Important Banking Awareness Materials: Crack BOB PO/SBI PO Mains 2017 (Day-7)- Download in PDF

Important Banking Awareness Materials (Cheques and Types, DD, Rupay card, Kisan credit card, SWIFT, IFSC and MICR codes): Crack SBI PO Mains 2017 (Day-7)- Download in PDF:

Dear Readers, SBI PO Mains Examination is approaching shortly and to Gear Up your preparation we have provided the “15 days Action Plan – Preparation Time Table for SBI PO Mains 2017”, based on the schedule we are provided Important Banking Awareness Materials, kindly make use of it.

Cheque - Definition:

· A cheque (British English) or check (American English) is a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued.

· The person writing the cheque, the drawer, has a transaction banking account (often called a current, cheque, chequing or checking account) where their money is held.

· The drawer writes the various details including the monetary amount, date, and a payee on the cheque, and signs it, ordering their bank, 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.

· 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 whomever it had in their possession (the bearer").

· A cheque is a negotiable instrument 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. 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.

Cheques are of four types:

1). Open Cheque

2). Crossed Cheque

3). Bearer Cheque

4). Order Cheque

1.) Open Cheque:

A Cheque is called “Open” when it is possible to get cash over the counter at the bank. The holder of an open cheque can do the following,

o Receive its payment over the counter at the bank

o Deposit the cheque in his own account

o Pass it to someone else by signing on the back of a cheque

2.) Crossed Cheque:

Since, open cheque is subject to risk of theft; it is dangerous to issue such cheques. This risk can be avoided by issuing another type of cheque called “Crossed Cheque”. The payment of such cheque is not made over the counter at the bank. It is only credited to the bank account of the payee. A cheque can be crossed by drawing two transverse parallel lines across the cheque, with or without the writing ‘Account Payee’ or ‘Not Negotiable’. These lines are usually drawn on the upper left hand corner of the cheque.

3.) Bearer Cheque:

A Cheque which is payable to any person who presents it for payment at the bank counter is called ‘Bearer Cheque’. A bearer cheque can be transferred by mere delivery and requires no endorsement.

4.) Order Cheque:

An order cheque is one which is payable to a particular person. In such a cheque the word ‘bearer’ may be cut out or cancelled and the word ‘order’ may be written. The payee can transfer an order cheque to someone else by signing his or her name on the back of it.

Categorization of Cheques:

· Ante-dated cheques

· Stale Cheque

· Mutilated Cheque

· Post-date Cheque

1). Ante-dated cheques:

Cheque in which the drawer mentions the date earlier to the date of presenting it for payment. For example a cheque issued on 20^th August, 2014may bear a date 5^th August 2014.

2). Stale Cheque: A cheque which is issued today must be presented to the bank for payment within a stipulated period. After expiry of that period, on payment will be made and it is then called ‘Stale Cheque’.

3). Mutilated Cheque: In case a cheque is torn into two or more pieces and presented for payment, such cheque is called “Mutilated Cheque”. The bank will not make payment against such a cheque without getting confirmation of the drawer. But is a cheque is torn at the corners and no material fact is erased or cancelled, the bank may make payment against such a cheque.

4). Post-date Cheque: Cheque on which drawer mentions a date which is subsequent to the date on which it is presented, is called ‘Post-dated Cheque’. For example, if a cheque presented on 5^th April 2015 bears a date of 20^th April 2015, is a post dated cheque. The bank will make payment only Monday or after 20^th April 2015.

Demand Draft:

· A demand draft is a negotiable instrument that is very much similar to a bill of exchange. A bank prepares a demand draft and the amount which is specified on the demand draft is deducted from the person’s account who has requested to make the draft.

· In other words, it is a pre paid instrument in which the amount has already been deducted from the person’s account who has requested to make the draft.

· In a demand draft, a bank issues a demand draft to a client in which another bank or a bank of its own branch is asked to pay a certain sum to the specified party. It is basically used for transfer of money from one account to another.

· The person to whom the demand draft is issued is called the drawer, the other bank which is directed to pay the sum is called drawee and the party to whom the amount is transferred or paid is called the payee.

· For example: You run a small business and you bought goods from a person on credit. You go to the bank are request a demand draft to be issued in the creditors name. The bank issues it and after the demand draft is matured, the creditor goes to the bank and collects his money after showing the demand draft from the bank.

o A DD can be prepared with cash payment if the value is less than 50,000

o For value of 50,000 or more , only paid through bank account.

Rupay Card:

Introduction:

· RuPay E-commerce solution from National Payments Corporation of India (NPCI) enables RuPay cardholders to transact online.

· It not only provides a platform for online transactions but also gives the customers a unique shopping experience.

· NPCI through its e-commerce solution, RuPay PaySecure, is already live with all major Acquiring banks and aggregators in the online space in the country.

Important Details about Rupay Card:

· RuPay e-commerce transaction experience is seamless since the user has to enter just the card details and a One Time Password (OTP) to complete the transaction.

· RuPay is a combination of two words — Rupee and Payment. RuPay Card is an Indian version of credit/debit card.

· It is very similar to international cards such as Visa/Master. RuPay is the Indian domestic card payment network set up by National Payments Corporation of India (NPCI) at the behest of banks in India with the approval of Reserve Bank of India.

· It is created to fulfill the Reserve Bank of India's desire to have a domestic, open loop, and multilateral system of payments in India.

· RuPay facilitates electronic payment at all Indian banks and financial institutions, and competes with Master Card and Visa in India.

· NPCI maintains ties with Discover Financial to enable the card scheme to gain international acceptance.

· National Payments Corporation of India (NPCI) has a plan to provide a full range of card payment services including the RuPay ATM, RuPay Micro ATM, Debit, Prepaid and Credit cards which will be accepted in India and abroad, across various channels like POS, internet, IVR, mobiles, etc.

· The initial focus of NPCI would be to approach those banks who have not been issuing any payment card at all more specifically — Regional Rural Banks (RRBs) and urban cooperative banks.

· RuPay cards are accepted at all automated teller machines (ATMs) across India under National Financial Switch, and under the NPCI's agreement with DFS. RuPay cards are accepted on the international Discover network.

· According to the data published by National Payments Corporation of India, there are around 145270 ATMs and more than 875000 Point of Sale (PoS) terminals in India under the RuPay platform.

· In addition to the ATMs and PoS terminals, RuPay cards are accepted online on 10,000 ecommerce websites with the same AN which they use for ATM transactions.

· RuPay cards are accepted at all PoS terminals in India. To enable this, RuPay has certified 29 major banks in India to accept the RuPay card at their respective PoS terminals located at different merchant locations.

· NPCI has rolled out its chip card for high security transactions using EMV (Europay, MasterCard and Visa) chip technology, which is a global standard for debit and credit cards.

· RuPay chip cards have an embedded microprocessor circuit containing information about the card holder and because transactions are AN based rather than signature based.

· RuPay also provides a unified "Kisan Card", issued by banks across the country under Kisan Credit Card, enabling farmers to transact business on ATMs and PoS terminals.

KISAN CREDIT CARD:

Introduction:

· Kisan Credit Card is offered to farmers in India in order to enable them to access affordable credit. Reserve Bank of India (RBI), along with National Bank for Agriculture and Rural Development (NABARD) initiated the conception of Kisan Credit Cards (KCC) in 1998-99, in order to assist agriculturists to have easily accessible cash credit facilities.

· Kisan Credit Card facility was proposed by the Finance Minister Shri Yashwant Sinha in the FY1998-99 Budget, with the objective of providing accessible short-term credit to farmers to meet their immediate credit requirements during the crop seasons.

· Reserve Bank of India (RBI), with National Bank for Agriculture and Rural Development (NABARD), shouldered the responsibility and initiated the Kisan Credit Cards in India.

Need for KCC:

· To provide timely credit facility to support agriculture and allied activities.

· To eliminate unregulated credit by money lenders.

· To boost nation's Agribusiness environment and productivity to international standards.

Working of KCC:

· Based on the land holdings and the income earned from the cultivation in it, banks issue farmers Kisan Credit Cards.

· The card holder/ farmer should have a good credit history to be eligible for the KCC.

· The Card holders get facilities like passbook, particulars of land holding, address, validity period, credit limit, etc., which acts as the customer’s unique identification and as a system for tracking transactions.

· Kisan credit cards can be used at outlets, as well as to withdraw cash to make the necessary purchases for agriculture.

KCC Interest and other charges:

· Kisan Credit Card interest rates, as well as credit limits, varies from bank to bank. Generally, the applicable interest rate per annum for Kisan Credit Cards is 9%, for a maximum Rs. 3 Lakh as a credit limit.

· The Central government subsidies on interest rate applicable to the financing institutions, provided that the cardholder’s credit history is good.

· The additional interest subsidy of 2% is provided and if the customer has a soundtrack record for 3 years, She/he is eligible for an increased credit limit.

· Other charges and fees involved in taking credit under KCC scheme are insurance premium, processing fees, charges on land mortgage deed, etc.

Benefits of KCC:

· Time and cost-efficient scheme.

· Comparatively lower interest rates.

· Single term loan for all agricultural requirements.

· Flexible repayment options.

· Assists in the purchase of fertilizers, seeds, availing cash discounts from merchants/ dealers, etc.

· Funds withdrawal from any of the Bank’s branches, as per the sole discretion of the bank is possible.

· Income from agriculture and allied sources determines the maximum credit limit.

· Repayment of the credit can be made once the harvest season in over.

· An elaborate documentation process is not required or continuous appraisals under the Kisan Credit Card Scheme.

· Cash withdrawal using the Kisan credit card requires very little paperwork, it is simple and hassle-free for both (the card holder and bank).

· Some other advantages include no transaction costs, lesser risks in loan recovery, etc.

Banks Providing KCC in India:

· NABARD

· State bank of India

· Bank of India

· IDBI

NPCI and KCC:

· RuPay Kisan credit cards are to be offered by National Payments Corporation of India (NPCI), as a part of its domestic card scheme for multilateral payments in RuPay platform.

· Under PMJDY( Jan Dhan Yojana), debit cards are offered in RUPAY platform.

Insurance under KCC Scheme:

· A personal accident insurance cover for farmers who have a Kisan Credit Card, as soon as the customer avails the scheme is provided.

· The individual gets a personal accident cover of Rs. 50,000 in the event of deceased(death), and Rs. 25,000 in the case of disability.

· In order to avail this insurance cover, the customer should not be above the age of 70 years at the time of availing the Kisan Credit Card.

Credit Cards and its Types

1). A credit card is a payment card issued to users as a system of payment which allows the card holder to pay for goods and services based on the holder’s promise to pay for them

2). The size of most of the credit cards are 85.60 × 53.98 mm according to the ISO/IEC 7810 ID-1standard

3). The front of a typical credit card consists of the following parts:

· Issuing bank logo

· EMV chip

· Hologram

· Card number

· Card Network Logo

· Expiration Date

· Card Holder name

· Contactless Chip

4). Similarly the reverse side of a credit card consists of the following parts:

· Magnetic Strip

· Signature Strip

· Card Security Code

5). Important terminologies related to credit cards are as follows:

· Card holder – the consumer or the holder of the card

· Card – issuing bank – the financial institution or other organizations that issued the credit card to the consumer

· Merchant – the individual or business accepting credit card payments for the products or services sold to the consumer

· Acquiring Bank – the financial institution accepting the payment on behalf of the merchant

· Independent sales organization – resellers of the services of the acquiring bank

· Merchant account – it is the organization that the merchant deals with

· Credit card association – an association of the card issuing banks that set transaction terms for merchants, card issuing banks and acquiring banks.

· Transaction networks – the system that implements the mechanics of the electronic transactions

· Affinity partner – an institution that lends their names to an issuer to attract customers that have a strong relationship with that institution and get paid a percentage of the balance for each card issued using their name

6). The transaction steps that are involved in the usage of a credit card are as follows:

· Authorization – verification done by the acquiring bank on the card number, the transaction type and the amount with the issuing bank

· Batching – the authorized transactions are stored in batches which are sent to the acquirer

· Clearing and Settlement – the acquirer sends the batch transactions through the credit card association which debits the issuers for payment and credits the acquirer

· Funding – once the acquirer has been paid, the acquirer in turn pays the merchant

· Chargebacks – is an event initiated by the cardholder where the money in a merchant account is held due to a dispute relating to the transaction

7). Types of Credit Cards

· Business credit cards – specialized credit cards issued in the name of a registered business and can only be used typically for business purposes

· Secured credit cards – it’s a card that is secured by a deposit account owned by the cardholder. The cardholder must deposit between 100% to 200% of the total amount of credit needed

8). Advantages of credit card system to the banks

· Scope and potential for better profitability out of share earned from the merchant’s income

· Helps in banking relationship with new customers

· Provides additional customer service to the existing clients

· Savings of expenses on manpower to handle clearing transactions

9). Advantages of credit card system to the merchants

· Systematic accounting since sale receipts are routed through banking channels

· Assured and immediate settlement

· Avoids all costs and security problems involved in handling cash

· Development of a prestigious clientele base

· Increase in sale because of increased purchasing power of the cardholder due to the unbilled credit available to him

· Advertising and promotional support on a national scale

10). Advantages of the credit card system to the cardholder

· It incorporates a sense of financial discipline in him/her

· Allows the cardholder to delegate spending powers to add-on members

· It extends additional facilities like insurance cover and discounts

· It provides proof of purchase through banking channels thus strengthening the cardholder’s position in case of any disputes with the sellers

SWIFT code:

Introduction:

· The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that helps financial institutions worldwide to send and receive information about financial transactions in a secure and reliable environment.

· The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a standard format of Business identifier codes approved by the International Organization for Standardization (ISO).

· It’s a secure network for sending messages between financial institutions. Set of standards for financial messages are followed.

· A set of connection software and services allowing financial institutions to transmit messages over SWIFT network.

· There are four major SWIFT services. They are

o Securities

o Treasury & Derivatives

o Trade Services

o Payments & Cash Management

SWIFT code:

· Swift Code is a standard format of Bank Identifier Codes (BIC) and is a unique identification code for a particular bank. These codes are used when transferring money between banks particularly for international wire transfers.

· Banks also use the codes for exchanging other messages between them. It is a unique identification code for both financial and non-financial institutions.

· When assigned to a non-financial institution the code will be as a Business Entity Identifier or BEI. The codes can sometimes be found on account statements.

· Business Identifier Codes (BIC) are also known as SWIFT codes.

· The Swift code consists of 8 or 11 characters. When 8-digits code is given, it refers to the primary office.

o First 4 characters - bank code (only alphabets)

o Next 2 characters - ISO 3166-1 alpha-2 country code (only alphabets)

o Next 2 characters - location code (letters and digits)

o Last 3 characters - branch code, optional (letters and digits)

o The last three codes are 'XXX' for primary office.

· Ned bank is primarily a South African bank with its head office in Johannesburg. The SWIFT code for its primary office is NEDSZAJJ.

o NEDS identifies Ned bank

o ZA is the country code for South Africa

o JJ is the code for Johannesburg

o Those transfer interfaces that require an 11 digit code would enter NEDSZAJJXXX

· Allahabad bank in India with its head office in new delhi. The SWIFT code for this is ALLAINBBRPN.

o ALLA identifies Allahabad bank

o IN is the country code for India

o BB is the code for New Delhi

o RPN is the branch code of R.P.C., New Delhi

IFSC Code:

· IFSC stands for Indian Financial System Code.

· It is an alphanumeric code that uniquely identifies a bank branch participating in the two main Electronic Funds Settlement Systems in India: the Real Time Gross Settlement (RTGS) and the National Electronic Funds Transfer (NEFT) Systems.

· It is an 11character code assigned by Reserve Bank of India for the identification of the bank branches.

· The components of IFS code are:

o The first four alphabetic characters representing the bank name,

o The fifth character is 0 (zero) and reserved for future use, and

o The last six characters (usually numeric, but can be alphabetic) representing the branch.

· A list of IFS Code for all the banks can be find out on the RBI website. It is also generally available on your bank account passbook, cheque book.

· Example:

o IFS Code of a branch of Punjab National Bank in Delhi is PUNB0614800.

o The IFSC code consists of 11 Characters : (e.g ICIC0000039)

§ First 4 characters represent the entity (ICIC0000039)

§ Fifth position has been defaulted with a '0' (Zero) for future use (ICIC0000039)

§ Last 6 character denotes the branch identity (ICIC0000039 )

· IFSC is being identified by the RBI as the code to be used for various payment system projects within the country, and it would, in due course, cover all networked branches

MICR Code:

· MICR (Magnetic Ink Character Recognition) Code

· A unique code used to identify the particular branch of a particular bank. It is used mainly by the banking industry to ease the processing and clearance of cheques and other documents.

· The technology allows MICR readers to scan and read the information directly into a data collection device. Unlike barcodes and similar technologies, MICR characters can be read easily by humans.

· It is a 9digit code.

· The components of MICR code are:

o The first three digits represent the city code of the bank branch – generally the pin code initials,

o The next three digits represent the bank code, and

o The last three digits represent the bank branch.

· The MICR Code allotted to a bank branch is printed on the MICR band of cheques issued by bank branches.

26th May 2017 – Today’s Preparation Schedule for SBI PO Mains 2017