Bankers' Wage revision : Utopian Dream of bankers and Pandora Box for Govt, IBA and unions

Bankers' Wage revision : Utopian Dream of bankers and Pandora Box for Govt, IBA and unions

Bankers' Wage revision is long due since 1st Novemeber 2017 which is being done through with the help of bipartite. Let me throw some light over this with a bankers perspective. A few might disagree but I don't mind it much as I am just presenting my views on the same being a banker. This bipartite happens between IBA(INDIAN BANKS ASSOCIATION) and UFBU every five years. UFBU constitutes of the leaders choosen from the various unions of different banks and are considered as the representative of the common bankers wherein the IBA presents the views of the government and usually comprises of the top management of various banks. Now the question comes that why the wage revision which is pending since more than last 2 years is not getting done. IBA has it's point that the banks are not performing well and hence the salary can not be increased in good quantum and hence they offered a hike of 2% initially to all the bankers. Had some one slapped these poor bankers, they would not have felt this kind of pain, agony and embarassment. But this was a slap of IBA not on their face but on their hard-work, their passion, their faith in the bipartite system, their faith in IBA and UFBU, their faith in the fact that justice prevails eventually. Offering a 2% hike was a brazen act which was just meant to humiliate the ufbu fraternity and to break the bankers unity and to erode their faith from UFBU in which IBA has succeeded considerably. Unfortunately the UFBU didn't understand the same initially and showed it's toothless-lion attitude. Had they taken a brave step at that time itself, probably the bipartite would have been achieved long back with much better percentage hike which these bankers actually deserve. They should have shown their unity and should have proved to IBA that before humiliating the bankers like this, they should have thought twice. IBA took advantage of the same and continued enjoying this liberty of giving a hike of 2-3% after every 6 months which has now resulted in a total delay of 2 years and 2 months with the final percentage Hike standing at 12.25%(which is also inclusive of 2% load factor). One of the times envious and much covered job of a banker has now been downgraded so much in terms of salary and perks and perquisites that an educated newly recruited clerk is getting a starting meagre salary of around 22-23k. Forget about the salary of the workmen like substaff who is getting a starting salary of some 11-13k. Thanks to the bubbling and bourgeoning population of this country, still youth is dying to get a job of a clerk and is fighting competitive exams with lakhs and lakhs of similar jobless candidates.

Many proponents of privatization propose for the sale of these nationalized banks without even knowing the consequences of the same. Which ICICI, HDFC, AXIS, HSBC and other private sector mammoth banks have ever done Mass banking in this country. Do they even know the meaning of MASS BANKING. I guess........No.....they don't know it at all. Their ultimate motto is to get profit after providing services to the riches and super-riches. What about the agriculturist of this nation, the Poor's, the students, the lower class, the lower middle class and even the middle class. These people consitute of more than 90% of the population of this country. Don't they deserve to get banking facilities if they can not afford to pay for the services of these private banks. The nationalized banks come forward to rescue and safeguard the rights of these people and these are the banks who provide them service. Someone should file a RTI and figure out that How many crop loans percentage wise are financed by these Private banks in this whole nation. What my prudence tells me is that 

It won't be exceeding 10% of total agricultural finance of the country. How many JANDHAN accounts have been opened by these mammoth private banks. Maximum are with government banks. How much crop insurance work has been taken care by these private banks. They are only there to eat the cream. These crop insurance premiums and policies are taken by these private lenders but the work of debiting the premium, to ensure the land of the farmer, to get his kyc details, etc has been given to government banks. How many mudra loans have been financed by these private sector players. The max has been financed and benefitted by nationalized banks.

Without digressing much, I would like to come back to the topic of wage revision. When a banker decides to go on strike on unions call, everyone else raises their eveybrow as in this is the last thing which shall happen on earth or it will be the end of the world..... Armageddon. All the demands of the bankers have been already dismissed by IBA. I would like to mention a few here. The hike of less than 25% which now seems nearly impossible to achieve. Their demand of five days working is also dismissed as it is not viable as per IBA and RBI(RBI itself works for 5 days a week....Irony....isn't it). The request for making the salary equivalent to 7th CPC has also been not considered. The salary hike is being linked to performance for which they have given name of PLI(Performance linked incentives). I don't remember any other organization where their salary is linked to profitability of the organisation....let me rethink.....railways....No.....BSNL.....No.....FCI......No.....LIC.....No.....Techers......No.....Police.....No.....any Navratna's......No.....Any other PSU.....NO. Also nationalized banks are supposed to do the thankless job of providing DBT benefits, fulfillment of social schemes(JANDHAN/APY/PMJJBY/PMSBY/CROP INSURANCE/MUDRA) of government etc and then the responsibility of remaining in profitability is also being forced upon. These two are contrary objectives and are going to hurt each other's motives and performance which will be making all the three parties suffer equally.... The government......the Banks......and ultimately the Bankers. 

This is the time when unions are eventually left with no other option but to go on strike. They have been requesting for consideration of their demands for last two years. It is still unheard of.....bankers have started calling their unions as spineless and toothless. None of their requests are being adequately fulfilled for so many of last bipartite a. This pain of getting unheard in every bipartite has become unbearable by bankers. There is lot of dissatisfaction in bankers against the bipartite as bipartite has continued to fail miserably for last so many years to take care of the needs of a common banker.

The ever active and prudent government in the great leadership of Shri Narendra modi ji has also failed to intervene so far. What the requirement of the time now is the intervention of the government and to address the issues properly and bring the matter to rest with consensus before it is too late. The plight of the bankers should not be overlooked or else the day is not far when these public sector banks will be left desolate without intellectuals and hard-working sincere officials. That day will bring another era of gloom financially for the comman man of this country.

--

Pushpak Pandey

A Banker

CRR,SLR,MSF,BANK RATE, BASE RATE,REPO, REVERSE REPO BY MEANS OF STORY TELLING

Now is the turn for the few rates which many of us are not so sure abut:

1) Repo Rate: repo rate s d rate at which banks borrow money frm RBI. it is meant for short term borrowing. Short term bole toh upto 90 days. It is against securities. Currently it is 7.75%(check on the last day too before going to ur interviews).It is part of LAF(liquidity adjustment facility)

Now how it is used to adjust liquidity into the market or to control inflation.

Let's take an example: agar mujhe RBI se 100Rs. ka loan lena hai toh samajhiye 7.75% interest dena hoga....matlab mile mujhe Rs.92.25......ab agar RBI ne kahiye repo ko badaa ke Rs.8 kar diya toh....mere haath main bacche Rs.92....matlab Rs0.25 kam pehale se......agar yeh crore main hota toh 0.25 crore kam milta.....Means the money which bank is now left with in it's hand is lesser now. So they will be able to invest less now. Or the cost of borrowing has increased and so banks will be borrowing less money. ie they will b able to spend less and hence the liquidity is lessened or reduced. Inflation kam karne ka tarika hai paisa market se absorb karke as people will b left with less money and hence reduced Purchasing power forcing producers to reduce the cost/prices. So iss an inflation control tool.

Reverse Repo: It is just the opposite of Repo rate....means when banks have excess money then they pool it with rbi.....yaa yun keh lejiye ki wen rbi requires loan den it takes from banks at reverse repo rate. Again LAF tool.

Reverse Repo= Repo - 1%, = 7.75% -1% = 6.75%

Same kahaani....agar reverse repo rate high.....toh banks max paisa RBI ke pass pool kar denge aur market main liquidity kam ho jaayegi. Otherwise agar Reverse repo rate kam hoga toh banks paisa apne pass rakhenge aur invest karenge market main leaving the market with more money. agar inflation low hai toh yeh measure use kiya jaata hai inflation normal laane ke liye as less inflation too is very risky for economy. There should always be a balance.

Bank Rate: It s same as Repo rate(concept wise) but is used for long term means for above 90 days.Secondly securities are not required for these long term loans unlike repo.

Base Rate:This s d rate which has replaced BPLR or PLR. PLR bole toh Prime lending rate that banks ka joh ab use naa howe hai........Base rate s d minimum rate below which banks can not give loans. It is decided by banks themselves with the help of few criteria....but hv to notify rbi and hv to keep base rate same for everyone and all d loans unlike PLR.

Cash Reserve Ratio: This is the amount of money which banks have to compulsively maintain with rbi. Again agar RBI CRR increase karti hai toh it means that it wants to reduce money liquidity frm d market as banks will b left with less cash in their hand.usually lies b/w 4-5%

SLR(Statutory Liquidity Ratio) : Every bank is required to maintain at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). agar RBI issey badaa deti hai toh v banks r left wid less money. These r used for liquidity control in the market.

slr bole toh statutory liquidity ratio.....jisme kuch 24-25% paisa in different forms, banks hv to keep with demselves as per d norms f RBI......take an example....maan le bhaiii Rs.100 hain X bank ke pass....ab agar rbi ne slr 24% rakha hai toh.......X ko Rs.24 toh bank ko apne hi pass rakh dene hain(means dey cannt utilise dat money/invest/give loan)...bacche Rs.76....jisko woh invest/loan etc kar/de sakta hai......ab agar rbi ne SLR badaa ke say 25% kar diya...toh bank ke pass bacche sirf Rs.75....matlab pehale se Rs.1 kam....toh market ka potential Rs.1 se kam ho gyaa.....means rbi leessened d liquidity frm market or reduced money....market main paisa kam toh logon ki purchasing power kam, purchasing power kam toh inflation apne aap hi hoga kam....kyunki agar price badenge toh log khariid naa paanvengeeee becaz f less purchasing power....Same applies in case f lowering f SLR...paisa bad jaayega....aur logon ki PP bad jaayegi...toh inflation apne aap badega....Rs.1 yahan chotta lag raha hoga.....but bak ke hazaaron crore hone ki wajah se 50 basis points yaa .50 ke change se v market pe badaa asar padta haiii......hope em clearr...

Beech main aaya inflation ka ek concept V. Kissi ne poocha tha ki aaj excess money se inflation kaise hota hai: Pasting d reply here too as it is relevant to d matter.

excess money se iflation hota hai....anoither example to explain dis..... socho market main sirf aap aur main hun(as a buyer) aur dono ke Pass Rs.100 hain.....dono dukaan pe jaate hain aur saaman kharid ke le aate hain Rs.100 ka...now if u have 110 Rs. and I hv Rs.100 only....aur socho saaman sirf 1 hi reh gya market main(as population f dis country s so high)....fir aap dukaandaar ke pass jaoge aur bologe ki woh saaman aapko hi de aur mujhe naa de.....bhale hi aapse Rs.5 ya 10 jyaada le le....ab mere pass toh Rs.100 hi hain.....toh main kaise khirdunga....dukaan daar Rs.5 jyaada leke aapko de dega saaman...badaa diyaa naa aapne price bcz f hving excess money.....dass inflationnnnn.....  

MSF(Marginal Standing Facility): this is for overnight borrowing from RBI. Almost same as repo but repo overnight nahi hota......MSF s for very short term.....No securities r required as in the case of repo. And MSF s always 1% higher than repo.

Formula:

Repo = Reverse Repo +1%

MSF = Repo + 1%

Reverse repo as on date = 6.75%(check on d last day too before attending ur interviewsas these rates change often now a days)

Post ur queries as comments guys......

Happy Learning

-- <3

Pp

MONEY MARKET AND CAPITAL MARKET IN INDIA

Hello Guys.......em back with another topic. Apologies for the delay as i got struck wid a few personal things.... Today's topic of discussion will be Money and Capital market in India and the instruments being used. Will b trying to keep it short n crisp as iss a very very long topic. What you all may do is to put ur doubts n queries into d comment section so dat d answer might help sundry n all...Happy Learning Guyzzzz.....Barely r we left wid a week's time for our interview....:

Capital Market and Money Market in India: Both the markets are meant for borrowing and lending of funds.

Before getting into individual details of these, we will try to figure out the difference b/w d two. Capital market is meant for medium to long term lending/borrowing where as Money market is meant for short term lending/borrowing and iss usages.

Now what is short term, medium term and long term

SHORT TERM: Tenures less than 1(one) year

MEDIUM TERM : Tenures more than an year but less than 3(three) years

LONG TERM : Tenures greater than 3 years

Differences: Money market is distinguished from capital on the basis of the maturity

period, credit instruments and the institutions.

1. Maturity Period: The money market deals in the lending and borrowing of shortterm

finance. But the capital market deals in lending and borrowing of long-term

finance.

2. Credit Instruments: The main credit instruments of the money market are trade

bills, promissory notes and Government papers or bills. On the other hand, the main

instruments used in the capital market are stocks, shares, debentures, bonds and

securities of the Government.

3. Nature of Credit Instruments: The credit instruments dealt within the capital

market are more heterogeneous than those in money market.

4. Institutions: Important institutions operating in the money market are central

bank, commercial banks, acceptance houses, non-banking financial institutions,

bill brokers etc. Important institutions in the stock market are stock exchanges,

commercial banks, development banks and non-banking financial institutions such

as insurance companies, mortgage banks and building societies.

5. Purpose of Loans: The money market meets the short-term credit needs of business.

It provides working capital to the industrialists. The capital market, on the other

hand, meets the long-term needs of the industrialists and provides fixed capital to

buy land, machinery etc.

6. Risk: The degree of risk is small in the money market. The risk is much greater in

capital market.

7. Relation with Central Bank: The money market is closely and directly linked with

the central bank of the country. The capital market feels central bank's influence,

but mainly indirectly and through the money market.

8. Market Regulation: In the money market, commercial banks are closely regulated.

In the capital market, the institutions are not much regulated.

9. Basic Role: The basic role of money market is that of liquidity adjustment. The

basic role of capital market is that of putting capital to work preferably to long-term

and productive employment.

CAPITAL MARKET IN INDIA : Capital market operations are operated and regulated in India by SEBI

Functions of Capital Market

The major functions performed by a capital market are as follows:

(a) Mobilisation of financial resources on a nation-wide scale.

(b) Securing the foreign capital and know how to fill up the deficit in the required

resources for economic growth at a faster rate.

(c) Effective allocation of the mobilised financial resources by directing the same to

projects yielding highest yield or to the projects needed to promote balanced economic

development.

Capital Market has three components namely:

1) The Equity Market

2) The Debt Market

3) The Derivative Market

1) and 2) ie Equity and Debt Market both have two segments:

A) Primary Market: which deals with new issues of equity and debt instruments

B) Secondary Market : Which facilitates trading in equity(already existing equities/shares and not the new ones) and debt instruments

A) PRIMARY MARKET: It is a channel for sale of new securities meant for both Govt and Corporates, to raise resources(funds) to meet their requirements of investors and/or discharge their obligations.

Now this issuance f securities may be done at face value or discounted value or at premium. Iska simple sa matlab hai ki Face Value = Rs. 100 ka share Rs.100 main bechha....., Discounted = Rs.100 ka share aaj Rs.90 main becha...kal ko uski keemat shuru 100 se hi maani jayegiii plus d bonus or d interest which it generates after getting available in market....... Premium = Rs. 100/- ka share Rs.120 main beccha aaj....kal se uski value 100 pe hi calculate hogi.

Now, What are the different Kinds of Issues:

1) IPO(Initial Public Offering) : fresh issue of securities for the first time to the public

2) Further Issue : IPO ke baad ki public offerings ko further Issue kehate hain. Means Issuance of securities after IPO one.

3) Rights Issue : A listed organisation proposes to issue a frsh securities to its existing shareholders as on a record date. The rights are offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for orgs who would like to raise capital without diluting the stake of its existing shareholders.

4) Preferential Issue: Dis s an issue f either shares or convertible securities by listed organisations to a select group of people under section 81 of the Companies Act, 1956. This issue is neither a Rights nor Public Issue and is a faster way for any orgs to raise capital.

B) SECOONDARY MARKET :

It facilitates trading in equity(already existing securities or pre-issued securities are traded among investors) and long term debt instruments. These impart liquidity and price discovery. Now, This market could be:

A) Auction Market : Stock exchange is a part of the auction market

B) Dealer Market - OTC(Over-the-Counter) is a part of Dealer Mart

Terms related to Secondary Market:

Corporate action: declaration of dividends, issue of bonus shares, and splitting shares into smaller denominations are called corporate actions. They impact the market price of shares as they alter(change) the intrinsic value of the shares.

Index: Index shows how a specified portfolio of share prices is moving to give an indication of the market trends. ex. S & P CNX Nifty...it is a scientifically developed 50 stock index

SENSEX : is an index based on shares traded on BSE. BSE is a scientifically developed 30 stock index.

3) Derivatives: Equity and debt market is covered in the primary and secondary market.

Derivative is a product whose value is derived from the value of one or more basic variables called underlying. The underlying asset can be equity, foreign exchange, commodity or any other asset.

Types Of Derivatives:

a) Forwards: dis s a customised contract between two entities where settlment takes place on a specific date n d future at today's pre-agreed price.

b) Futures: An agreement b/w 2 partis to buy or sell an asset at a certain time in future at a certain price.

c) Options: a contract which gives the right, but not an obligation to buy or sell d underlying at a stated date and a stated price.

d) Options ki life hoti hai usually upto 1(one) year. Most f d options on the exchanges hv max maturity of nine months. Issassey lambey options huye toh inhe warrant kehate hain. and these are usually traded over the counter(OTC).

Now, Money Market in India

It is the market in which short term funds are borrowed n lent. Lending money institutions are:

Govt f India and other sovereign bodies

Banks n other Developmental Financial institutions

PSUs

Private sector Orgs

Govt/Quasi-govt owned non-corporate bodies

Instruments of Money Market:

1) Call Money: Call or notice money is an amount borrowed or lent on demand for a very short period. If Period >1 day<14days = Notice money otherwise it is called as Call money. No collateral s needed to cover dese transactions.

This is a completely inter-bank market. Interest rates r market determined. both borrowers n lenders need to hv a current account wid RBI. Call market enable banks n institutions to even out their day-to-day deficits n surpluses of money. Co-operative banks, Commercial banks and primary dealers are only allowed to lend or borrow for adjusting their cash reserve adjustments.

2) Treasury Bills: dese r d lowest risk category instruments for d short term. RBI issues T -Bills at a prefixed date and for a fixed amount. There r 4 types f T-Bills which r mentioned below:

a) 14 Day T-Bills: Maturity: 14 days, auctioned on every friday f every week, Notified amount for auction = 100 crores

b) 91 Day T-Bill: Maturity : 91 days, auctioned on every friday f every week, Notified amount for auction = 100 crores
c) 182 day T-Bill : Maturiy : 182 days, auctioned on every alternate wednesday which is not a reporting week, Notified amount for auction = 100 crores

d 364 days T-Bill : Matuity is 364 days, auctioned on every alternate wednesday which is a reporting week, Notified amount for auction = 500 crores

3) Certificates of Deposits(CODs) : After T-Bills, the next lower risk category investment option is CODs issues by banks n Financial institutions. Allowed in 1989. A COD is a promissory note, secured n short term, of upto one year in nature.

A COD is issued at a discount to the face value. discount rate being negotiated b/w the issuer n d investor. 90 days CODs are most famous even if till one year maturity are allowed in the market.

4) Commercial Papers : Negotiable Short term unsecured promissory notes with fixed maturities, issued by well-rated organisations. Generally sold on discount basis. Orgs can issue it directly or through banks or merchant banks(called as dealers). Normally issued in d multiples of Rs.5 Crores for 30/45/60/90/120/180/270/364 days.

5) Inter-corporate deposits : It is an unnsecured loan extended by one corporate to another. This market allows fund surplus corporate to lend to other corporate. High Risk with High Returns. Better rated Corporates lend money from banking system aur kam ratings waale corporates ko loan de dete hain at high rates kyunki unko kam ratings ki wajah se bank se loan nahin mil paata. Risk is high and so is the return.

6) Commercial Bills : Start karte hain Bills of exchange(BOE) se.... BOE are negotiable instruments drawn by the seller or drawer of the goods on the buyer or drawee of the good for the value of goods delivered. Inn Bills ko TRADE BILLS kehate hain. Ab inn Trade bills ko commercial bills tab kahaa jaata hai jab when they are accepted by commercial banks.

Now technically, The commercial bill is a bill drawn by one merchant firm on the other.

Generally, commercial bills arise out of domestic transactions. The legitimate purpose of

a commercial bill is to reimburse the seller while the buyer delays payment. In India, the

commercial bill market is highly undeveloped. The two major factors which have arrested

the growth of a bill market are: (i) popularity of cash credit system in bank lending, and

(ii) the unwillingness of the larger buyer to bind himself to payment discipline associated

with the commercial bill. Among other factors which have prevented growth of genuine bill

market are lack of uniformity in drawing bills, high stamp duty on usance or time bills and

the practice of sales on credit without specified time limit.

7) Ready Forward Contracts: transactions in which two parties agree to sell and purchase the same security.Isme seller* securities becchta hai iss waade ke saath ki woh dobara inn securities ko ek fixed rate pe certain fixed time ke baad khud waapis khareed lega. Issi tarah Buyer^ securities kharidata haii iss waade ke saath ki woh ek fixed time pe fixed price pe inn securities ko seller ko waapis becch dega.

Ab aise transaction ko Repo tab kahaa jaata hai jab hum issey buyer^ of securities ke prospective se dekhein. Aur Reverse Repo tab kahaa jaata hai jab hum issey seller* of funds ke prospective se dekhein.

* -- Seller

^ -- Buyer. Yeh samjhane ke liye hai.... seller/buyer concept oopar hindi main issiliye diya hai. Ussase relate karke repo/reverse repo samajhane ki koshish karein. Theek se samajh aaiyega...... 

8) Dated Govt Securities : Lowest risk category instrument. Issued by GOV and state Govts. Date f maturity is specified n dat s why it s called as Dated Govt Secs. Govt borrows money/funds through the issue of long term dated securities. Issued through auctions conducted by RBI, where RBI decides the coupon or discount rate depending upon the response received. Jyaadatar fixed interest bearing securities hi rehati hain per kavi kavi Zero coupon instruments aur floating rate securities bhi aati hain.

Hope you all would have got a glimpse of indian money and capital market...... Share your feedback in the comments section guys....Happy Learning.

-- <3

Pp

LIST OF RBI GOVERNORS OF INDIA

List of RBI Governers in India

I am sharing the list of Governors of Reserve Bank of India for your reference. 

1.Sir Osborne Smith -- First Governor 1935

2.Sir James Taylor Sir 

3.C D Deshmukh Sir 

4.Benegal Rama Rau 

5.K G Ambegaonkar 

6.H V R Iengar 

7.P C Bhattacharya 

8.L K Jha 

9.B N Adarkar 

10.S Jagannathan 

11.N C Sen Gupta 

12.K R Puri 

13.M Narasimham 

14.Dr. I G Patel 

15.Dr. Manmohan Singh 

16.A Ghosh 

17.R N Malhotra 

18.S Venkitaramanan 

19.Dr. C Rangarajan 

20.Dr. Bimal Jalan 

21.Dr. Y V Reddy 

22.Dr. D. Subbarao

23. Raghuram Rajan -- Current Governor

-- <3

Pp

TYPES OF ACCOUNTS IN INDA: CURRENT, SAVINGS AND RECURRING/FIXED DEPOSITS

Guys, starting wid d most basic things......Got a good explanation of Types of Banking accounts, Posting it here for U all too.....! ! ! ! Post your queries as comments so that we all can learn further in detail. 

1. CURRENT ACCOUNT

2. SAVINGS ACCOUNT

3. RECURRING ACCOUNT

1. What is a Current Account ? Who uses current accounts? Current Accounts in Banks

Current Accounts are basically meant for businessmen and are never used for the purpose of investment or savings. These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day. Most of the current account are opened in the names of firm / company accounts. Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties. No interest is paid by banks on these accounts. On the other hand, banks charges certain service charges, on such accounts.

Features of Current Accounts :

(a) The main objective of Current Account holders in opening these account is to enable them (mostly businessmen) to conduct their business transactions smoothly.

(b) There are no restrictions on the number of times deposit in cash / cheque can be made or the amount of such deposits;

(c) Usually banks do not have any interest on such current accounts. However, in recent times some banks have introduced special current accounts where interest (as per banks' own guidelines) is paid

(d) The current accounts do not have any fixed maturity as these are on continuous basis accounts

2. What is a Savings Bank Account ? Who uses Saving Bank Accounts ?

These deposits accounts are one of the most popular deposits for individual accounts. These accounts not only provide cheque facility but also have lot of flexibility for deposits and withdrawal of funds from the account. 

- Most of the banks have rules for the maximum number of withdrawals in a period and the maximum amount of withdrawal, but hardly any bank enforces these. However, banks have every right to enforce such restrictions if it is felt that the account is being misused as a current account. 

Till 24/10/2011, the interest on Saving Bank Accounts was regulated by RBI and it was fixed at 4.00% on daily balance basis. However, wef 25th October, 2011, RBI has deregulated Saving Fund account interest rates and now banks are free to decide the same within certain conditions imposed by RBI. 

Under directions of RBI, now banks are also required to open no frill accounts (this term is used for accounts which do not have any minimum balance requirements). Although Public Sector Banks still pay only 4% rate of interest, some private banks like Kotak Bank and Yes Bank pay between 6% and 7% on such deposits.

- From the FY 2012-13, interest earned upto Rs 10,000 in a financial year on Saving Bank accounts is exempted from tax. 

Glossary :

No frill accounts : this term is used for accounts which do not have any minimum balance requirements.

3. What are Recurring Deposit Accounts ? Who use Recurring Deposit Accounts ? or RD accounts

These are popularly known as RD accounts and are special kind of Term Deposits and are suitable for people who do not have lump sum amount of savings, but are ready to save a small amount every month. Normally, such deposits earn interest on the amount already deposited (through monthly installments) at the same rates as are applicable for Fixed Deposits / Term Deposits. *These are best if you wish to create a fund for your child's education or marriage of your daughter or buy a car without loans or save for the future.*

Under these type of deposits, the person has to usually deposit a fixed amount of money every month (usually a minimum of Rs,100/- p.m.). Any default in payment within the month attracts a small penalty. However, some Banks besides offering a fixed installment RD, have also introduced a flexible / variable RD. Under these flexible RDs the person is allowed to deposit even higher amount of installments, with an upper limit fixed for the same e.g. 10 times of the minimum amount agreed upon.

These accounts can be funded by giving Standing Instructions by which bank withdraws a fixed amount on a fixed date of the month from the saving bank of the customer (as per his mandate), and the same is credited to RD account.

Recurring Deposit accounts are normally allowed for maturities ranging from 6 months to 120 months. A Pass book is usually issued wherein the person can get the entries for all the deposits made by him / her and the interest earned. Banks also indicate the maturity value of the RD assuming that the monthly installments will be paid regularly on due dates. In case installment is delayed, the interest payable in the account will be reduced and some nominal penalty charged for default in regular payments. Premature withdrawal of accumulated amount permitted is usually allowed (however, penalty may be imposed for early withdrawals). These accounts can be opened in single or joint names. Nomination facility is also available.

The RD interest rates paid by banks in India are usually the same as payable on Fixed Deposits, except when specific rates on FDs are paid for particular number of days e.g. 500 days, 555 days, 1111 days etc i.e. these are not ending in a quarter.