Banking operations form the backbone of the financial system, enabling individuals, businesses, and governments to manage money securely and efficiently. This unit focuses on the various types of bank accounts, essential instruments like cheques, modern digital banking services, and the important compliance requirements under KYC (Know Your Customer) norms to prevent misuse of the banking system.
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1. Types of Bank Accounts
Banks offer a variety of accounts to suit the needs of different customers:
Savings Account
Designed for individuals to deposit money securely and earn interest. It promotes savings habits and allows withdrawals when needed. Banks often offer ATM/debit cards and online banking facilities with these accounts.Current Account
Primarily meant for businesses and traders who require frequent transactions. These accounts usually do not offer interest but provide overdraft facilities and higher transaction limits.Fixed Deposit (FD) Account
Customers deposit a lump sum for a fixed period at a predetermined interest rate. This is ideal for those seeking low-risk, guaranteed returns.Recurring Deposit (RD) Account
Allows customers to deposit a fixed amount monthly and earn interest. It’s popular among salaried individuals for disciplined savings.
Each account type has its own purpose, features, and benefits, enabling banks to cater to diverse financial needs.
2. Cheques – Features and Types
A cheque is a written order from an account holder directing the bank to pay a specified sum to the person named on it.
Key Features of a Cheque:
Must be in writing.
Signed by the account holder.
Specifies the amount in words and figures.
Drawn on a specific bank branch.
Types of Cheques:
Bearer Cheque – Payable to the person holding the cheque.
Order Cheque – Payable only to the person named on the cheque.
Crossed Cheque – Contains two parallel lines and is payable only through a bank account, making it safer.
Post-dated Cheque – Dated for the future and cannot be cashed until that date.
Stale Cheque – Presented after its validity period (usually three months).
Cheques remain important despite the growth of digital payment systems because they are legally recognized and widely accepted.
3. Digital Banking Services
With technological advancements, banking has evolved far beyond physical branches. Today, customers can perform transactions 24/7 through digital platforms.
a) NEFT (National Electronic Funds Transfer)
Allows electronic transfer of funds between banks on a deferred settlement basis, meaning transactions are settled in batches. It’s suitable for low to medium-value transfers.
b) RTGS (Real Time Gross Settlement)
Enables real-time, high-value fund transfers. “Real-time” means transactions are processed instantly, and “gross settlement” means each transaction is settled individually.
c) UPI (Unified Payments Interface)
A revolutionary system allowing instant money transfers via mobile apps using a Virtual Payment Address (VPA) without sharing bank details. Examples include Google Pay, PhonePe, and Paytm.
d) Mobile Banking
Enables account holders to conduct financial transactions using a smartphone app, including balance checks, bill payments, and fund transfers.
e) Internet Banking
A web-based service allowing customers to manage accounts, transfer funds, open deposits, and pay bills from a computer.
These services have made banking faster, more secure, and highly convenient, reducing the need for in-branch visits.
4. KYC (Know Your Customer) Norms
KYC norms are regulations that require banks to verify the identity and address of customers before opening an account or providing services. The main aim is to prevent money laundering, fraud, and terrorist financing.
Documents Required:
Proof of Identity – Aadhaar Card, PAN Card, Passport, Voter ID.
Proof of Address – Utility bills, rental agreements, Aadhaar Card, Passport.
KYC Process Includes:
Customer Identification – Verifying documents and details.
Customer Due Diligence (CDD) – Assessing the customer’s financial background.
Ongoing Monitoring – Regular checks to ensure transactions match the customer’s profile.
5. Anti-Money Laundering (AML) Compliance
AML compliance works alongside KYC norms to detect and prevent illegal activities in the banking system. Banks must monitor suspicious transactions and report them to the Financial Intelligence Unit (FIU-IND).
Examples of Suspicious Activities:
Large cash deposits inconsistent with the customer’s profile.
Frequent international fund transfers without clear purpose.
Structuring transactions to avoid reporting limits.
By following AML regulations, banks ensure transparency and trust in the financial system.