Banking (ICSE Class 10 Mathematics Project)

BANK ACCOUNT

A bank account is a financial account between a bank customer and a financial institution. A bank account can be a deposit account, a credit card, or any other type of account offered by a financial institution. The financial transactions which have occurred within a given period of time on a bank account are reported to the customer on a bank statement and the balance of the account at any point in time is the financial position of the customer with the institution. a fund that a customer has entrusted to a bank and from which the customer can make withdrawals.

BANK

A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank links together customers that have capital deficits and customers with capital surpluses. The word bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank "bench, counter". Benches were used as desks or exchange counters during the Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths.

Advantages of banking

Commercial banking can help a small business by making it easier to manage day-to-day financial tasks. An established commercial account with a bank will make it easier to borrow money when you grow your business. Often a business is assigned a representative who works directly with the company to find the best services and solutions for the issues the business is facing.  Some banks offer retirement account management for your employees as well as other employee benefits. 

Disadvantages of banking

Commercial banking or business accounts are often more expensive than traditional bank accounts. Banks may charge fees for night deposits, for processing a certain number of checks and for the payroll services. Depending on the size of your business, some of the services offered may not be needed, and you may still be charged for the services even if you're not fully using them.

TYPES OF ACCOUNTS

Saving accounts--- are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money in the narrow sense of a medium of exchange (for example, by writing a cheque). These accounts let customers set aside a portion of their liquid assets while earning a monetary return. For the bank, money in a savings account may not be callable immediately and in some jurisdictions, does not incur a reserve requirement, freeing up cash from the bank's vault to be lent out with interest. The other major types of deposit account are transactional account (checking account or current account by country), money market account, and time deposit.

ADVANTAGES OF Saving accounts

1.Keeping your money liquidè

Savings accounts and money market accounts allow you to withdraw your money at any time, which is rarely an option with CDs or long-term investment options. Savings accounts allow for unlimited withdrawals Nevertheless, you can access the money in your savings account when you need it most.

2.Get started with minimal cashè

If you don't have a lot of money to invest, you can begin your saving habits using a savings account. Savings accounts usually require a minimum amount to get started,

3.FDIC or NCUSIF insuredè

Your money is extremely safe in a savings account or money market account, making it a great location for secure saving
4. High-yield savings optionsè

Some savings accounts offer higher interest rates than others. These high-yield options listed on Bankrate.com are ideal for long-term saving, such as emergency funds. Most of these high-yield savings accounts are strictly online, which decreases the bank's overhead, allowing for these higher interest rates. 

DISADVANTAGES OF Saving accounts                        

Low Returns:-

A main drawback of a basic savings account is a limited interest yield. Typical savings funds earn well below 1 percent in interest These accounts are not the best place to grow your wealth if you have more money to invest beyond your short-term emergency needs.

Withdrawal Limitations:-

Another limitation of savings accounts is standard regulatory requirements on the number of withdrawal transactions you can do per month. Basic savings accounts usually allow up to six transfers in a month

Minimum Balance Requirements:-

Savings accounts usually have minimum initial deposit and average balance requirements tied to interest yields. You can often get accounts with no deposit and no minimum balance requirements, but yields are miniscule and you usually pay monthly account fees between $5 to $10.

RECURRING DEPOSIT ACCOUNTS=Recurring Deposits are a special kind of Term Deposits offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits.[1] It is similar to making FDs of a certain amount in monthly installments, for example Rs 1000 every month. This deposit matures on a specific date in the future along with all the deposits made every month. Thus, Recurring Deposit schemes allow customers with an opportunity to build up their savings through regular monthly deposits of fixed sum over a fixed period of time.

The Recurring Deposit can be funded by Standing instructions which are the instructions by the customer to the bank to withdraw a certain sum of money from his Savings/ Current account and credit to the Recurring Deposit every month.

When the RD account is opened, the maturity value is indicated to the customer assuming that the monthly installments will be paid regularly on due dates. If any installment is delayed, the interest payable in the account will be reduced and will not be sufficient to reach the maturity value. Therefore, the difference in interest will be deducted from the maturity value as a penalty. The rate of penalty will be fixed upfront. Interest is compounded on quarterly basis in recurring deposits. One can avail loans against the collateral of Recurring deposit up to 80 to 90% of the deposit value. Rate of Interest offered is similar to that in Fixed Deposits. At present it seems to be one of the best method to save the amount yield after years of deposit because TDS is not applicable on RDs. Taxation of Recurring Deposit Tax Deducted at Source ( TDS ) is not applicable on RDs. However interest from RD is not tax free. Income tax is to be paid on interest earned from a Recurring Deposit at the rate of tax slab of the RD holder .

Advantages of a recurring deposit:

Fixed monthly investment: In recurring deposit, you invest a fixed amount every month. It is very similar to paying the EMI. You can start with less amount. In many banks you can start it with monthly investment of as low as Rs. 100..

Fixed duration: You can go for a recurring deposit option for a fixed tenure. In most of the banks, you may choose maturity period ranging from 6 months to 10 years.

Fixed rate of interest: Rate of interest in a recurring deposit is fixed. It remains the same for the entire duration of the recurring deposit. This interest rate varies from bank to bank and tenure of recurring deposit. Most of the banks offer it between 3.75% and 9.5%.

Disadvantages of recurring deposit: In case of urgency, money can not be withdrawn instantly.