BANKING

Banking in India
Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955.

History
Merchants in [Calcutta] established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla.

Foreign banks too started to app, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras andPondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". During the First World War (19141918) through the end of the Second World War (19391945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table:

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Years Number of banks Authorised capital Paid-up Capital that failed (Rs. Lakhs) (Rs. Lakhs)

1913

12

274

35

1914

42

710

109

1915

11

56

1916

13

231

1917

76

25

1918

209

TYPES OF BANKS:Saving Banks Saving banks are established to create saving habit among the people. These banks are helpful for salaried people and low income groups. The deposits collected from customers are invested in bonds, securities, etc. At present most of the commercial banks carry the functions of savings banks. Postal department also performs the functions of saving bank. Commercial Banks Commercial banks are established with an objective to help businessmen. These banks collect money from general public and give short-term loans to businessmen by way of cash credits, overdrafts, etc. Commercial banks provide various services like collecting cheques, bill of exchange, remittance money from one place to another place. In India, commercial banks are established under Companies Act, 1956. In 1969, 14 commercial banks were nationalised by Government of India. The policies regarding deposits, loans, rate of interest, etc. of these banks are controlled by the Central Bank.

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Industrial Banks / Development Banks Industrial / Development banks collect cash by issuing shares & debentures and providing long-term loans to industries. The main objective of these banks is to provide long-term loans for expansion and modernisation of industries. In India such banks are established on a large scale after independence. They are Industrial Finance Corporation of India (IFCI), Industrial Credit and Investment Corporation of India (ICICI) and Industrial Development Bank of India (IDBI). Land Mortgage / Land Development Banks Land Mortgage or Land Development banks are also known as Agricultural Banks because these are formed to finance agricultural sector. They also help in land development. In India, Government has come forward to assist these banks. The Government has guaranteed the debentures issued by such banks. There is a great risk involved in the financing of agriculture and generally commercial banks do not take much interest in financing agricultural sector. Indigenous Banks Indigenous banks means Money Lenders and Sahukars. They collect deposits from general public and grant loans to the needy persons out of their own funds as well as from deposits. These indigenous banks are popular in villages and small towns. They perform combined functions of trading and banking activities. Certain well-known indian communities like Marwaries and Multani even today run specialised indigenous banks.

Central / Federal / National Bank Every country of the world has a central bank. In India, Reserve Bank of India, in U.S.A, Federal Reserve and in U.K, Bank of England. These central banks are the bankers of the other banks. They provide specialised functions i.e. issue of paper currency, working as bankers of government, supervising and controlling foreign exchange. A central bank is a non-profit making institution. It does not deal with the public but it deals with other banks. The principal responsibility of Central Bank is thorough control on currency of a country. Co-operative Banks In India, Co-operative banks are registered under the Co-operative Societies Act, 1912. They generally give credit facilities to small farmers, salaried employees, small-scale industries, etc. Cooperative Banks are available in rural as well as in urban areas. The functions of these banks are just similar to commercial banks. Exchange Banks Hong Kong Bank, Bank of Tokyo, Bank of America are the examples of Foreign Banks working in India. These banks are mainly concerned with financing foreign trade.

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Following are the various functions of Exchange Banks :Remitting money from one country to another country, Discounting of foreign bills, Buying and Selling Gold and Silver, and Helping Import and Export Trade. Consumers Banks Consumers bank is a new addition to the existing type of banks. Such banks are usually found only in advanced countries like U.S.A. and Germany. The main objective of this bank is to give loans to consumers for purchase of the durables like Motor car, television set, washing machine, furniture, etc. The consumers have to repay the loans in easy installments.

FUNCTIONS OF COMMERCIAL BANKS:The functions of a commercial banks are divided into two categories: i) Primary functions ii) Secondary functions including agency functions.

i) Primary functions:
The primary functions of a commercial bank include: a) Accepting deposits The most important activity of a commercial bank is to mobilise deposits from the public. People who have surplus income and savings find it convenient to deposit the amounts with banks. Depending upon the nature of deposits, funds deposited with bank also earn interest. Thus, deposits with the bank grow along with the interest earned. If the rate of interest is higher, public are motivated to deposit more funds with the bank. There is also safety of funds deposited with the bank. b) Grant of loans and advances

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The second important function of a commercial bank is to grant loans and advances. Such loans and advances are given to members of the public and to the business community at a higher rate of interest than allowed by banks on various deposit accounts. The rate of interest charged on loans and advances varies depending upon the purpose, period and the mode of repayment. The difference between the rate of interest allowed on deposits and the rate charged on the Loans is the main source of a banks income. i) Loans A loan is granted for a specific time period. Generally, commercial banks grant short-term loans. But term loans,Functions of Commercial Banks :: 23 that is, loan for more than a year, may also be granted. The borrower may withdraw the entire amount in lumpsum or in instalments. However, interest is charged on the full amount of loan. Loans are generally granted against the security of certain assets. A loan may be repaid either in lumpsum or in instalments. ii) Advances An advance is a credit facility provided by the bank to its customers. It differs from loan in the sense that loans may be granted for longer period, but advances are normally granted for a short period of time. Further the purpose of granting advances is to meet the day to day requirements of business. The rate of interest charged on advances varies

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from bank to bank. Interest is charged only on the amount withdrawn and not on the sanctioned amount. Modes of short-term financial assistance Banks grant short-term financial assistance by way of cash credit, overdraft and bill discounting. a) Cash Credit Cash credit is an arrangement whereby the bank allows the borrower to draw amounts upto a specified limit. The amount is credited to the account of the customer. The customer can withdraw this amount as and when he requires. Interest is charged on the amount actually withdrawn. Cash Credit is granted as per agreed terms and conditions with the customers. b) Overdraft Overdraft is also a credit facility granted by bank. A customer who has a current account with the bank is allowed to withdraw more than the amount of credit balance in his account. It is a temporary arrangement. Overdraft facility with a specified limit is allowed either on the security of assets, or on personal security, or both. c) Discounting of Bills Banks provide short-term finance by discounting bills, that is, making payment of the amount before the due date of the bills after deducting a certain rate of discount. The party gets the funds without waiting for the date of maturity of the bills. In case any bill is dishonoured on the due date, the bank can recover the amount from the customer.

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ii) Secondary functions
Besides the primary functions of accepting deposits and lending money, banks perform a number of other functions which are called secondary functions. These are as follows a) Issuing letters of credit, travellers cheques, circular notes etc. b) Undertaking safe custody of valuables, important documents, and securities by providing safe deposit vaults or lockers; c) Providing customers with facilities of foreign exchange. d) Transferring money from one place to another; and from one branch to another branch of the bank. e) Standing guarantee on behalf of its customers, for making payments for purchase of goods, machinery, vehicles etc. f) Collecting and supplying business information; g) Issuing demand drafts and pay orders; and, h) Providing reports on the credit worthiness of customers

TYPES OF ACCOUNTS :Transactional account

A transactional account is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Transactional accounts are meant neither for the purpose of earning interest nor for the purpose of savings, but for convenience of the business or personal client; hence they tend not to bear interest. Instead, a customer can deposit or withdraw any amount of money any number of times, subject to availability of funds.

- Deposit account -Checking account -Current account -Personal account

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-Transaction deposit Savings AccountSavings 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 check). 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 therefore often does not incur a reserve requirement freeing up cash from the bank's vault to be lent out with interest.

-Individual Savings Account -Time deposit / certificate of deposit -Tax-Exempt Special Savings Account -Tax-Free Savings Account -Money market account Other accounts-Loan account -Joint account -Low-cost account -Nostro and vostro accounts -Numbered bank account -Negotiable Order of Withdrawal account

Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank, and represent the amount owed by the bank to the customer. Some banks charge a fee for this service, while others may pay the customerinterest on the funds deposited.

Major types

Checking accounts: A deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts.

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Money market account: A deposit account with a relatively high rate of interest, and short notice (or no notice) required for withdrawals. In the United States, it is a style of instant access deposit subject to federal savings account regulations, such as a monthly transaction limit.

Savings accounts: Accounts maintained by retail banks that pay interest but can not be used directly as money (for example, by writing a cheque). Although not as convenient to use as checking accounts, these accounts let customers keep liquid assets while still earning a monetary return.

Time deposit: A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time. When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the better the yield on the money.

call deposit: A deposit account which allows to withdraw the money without penalty, mostly without notification to the bank. Often it bears favourable interest rate, but also a minimum balance to take advantage of the benefits [1]

ONLINE BANKING:Online banking (or Internet banking or E-banking) allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or building society. To access a financial institution's online banking facility, a customer having personal Internet access must register with the institution for the service, and set up some password (under various names) for customer verification. The password for online banking is normally not the same as for telephone banking. Financial institutions now routinely allocate customer numbers (also under various names), whether or not customers intend to access their online banking facility. Customer numbers are normally not the same as account numbers, because a number of accounts can be linked to the one customer number. The customer will link to the customer number any of those accounts which the customer controls, which may be cheque, savings, loan, credit card and other accounts. To access online banking, the customer would go to the financial institution's website, and enter the online banking facility using the customer number and password. Some financial institutions have set up additional security steps for access, but there is no consistency to the approach adopted.

Features
Online banking facilities offered by various financial institutions have many features and capabilities in common, but also have some that are application specific. The common features fall broadly into several categories

A bank customer can perform some non-transactional tasks through online banking, including -

viewing account balances viewing recent transactions

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downloading bank statements, for example in PDF format viewing images of paid cheques ordering cheque books

Bank customers can transact banking tasks through online banking, including -

Funds transfers between the customer's linked accounts Paying third parties, including bill payments (see, e.g., BPAY) and telegraphic/wire transfers Investment purchase or sale Loan applications and transactions, such as repayments of enrollments

Financial institution administration Management of multiple users having varying levels of authority Transaction approval process

Some financial institutions offer unique Internet banking services, for example

Personal financial management support, such as importing data into personal accounting software. Some online banking platforms support account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions.

Procedure to open a Current Account or a Saving Bank Account

The following procedure is followed in opening a current account or a saving bank account.

Application in the Prescribed Form:

The person desiring to open a current account or a saving bank account has to apply to the bank concerned in the prescribed form. The application forms are printed and are available in the bank free of cost. Banks provide different application forms for opening a saving or current account. The application form contains the information regarding the name of applicant, his occupation, full address, and specimen signatures. The bank may also call for reference from the applicant.

Introduction of the Applicant:

By opening an account in the bank, the customer enters into a relationship with the banker. The bank undertakes to honor the cheque drawn by the customer as long as his account shows a credit balance. This involves risk. Though any person may apply for opening an account in his name but the bank reserves the right to do so on being satisfied about the identity of the customer. The banks usually insist on such person or business enterprise being introduced to the bank by an existing customer of the bank or a reputed businessman. The person introducing the account sings on the application form itself along with his full address. The bank may also call for references that would be consulted about the integrity, honesty, financial standing and respectability of the applicant. Introduction and references reduce the scope for fraud.

Specimen Signature:
When the bank is satisfied with the introductory references it proceeds with the opening of the account. The applicant is asked to give his two or three specimen signatures on a prescribed form, generally a card, for the purpose of banks record. These signature cards are preserved by the bank and are alphabetically filled for ready reference to verity the signatures whenever the need arises. The specimen signatures are compared with the signatures on the cheques of the customers. If the two signatures differ, the bank can refuse to honor the cheque. If a company wants to open a current account with a bank, the following documents have also been admitted: 1. A certified copy of the resolution of the Board of Directors for opening of the account.

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2. 3. 4. A copy of the Memorandum and Articles of Association of the Company. A copy of the Certificate of Incorporation and Certificate of Commencement of business. Specimen signatures of the persons authorized to operate the account. In the same manner, if a society or club wants to open an account with a bank, it should admit a copy of the certificate of registration, a copy of the resolution of its managing committee for opening of the account, a copy of its bye-laws and specimen signatures of persons authorized to operate the account. In case of partnership, a copy of the partnership deed is also to be submitted while opening a current account.

To make the Initial Deposit:

After the above formalities are over, the applicant deposits the initial amount and the banker opens an account in the name of the applicant. Generally, the minimum amount to be deposited varies from bank to bank. At present many banks accept an initial deposit of Rs. 500/- for opening a new account.

How to open a fixed deposit

Fixed deposits have never seemed as alluring, with equity markets seemingly keen on discovering how far they can fall. What's more, interest rates on deposits are rather attractive at present. Opening a fixed deposit may not be as quick as buying stocks, but it isn't a hassling process either. Here's detailing how you can open a bank fixed deposit and a corporate fixed deposit.
BANK DEPOSITS

The minimum amount to be deposited varies with banks, but is usually around Rs 10,000. If the foremost question on your mind regarding deposits is if you need a savings account with the bank, rest assured. Most banks don't require you to be a savings account holder first, though there are some benefits. For instance, if you have internet banking enabled with your bank, opening a fixed deposit may only require you to log on and open a fixed deposit. You can choose the kind of deposit you want to make, the time period, and the amount. Other benefits include overdraft facilities and linking the deposit to your bank account and enabling the sweep-in and sweep-out facilities. However, online or not, opening a deposit in other banks is hardly a taxing process. It simply involves filling out a form, putting together a set of documents and your photographs and submitting them. The bank will issue a fixed deposit receipt which you need to hold on to. While all banks have the required forms at their branches, a good many, such as Kotak Mahindra Bank or Axis Bank, have them available on their Web site. Download, print and fill these out. Still others such as HDFC Bank, ING Vysya, Axis Bank and ICICI Bank allow you to submit details online, post which the bank sends a representative to collect the form and necessary documents. You can also opt to submit them at the closest bank branch itself, but in such a case, you have to go in person. Forms are either available under the Accounts and Deposits' tab on the Web site or in the Downloads' section.
DOCUMENTATION

Documents required are for proof of identity, address, signature, and in case of senior citizenship, age. There are a variety of documents you can produce for proof of identity and address, such as your passport, driving license, voter's identity card, PAN card, ration card, recent utility bills, credit card bills and so on. Signature proofs can take the form of passport, PAN card or a signed cheque. Apart from this, some banks, such as Axis Bank, also demand an introduction letter from an account holder.

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COMPANY DEPOSITS

The process for opening company deposits is similar to that of a bank deposit. Forms can be downloaded from the company Web site or taken from the manager of the deposit scheme. Submission of the filled-out form, along with the cheque for the deposit amount, should be done at the bank branches specified by the company or to the manger of the issue. Note that only bank deposits up to Rs 100,000 are insured.

ATM card
An ATM card (also known as a bank card, client card, key card, or cash card) is a card issued by a bank, credit union, or building society that can be used in an Automated Teller Machine (ATM) for transactions such as: deposits, withdrawals, account information, and other types of transactions, often through interbank networks. It can also be used on improvised ATMs, such as merchants' card terminals that deliver ATM features without any cash drawer (commonly referred to as mini ATMs).[1][2] These terminals can also be used as Cashless scrip ATMs by cashing the fund transfer receipt at the merchant's Cashier.[3]

The dimensions of an ATM card

ATM cards are typically about 86 54 mm, i.e. ISO/IEC 7810 ID-1 size. Similar to the size of an Credit Card, Debit Card, and so on.

Debit card
A debit card (also known as a bank card or check card) is a plastic card that provides the cardholder electronic access to his or her bank account(s) at a financial institution. Some cards have a stored value with which a payment is made, while most relay a message to the cardholder's bank to withdraw funds from a designated account in favor of the payee's designated bank account. The card can be used as an alternative payment method to cash when making purchases. In some cases, the primary account number is assigned exclusively for use on the Internet and there is no physical card.[1][2] In many countries, the use of debit cards has become so widespread that their volume has overtaken or entirely replaced cheques and, in some instances, cash transactions. The development of debit cards, unlike credit cards andcharge cards, has generally been country specific resulting in a number of different systems around the world, which were often incompatible. Since the mid 2000s, a number of initiatives have allowed debit cards issued in one country to be used in other countries and allowed their use for internet and phone purchases.

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Unlike credit and charge cards, payments using a debit card are immediately transferred from the cardholder's designated bank account, instead of the them paying the money back at a later date. Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash. Merchants may also offer cashback facilities to customers, where a customer can withdraw cash along with their purchase.

How Does a Debit Card Work?

When you use a debit card, the transaction debits (withdraws) the amount of the transaction from your checking account, usually on the same day. You can use a debit card to get cash from ATM machines or have it swiped like a credit card at shops or restaurants or swipe it through a pay phone to make a call.

Advantages of debit cards

A consumer who is not credit worthy and may find it difficult or impossible to obtain a credit card can more easily obtain a debit card, allowing him/her to make plastic transactions. For example, legislation often prevents minors from taking out debt, which includes the use of a credit card, but not online debit card transactions. For most transactions, a check card can be used to avoid check writing altogether. Check cards debit funds from the users account on the spot, thereby finalizing the transaction at the time of purchase, and bypassing the requirement to pay a credit card bill at a later date, or to write an insecure check, containing the account holders personal information. Like credit cards, debit cards are accepted by merchants with less identification and scrutiny than personal checks, thereby making transactions quicker and less intrusive. Unlike personal checks, merchants generally do not believe that a payment via a debit card may be later dishonored. Unlike a credit card, which charges higher fees and interest rates when a cash advance is obtained, a debit card may be used to obtain cash from an ATM or a PIN-based transaction at no extra charge, other than a foreign ATM fee.

Disadvantages of debit cards

Use of a debit card is not usually limited to the existing funds in the account to which it is linked, most banks allow a certain threshold over the available bank balance which can cause overdraft fees if the user's transaction does not reflect available balance. This disadvantage has lessened in the United States with the requirement that an issuer obtain opt-in permission in advance to allow an overdraft on a debit card. Lacking this opt-in, overdrafts are not permitted for electronic transactions. Many banks are now charging over-limit fees or non-sufficient funds fees based upon pre-authorizations, and even attempted but refused transactions by the merchant (some of which may be unknown until later discovery by account holder).

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Many merchants mistakenly believe that amounts owed can be "taken" from a customer's account after a debit card (or number) has been presented, without agreement as to date, payee name, amount and currency, thus causing penalty fees for overdrafts, over-the-limit, amounts not available causing further rejections or overdrafts, and rejected transactions by some banks. In some countries debit cards offer lower levels of security protection than credit cards.[7] Theft of the users PIN using skimming devices can be accomplished much easier with a PIN input than with a signature-based credit transaction. However, theft of users' PIN codes using skimming devices can be equally easily accomplished with a debit transaction PIN input, as with a credit transaction PIN input, and theft using a signature-based credit transaction is equally easy as theft using a signature-based debit transaction. In many places, laws protect the consumer from fraud much less than with a credit card. While the holder of a credit card is legally responsible for only a minimal amount of a fraudulent transaction made with a credit card, which is often waived by the bank, the consumer may be held liable for hundreds of dollars, or even the entire value of fraudulent debit transactions. Because debit cards allow funds to be immediately transferred from an account when making a purchase, the consumer also has a shorter time (usually just two days) to report such fraud to the bank in order to be eligible for such a waiver with a debit card and recover the lost funds,[7] whereas with a credit card, this time may be up to 60 days, and the transactions are removed without losing any credit. A thief who obtains or clones a debit card along with its PIN may be able to clean out the consumer's bank account, and the consumer will have no recourse.

Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. [1] The issuer of the card creates arevolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A credit card is different from a charge card: a charge card requires the balance to be paid in full each month.[2] In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. The size of most credit cards is 85.60 53.98 mm (33/8 21/8 in),[3] and conform to the ISO/IEC 7810 ID-1 standard. Credit cards have an embossed bank card number complying with the ISO/IEC 7812 numbering standard.

Advantages
1. Offer free use of funds, provided you always pay your balance in full, on time. 2. Be more convenient to carry than cash. 3. Help you establish a good credit history. 4. Provide a convenient payment method for purchases made on the Internet and over the telephone. 5. Give you incentives, such as reward points, that you can redeem.

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Disadvantages
1. Cost much more than other forms of credit, such as a line of credit or a personal loan, if you don't pay on time. 2. Damage your credit rating if your payments are late; 3. Allow you to build up more debt than you can handle; 4. Have complicated terms and conditions;

Cheque
A cheque (or check in American English) is a document[nb 1] that orders a payment of money from a bank account. The person writing the cheque, the drawer, usually has a current account (most English speaking countries) or checking account (US) where their money was previously deposited. The drawer writes the various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering theirbank, known as the drawee, to pay that person or company the amount of money stated. Cheques are a type of bill of exchange and were developed as a way to make payments without the need to carry large amounts of money. While paper money evolved from promissory notes, another form of negotiable instrument, similar to cheques in that they were originally a written order to pay the given amount to whoever had it in their possession (the "bearer"). Technically, a cheque is a negotiable instrument[nb 2] instructing a financial institution to pay a specific amount of a specific currency from a specified transactional account held in the drawer's name with that institution. Both the drawer and payee may be natural persons or legal entities. Specifically, cheques are order instruments, and are not in general payable simply to the bearer (as bearer instruments are) but must be paid to the payee. In some countries, such as the US, the payee may endorse the cheque, allowing them to specify a third party to whom it should be paid. Although forms of cheques have been in use since ancient times and at least since the 9th century, it was during the 20th century that cheques became a highly popular non-cash method for making payments and the usage of cheques peaked. By the second half of the 20th century, as cheque processing became automated, billions of cheques were issued annually; these volumes peaked in or around the early 1990s.[1]Since then cheque usage has fallen, being partly replaced by electronic payment systems. In some countries cheques have become a marginal payment system or have been phased out completely.

Definition of 'Bank Draft'

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A type of check where the payment is guaranteed to be available by issuing bank. Typically, banks will review the bank draft requester's account to see if sufficient funds are available for the check to clear. Once it has been confirmed that sufficient funds are available, the bank effectively sets aside the funds from the person's account to be given out when the bank draft is used.

Traveler's cheque
A traveler's cheque (also traveller's cheque, travellers cheque, traveller's check or traveler's check) is a preprinted, fixed-amount cheque designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege. They were generally used by people on vacation instead of cash as many businesses used to accept traveller's cheques as currency. Their use has been declining since the 1990s as better alternatives, such as credit cards and automated teller machines became more widely accepted and available.

WITHDRAWAL SLIP
A form or slip of paper from a bank or credit union that is filled out by bank account holders to take money out of their savings or checking account.

Passbook
A passbook or bankbook is a paper book used to record bank transactions on a deposit account. Depending on the country or the financial institution, it can be of the dimensions of a chequebook or a passport. Traditionally, a passbook is used for accounts with a low transaction volume, such as a savings account. Traditionally, a bank teller or postmaster would write, by hand, the date and amount of the transaction, the updated balance, and enter his or her initials. In the late 20th century, small dot matrix or inkjet printers were introduced capable of updating the passbook at the account holder's convenience, either at an automated teller machine or a passbook printer, either in a self-serve mode, by post, or in a branch. Withdrawals normally required the account holder to visit the branch where the account was held, where a withdrawal slip would be prepared and signed. If the account holder was not known to the teller, the signature on the slip and the authorities would be checked against the signature card at the branch, before money was paid out. In the 1960s, banks adopted the black light signature system for passbooks, which enabled withdrawals to be made from passbooks at a branch other than the one where an account was

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opened, unless prior arrangements were made to transfer the signature card to the other branch. Under this system, the passbook's owner would sign in the back of the passbook in an invisible ink and the signing authorities would also be noted. At the paying branch, the signature on the withdrawal slip would be checked against the signature in the book, which required a special ultraviolet reader to read. [1] Nowadays, customer verification is more likely to be by PIN.

For people who feel uneasy with telephone or online banking, this is an alternative to obtain, in real-time, the account activity without waiting for a bank statement. However, contrary to some bank statements, some passbooks offer fewer details, replacing easy-to-understand descriptions with short codes, also known as mnemonics.

Bank statement
An account statement or a bank statement is a summary of all financial transactions occurring over a given period of time on a deposit account, a credit card, or any other type of account offered by a financial institution. Bank statements are typically printed on one or several pieces of paper and either mailed directly to the account holder's address, or kept at the financial institution's local branch for pick-up. Certain ATMs offer the possibility to print, at any time, a condensed version of a bank statement. Historically, bank statements were produced quarterly or even annually. Since the introduction of computers in banks in the 1960s,[1] bank statements are generally produced every month. Lesser frequencies are nowadays reserved for accounts with small transaction volumes, such as investments or savings accounts. Depending on the financial institution, bank statements may include certain features such as the cancelledcheques (or their images) that cleared through the account during the statement period, promotional inserts or important notices about changes in fees or interest rates. Thanks to online banking, financial institutions offer virtual statements, also known as paperless statements or estatements. Due to identity theft concerns, a virtual statement may not be seen as a dangerous alternative against physical theft as it does not contain tangible personal information, and does not require extra safety measures of disposal such as shredding. However, a virtual statement can be easier to obtain than a physical through computer fraud, data interception and/or theft of storage media. Although popular for customers, paperless statements are a way for a bank to reduce their costs.