Assam Board (ASSEB-AHSEC) Class 11 Finance Unit-4: Different Types Of Bank Accounts And Customers Important Questions and Answers for the 2025 Examination. These notes and important questions and answers, prepared by The Treasure Notes, are helpful for your exam preparation.
Unit-4: Different Types Of Bank Accounts And Customers
Chapter-11 Different Types Of Bank Accounts
1. What are the different types of Bank Account?
Or
What are division of Bank Account on the basis of Term and Demand?
Ans: A Bank Account (Savings) is a type of Bank Account which is a safe place where we can keep our money to save it. We can put money in whenever we want, and take it out whenever we need, usually by using a check or an ATM card. The account also gives us some extra money called interest, just for keeping our money with them. It's a simple way to save money for things we might need soon, like buying groceries or paying bills .
Types of Bank Account
Division on the basis of Term and Demand:
A) Demand Deposit Account: A Demand Deposit Account is a type of bank account where funds are repayable on demand. Depositors have the right to withdraw money from these accounts using methods such as checks or other means. Demand deposit accounts include: i) Savings Bank Account and ii) Current Deposit Account
B) Term Deposit Account: A Term Deposit Account is a type of account accepted by banks for a specified period. Funds deposited in these accounts can only be withdrawn after the predetermined time period has elapsed, and withdrawals cannot be made using checks or other methods. Term deposit accounts include:
i) Fixed Deposit Account
ii) Recurring Deposit Account
These bank accounts can be classified as:-
i) Savings Bank Account
ii) Current Deposit Account
iii) Fixed Deposit Account
iv) Recurring Deposit Account
2. What is a Saving Bank Account? Write its features.
Ans: Savings Bank Accounts are designed for individuals to save money for their future financial needs. They are particularly important for people with varying income levels, as they encourage saving among all income groups, especially those with modest incomes. Depositing small savings in a savings bank account can provide economic relief and is popular among people from all walks of life.
To open a savings bank account, an individual needs to fill out an application form provided by the bank. There's usually a minimum deposit requirement, which varies from bank to bank and depends on the location. While there's no limit to how much money can be deposited, banks impose certain restrictions on withdrawals from these accounts.
Savings bank accounts offer a nominal rate of interest to encourage saving habits. Upon opening an account, the bank provides a Passbook and can issue a chequebook and ATM card upon request. Deposits and withdrawals can be made using pay-in slips, cheques, or debit cards.
Features:
1) Account Opening Eligibility: Savings Bank Accounts can be opened by individuals, joint account holders, minors (with guardians), clubs, charitable institutions, trustees, educational institutions, and religious institutions. However, they are not allowed for trading or business concerns.
2) Minimum Deposit Requirement: There is usually a minimum deposit requirement to open a Savings Bank Account, which varies from bank to bank and depends on the location. However, there is no limit on the amount that can be deposited on a daily basis.
3) Withdrawal Restrictions: Banks typically impose restrictions on the number and amount of withdrawals from Savings Bank Accounts. For example, there may be a limit on the number of withdrawals allowed per year.
4) Interest Rates: Savings Bank Accounts offer lower interest rates compared to fixed deposit and recurring deposit accounts. Interest is calculated on a daily basis.
5) Account Documentation: On opening a Savings Bank Account, the bank provides a Passbook to the account holder Additionally, the bank may issue a chequebook on request.
6) Withdrawal Options: Account holders can withdraw money from their Savings Bank Accounts using withdrawal forms, cheques, or ATMs.
3. What is a Current Account? Write its features.
Ans: A Current Deposit Account, also known as a current account, is designed for conducting large volumes of transactions regularly. It is a running account, maintained solely or jointly, primarily by businesses and other entities. Unlike savings accounts, current accounts typically do not earn interest. The primary objective of a current account is to facilitate smooth financial transactions for businesses.
Features of Current Deposit Account:
i. Account Opening Eligibility: Current deposit accounts can be opened by individuals, businessmen, firms, companies, etc. Minors are not permitted to open such accounts.
ii. Deposit and Withdrawal Flexibility: Account holders can deposit and withdraw money as frequently as needed without any restrictions.
iii. Interest: Generally, no interest is provided on the credit balance in a current account because banks must maintain more liquid funds against these accounts.
iv. Banking Facilities: Banks provide passbooks, chequebooks, and ATM facilities to all current account holders.
v. Overdraft Facilities: Current account holders can avail of overdraft facilities by intimating the bank of their requirements.
vi. Cheque Collection: Banks collect third party cheques and cheques with endorsements on behalf of current account holders.
vii. Credit Facilities: Unlike cash credit directly provided in other types of accounts, loans and advances are granted to current account holders.
viii. Penalties for Minimum Balance: Penalties or incidental charges may be levied if the minimum balance requirement in the current account is not maintained.
ix. Acceptance of Various Instruments: Banks accept bills of exchange, bank drafts, cheques, etc., on behalf of customers besides deposits in current accounts.
4. What is a Fixed Deposit Bank Account? Write its features.
Ans: A Fixed Deposit Account, also known as a time or term deposit account, involves depositing a specific sum of money for a pre-determined period chosen by the account holder. These accounts typically offer higher interest rates compared to other types of accounts. The deposited amount cannot be withdrawn before the maturity of the agreed-upon period, although the bank may allow early withdrawals upon the account holder's request, subject to certain conditions.
Features of Fixed Deposit Account:
i. Account Opening Eligibility: Fixed deposit accounts can be opened in the name of an individual, jointly by two or more persons, or in the name of a minor through a guardian.
ii. Deposit Period and Interest Rate: A certain sum of money is deposited for a specific period of time at an agreed-upon interest rate.
iii. Fixed Deposit Receipt: On receiving the deposit, the bank issues an acknowledgement fixed deposit receipt, which includes details such as the depositor's name, interest rate, maturity date, and the amount to be paid on maturity.
iv. Loss of Receipt: In case the fixed deposit receipt is lost, the customer can obtain a duplicate receipt by submitting authenticated proofs.
v. Interest Rates: Fixed deposit accounts typically offer higher interest rates compared to other deposit accounts, as banks can invest the funds profitably for a longer period.
VI. Withdrawal Restrictions: Withdrawals are not permitted until the maturity period is over, although the bank may offer loans against the deposit
VII. Interest Payment: Interest on fixed deposit accounts is usually paid upon maturity. However, the bank may provide accrued interest to the depositors monthly, quarterly, or half-yearly upon request.
VIII. Tax Liability: Customers are liable to pay income tax if the yearly interest exceeds Rs. 10,000
Advantages of Fixed Deposit Account:
i. Secure Investment: Fixed deposit accounts offer a secure investment option, ensuring the safety of the depositor's funds.
ii. Higher Interest Rates: Depositors enjoy higher interest rates compared to other deposit accounts, making fixed deposits an attractive option for investors.
iii. Liquidity for Banks: Banks can utilize the funds deposited in fixed deposit accounts for loans and advances, thus earning interest.
IV. Loan Facility: Depositors can avail loans against their fixed deposits as needed.
V Flexible Interest Withdrawals: Depositors can withdraw accrued interest on their deposits monthly, quarterly, or half-yearly.
VI Minimum Deposit Period: The minimum period for a fixed deposit is typically 7 days, as per the Reserve Bank of India's directive.
5. What is a Recurring Deposit Bank Account? Write its features.
Ans: A Recurring Deposit Account operates similarly to a fixed deposit account, where a predetermined amount of money is deposited at regular intervals over a fixed period of time. These accounts are designed to promote regular savings, especially among individuals with fixed incomes. Deposits are typically made on a monthly basis for a specified period, and upon maturity, the deposited amount along with interest is repaid to the depositors.
Features of Recurring Deposit Account:
i. Account Opening Eligibility: Recurring deposit accounts can be opened by individuals, jointly by two or more persons, minors jointly with their guardians, or minors in their own name with guardianship ii. Regular Deposit Intervals: Depositors need to deposit a fixed sum of money at regular intervals chosen by them, which could be monthly, quarterly, or half-yearly.
iii. Penalty for Missed Deposits: If the account holder fails to deposit money in a specific period, the bank may levy a charge at a predetermined rate.
iv. Interest Rates: Recurring deposit accounts offer interest rates almost equal to those of fixed deposit accounts, typically higher than other deposit accounts.
V. Passbook Provision: The bank provides a passbook to the account holder to record every deposit made
vi. Loan Facility: Account holders can avail a loan facility of up to 75% of their total deposits.
vii. Transferability: Account holders can transfer their recurring deposit from one branch to another branch of the same bank without incurring any charges.
viii. Withdrawal at Maturity: On maturity, the account holder can withdraw the principal amount along with the accrued interest.
6. Explain the procedures of Opening a Savings Bank Account and Current Deposit Account.
Procedures of Opening a Savings Bank Account and Current Deposit Account:
i. Application on Prescribed Form: The applicant submits a request on the bank's prescribed application form, providing necessary information such as name, date of birth, nationality, type of account, occupation, and address. The applicant also declares compliance with the bank's account maintenance rules.
ii. Photograph: At least two copies of recent passport size photographs are enclosed with the application form and affixed to the specimen signature card.
iii. Identification and Address Proof. The applicant must present valid proof of identity and residential address, such as a passport, PAN card, voter card, government employee identity card, driving license, or electricity bill, along with the application form.
IV. Introductory References: An existing bank customer or a respectable member of society introduces the applicant to the bank, providing details such as name, signature, address, occupation, and account number
v. Permanent Account Number (PAN): The applicant must provide their PAN issued by the Income Tax Authority. If not available, the applicant fills out a prescribed form sent to the income Tax Department by the bank.
vi.Specimen Signature: The applicant provides two or more specimen signatures, which are stored for future reference, often scanned and stored digitally.
vii. Mode of Account Operation: The applicant specifies the mode of account operation, whether individual or joint, and if joint, specifies the mode of operation among account holders.
viii. Nomination: The applicant fills out a nomination form, specifying the nominee(s) to receive the deposits in case of the account holder's unexpected death, providing necessary details such as name, address, age, relationship, and guardian details if the nominee is a minor
ix. Opening the Account: After completing these formalities, the bank agrees to open the account. The applicant then deposits an initial amount via pay-in-slip The bank provides essential account operation tools such as a Passbook, chequebook, pay-in-slip book, and ATM card.
These steps ensure a smooth process for opening both Savings Bank and Current Deposit Accounts.
7. Differentiate between Savings Bank Account and Current Deposit Account.
Answer:-
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Differentiate between Savings Bank Account and Fixed Deposit Account.
Answer:-
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Differentiate between Current Bank Account and Recurring Deposit Account.
Answer:-
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Differentiate between Savings Bank Account and Recurring Deposit Account.
Ans: Differences between Savings Bank Account and Current Deposit Account
8. What do you mean by Passbook? What are its merits/advantages?
Ans: A passbook is a vital booklet provided by the bank to customers upon opening an account. It includes the customer's address, account number, mobile number, and PAN number. The passbook serves as a record of all transactions between the customer and the bank After each transaction, the bank updates the passbook with details of the transaction, enabling the customer to track deposits, withdrawals, and current balance.
Customers should periodically submit the passbook to the bank for updates. Cheque numbers are also recorded in the passbook for transactions involving cheques. Any discrepancies in transactions should be reported to the bank promptly. If lost or filled, customers can request a duplicate passbook from the bank. (Students can ignore this para)
Importance of Passbook:
i. Transaction Records: It provides detailed transaction history, including deposits and withdrawals.
ii. Balance Monitoring: It enables tracking of up to date deposit balances for informed financial decisions.
iii. Cheque Issuance: It helps in issuing cheques confidently based on available funds.
iv. Withdrawal Authorization: It required alongside withdrawal form for bank payments, ensuring security
V. Proof of Account Activity: It serves as tangible evidence of account activity and balance, useful for audits or disputes.
9. Write Short Notes On:
(a) Pay-In-Slip
(b) Cheque Book
(c) ATM Card
Ans:
(a) Pay-In-Slip: The bank issues a pay-in-slip book to account holders for depositing cash, cheques, or drafts into their accounts. Each slip has two parts. Customers fill out both sides with details like date, account number, and deposit amount. The bank retains one part and returns the other stamped with the date as proof of deposit. Nowadays, a single pay-in-slip serves for all account types. Although designs vary, contents remain similar. If depositing a cheque from another bank, the amount is credited once cleared. Pay-in-slips facilitate smooth transactions, ensuring accurate recording of deposits.
(b) Cheque Book: A cheque book, provided by the bank, enables customers to withdraw money and make payments from their accounts. It consists of printed blank cheques and is issued primarily to current account holders. Savings account holders may also receive cheque books upon request and meeting certain balance criteria. Typically containing 10 to 50 leaves, each cheque book includes a requisition slip for obtaining a new one. While pay-in-slips are usually free, banks may charge for cheque book issuance To withdraw money, the customer fills out a cheque and presents it at the bank counter. Alternatively, savings account holders without cheque book facilities can use withdrawal forms available at the bank.
(c) ATM Card: The ATM (Automated Teller Machine) card was introduced in New York City in 1930, gained popularity worldwide, with Hongkong Bank bringing it to India. Available to savings and current account holders, it allows 24-hour access to account status and cash withdrawals. Also known as "Any Time Money," users must adhere to bank rules and safeguard their Personal Identification Number (PIN), a four-digit secret code provided by the bank. Stealing of the PIN can lead to forgery. Lost cards should be reported immediately to the bank. ATM cardholders can withdraw cash and deposit funds anytime, anywhere, as per bank regulations.
10. What are the differences between Passbook and Chequebook?
Answer:-
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Chapter 12: Bank Customer and Banking Ombudsman
1. What is meant by a Bank Customer? What are the conditions recognized for a bank customer?
Ans: The term "customer" in the context of banking refers to an individual or entity that engages in regular transactions with a bank. While there is no statutory definition of a bank customer, generally, someone who holds an account with a bank and conducts transactions qualifies as a customer.
According to Sir John Paget "to constitute a customer there must be some recognizable course or habit of dealing in the nature of regular banking business."
To be a customer of a bank the following two conditions must be satisfied :-
i) there should be a regular habit of transactions between the bank and the customer.
ii) the transaction should be of banking nature.
According to Dr. H.L. Hart, "a customer is one who has an account with a banker or for whom a banker habitually undertakes to act as such."
To be recognized as a bank customer, certain conditions must be met:
1. The individual must have a bank account in their name, such as a savings, current, recurring, or fixed deposit account.
2. The transactions conducted with the bank must be of a banking nature
2. What are the Special Types of Bank Customers?
Ans: In addition to general customers who meet the standard criteria, banks also cater to special types of customers who may require special considerations or precautions. These include:
(a) Minors: Individuals under the legal age of majority who may require guardianship or special account types.
(b) Illiterate Persons: Individuals who may require assistance or accommodations in conducting banking transactions.
(c) Joint Accounts: Accounts held by multiple individuals, each with varying degrees of ownership and access.
(d) Partnership Firms: Businesses formed by two or more individuals who share profits and liabilities, requiring specific documentation and authorization
(e) Companies: Legal entities separate from their owners, which may require corporate documentation and authorization for banking transactions.
Banks must adhere to regulatory guidelines and internal policies when dealing with these special types of customers to ensure compliance and mitigate risks associated with their unique circumstances.
3. Who is a minor? Discuss the procedure of opening an account in name of a minor?
Ans: MINOR: A minor is an individual who has not attained the age of 18 years, as defined by Section 3 of the Indian Majority Act, 1875. Minors lack the legal capacity to enter into valid contracts, except for contracts for necessaries of life, as per Section 11 of the Indian Contract Act, 1872.
Precautionary Measures:
a. Nature of Accounts: Banks may open savings accounts for minors, either in the minor's name, jointly with a guardian, or in the guardian's name for operation. Current accounts are generally not recommended for minors due to their lack of personal liability.
b. Date of Birth Recording: Banks should accurately record the minor's date of birth as provided by the guardian during the account opening process.
c. Death of Guardian: If the guardian passes away before the minor reaches adulthood, the bank should transfer the account funds to the minor upon reaching majority or to a court-appointed guardian.
d. Death of Minor: In the event of the minor's death, account funds are payable to the guardian.
e. Minor as a Partner: While minors typically cannot be partners in a firm, they may be admitted to partnership benefits with the consent of all partners. The minor's liability is limited to their share of profits and assets.
f. Minor as an Agent: Minors can act as agents, but banks should obtain written authorization from the principal, who must be of legal age, to ensure validity of contracts with third parties
4. Who is an illiterate person? Discuss the procedure of opening an account in name of an illiterate person?
Ans: ILLITERATE PERSON: Despite being unable to read or write, an illiterate person still has the right to open a bank account in their own name. When an illiterate individual becomes a bank customer, a relationship develops between the bank and the customer, with the bank assuming increased responsibility. It is essential for bank officers to clearly explain the rules and regulations to the illiterate customer. The following precautions should be taken by the bank when opening and managing an account for an illiterate person:
Precautionary Measures:
(i) Thumb Impression: The bank should obtain the left-hand thumb impression of the depositor on the application form and specimen signature sheet in the presence of an authorized bank official.
(ii) Identification Mark: Physical identification marks should be obtained from the illiterate person at the time of account opening, and it should be noted down in the account opening form and specimen signature sheet. This mark must be certified as authentic by a responsible bank officer.
(iii) Photographs: Three copies of recent passport-sized photographs of the illiterate depositor should be obtained by the bank. One copy should be affixed to the account opening form, another to the specimen signature sheet, and the third to the passbook.
(iv) Account Operation: An illiterate person can deposit money with the assistance of another individual. However, for withdrawals, the illiterate person must personally visit the bank with their passbook and affix their thumb impression in the presence of a bank official on the withdrawal form. If the person is unable to visit the bank, they can send a messenger with an authorization letter containing the signature of two witnesses and authorized by the left-hand thumb impression. Generally, chequebook facilities are not provided to such individuals.
5. What is a Joint Account? Discuss the procedure of opening an account in name of it?
Ans: JOINT ACCOUNT: A joint account is opened when two or more individuals establish an account together in their names. Typically, joint accounts are opened for the convenience of the account holders, allowing any one of them to operate the account as needed. Examples include joint accounts between spouses or business partners. Specific instructions regarding transactions, loans, and advances must be provided in writing and signed by all joint account holders.
Precautionary Measures:
a. Completion of Application Form: The application form for a joint account must be fully completed, including details of all joint account holders, and signed by each individual intending to open the account.
b. Written Instructions: Clear and specific instructions regarding account operation must be provided in writing and signed by all joint account holders
c. Right to Stop Payment: Any joint account holder has the right to stop payment of a cheque issued on the joint account, and the bank must comply with such instructions.
d. Full Name in Documents: The full name of each account holder should be provided in all documents. submitted to the bank, even if the account is to be operated by only one or a few of the joint account holders.
e. Authorization for Transactions: The bank must verify whether the individuals operating the joint account are authorized to conduct transactions, including overdraws, loans, advances, and bill transactions.
f. Withdrawal of Securities: Clear instructions must be provided to the bank regarding the withdrawal of securities held in the joint account and the authority granted to the individual(s) operating the account to pledge these securities.
g. Survivorship Rights: In the event of the death of one or more joint account holders, the balance in the account will belong to the surviving account holder(s). If all joint account holders pass away, any remaining balance will be payable to the legal representative of the last surviving account holder.
6. What is a Partnership Firm? Discuss the procedure of opening an account in name of it?
Ans: PARTNERSHIP FIRM: Section 4 of the Indian Partnership Act, 1932 defines partnership as "The relationship between persons who have agreed to share profits of a business carried on by all or any one of them acting for all."
Each partner is individually referred to as a "partner," and collectively they form a "partnership firm." The name under which the business is conducted is known as the "firm name." A partnership firm is not a separate legal entity but rather a collective name for the individuals involved.
Precautionary Measures:
i. Titles of the Firm's Account: Banks should open accounts in the name of the partnership firm and not in the names of individual partners.
ii. Account Opening Application: An account should be opened in the name of the firm upon receiving an application from one or more partners, with signatures and specimen signatures of all partners obtained.
iii. Copy of Partnership Deed: A copy of the partnership deed must be provided to the bank for examination of its clauses.
iv. Partnership Letter or Mandate: A letter signed by all partners detailing the firm's information and authorizing specific partners to operate the account should be provided.
v. Revocation of Authority: Any partner can revoke the authority given to another partner regarding account operation, and the bank must comply with such instructions.
vi. Delegation of Authority: Authorized partners cannot delegate their authority without written consent from all other partners.
vii. Personal vs. Firm's Account: Transactions related to partnership business should be conducted through the firm's account, and funds must be credited accordingly.
viii. Admission of New Partner: Admission of a new partner requires consent from all existing partners, and the bank should obtain a new mandate reflecting the change.
ix.Liability of Partners: Partners are jointly and severally liable for the firm's debts, and documents should be signed by all partners in their individual capacities.
x. Retirement, Death, or Insolvency: Upon notification of retirement, death, or insolvency of a partner, the bank should operate the firm's account in accordance with the partnership deed.
7. What is a Company? Discuss the procedure of opening an account in name of a company?
Ans: COMPANY: As per the Companies Act, 2013 Sec 2(20), "A company is a company incorporated under this Act or any other previous Law." A company means an association of person registered under the law of the land and operate certain economic activities in order to earn profits. It has a legal entity separate from its members and has a perpetual succession with a common seal.
Justice Lindley defined a company as "An artificial person created by law with a perpetual succession and al common seal."
Precautionary measures should be taken by banks when opening an account for a company.
1. Examination of Documents:
i. Certificate of Incorporation: It provides evidence of the company's registration
ii. Certificate of Commencement of Business: It confirms the company's authorization to start operations.
iii. Memorandum of Association: It defines the company's objectives and fundamental conditions.
iv. Articles of Association: It contains rules and regulations governing internal affairs.
V. Copies of Annual Accounts: It provides insight into the company's financial condition.
2. Copy of Board of Director's Resolution: It specifies authorized individuals for account operation, borrowing, and document execution. It also provides details of authorized advances, including limits, security, and interest rates.
3. Borrowing Powers of the Company:
i. Implied borrowing powers for trading companies.
ii. Non-trading companies require explicit authorization in their memorandum and articles.
iii. Borrowings should not exceed authorized limits specified in the memorandum
4. Registration of Charges:
i. Charges created on company assets for securing loans should be registered with the Registrar of Companies within 30 days.
5. Separation of Company and Personal Accounts:
i. Company accounts and personal accounts of authorized individuals should be maintained separately.
ii. Funds should not be transferred from the company's account to personal accounts.
iii. By adhering to these precautionary measures, banks can ensure compliance with legal requirements and mitigate risks associated with opening accounts for companies
BANKING OMBUDSMAN: MEANING, POWERS AND DUTIES OF BANKING OMBUDSMAN
MEANING The Banking Ombudsman Scheme, introduced by the Reserve Bank of India, aims to resolve complaints related to banking services and facilitate their satisfaction or settlement. The scheme applies to all commercial banks, regional rural banks, and scheduled primary co-operative banks.
Appointment: The Reserve Bank may appoint one or more Banking Ombudsmen. The Banking Ombudsman holds office at the pleasure of the Governor of RBI. Currently, there are 22 Banking Ombudsmen located mostly in state capitals.
Qualification: Banking Ombudsmen are individuals of high standing in legal, banking, financial services, or public administration sectors.
Tenure: Banking Ombudsmen are appointed for up to three years, extendable for another two years, with an overall age limit of 65 years.
Powers and Duties:
1. General:
i. Receive complaints relating to banking services.
ii. Consider complaints and facilitate their resolution through recommendations or awards.
Specific Authority:
i. Address complaints concerning deficiencies in service, such as payment delays, non-adherence to working hours, and fraudulent withdrawals.
ii. Handle complaints related to loans and advances, including non-observance of interest rate directives and delays in loan processing.
ii. Address other matters specified by the Reserve Bank from time to time
iii. The Banking Ombudsman plays a crucial role in ensuring consumer protection and promoting accountability within the banking sector by addressing grievances and facilitating their resolution.
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