Banking Domain Knowledge for Software Professionals

Banking Domain Basics for IT Professionals, Types of Banks, Types of Banking Accounts, Types of Banking Products, Types of Loans, and Types of deposits.
1. Introduction
A Bank is a financial institution that provides banking and other financial services to its customers. Banks are a subset of the financial services industry and play an important role in the global economies.
Banks play a key role in the entire financial system by mobilizing deposits from households spread across the nation and making these funds available for investment, either by lending or buying securities.
2. Primary Functions of Banks
All banks have to perform two major primary functions, One is Accepting deposits. and another is Granting of loans and advances.
a. Deposits.
i. Saving Deposits
The account for saving deposits can be opened in a single name or in joint names. The depositors just need to maintain a minimum balance which varies across different banks.
ii. Fixed Deposits
Also known as Term Deposits, money is deposited for a fixed tenure. No withdrawal money during this period allowed. In case depositors withdraw before maturity, banks levy a penalty for premature withdrawal.
iii. Current Deposits
They are opened by businessmen. The account holders get an overdraft facility on this account. These deposits act as short-term loans to meet urgent needs.
iii. Recurring Deposits
A certain sum of money is deposited in the bank at a regular interval. Money can be withdrawn only after the expiry of a certain period. This type of account is operated by salaried persons and petty traders.
b. Granting of Loans & Advances
Bank offers the following types of Loans and Advances:
i. Bank Overdraft
This facility is for current account holders, it allows account holders to withdraw money anytime more than available in bank balance but up to the provided limit. An overdraft facility is granted against collateral security.
ii. Cash Credits
A short-term loan facility up to a specific limit fixed in advance. Banks allow the customer to take a loan against a mortgage of certain property.
iv. Loans
Banks lend money to the customer for short-term or medium periods of say 1 to 10 years against tangible assets.
v. Discounting the Bill of Exchange:
It is a type of short-term loan, where the seller discounts the bill from the bank for some fees.
3. Secondary Functions of Banks
a. Transfer of Funds:
Transferring of funds from one branch/place to another.
b. Bill Payments
c. Periodic Collections
Collecting dividends, salaries, pension, and similar periodic collections on the clients’ behalf.
d. Periodic Payments
Making periodic payments of rents, electricity bills, etc on behalf of the client.
e. Collection of Cheques
Like collecting money from the bills of exchanges, the bank collects the money of the cheques through the clearing section of its customers.
f. Portfolio Management
Banks manage the portfolio of their clients. It undertakes the activity to purchase and sell the shares and debentures of the clients and debits or credits the account.
g. Utility Functions of Banks:
• Issuing letters of credit, traveler’s cheque, etc.
• Undertaking safe custody of valuables, important documents, and securities by providing safe deposit vaults or lockers.
• Providing customers with facilities of foreign exchange dealings
• Underwriting of shares and debentures
• Dealing in foreign exchanges
• Standing guarantee on behalf of its customers, etc.
4. Types of Banks
There are many different types of banks in the world and each serves its own special purpose.
a. Retail Banks
The majority of people are the most familiar with retail banks, as they are aimed primarily at consumers.
b. Commercial Banks
Commercial banks service primarily individuals and small businesses. Typically, they will offer similar services as a retail bank.
c. Central Banks
Central banks serve a more governmental role than the other kinds of banks.
d. Cooperative Banks
Cooperative or mutual banks can offer the financial products that both retail and commercial banks provide.
e. Investment Banks
Investment banks serve as intermediaries and advisers for large corporations, governments, hedge funds, and other financial institutions.
f. Private Banks
Like many other banks, private banks offer a suite of financial products and services, but to a much more specific audience.
g. Online Banks
While retail banks have traditionally had physical locations, many are beginning to migrate to a purely digital space.
h. Credit Unions
A credit union is a type of cooperative bank that is entirely member-owned.
i. Savings and Loan Associations
5.Type of Bank Accounts
a. Savings Account
b. Current Account
c. Recurring Deposit Account
d. Fixed Deposit Account
e. DEMAT Account
6. Types of Bank Loans
7. Banking Software Applications

[@gcreddy]

Banking domain fundamentals document (video notes) gcreddy.info/banking-domain-fundamentals/

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[@revanth.rrakshith3733]

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