ) Account – This type of
account can be opened to manage an international currency. It can only
be in the form of Term deposit and can be withdrawn after the maturity
period only.
Common Banking Products
• Credit Card: Credit Card is “post paid” or “pay
later” card that draws from a credit line-money
made available by the card issuer (bank) and
gives one a grace period to pay.
• If the amount is not paid full by the end of the
period, one is charged interest.
• Debit Cards: Debit Card is a “prepaid” or
“pay now” card with some stored value.
Debit Cards quickly debit or subtract money
from one’s savings account, or if one were
taking out cash.
• Every time a person uses the card, the
merchant who in turn can get the money
transferred to his account from the bank of
the buyers, by debiting an exact amount of
purchase from the card.
• To get a debit card along with a Personal
Identification Number (PIN).
Automatic Teller Machine
• The ATM’s are used by banks for making the customers dealing
easier.
• ATM card is a device that allows customer who has an ATM
card to perform routine banking transaction at any time without
interacting with human teller.
• It provides exchange services. This service helps the customer
to withdraw money even when the banks ate closed.
• This can be done by inserting the card in the ATM and entering
the Personal Identification Number and secret Password.
• It allows the customers • To transfer money to and from
accounts. • To view account information. • To order cash. • To
receive cash.
Electronic Funds Transfer (EFT)

• The system called electronic fund transfer (EFT)

automatically transfers money from one account to
another.
• This system facilitates speedier transfer of funds
electronically from any branch to any other branch.
• In this system the sender and the receiver of funds
may be located in different cities and may even bank
with different banks.
• Funds transfer within the same city is also
permitted.
• The scheme has been in operation since February 7,
1996, in India..
Telebanking

Telebanking refers to banking on phone

services.
• A customer can access information about
his/her account through a telephone call and
by giving the coded Personal Identification
Number (PIN) to the bank.
• Telebanking is extensively user friendly and
effective in nature
Cheque book

A cheque book is a set of printed forms which

allow you to pay amounts of money to a named
individual or company.
How to write a cheque
You complete:
• the name or company to be paid
• the quantity in words and numbers
• date and signature
Using cheques

Cheques are not used as much as

they used to be – some shops will
not accept them anymore.

Sometimes cheques have to be

presented with your debit card– this
is used to confirm your signature.

Cheques to pay other people, you

can put cheques into your current or
savings accounts by presenting
them at the bank’s counter as a
deposit.
Clearing cheques
Cheques take a few days to clear-
for the funds to move from one bank
to another.
There needs to be enough money in
the account from which the cheque
is paid to cover the amount.
Otherwise the cheque will be
refused by the bank.
This is known as a ‘bounced’
cheque.
Cheque numbers
Each cheque in your book is individually numbered and
you can use the cheque stub to write down the details
of the cheque such as the date, amount and who it is
made payable to.
If you need to make an alteration to something you
have written on a cheque you must write your initials
beside it.
The branch sort code

There are two important numbers shown on a cheque. The

branch sort code is made up of 3 two-digit numbers, eg 11-22-
33. Each bank branch has a unique number. It is shown in two
places on this cheque.
Bank account number

The other is your account number. This is usually eight digits

long and is used to identify your account.

These two numbers are also shown on your debit card and are
required when buying items online or buy telephone.
Altering cheques
If you need to make an alteration to something you
have written on a cheque you must write your
initials beside it.
Debit cards
The easiest ay to access the money in your account
without using cash is by debit card.
• Debit cards allow for payment to be made in a shop or
company directly from your current account.
• Debit cards are not a way to borrow money.
• Banks do not normally charge for this service.
• You have to make sure that there are sufficient funds
in your account to cover the payment as card readers
in the shops will contact your bank to confirm the
transaction
• They can also be used to pay for things via the
internet or telephone.
 A debit card also allows you to withdraw money from
your current account at a cashpoint – sometimes
referred to as an ATM (Automated Teller Machine).
 Debit cards are also known as ‘Chip and PIN’ cards.
They include a microchip for security purposes and
you put a PIN (Personal Identification Number) into a
keypad instead of a signature when you make a
payment.
Cashpoint cards
Cashpoint cards allow you to withdraw
money from your current account at a
cashpoint- sometimes referred to as an
ATM (Automated Teller Machine).
•This provides easy, round the clock
access to your money.
•A cashpoint requires a Personal
Identification Number or PIN to access
the account.
•This is a four digit code which you will
need to memorise and keep secret.
•It is also possible to withdraw money
from cashpoints provided by other
banks but be aware that some charge
you for doing this.
• You cannot use cashpoint cards to
purchase goods in shops or over the
internet.
Credit cards
Credit cards are not the same as Debit or Cashpoint
cards.
•Credit cards have a separate account and allow you to
borrow money.
•You can apply for a credit card from any provider as
well as your own bank.
•Often banks issue multi-function cards which combine
a debit card and cashpoint card in one.
For more information about credit cards visit
BORROWING.
If you lose a debit, credit or cashpoint card or it is stolen
you must report it to you bank building society or credit
company as soon as possible. You will find a telephone
number for reporting lost or stolen cards on the reverse of
your bank statements or on your Bank’s website.
You will not have to pay for any misuse of the card after
you have reported it. If the card is lost or stolen before
you receive it, you will not be responsible for any misuse
of the card.
Banks suggest that you never keep your card and pin
number together in case they are stolen. Also you should
never tell anyone else your PIN number.
Chip and Pin
During 2005 new cards will be issued
which contain a small microchip which
holds your account details. You will also
be sent a 4 digit personal identification
number (PIN) separately.
Instead of signing when you buy goods in
shops you enter your PIN number on a
keypad just like at a cashpoint.
It is important to keep your PIN number
secret to protect your account.
For more information visit
www.chipandpin.co.uk
Most bank accounts offer an OVERDRAFT facility. This
allows you to spend more than the total balance in your
account and go “overdrawn”. It is a way to borrow money
short-term.
You will need to agree with your bank an overdraft limit for
example £100 which would then allow you to borrow up to
this amount.
 An overdraft can be useful if
you know that you are about
to run out of money but will
soon receive some income.
 Banks charge you Interest on
your overdraft.
 This is another percentage
rate and varies from one
account to another.
 You will need to find out from
your bank what your
overdraft limit is and what
interest you will pay to
borrow this money.
 If you were to go overdrawn without the bank’s
agreement they may impose charges.
 Banks and building societies currently charge around
£25 to customers who exceed their credit limit, go
overdrawn without authorisation, or bounce a cheque.
This charge can be made each time a debit is made
from the overdrawn account adding up to a large
amount of money.
 Although banks will tell you about these charges it
can be argued that excessive charges are unlawful. If
this happens to you seek advice.
 You can find more information about Overdrafts in the
Borrowing unit.
A BANK STATEMENT is a list of transactions made from your
account.
You can opt to receive your statements online or your bank will
regularly send you a bank statement. You can also sometimes
obtain one from a cashpoint.
Most banks also have app’s that you can install onto your phone or
tablet that will keep you informed of your current balance and allow
you to carry out certain transactions.
The statement will list each transaction
• in date order,
• show who the transaction is made with,
• show the amount as either a credit (paid in) or a debit (paid
out)
• show the total amount of money in your account after all
transactions. This is known as the BALANCE
Your bank statement can be a useful tool for budgeting as it provides a record of
your monthly income and spending. You can use it to predict the amounts which
will need to be paid in the coming months.
If at any time you notice an item on your statement
which seems incorrect you should tell your bank,
building society or credit company immediately. It
could be an error or it could be an incidence of fraud if
someone has used your card details.
Be vigilant and report anything unusual.
You can arrange with your bank for a regular payment
to be made from your account to a company or other
account. This can take the effort out of having to make
the payments in person and having to remember to pay
on a set date.
This is especially useful for paying bills such as
electricity, gas, telephone etc. You could also arrange
for an amount to be transferred to a savings account.
There are two ways to do this:
• Standing order
• Direct Debit
STANDING ORDERS allow you to pay a set amount to
another bank account on a regular date, such as on the
10th of each month.
You can use this to pay money to companies or
individuals or to pay money into a savings account.
 A DIRECT DEBIT is used
to allow a company to
take amounts from your
account, to pay for bills
etc.
 The amounts may vary
but will usually be at the
same intervals.
 You will be informed by
the company how much
and when the money will
be taken from your
account.
 You will need to make
sure that there is enough
money in your account to
cover the amounts to be
paid by both standing
orders and direct debits.
 Otherwise you may
become overdrawn.
 If you have not agreed
an overdraft limit with
you bank they will charge
you for the uncleared
direct debit.
 This can happen more
than once and the
charges can mount up.
INTEREST
The bank pay you for keeping your money with them. This is called Interest.
It is paid as a percentage rate based on the balance in your account.
Interest can be paid on some current accounts and all savings accounts.
Interest Rates vary so it is a good idea to shop around and compare the
interest rates that banks are currently offering.
Most bank accounts offer telephone or online
banking.
Telephone banking allows you to phone a call
centre and ask for an operator to make
payments and transfers from your account.
You can set up standing orders and ask for
an update on your account balance. Usually
this costs the price of a local call.

Online banking allows you to access your bank

account details via the internet and make
transactions yourself. It is free, apart from the cost
of using the internet. Banking Apps on your phone
or tablet may also enable you to do this free of
charge.
These facilities can help you manage your money
more effectively and are useful tools for
budgeting.
Ask about these options when you choose a bank.
Savings accounts, also known as Deposit accounts,
are intended for money to be paid in but not often
withdrawn. Some allow instant access to your money
but others require that you give the bank notice before
making a withdrawal or incur a penalty.
They do not offer the same access facilities as current
accounts such as cheque books and cashpoint cards.
They usually offer higher rates of interest than current
accounts but these too can vary so it is worth shopping
around.
Individual Savings Accounts or ISAs are a government
scheme to encourage more people to save or invest their
money without paying any tax on the interest earned.
With an ordinary bank or building society account you pay
tax on the interest you earn.
Bank Guarantee
• A bank guarantee is defined as a guarantee provided by a
lending institution under which the bank will assume the
overall costs in case a borrower defaults on their liabilities
or obligations.
• A bank guarantee is seen as a provision placed in the
bank loan prior to them agreeing to provide the money.
• The bank will also charge a fee for providing the
guarantee.
• It also encourages companies and consumers to make
purchases they would otherwise not make, which helps to
increase the business activity along with consumption and
also provides entrepreneurial opportunities.
• Commercial banks often help to provide bank guarantees to
individuals or business owners who want to borrow money
for purchasing new equipment.
• For example, with the help of a guarantee, the bank
assumes liability for the debtor in case they fail to fulfil
their contractual obligations.
• The bank offers to stand as a guarantor on behalf of
business customers in a transaction.
• Most bank guarantees also charge a fee that is equal to a
small percentage of the entire contract amount (The
percentage is normally 0.5% to 1.5% of the total guaranteed
amount).
• There are different kinds of guarantees like bid
bond guarantees, performance guarantees, advance
or deferred payment guarantees and financial
guarantees.
• The guarantees are also used for different reasons.
• They are often included in arrangements that take
place between a small firm and a large
organisation.
• The larger organisation may also seek protection
against any counterparty risk, and it requires the
smaller party to receive the bank guarantee in
advance of their work.
Bond

• Bonds are used by various governments and

corporations for raising money along with financing
needed projects.
• A bond also resembles an IOU that takes place
between a borrower (who issues the bond) and a
lender (the bondholder).
• The entity also issues a bond at a par value with a
stated coupon rate. An investor effectively lends a
bond to the issuer at a certain time and receives
coupon payments that are issued until the par value
is repaid by the party that had borrowed the money.
• A bond gets issued with maturity or end date.
• The maturity date is the date when the principal amount
of the loan is due to be paid to the owner of the bond.
• It includes the terms and conditions of the bond along
with the details of the amount for the fixed or variable
interest payments that will be made by the borrower.
• The interest payment or the coupon rate is also a part of
the total return that the bondholders can earn for loaning
their funds to an issuer.
• The coupon rate is the interest that determines the total
payment.
• Bonds are described as fixed-income securities
and are also one of three main asset classes.
• The other asset classes that are more familiar
to investors are cash equivalents and stocks
(equities).
• Many of the government and corporate bonds
are publicly traded; several others are traded
privately or over-the-counter (OTC) between
the lender and borrower.
Bank Guarantee
Bond

Definition
A bank guarantee occurs when a lending A bond is a deal or agreement between
institution stands as a guarantor and the borrower and lender that acts as a
promises to cover any losses when the surety of the payment for either borrower
borrower fails to do so. or lender.

Issuers
Bonds get issued by the government,
A bank guarantee gets issued only by a
banks or even large companies to meet
bank as a surety for certain individuals.
their capital requirements.

Payment Route
The bank does not have to pay the
The payment for a bank guarantee will go
bondholder, and they can keep the fees if
from seller to buyer via the bank.
there are payment issues.
Accounting
A bank guarantee is seen as a
A bond is like an insurance
liability for the bank because
product because of which it is
it is an obligation that the
considered an asset.
bank has to pay.

Users
Bonds are used by
Bank guarantees get used by
governments as well as
individuals for international
corporations as they allow
transactions to help the
them to borrow huge sums of
businesses grow.
money.
Fixed Deposit Receipt
• A Fixed Deposit Receipt (FDR) is nothing
but a document provided by the bank after
the applicant procures a fixed deposit
scheme from their bank.
• This document contains details such as the
individual's name, age, address, details of
the scheme chosen by them such as deposit
amount, tenure and interest rate applicable
on the deposit and so on.
• A Fixed Deposit Receipt contains all the details related
to the deposit option procured by the individual. These
details include:
• Name of the applicant
• Age of the applicant
• Account Number of the applicant
• Amount of principal that has been placed
• Rate of Interest that is applicable
• Date of Maturity
• Amount of interest that the individual will receive on
maturity
• Instructions regarding maturity date such as account
transfer or rollover amount (extend a particular
financial agreement)
Student & Young Person Accounts are designed to help young
people and students to get control over their money. Many Student
Accounts have interest free overdraft facilities and have no charges for
using the account.
There is usually a Student Adviser to help students with any money
management problems. They may also offer a credit card.
Student and Young Person Accounts offer incentives like discounted rail
tickets, discounted holidays etc...
Although incentives are tempting, good interest rates and low charges
are usually more helpful in the long run.
Graduate Accounts offer facilities to assist graduates with their money
and debt management for time periods of up to 3 years after graduation.
When choosing a bank account, you may find it useful to consider:
• How much interest is paid when your account is in credit?
• How much is the interest free overdraft limit?
• Charges for agreed overdrafts & loans - these vary
• Charges for unauthorised overdrafts. These are overdrafts where you have
not received permission from your bank in advance & the charges are much
higher
• The qualifying period after graduation (to stay in the same account, which
will probably have better rates than other accounts). Many of the banks now
have an option to move to a graduate account which may also have better
terms of interest or charges than an ordinary account, especially if you are
still paying off an overdraft or loan.
Other issues you may want to consider when choosing a bank are:

• Location of cashpoints and/or branches

• telephone banking service
• online banking service
• can you use other bank’s cashpoints? Do they charge?
• Saturday or late night opening?
• Where can you make cash and cheque deposits?
• Personal banking advisers
• standing orders and direct debits
• what other services are offered, e.g. ethical approach to banking, share
dealing, small business advice etc.?
Opening an account
To open a bank or building society account, you will usually have to:
• Complete and application form
• Provide proof of your identity and address
• Put some money in the new account
Wherever possible, the bank or building society will want to verify your identity and
address through official documents that contain a photo and ideally a signature, for
example,
• a current valid full passport,
• national identity card or
• Driving licence.
If you do not have these documents, the bank or building society may ask for other
proof of identity. To check the address, the bank or building society may ask for a recent
utility or council tax bill.
A student may provide a letter from her/his college. The same document cannot be
used to prove both identity and address.
Joint Accounts
You can open a bank account in your name only or open a joint
account with one or more people.
This can apply to either Current or Savings accounts.
Some couples decide to do this and agree to have equal access to
the funds, regardless of whether they pay in different amounts.
Other couples choose to have separate accounts.
You could set up a joint account from which bills are paid by direct
debit or standing order. Both of you can pay into the account.

Me Direct Debit £££

Direct Debit
JOINT ACCOUNT
You Standing Order
£££
Although we have referred to banks in this subject
Building Societies now offer many of the same features
in their accounts.

As well as the well known high street banks there are

now several online banks that do not have premises.
These can offer the same kind of features as the high
street banks.
Difference Between Certificate of Deposit and
Fixed Deposit -
1. The minimum investment amount for a Fixed
Deposit (FD) varies from bank to bank, it can be
Rs. 1,000 also.

On the other hand, the minimum investment

amount for a Certificate of Deposit (CD) is fixed at
Rs. 1 lakh. (In case of India)
2. The maturity period of fixed deposit (FD)
ranges from 7 days to 1 year.
Whereas, the maturity period of certificate of
deposit issued by scheduled commercial
banks varies between 7 days to 1 year, and
the CDs issued by financial institutions have a
term period ranging from 1 year to 3 years.
(In case of India).
3.Certificates of deposit are more risky
than fixed deposits but the return on
investment for a certificate of deposit is
much higher than that of a fixed deposit.
Difference Between Commercial Paper and Certificate of Deposit -
1. Commercial papers (CP) are, unsecured, short-term debt instruments, used to
meet short-term liabilities.
Whereas, Certificate of Deposits (CD), are time-deposits, provide interest rate in
exchange for the deposits.
2. Commercial papers are issued by large corporations, private sector companies,
public sector units, non-banking companies, primary dealers, satellite dealers etc.
A certificate of deposit can be issued by financial institutions and banks.
3. A commercial paper is issued for an investment of at least Rs. 5 lakhs and in
multiples of it thereafter.
Whereas, a certificate of deposit requires a minimum lump-sum investment of Rs. 1
lakh and multiples of it thereafter. (In case of India)
4. The maturity period of commercial papers usually ranges from 7 days to 1 year
from the date of issue.
Whereas, the maturity period of certificate of deposit issued by scheduled
commercial banks varies between 7 days to 1 year, and the CDs issued by financial
institutions have a term period ranging from 1 year to 3 years. (In case of India
Ledger Account
• Ledger Account is a journal in which a
company maintains the data of all the
transactions and financial statement.
• Company’s general ledger account is
organized under the general ledger with the
balance sheet classified in multiple accounts
like assets, Accounts receivable, account
payable, stockholders, liabilities, equities,
revenues, taxes, expenses, profit, loss, funds,
loans, bonds, stocks, salaries, wages, etc.
Types of Ledger

• Maintain the transaction of selling the products, services, cost

Sales of goods sold to customer
Ledger

• Purchasing the services, products or other businesses

Purchase
• It gives the visibility of how much amount the company paid
ledger to other businesses.

• Information on income, expense, insurance, salary , wedges,

General capitals etc.
Ledger
Ledger Account Examples
• Cash, Land, Accounts receivable, Equipment
• Accounts Payable, Loans, Accrued expenses
• Retained Earnings
• Operative Revenues
• Sales
• Services Fees
• Operating Expenses
• Salaries and wages
• Office Expenses
• Depreciation Expense
Drafts
• A bank draft is a convenient and secure
instrument for making large payments
without having to withdraw cash from one’s
account.
• Bank drafts are guaranteed by financial
institutions and can be used by individuals
to make payments to third parties.
Types of Bank Draft

Money Order: The transfer

of a defined quantity from Demand drafts: When the
Cheques: A common type
one location to another.
of banker’s cheque is a payer and the receiver are
This is also issued on not in the same location,
certified cheque. The
behalf of clients by banks. this method is employed.
money is transmitted
Example: Money orders through the bank to the Upon depositing the draft,
are delivered from one recipient’s bank account, the money is transferred
location to another. It is deducting a commission into the receiver’s account.
also a financial tool, and
. It is one of the most Today, this strategy is
the bank assumes
secure ways to send used for a large number of
responsibility for remitting
money. financial transactions.
the funds upon receipt of
the order.
Debit card
• Debit card is also referred to as plastic cash,
issued by banks and are used to fund
purchases in daily life.
• It is used to withdraw cash at ATMs and
other online and offline store purchases.
Types of Debit Cards in India
• Visa Debit Cards: Due to the bank's partnership with VISA Payment
Services, which offers the Verified by Visa (VbV) infrastructure for online
transactions, Visa debit cards are issued.
• Visa Electron Debit Cards: Visa debit cards and visa Electron debit
cards are quite similar, except the overdraft option is not available on these
cards.
• Contactless Debit Cards: Customers can use their contactless debit cards,
which operate on Near Field Communication (NFC), to make payments by
just tapping or waving them in close proximity to PoS terminals.
• RuPay Debit Card: developed by the NPCI as a domestic card program to
help with internet transactions on the Discover network as well as ATM
transactions on the National Financial Switch network.
• MasterCard Debit Cards: The MasterCard Debit Cards are one of the
world’s most popular forms of electronic transactions.
• Maestro Debit Cards: Maestro Debit Cards are globally accepted debit
cards. This card can be used to withdraw cash from ATMs across the world.
With this card, you can make payments for online purchases and for
transactions at retail outlets across the globe.
PAN Card Aadhaar Card
Country of Issue India India
Stands For Permanent Account Number Unique Identification (UID)
Unique Identification
Issued By Income Tax Department of India
Authority of India
UID number, Aadhaar number,
Other names PAN number
UIDAI card
Photograph, Fingerprints, Date
Name, Date of Birth, Address,
Database Collection of Birth, Name, Iris Scan,
Signature, Account Number
Address, Signature

Essential identification for

Essential identification when availing government welfare
Primary Purpose
undertaking financial transactions schemes as well as banking
services

Individuals who conduct business and

Issued To Indian residents and citizens
financial transactions in India
Act as a universal
Prevent financial frauds and tax
Use identification for Indian
evasion
residents
• Plastic Money may refer to the use of plastic
cards like debit/credit cards in the form of
electronic transactions.
• Credit cards and debit cards are referred to as
plastic money.
• It is a form of payment that enables consumers
to make transactions without spending cash.
• Plastic money is versatile and convenient. The
invention of plastic money was made possible
by technology.
• Payments can be made with a credit card, debit card,
or even your phone. It’s quite safe and a fantastic
method to avoid carrying cash around.
• Almost anyplace you go, you may use this payment
option, which makes it really easy.
• Credit cards and debit cards are the two most
common types of plastic money.
• Banks issue credit cards that let users borrow money
up to a certain amount.
• Customers can use debit cards, which are connected
to bank accounts, to make purchases with funds they
already have.
Types of plastic money
• Debit Card: When a transaction is made from a debit card, the
funds are withdrawn directly from the user’s bank account.
The majority of transactions are made while online shopping
and ATM cash withdrawal.
• Credit Card: While using a credit card users can withdraw
money or borrow according to their limit.
• Charge Card: Users with charges are required to clear their
balance shown in their statement within the given time limit
issued to them. It can be considered a short-term loan.
• ATM Card: These cards are used to withdraw money from the
Automated Teller Machine or ATM. ATM cards can be
separately issued or a debit card can also be used as an ATM
card.
• Magnetic Strip Card: Magnetic strip was
introduced on cards in the late 1970s.
• Magnetic strips contain data that can be
read only through physical contact or
swiping action.
• Magnetic stripe cards have PINs with
them which have to be provided in order to
authenticate the transaction.
• Smart Card: These cards contain a chip
which is an integrated circuit. Smart cards
also contain magnetic stripes.