Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Commerce Guide Pdf Chapter 12 Functions of Commercial Banks Text Book Back Questions and Answers, Notes
Tamilnadu Samacheer Kalvi 11th Commerce Solutions Chapter 12 Functions of Commercial Banks
11th Commerce Guide Functions of Commercial Banks Text Book Back Questions and Answers
I. Choose the Correct Answer
Question 1.
Electronic banking can be done through
a. Computers
b. Mobile phones
c. ATM
d. All of the above
Answer:
d. All of the above
Question 2.
Minimum how much amount can be transferred through RTGS?
a. Any amount
b. 50,000
c. 2 lakh
d. 5 lakh
Answer:
c. 2 lakh
Question 3.
The largest commercial bank of India
a. ICICI
b. SBI
c. PNB
d. RBI
Answer:
b. SBI
Question 4.
In which kind of account, it is compulsory to deposit certain amount at certain time?
a. Saving deposit
b. Fixed deposit
c. Current deposit
d. Recurring deposit
Answer:
d. Recurring deposit
Question 5.
Which of the following is not a type of advance provided by commercial bank?
a. Collecting and supplying business information
b. Overdraft
c. Cash credit
d. Discounting of bills
Answer:
a. Collecting and supplying business information
I. Very Short Answer Questions
Question 1.
What is Mobile Banking?
Answer:
Most of the commercial banks have designed computer programs called apps which can be downloaded on smartphones. With this app on the smartphone, a customer can operate his account transactions from anywhere. This service is known as mobile banking.
Question 2.
Briefly explain the need for a Debit card.
Answer:
An ATM card is also called a debit card. This card is more useful in the purchase of goods and services anywhere in India, if the shop maintains a swiping machine facility.
Question 3.
Briefly explain the term – Credit card.
Answer:
Banks issue credit cards to customers and other eligible persons. With this card, the holder can purchase goods and services on credit at any shop in India.
Question 4.
What do you mean by ATM?
Answer:
ATM (Automated Teller Machine) card. A customer can withdraw money any time, anywhere in India from the ATM machine using the ATM card given by his / her bank.
Question 5.
Write a note on – ECS.
Answer:
ECS was launched by the RBI in 1995. It is an electronic method of fund transfer from a bank to another bank. ECS credit can be used to credit salary, dividend, interest, pension, etc.
II. Short Answer Questions
Question 1.
What is E-Banking?
Answer:
E-Banking is a method of banking in which the customer conducts transactions electronically via the internet.
Question 2.
Write a short note on – RTGS.
Answer:
The Real-Time Gross Settlement Systems (RTGS) was launched by RBI in 2013.. The transactions are settled on real-time basis. Gross settlement means the transaction is settled between one bank and another bank without adding any other transactions. RTGS facility is available between 9.00 am to 4.30 pm on weekdays and up to 2.00 pm on Saturdays. RTGS transfers are not allowed on Sundays and bank holidays. The minimum limit for RTGS transactions is 2 lakhs.
Question 3.
Briefly explain the Diversified banking services of commercial banks.
Answer:
Competition in the banking industry has reduced their profits. Therefore the commercial banks started identifying and offering new and diversified financial services. They are purely other than banking services. Providing all such banking and other financial services are also called universal banking. Such services are as follows: Bank Assurance, Merchant Banking, Retail Banking (Personal Banking), Housing Finance, Mutual Fund, Venture Capital Fund, Factoring.
Question 4.
Explain NEFT.
Answer:
The National Electronic Funds Transfer (NEFT) was launched by RBI in 2005. Under this electronic funds transfer system, the bulk transfer of transactions is settled in batches during specific timings across India. Individuals and institutions which maintain accounts with an NEFT enabled bank branch are eligible for using NEFT. Transactions do not occur on a real-time basis. Once in every half hour from 8.00 am to 7.30 pm.
23 settlements are allowed in a day. NEFT transfers are not allowed on Sundays and bank holidays. NEFT use IFSC (Indian Financial System Code) -all digit alphanumeric code, to identify a bank branch. IFSC is provided by IDRBT(Institute for Development & Research on Banking Technology), Hyderabad.
Question 5.
What do you mean by Core Banking Solutions?
Answer:
‘CORE’ stands for ‘Centralized Online Real-time Exchange’. In the centralized server of the bank, all the details of all the accounts of all the branches of the bank are available. A customer can withdraw money through a cheque at any branch of that bank throughout the world. Similarly, anyone can deposit money into the account. The entry of the transactions is recorded in the centralized server of the bank in real-time and can be seen in all the branches of the bank. This facility is called Core Banking Solutions.
IV. Long Answer Questions
Question 1.
Discuss the various primary functions performed by the commercial banks.
Answer:
The primary functions of a commercial bank are of three types. They are:
1. Accepting Deposits :
The basic deposit accounts offered by commercial banks are listed below. In these days banks compete with each other to attract customers by adding facilities to these deposit accounts. Broadly deposit accounts can be classified into demand deposits and time deposits.
2. Granting Loans and Advances:
The second primary function of commercial banks is lending money in order to earn interest income. Banks provide specific sums as loans which are repayable along with interest. Demand loans should be repaid whenever demanded.Term loans can be repaid after the agreed period. Advances are credit facilities provided for short period (within a year) to business community. But both terms are used interchangeably.
3. Creation of Credit:
Apart from the currency money issued by the RBI, the credit money in circulation created by commercial banks influence economic activities of a country to a large extent. Credit money of commercial banks is far greater in volume than the currency money.
The volume, the purposes and the sector to which this credit money is to be channelised – all these are implemented by commercial banks under the guidance of the RBI.
Question 2.
Explain the various secondary functions of commercial hanks.
Answer:
These services can be broadly classified into agency services and general utility services.
I. Agency Functions:
Banks act as agents of customers and provide certain services. They are called Agency Functions which are as follows:
- Transfer of Funds: Banks issue demand drafts, bankers cheques, travelers’ cheques, etc., and help in the transfer of funds from one place to another.
- Periodic Payment of Premiums, Rent, etc.: After instruction from the customers, banks undertake the monthly payment of insurance premium, rent, telephone bills, etc. from the accounts of customers.
- Collection and Payment of Cheques: On behalf of customers bank collect the cheques deposited into the accounts of customers from other banks and deposit cash in the customers’ accounts.
- Acting as Executors, Trustees, and Attorneys: Banks act as executors of the will of the customers and implement their will after their death.
- Conduct Share Market transactions: A Demat account should be opened with Depository Participant and that Demat account should be linked with a savings bank account by the customer.
- Preparation of Income Tax Return: Banks prepare the annual income tax return on behalf of the customers and provide income tax-related advice to them.
- Dealing in Foreign Exchange: Banks buy and sell foreign currencies on behalf of customers.
- Acting as Correspondent: Banks act as correspondents of customers and receive travel tickets, passports, etc.
II. General Utility Functions:
- Issue of Demand Drafts and Bankers’ Cheques
- Accepting Bills of Exchange on behalf of Customers
- Safety Lockers
- Letters of Credit
- Travellers Cheques
- Gift Cheques
- Reference Service
11th Commerce Guide Functions of Commercial Banks Additional Important Questions and Answers
I. Choose the Correct Answer
Question 1.
The primary functions of a commercial bank are of ……………. types.
(a) One
(b) Two
(c) Three
(d) Four
Answer:
(c) Three
Question 2.
The deposit which has no limitation on deposit of cheques or withdrawals from the account is …………………..
a)’Demand Deposit
b) Current Deposit
c) Fixed deposit
d) Recurring Deposit
Answer:
b) Current Deposit
Question 3.
Overdraft facility is given ……………. account holders.
(a) Savings
(b) Current
(c) Fixed
(d) Recurring
Answer:
(b) Current
Question 4.
…………….. Documents have been notified by the Government of India as ‘Officially Valid Documents’ for proof of identity.
a) Four
b) Five
c) Six
d) Seven
Answer:
c) Six
Question 5.
National Electronic Funds Transfer (NEFT) was launched by the RBI in …………….
(a) 1995
(b) 2000
(c) 2005
(d) 2010
Answer:
(c) 2005
Question 6.
To identify the bank branch banks use ……………… digit alphanumeric code.
a) 11
b) 12
c) 10
d) 6
Answer:
a) 11
Question 7.
National Electronic Funds Transfer was launched by RBI in …………….
a) 2002
b) 2006
c) 2005
d) 2007
Answer:
c) 2005
Question 8.
Indian Financial System Code is provided by ……………….
a) IDRBT
b) IDBI
c) RBI
d) IFC
Answer:
a) IDRBT
Question 9.
The current maximum limit for Immediate Payment Service (IMPS) is ……………….
a) 2 Lakhs
b) 5 Lakhs
c) 8 Lakhs
d) 10 lakhs
Answer:
a) 2 Lakhs
Question 10.
…………………… cards services were launched in March 2012 by the National Payments Corporation of India.
a) VISA
b) Maestro
c) Credit
d) RuPay
Answer:
d) RuPay
II. Very Short Answer Questions:
Question 1.
Give the features of Smart card.
Answer:
Nowadays smart card is used for day to day purposes.
- Strong device security
- Biometrics
Question 2.
What do you mean by ‘KYC’?
Answer:
KYC means “Know Your Customer”. It is the general rule to be followed by banks to get information regarding the identity and address of the customers. A person willing to open a bank account should submit a ‘proof of identity and proof of address’ together with a recent photograph. Six documents have been notified by the Government of India as ‘Officially Valid Documents’ (OVDs) for proof of identity.
Question 3.
What is Capital Formation?
Answer:
Banks encourage savings habits among people and accumulate their small dormant savings. These funds can be fruitfully channelized for the productive purposes of the economy.
Question 4.
What do you mean by Gift Cheque?
Answer:
In order to present as a Gift, the denomination printed cheques are available in an attractive design. This is known as Gift Cheque.
Question 5.
What is meant by Bank Assurance?
Answer:
The offering of insurance policies or products by a bank in association with another insurance company is known as Bank Assurance.
Question 6.
What is Venture Capital Fund? Give Example.
Answer:
The start-up share- capital to new ventures of little known, unregistered, risky, young and small private business, especially in technology-oriented and knowledge-intensive business in known as Venture Capital Fund. E.g. SBI and Canara Bank have set up venture capital fund subsidiaries.
Question 7.
Write a note on Funds transfer through SMS:
Answer:
*99# is the number for the fund’s transfer from any mobile phone. It was launched in 2014. Every common man in India can transact banking transactions from any comer of India.
III. Short Answer Questions
Question 1.
What are all the notified documents for the proof of identity?
Answer:
Passport, Driving Licence, Voters’ Identity Card, PAN Card, Aadhar Card issued by UIDAI, and NREGA Job Card are the notified documents for the proof of identity.
Question 2.
Define Cheque.
Answer:
According to the Negotiable Instruments Act 1881, “the cheque is a bill of exchange drawn on a specified banker payable on demand”.
Question 3.
What do you mean by Crossing of Cheque?
Answer:
Drawing two parallel transverse lines on the left top of the cheque. It implies that the money will not be paid over the counter but through a bank account only.
Question 4.
Give two examples for Bank Assurance.
Answer:
- Corporation Bank, Oriental Bank of Commerce, and Vijaya Bank have tied up with Life Insurance Corporation of India.
- SBI has joined hands with BNP Paribas Cardif- a French company to sell insurance products.
Question 5.
Explain Factoring.
Answer:
Factoring is a continuing arrangement between financial intermediaries (factor) and a business concern (client) whereby the factor purchase the clients’ accounts receivable. E.g: SBI & Canara Bank.
Question 6.
Write a note on Virtual Banking.
Answer:
Virtual Banking or Internet banking refers to perform banking operations through the internet, using computers and mobile phones. This can be done by a customer from home or office or any part of the world and all 24 hours of 7 days.
Question 7.
Explain BBPS.
Answer:
Bharat Bill Payment System is an RBI-guided system operated by the National Payments Corporation of India from August 2016. It is a one-stop payment platform for all bills providing anytime anywhere bill payment service to all customérs across India with certainty, reliability, and safety of transactions.
Question 8.
Explain BHIM.
Answer:
Bharat Interface for Money is an app that lets a bank customer make simple, easy, and quick payment transactions using Unified Payments Interface (UPI). A bank customer can make instant bank-to-bank payments and Pay and collect money using just a mobile number or virtual payment address (VPA). It was launched in December 2016.
Question 9.
Write a note on Credit Cards.
Answer:
Banks issue credit cards to customers and other eligible persons. With this card, the holder can purchase goods and services on credit at any shop in India. If the dues are paid within the stipulated time no interest is charged. The credit limit is fixed by the issuing bank based on the income of the cardholder.
IV. Long Answer Questions:
Question 1.
Briefly explain the Electronic Banking Functions: (Any Five) ‘
Answer:
1. NEFT:
National Electronic Funds Transfer This was launched by the RBI in 2005. Under this electronic funds transfer system, the bulk transfer of transactions is settled in batches during specific timings across India. Individuals and institutions which maintain accounts with an NEFT enabled bank branch are eligible for using NEFT. Transactions do not occur on a real-time basis. Once in every half hour from 8.00 am to 7.30 pm. 23 settlements are allowed in a day.
NEFT transfers are not allowed on Sundays and bank holidays. Both NEFT and RTGS use IFSC (Indian Financial System Code) – an 11 digit alphanumeric code, to identify a bank branch. IFSC is provided by IDRBT (Institute for Development & Research on Banking Technology), Hyderabad.
2. RTGS:
Real-Time Gross Settlement Systems It was launched by the RBI in 2013. The transactions are settled on a real-time basis. The gross settlement means the transaction is settled between one bank and another bank without adding any other transactions. RTGS facility is available between 9.00 am to 4.30 pm on weekdays and up to 2.00 pm on Saturdays.
In one day the RTGS routes about 60,000 transactions worth about ‘ 2,700 billion and covers over 52,000 bank branches located in 10,000 cities and towns. RTGS transfers are not allowed on Sundays and bank holidays. The minimum limit for RTGS transactions is 2 lakhs.
3. Electronic Clearing Services (ECS):
ECS was launched by the RBI in 1995. It is an electronic method of fund transfer from a commerce 1-15.indd 112 24-03- 2018 12:56:55 113 banks to another bank. ECS credit can be used to credit salary, dividend, interest, pension, etc. and ECS debit is used to debit monthly telephone bills, electricity bills, equated monthly installments (EMI) payments.
For this purpose, the account holding individuals and institutions concerned should fill up certain forms and submit them to the banks. ECS transactions between banks are settled in the current account maintained in the clearinghouse.
4. CORE Banking Solutions:
‘CORE’ stands for ‘Centralized Online Real-time Exchange. In the centralized server of the bank, all the details of all the accounts of all the branches of the bank are available. A customer can withdraw money through a cheque at any branch of that bank throughout the world.
Similarly, anyone can deposit money into the account. The entry of the transactions is recorded in the centralized server of the bank in real-time and can be seen in all the branches of the bank. This facility is called core banking solutions.
5. Internet Banking or Virtual Banking:
Internet banking refers to performing banking operations through the internet, using computers and mobile phones. This can be done by a customer from home or office or any part of the world and all 24 hours of 7 days.
Question 2.
Write a note on the types of Loans:
Answer:
Short-term and medium-term loans are provided by commercial banks against eligible collateral to business concerns. It is a definite sum of money lent for a definite period. It is repayable in one lump sum or in installments. Interest is payable on the entire loan amount. The loans are classified as under:
1. Housing Loan:
Taking the title deeds of the house as collateral security, based on the monthly income of the borrowing customer, banks advance medium and long-term loans. The customer repays the loan in equated monthly installments (EMI consists of principal and interest).
2. Consumer Loans:
Consumer durables like refrigerators, air conditioners, laptops, washing machines, television, etc. can be purchased by customers with consumer loans from banks. The product purchased is hypothecated (secured loan arrangement where the movable asset remains with the borrower) as security for the consumer loan amount. The customer pays in equated monthly installments for a specified period.
3. Vehicle Loans:
Two-wheelers, cars, buses, and other vehicles can be purchased by individuals as well as institutions obtaining vehicle loans from the banks. Vehicles are hypothecated to the bank until the entire loan amount is repaid.
4. Educational Loan:
The loan is provided by banks to students for studying undergraduate, postgraduate or professional courses. The loan may be received in installments to pay the educational fees every year. After completion of the course, one year is allowed for the student to get ‘employed.
Afterward, the student should repay the loan with interest for the entire period. Interest is charged from the date, of the first installment of loan amount payment.
5. Jewel Loan:
Customers pledge their gold jewels and obtain loans from banks. The margin (percentage of value per gram that can be given as credit) requirement is fixed by the RBI. Interest should be paid every month. Otherwise, interest on interest is charged.
Within 12 months the customer can redeem or else can re-pledge. Jewels not redeemed even after reminders are sold in auction by banks to recover their dues.