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Business Services-2 · Gujarat Board (GSEB) STD 11 Commerce (GSEB - English Medium). 11 questions.

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Question 15 Marks
Explain the types of Bank Account.
Answer
Introduction :
    • The main function of bank is to collect unutilized money as deposit from public.
    • Depositor in bank has to open account in the bank while opening the account in the bank as per rule for $KYC$ (Know Your Customer), identity card with photograph and evidence of residence is submitted to the bank.
    • Then only the bank opens account as according to the requirement of the applicant.
    • Two Types of Bank Accounts : There are four main types of hank accounts.
    • Savings Account :
      • This account is opened in single name or joint names.
      • Interest at fixed rate is paid on the amount deposited in this account.
      • Interest is paid on the days for which the amount is deposited in large account.
      • Account holder can deposit amount in this account through cash, cheque and draft. He can withdraw money through withdrawal slip or cheque.
      • Minimum balance as decided by bank is been kept in this account number of withdrawal transactions in a month are fixed by bank for this account.
      • Bank provides facility of cheque book and $ATM$ Card. Account holder can nominate his successor for this account.
      • The number of middle class families is quite large in our country so banks receive deposits in large number.
    • Current Account :
      • Normally businessmen keep this type of account.
      • This account can be opened in single name of an individual or in m n the name of a business unit.
      • There is no limit for $N$ debit or credit transactions in this account. or mallty no interestis paid on the amount lying in this account.
      • Bank charges are recovered from account. Bank provides lending facility to the account holder of this type of account.
    • Recurring Account :
      • This type of account is opened for the purpose of saving. Every month fixed amount on fixed date is deposited in this account.
      • The rate of interest is higher than saving account but lower than fixed deposit account. On maturity of the account, account holder is paid the amount deposited with interest.
    • Fixed Deposit Account :
      • In this account amount is deposited for fixed period, that is why it is called fixed deposit account.
      • Depositor cannot withdraw money before stipulated period fixed between bank and himself.
      • Compare to recurring and saving account the rate of interest is higher.
      • Bank gives written promise to pay the deposited amount with interest to the depositor.
Conclusion :
    • Banks accept deposits through various accounts and pays interest on the amount deposited. Normally the rate of interest of all nationalized banks is the same.
    • Private banks and Co-operative banks pay little higher to interest.
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Question 25 Marks
Explain : Functions of bank.
Answer
Introduction :
        • The terns 'commerce' includes support services such as bank, insurance, warehouse, transportation, communication etc. related to trade. Banking is related to all other services.
        • One can't think of trade and commerce without banking services.
        • It is a wrong belief that bank provides services to trade and commerce only.
        • In modern times banks on behalf of customers many financial and non-financial functions.
        • Banking services are interwoven with human life.
What is Bank ?
        • According to the Reserve Bank of India "Bank is an institution which collects deposits in order to land them with condition to return it at the end of the fixed term or whenever, it is demanded." $3.$ Core Functions of Bank :
        • Following are the main functions of bank.
        • To accept deposits.
        • To lend money
        • To invest money.
        • To perform inter-banking (transactions)
To Accept / Collect Deposit :
        • Bank accepts unused money from public in four different accounts
        • Saving Account
        • Current Account,
        • Recurring Account,
        • Fixed Deposit Account.
        • Bank pays interest on the amount deposited in all these accounts.
        • The rate of interest varies.
        • The greatest responsibility of bank is to maintain the trust of depositors.
      • To Lend Money :
        • The bank accepts deposits from public and these money received through deposit is lended by bank.
        • Bank pays low interest to the depositors and lends to the borrowers at higher rate of interest. Interest that paid to the depositors is lower than interest charged to the borrowers.
        • The difference between the two is the profit of the bank. Normally banks lend money through $(A)$ Loan $(B)$ Overdraft $(C)$ Cash Credit.
        • Explanation about overdraft and Cash Credit is given in short answer to questions Np. $6$ and $7$).
      • To Invest :
        • If bank can not invest properly or land amount of deposit received or its capital, it can not get sufficient return.
        • It is the most important function of bank to invest money properly with safety with calculation.
        • When critical financial situation arises in bank, then with the purpose of easy liquidity of investment made by bank as per the rule of RBI. certain percentage of deposit amount should be invested in government securities of low interest. The remaining amount is invested in financially prosperous units.
      • To do Inter-banking Transactions :
        • Every bank has to do inter-banking transactions to remove short- term financial crisis. It may be for $24$ hours only, or less than that. If such situation arises $RBI$ is informed.
        • Through the appointed agencies by $RBI$, unutilized money is sent to the needy bank by $RBI$. During this transactions money lender and money borrower bank do not come indirect contact.
        • The borrower bank has to pay interest on the amount received. Rate of interest is determined on the basis of demand and supply of money in the market and it is known as 'Call Money'.
        • In this transaction money is received before twenty four hours. That is why it is called 'Call Money'.
Conclusion :
        • The number of account holders increase due to regularity and care in core functions of bank.
        • The more the carefulness of the bank, the more is the number of account holders of the bank.
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Question 35 Marks
Explain in brief the various services provided by Bank. Following services are included in various services of Bank.
Answer
Issuing Draft :
    • Demand Draft $(D/D)$ is a cheque written by one bank to the branch of other bank.
    • The amount is paid to the person whose name is written.
    • For this the person or institution that wants to send money to any individual or institution fills the prescribed form and requests the bank to issue draft.
    • On its basis bank prepares draft indicating the details as per filled in the form such as, name of the receiver, amount, etc. Batik gives an order to its branch situated at money receivers place.
    • This document which indicates the order is called Demand Draft.
    • Sender has to pay the amount he wants to send along with the amount of commission to the bank, when the bank issues draft which can be enchased in its city only it is called pay-order.
  • Bankers Cheques :
    • The bank issues cheque against the money it has received is called pay order. This cheque is encashed only in the same city or village.
  • Real Time Gross Settlement $(RIGS)$ :
    • $RIGS$ means Real Time Gross Settlement. Member of $RTGS$ bank in India can transfer money in any bank in India.
    • This process is called $RTGS$.
    • Member bank's branch of $RTGS$ is known by $IFSC$ Code (Indian Financial System Code).
    • This code is of eleven digits and in alfa numeric form. Through $RTGS$ system real time means at the same time and gross settlement means to give effect of total transactions.
    • Cash money is not transferred in this system.
    • It is necessary that customer and beneficiary both should have accounts in the bank.
    • $IFSC$ Code is a must for both of them.
    • Through $RTGS$ system transfer of more than $2$ lacs of rupees is done.
    • No commission is charged from the receiver but it is charged from the sender.
  • National Electronic Fund Transfer $(NEFT)$ :
    • $NEFF$ means National Electronic Fund Transfer. Fund from the bank having membership of $NEFT$ is transferred to the bank holding the membership of $NEFT$.
    • The branch of the bank holding $NEFT$ membership is known by its $IFSC$ Code which is of eleven digits and in alpha numeric form.
    • Maximum 2 lacs of rupees are transferred under this system.
    • Process is carried out as per hour batch, through $RBI$. In one batch maximum $10$ transactions are carried out.
    • Amount to be deposited takes maximum $48$ hours.
    • $NEFT$ of less than the amount $Z$ $50,000$ also can be done.
    • Its advantage is obtained by walk-in customer also.
    • Beneficiary of $NEFT$ is not charged any commission.
    • Commission is charged from the sender of money.
  • Bank Overdraft :
    • Businessmen are given facility to withdraw the amount more than the balance in current account.
    • This is called overdraft.
    • Normally the period of overdraft is short.
    • When it is fixed it is known as cash credit.
    • Businessman gets overdraft on his own guarantee.
    • Bank recovers interest only on the amount used not on the entire amount sanctioned.
  • Cash Credit :
    • Money lending to the businessmen for the purpose of expansion of business, keeping in consideration stock of goods in business, and the amount to be received is called cash credit.
    • Against this facility stock of goods of the merchant is mortgaged in the bank.
    • The interest is charged on the amount utilized by the borrower not on the entire amount sanctioned by the bank.
    • The amount of overdraft used for specific fixed period becomes cash credit
  •  Loan :
    • When bank lends large amount at a time for long term it is called 'loan'. Before lending loan, bank takes asset as security from the borrower.
    • Banks accept deposit at low saw of interest and lends at higher rate of interest.
    • Normally customer and traders get loan from bank, fur the purchase of house, purchase of vehicles, furniture, house repairing and for the development of business.
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Question 45 Marks
Show the difference pay order and Demand Draft.
Answer
Points Pay order Demand Draft
Payable Order to the bank itself by the bank. Order to its own branch or representative bank.
Parties Receiver and payer in the same. Receiver of the money and cheque drawer is different.
Utility For paying money to government. For sending money and anywhere outstation.
Expenses No expense Commission is to be paid bank.
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Question 55 Marks
Show the difference between cheque and Demand Draft.
Answer
Points Cheque Demand Draft
Who writes? Account holder writes. Bank writes
To whom written? Account holder writes to his bank. Bank writes to its other branch.
Who gets facility? The account holder of that bank gets the facility. Anybody can get from any bank.
When required? For the settlements of local or out station payments. Mostly for sending money to out station.
Commission Without any charges to the account holders. For draft, bank has to be paid commission.
Parties The drawer and the receiver of the cheque may be different parties. Sender and the receiver are different parties.
Payment Amount is to be paid from the account holder’s account. The sender first pays in the bank and then the amount is sent.
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Question 65 Marks
Shown the difference between bank overdraft and cash credit.
Answer
Points Bank Overdraft Cash Credit
Meaning The facility given to the current account holder to withdrawn more than balances amount is called overdraft. Big amount of overdraft facility is granted for a long-time is called cash credit.
Who can get? The facility given to the current account holder only. This facility is given to any type of account holder.
Objective The aim of overdraft is to satisfy temporary financial requirement. The aim of each credit is to satisfy long-term financial requirement.
Amount Overdraft is used for the amount of small and medium type of advances. For the advances of big amount cash credit is used.
Guarantee Overdraft facility can be obtained against personal guarantee of account holder. Cash credit facility can be obtained against personal guarantee or assets.
Interest Bank earns small interest on overdraft. On cash credit, bank earns more interest.
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Question 75 Marks
Show the difference between Current Account and Saving Account.
Answer
Points Current Account Saving Account
Objective The objective of current account is to make commercial transaction easy. The objective of saving account is to create saving habit, safety of saving and to each interest income.
Who opens it? Current account is generally opened by business men and institution. Middle class and salaried people generally open saving account.
Introduction for account Bank demands introduction of the account holder. Normally no introduction is asked for to open this account.
Interest No interest is paid on the amount in this account. Normally 4% interest is paid on the balance in this account.
Mode of withdrawal of money From the current account money is withdrawn through cheque only. Money cannot be withdrawn through withdrawal slip. Money can be withdrawn through cheque or withdrawal slip.
Facility of Overdraft. Looking no the dealing and application of the trade over draft facility is available (withdrawal of amount more than balance) Amount more than balance in saving account cannot be withdrawn.
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Question 85 Marks
Explain subsidiary functions of bank.
Answer
 
Introduction :
    • Besides major functions, in the current time bank provides various services to its customers.
    • Account holders also are attracted towards services offered by bank because it is time and expense saving.
    • Competition also increased in banking sector, hence to attract customers banks try to provide various types of services.
What is Bank ?
    • According to the Reserve Bank of India "Bank is an institution which collects deposits in order to land them with condition to return it at the end of the fixed term or whenever, it is demanded." $3$. Core Functions of Bank :
    • Following are the main functions of bank.
    • To accept deposits.
    • To lend money
    • To invest money.
    • To perform inter-banking (transactions)
      • To Accept / Collect Deposit :
        • Bank accepts unused money from public in four different accounts
        • Saving Account
        • Current Account,
        • Recurring Account,
        • Fixed Deposit Account.
        • Bank pays interest on the amount deposited in all these accounts.
        • The rate of interest varies.
        • The greatest responsibility of bank is to maintain the trust of depositors.
      • To Lend Money :
        • The bank accepts deposits from public and these money received through deposit is lended by bank.
        • Bank pays low interest to the depositors and lends to the borrowers at higher rate of interest. Interest that paid to the depositors is lower than interest charged to the borrowers.
        • The difference between the two is the profit of the bank. Normally banks lend money through $(A)$ Loan $(B)$ Overdraft $(C)$ Cash Credit.
        • Explanation about overdraft and Cash Credit is given in short answer to questions Np. $6$ and $7$).
      • To Invest :
        • If bank can not invest properly or land amount of deposit received or its capital, it can not get sufficient return.
        • It is the most important function of bank to invest money properly with safety with calculation.
        • When critical financial situation arises in bank, then with the purpose of easy liquidity of investment made by bank as per the rule of $RBI$. certain percentage of deposit amount should be invested in government securities of low interest. The remaining amount is invested in financially prosperous units.
        • To do Inter-banking Transactions :
        • Every bank has to do inter-banking transactions to remove short- term financial crisis. It may be for $24$ hours only, or less than that. If such situation arises $RBI$ is informed.
        • Through the appointed agencies by $RBI$, unutilized money is sent to the needy bank by $RBI$. During this transactions money lender and money borrower bank do not come indirect contact.
        • The borrower bank has to pay interest on the amount received. Rate of interest is determined on the basis of demand and supply of money in the market and it is known as 'Call Money'.
        • In this transaction money is received before twenty four hours. That is why it is called 'Call Money'.
      • Subsidiary Functions of Bank :
        • They are noted as below.
        • To maintain financial transactions of customers :
        • Bank, on behalf of its customers pays the amount of cheques drawn by account holder in favour of other party or a person and recovers money of the cheques received by its customers from the party or individual.
        • Banks handle both these transactions. Besides, this bank provides services of paying electric bills, insurance, premium, telephone bills etc. Bank transfers money from one account to another.
        • All these services are provided by bank on behalf of its customers.
      • Transactions related to currency :
        • In India import-export trading is done through banks.
        • This requires foreign currency.
        • The banks whom the Reserve Rank has given permission of foreign currency, maintains the transactions of foreign exchange.
        • Besides this, these banks provide service to bring and carry documents related to trade with foreign countries.
      • Issuing Traveller's Cheques :
        • While travelling in a country or in foreign countries, people bear the tension of cash money being stolen or lost.
        • Banks issue travelers cheque and they are relieved from tension.
        • Traveler’s cheque holder puts his signature as the specimen signature and enchases them any where in the country or in the foreign country in any branch of the bank.
        • These types of cheques are the most reliable and money is easily transferable.
        • With the facility of ATM the importance of travellers cheque is decreased.
      • To issue Letter of Credit (LIC) :
        • Letter of Credit is a letter written by one bank regarding the credit of its account holders to another bank.
        • This letter shows the amount of credit granted to the account holder.
        • Before granting the amount of credit the bank collects the same amount from the person or bank asks for securities of the equal amount.
        • Due to this letter of credit financial transactions run very smooth and become reliable.
        • This letter shows the name of a person, amount granted as credit and payment period.
      • Service of Demand Draft :
        • Demand Draft $(D/D)$ is a cheque written by one bank to the branch of other bank.
        • The amount is paid to the person whose name is written.
        • For this the person or institution that wants to send money to any individual or institution fills the prescribed form and requests the bank to issue draft.
        • On its basis bank prepares draft indicating the details as per filled in the form such as, name of the receiver, amount, etc. Batik gives an order to its branch situated at money receivers place.
        • This document which indicates the order is called Demand Draft.
        • Sender has to pay the amount he wants to send along with the amount of commission to the bank, when the bank issues draft which can be enchased in its city only it is called pay-order.
      • To provide service as Underwriter :
        • When newly established company wants to raise share capital and collects the amount by share application in specific period equal to minimum subscription.
        • If the amount is not collected then shares of remaining amount will be purchased from the company for this service bank, receives commission from the company.
      • To provide information regarding credit of the parties related with bank :
        • Bank frequently performs financial transactions with clients.
        • Bank is aware of their credit and financial stand.
        • The concerned firm or institution which is in business on credit with other party wants to know about reliability and financial stand and contacts bank.
        • Bank issues solvency certificates of the institution or individual within the limit of law.
        • It is to be noted that it provides only information but bank does not take any responsibility.
      • To provide other related services :
        • Today banks provide other services such as safe Deposit vault, $ATM, DEMAT,$ Credit Card, Debit Card etc.
Conclusion :
    • Banks provide many types of facilities, as a result customers find relief.
    • In the present time bank provides the facility of paying electric bill, telephone bill, insurance premium on behalf of
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Question 95 Marks
(i)How did the word 'bank' originate?
(ii) "The main function of a bank is to accept deposits." In this context, what functions can a bank perform to accept deposits? Present your thoughts.
Answer
(i) Origin of the word 'Bank':
The word 'bank' originated from the Italian word “banca”, which means a bench or counter where money changers and money lenders used to conduct their business in the marketplaces.

(ii) Functions of a Bank to Accept Deposits:
To accept deposits, a bank performs several functions such as:
  • Opening Savings and Current Accounts where customers can deposit money.
  • Fixed Deposits and Recurring Deposits: Offering different deposit schemes with varied interest rates and tenure.
  • Providing Safe Custody: Ensuring the security of customers’ money and providing easy access when needed.
  • Issuing Deposit Receipts: Giving official acknowledgment or passbooks to customers as proof of their deposits.
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Question 105 Marks
"A new bank is going to be established in your village. How can it be beneficial for the people? Explain the main functions of a bank."
Answer
Benefits of a New Bank in the Village:
  • Provides a safe place for people to deposit their savings.
  • Makes it easier to get loans for farming, business, and personal needs.
  • Encourages financial discipline and helps improve the local economy.
  • Facilitates smooth and secure transactions like money transfers and payments.
Main Functions of a Bank:
  1. Accepting Deposits: Banks accept different types of deposits like savings, current, and fixed deposits.
  2. Providing Loans and Advances: Banks lend money to individuals and businesses for various purposes.
  3. Agency Functions: Banks collect cheques, pay bills, and handle investments on behalf of customers.
  4. General Utility Services: Banks offer services like issuing debit/credit cards, lockers, and facilitating online banking.
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Question 115 Marks
"Your father wants to open a bank account for his business, where he can deposit and withdraw money as needed. Which type of bank account would be suitable for him? Explain the different types of bank accounts."
Answer
Suitable Bank Account:
For your father’s business, a Current Account would be suitable. It allows unlimited deposits and withdrawals, provides overdraft facilities, and is designed for frequent transactions.

Different Types of Bank Accounts:
  1. Savings Account: Designed for individuals to save money and earn interest; withdrawals are limited.
  2. Current Account: Meant for businesses and professionals, allowing unlimited transactions without interest.
  3. Fixed Deposit Account: Money is deposited for a fixed term and earns higher interest; withdrawals before maturity are restricted.
  4. Recurring Deposit Account: Regular fixed amounts are deposited monthly for a specified period to earn interest.
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5 Marks Each - OCM STD 11 Commerce Questions - Vidyadip