Banking Procedure

The term bank comes from the French word “Banco” which means a bench. A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and it lend it to others.
Functions of Commercial Bank
Primary Function:
The primary functions of bank are also knowns as banking functions . They are the main functions of a bank.
Accepting Deposits
SAVING DEPOSITS
An persone can open an saving account by keeping a minimum deposit amount.
Procedure
Following documents to open a bank account:
1. Address proof
2. Identity proof
3. Photograph
4. Introducer
For address and Id proof you can use your driving license or passport or ration card. Most banks expect you to bring a friend or relative who already has an account with the bank as a gesture of trust.

CURRENT DEPOSIT
Any sane major person or a firm which can enter into contract can open an account with a bank. The following formalites are requires to be completed before a current or profit and loos sharing account is opened in a bank. First of all the person who is desirous of opening an account with the bank has to filling in the account opening form . The applicant writes his name, address, occupation and the amount to be deposited in the form. The applicant has to declare in the form that he shall comply with the bank rules., which are in force from time to time the conduct of the discount. The prospective customer is to provide his introduction to the bank either from the old customer of the bank or from persn known to the bank. The introducer or reference verifies the integrity, character, honesty and goodwill of the intending customer on the application form.
When the banker is satisfied about the integrity of the customer he then agrees to open his account.
FIXED DEPOSIT
Visit the bank for opening account to make the deposit. If account is there it is easier to open the FD else we need address and indentity proof. So we have to fill the form for keeping deposit and pay the money to cashier.

RD
The bank will provide the form , we have to fill the form and pay the money at bank teller counter. Once done bank officals will give a small passbook for RD with days date and amount paid up. Every monthe we need to go to bank to pay the RD amount.
Granting of Loan and Advances
The bank advances loan to the business cimmunity and other members of th public. The bank loans and advances include
Overdraft
It is given to current account holders
A certain amount is sanctioned as overdraft which can be withdrawn within a certain period of time say 3 months
Interest is charged on actual amount withdrawn
An overdraft facility is granted against a collateral security.
CASH CREDIT
The client is allowed cash credit upto a specific limit fixed in advance. It can be given to current account holders and to others who do not have a current account with the bank
Separate cash credit account is maintained.
Discounting of Bills of Exchange
The bank can advance money by discounting or by purchasing bills of exchange both domestic and foreign bills,
The bank pays the bill amount to the drawer of the bill by deducting usual ‘discount’ charges.
Investments
The bank invest a part of the deposit money in bonds, debentures and other securities. Investment is profitable areas brings good returns to the bank.
Secondary Functions
The bank acts performs a number of secondary functions, also called as non banking functions. The importance secondary functions are as follows.

Agency functions
The bank acts an agent of its customers.
Transfer of funds : The bank transfers funds from one branch to another or from one place to another.
Collection of Cheques: The bank collects the money of the cheques through clearing sections of its customers. The bank also collects money of the bills of exchange.
Periodic payments; On standing instructions of the client, the bank makes periodic payments in respect of electricity bills, rent, etc
Portfolio Management Large banks undertake to purchase and sell the shares and debentures on behalf of its clients and accordingly debits or credits the account. This facility is called portfolio management.

Periodic Collections The bank collects salary pension, dividend and such other periodic collections on behalf of the client.

Other Agency Functions
It acts as trustees, executors, attorney and administrators on behalf of its clients.
General Utility Functions
Issue of Drafts, L.CS etc
Bank issue drafts for transferring money from one place to another. It also issues letter of credit, especially in case of import trade. It also issues travellers cheques.
Locker Facility : The bank provides a locker facility for the safe custody of valuable documents, gold ornaments, and other valuables.
Underwriting of Shares: The bank underwriters shares and debentures through its merchant banking division.
Dealing in Foreign Exchange: The commercial banks are allowed by RBI to deal in foreign exchange.
Project Reports: The bank may also undertake to prepare project reports and feasibility studies on behalf of its clients.
Capital Deposit Ratio:
In some countries banking rules do not permit commercial banks from accepting primary deposits of more than a certain multiple of the paid up capital. This limitation is imposed for increasing the accountability of bankers and preventing misuse of funds. If the paid up capital is low, the deposits with the bank will be low, and therefore credit creation capacity will be low.
Liquidity Preference of Public
If the public do not want more money, banks can not create more money. Bank money is created only if there are borrowers. If the public preference is for non monetary assets, banks will remain as silent spectators
Leakages
If a cheque is not deposited immediately, a secondary deposit is not created. In India one can keep a cheque upto six months during which no money will be created.Similarly it takes many weeks and some times months for collection and realization of cheque due to poor interbank communication set up. This problem is now being solved by some banks due to introduction of core banking facilities. The amount of commission and collection charges levied by bank also represent leakages.
Monetary Policy
Monetary policy of the central bank imposes severe limitations on commercial banks.
Banking Terms checks written orders to a bank to make payment against the depositors funds in that bank accounts receivable the short-term debts owed to your company by the others, such as its customers endorsement a signature or instructions, stamped or written on the back of a check deposit slip a form used to record cash and checks to be added to a bank account lockbox a postal address maintained at the company's bank to collect payments accounts payable refers to the short-term debts your company owes to others
Electronic funds transfer (EFT) the use of a computer and a telecommunications network to transfer funds from one party to another automatic teller machine (ATM) these are deposits and withdrawls made at electronic machines checking account allows a person or business to deposit cash in a bank and to write checks against the account balance. check a written order from a depositor telling the bank to pay a stated amount of cash to the person or business named on the check. depositor a person or business that has cash on deposit in a bank. deposit slip a bank form listing the cash and checks to be deposited. endorsement an authorized signature written or stamped on the back of a check that transfers ownership of the check. blank endorsement includes only the signature or stamp of the depositor. special endorsement transfers ownership of the check to a specific individual or business. payee the person or business to which a check is written. drawer the person who signs the check drawee the bank on whick the check is written voiding a check if an error is made while writting a check,the check is marded 'void' reconciing the bank statement the process of the determining any differences between the bank and statement and the checkbook. band service charge a fee for maintaining bank records and processing bank statement items for the depositor. stop payment order a demand by the drawer, usually in writing, that the bank not honor a specific check.
NSF check a checking returned to the depositor by the bank because the drawer's checking account does not have enough funds to cover the amount.. check 21 allows the conversation of a paper check to an electronic image that can be processed quickly. postdated check a business might accept a check that has a future date instead of the actual date.
EFTS to handle such a large volume of transfers.
ATM to conduct banking activities. m-banking banking through the use of wireless devices, such as cellular phones and wireless internet services