MONEY BANKING ,

 NOTES PREPARED BY 

HEENA KOUSAR ,MA ,Bed

TEACHER SCHOOL EDUCATION 

DEPARTMENT JAMMU AND KASHMIR

LESSON No. 1

MONEY BANKING

IMPORTANT TERMS

Money: - Money is something that can act as a medium of exchange in transactions

Currency:- It is modern form of money like paper notes and coin Dollar

Double Coincidence of wants:- It means a person wants wants to buy.

Barter system:- It is a system where goods are directly exchanged without the use of money.

Reserve Bank of India:- It is a central Bank of India which issues currency note on behalf of central Govt.

Demand Deposits: - Demand deposit is that deposit in the bank account which can be withdrawn any time on demand.

Cheque:- A cheque is a paper instructing the bank to pay a specific amount from a person's account to a person in whose name the cheque has been issued.

Loan - It refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.

Debt Trap: It is the situation when repayment for a borrower becomes impossible.

Collateral: It is an asset that the borrower owns and uses this as a guarantee to a lender until the loans repaid.

Bank - A bank a financial intermediary that accepts deposits and channels these deposits into lending activities either directly by loaning or Indirectly through capital markets. It is the organization where people deposit, their money, keeps safe their own assets like gold, diamond etc. It also repays back the things on demand.

Q1. What are the various forms of modern money?

Ans The modern forms of money are Currency (paper notes and coins), Deposits, with bank and Plastic money.

(i) Currency: Currency Includes coins and paper money in India currency notes and coins are issued by RBI on behalf of the govt. No person or organisation is allowed to issue currency. Moreover, no person in India can legally refuse a payment made in rupees. Hence the rupee is universally accepted medium of exchange in India.

(ii) Deposits with Banks:- The money which is kept away from home somewhere safe that is in banks as deposited form of currency can be had from any time in the time of need.

(iii) Plastic Money ,money banking :-Every country has their own printed currency however paper money can easily be spoiled and has no durability. Therefore, the use of plastic money has started and found worldwide acceptance. Plastic refers to the hand plastic cards which we use every day in place of actual bank note. They can come different forms like Cash Cards, Credit Cards, Debit Cards, Prepaid Cash Cards and Store Cards.

Q2. What is the procedure of opening a saving bank account?

Ans. Following points should be considered for opening bank account.

i) Choose a bank in which we want to open an account: This Step involves choosing or selecting a bank with which a person wants to open an account..

ii) Fill up the prescribed form:- Every bank i i prescribed application form to be filled up for opening an account. The application involves information regarding name, residence, space for fixing a photograph etc.

iii) Submit the filled up application form: The filled, up application form is to be submitted to the bank officer. It must be kept in mind that the bank may ask for necessary relevant document like proof of residence, proof of identity. After security as the same the bank may issue an account number.

iv) Receive necessary document from the bank:- After completion and successful submission of the form, the Bank issues an account number. Bank also provides a small book known a pas book which contains particulars of the account holder. The bank may also issue Debit Card Commonly called ATM Card.

Q.3)How can you with draw money from a saving Bank Account?

How to transfer money through net banking

Ans:-The cash can be withdrawn by two procedures.

I) By visiting-branch.

(a) By filling withdrawal form:- The Account holder has to present himself/herself personally and fill up the withdrawal form. The bank official after identifying the person through passbook photograph and signature on withdraw form hands over the money demanded.

(b) By Cheque:- The cheque can be signed and issued by the account holder on the concerned bank.

II) By using ATM: ATM is a machine controlled procedure. A person on opening an account is provided with a card which can be used to withdraw cash by inserting PIN to proceed. After that the machine will ask for options like amount to be drawn etc. At the end of transaction the machine will provide slip showing amount withdrawn and balance remaining with the bank.

Q.4) What are the various forms of plastic money?

Ans. Plastic money can come in many forms such as:
i) Debit Card: A debit card also known as a bank card is a plastic card that provides the cardholder, electronic access to his or her bank account. The card, where accepted, can be used instead of cash when making purchases.

ii) Credit Card: A credit card allows the cardholder to pay for goods and services based on the holder's promise to pay for them. The issuer of the card (Bank) creates a revolving account and grants a limit of credit to the consumer from which the user can borrow money for payment to a seller as a cash advance to the user.

Q.5) Explain the various credit and loan activities of bank with an example?

Ans. Step-I: A person called A, deposits Rs.100 in the bank, As a result the bank's deposits increases by Rs.100. As per the bank keeps 20% of 100 as cash. This comes out to be Rs. 20. The bank can lend out the remaining amount of Rs. 80 in the
form of loan.

Step-II: A person called B Approaches the bank to take a loan of Rs.80. After the bank gives this loan, it can claim the amount from B in future. This means that by giving loan to person Bhe bank can create another deposit of Rs. 80. Now calculate the total deposit with the bank first, person A deposited R. 100. By giving loan to B,
the bank is able to claim Rs. 80. So after two steps the bank has total deposit of Rs. 180 i,e 100+80= 180.

Step-III. Another person called C wants a loan from the bank. How much amount of money the bank can give as loan to C ? In the previous step we saw that, the bank could increase its deposit by Rs.80 by claiming the amount from B. As per rule it has to keep 20% of 80 =16. So the bank will now keep Rs.16 as cash and give rest of the
amount as loan 80- 16 = 64. So the bank can give Rs. 64 as loan to C.

SHORT ANSWER TYPE QUESTIONS

Q.1) What is double coincidence of wants? Explain with an example of you own.

Ans:-Double coincidence of wants is an essential feature in a barter system where goods are directly exchanged with out the use of money. As human beings we all have basic needs like food, shelter, clothes etc Take the case of shoes maker. He wants to sell shoes and buy wheat. The shoe merchant will first exchange shoe to sell for money and then exchange the money, First he has to find a wheat growing farmer who is willing to sell him wheat. Imagine how much more difficult it would be for the shoe. Maker if he had to exchange shoe directly for wheat without the use of money. He would have to find a wheat growing farmer who would be will to sell him wheat in exchange for shoe. To put it is simple both parties have agree to buy and  sell commodities to each other. This is called double coincidence wants.

Q.2) Can you think of some examples of goods/services being exchanged or wages being paid through barter?

Ans)When shoes maker exchanged a pair of shoes with some quantity of wheat-or rice from rice grower. In the same way when a roster is paid with a cock or hen for his services or when a carpenter is paid with some fruits, are some of the examples of barter system. Barter system prevails when there is double coincidence of wants. Barter system fails if there is lack of double coincidence of wants.

Q.3)Why money is called a medium of exchange?

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Ans) Money is accepted as a medium of exchange because the currency is authorized by the govt. of India, The Reserve Bank of India issues currency note on behalf of central govt. As pe Indian law no other individual or organization is allowed to issue currency. Moreover the law legalises the use of rupee as a medium of payment accepted as a medium of exchange. that cannot be refused in any transactions in India. Hence the money (INR) is widely accepted as a medium of exchange

Q.4) What are the different forms of modern currency?

Ans) The modern forms of money in India are currency paper notes and coins, bank deposit and plastic money such as cash cards, credit cards, debit cards, prepaid cash by the govt. of the country. cards and store cards. These are accepted as money because the currency is authorized  by the government of the country 

Q.5) Who is authorized to issue currency in India?

Ans:- In India currency notes and coins are issued by the Reserve Bank of India.

Q.6) Why can no one refuse to accept payment in rupees?

Ans) In Indian currency note and coins are issued by the RBI on behalf of the govt. No person or organisation is allowed to issue currency. Moreover, no person in India can legally refuse a payment made in rupees. In other words, the rupee is a universally accepted medium of exchange in India. Thus the law legalizes the use of rupee as a medium of payment so no one can refuse to accept payment in rupees.

Q.7) Why are the deposits in the bank account called deposits?

Ans) Sometimes when we need only certain amount of money four day to day needs, we need to keep our extra cash at a safe place. This means hat apart from our currency Deposits is a form of holding money. People deposit their extra money in the bank by opening a bank account in their name. Banks accept deposits from the public and also pay some interest on the deposits.

Q.8) How do bankers mediate between those who have surplus money and those who need money

Ans:-Banks use the major portion of the deposits to extend loans. There is a huge demand for loans for various economic activities. In this way, banks mediate between those who have surplus funds and those who are in need of these funds. Banks charge a higher interest rate on loans than what they offer on deposits. The difference  between what charged to borrower and what is paid to depositors is their main source of income. Thus by accepting deposits and by advancing loans banks mediate between  those who have surplus money and those who need money.

Q.9) Define a cheque?

A cheque is a paper instructing the bank to pay a specific amount from the person's account to the person in whose name the cheque has been issued.

Q.10) Define a loan?

Ans) Refers to an agreement in which the lender supplies the borrower with goods or services in exchange for the promise of future payment.

Q.11) Why do lenders ask for collateral while lending?

Ans:-Collateral is an asset that the borrower owns and is kept with lender as repaid in full. If the borrower  fails to repay the loan, the  guarantee till the loan lender has the right to sell the collateral to obtain payment.

Fill in the blanks

1. Reserve Bank of India issues currency note on behalf of the central govt.

2. Banks charge a higher interest rate on loans then what they offer on Deposits.

3 Collateral is a asset that the borrower own and use as a guarantee until the loan is repaid to the lender.

4. A Saving account is the simplest form of bank account which can individual for encouraging savings.

5. The most common farm of payments being made instead of cash is a bank instrument called cheque

6. This is also called Remotely created cheque Demand draft 




ONE WORD ANSWER 

1.The central bank of India.

Ans:-The Reserve Bank of India



2.One nationalized Bank of India

Ans:-Punjab Nationalized Bank.

3. One Privately owned bank in India.

Ans:-Jammu and Kashmir Bank Ltd.

4.One post office savings scheme.

Ans:-Senior citizen saving scheme

5 .One co-operative bank in rural India giving loans to farmers.

Ans:-Himachal Pradesh State Co-Operative Bank.