WBBSE Madhyamik Banking & Financial Services (Vocational) cheat sheet

A bank is a financial intermediary that accepts deposits from surplus units and lends to deficit units, earning the spread between deposit and lending rates.

Central bank of India is the Reserve Bank of India (RBI), established 1935 and nationalised 1949; it regulates banks under the Banking Regulation Act, 1949.

Scheduled banks are those listed in the Second Schedule of the RBI Act, 1934; they must satisfy minimum paid-up capital and reserve requirements.

Types by ownership/structure: public sector, private sector, foreign, cooperative, regional rural banks (RRBs), and small finance banks.

Commercial banks run on the fractional reserve principle: they keep a fraction of deposits as reserves and lend the remainder, creating credit.

CRR (Cash Reserve Ratio) is the share of net demand and time liabilities held as cash with RBI; SLR is held in approved securities and cash.

Functions of a bank: accepting deposits, lending, agency functions (payments, collections), and general utility services (lockers, drafts).

Priority Sector Lending requires banks to direct a mandated share of credit to agriculture, MSMEs, education, housing and weaker sections.

Deposit accounts: savings (interest-bearing, withdrawal limits), current (no interest, meant for business), fixed deposit (lump sum, fixed term) and recurring deposit (periodic instalments).

KYC (Know Your Customer) requires identity, address and photograph verification before opening an account; it is mandatory under RBI master directions.

A cheque is a bill of exchange drawn on a specified banker and payable on demand; crossing (two parallel lines) restricts it to collection through a bank account.

Dishonour of a cheque for insufficient funds attracts Section 138 of the Negotiable Instruments Act, 1881, with criminal liability.

Endorsement transfers rights in an instrument; a blank endorsement bears only the signature, a full endorsement names the endorsee.

Loan types: cash credit and overdraft (working capital, running limits), term loans (fixed repayment), and demand loans (repayable on demand).

A mortgage hypothecates immovable property as security; a pledge delivers movable goods, while a lien gives the banker a right to retain goods.

A bank guarantee is a contingent liability: the bank pays the beneficiary if the applicant defaults on a contractual obligation.

A budget is: Income minus Fixed Expenses minus Variable Expenses equals Surplus or Deficit; a positive result enables saving and investment.

Emergency fund rule: hold 3 to 6 months of essential expenses in a liquid, low-risk instrument such as a savings account or liquid fund.

Compound interest formula: A = P(1 + r/n)^(nt), where P is principal, r annual rate, n compounding frequency per year, t years.

Simple interest formula: SI = (P × R × T) / 100, where R is the annual rate percent and T the time in years.

Rule of 72: years to double money is approximately 72 divided by the annual interest rate percent.

Inflation erodes purchasing power; real return equals nominal return minus inflation rate, so a 6% return with 5% inflation gives 1% real return.

Distinguish needs (rent, food, insurance) from wants (entertainment, gadgets); budgeting prioritises needs and debt repayment before discretionary spending.

Credit score in India is issued by bureaus such as CIBIL and ranges from 300 to 900; higher scores improve loan approval odds and lower interest rates.

Savings are low-risk, liquid holdings; investments carry market risk with higher expected return; insurance transfers risk of loss to an insurer for a premium.

Instruments by risk: savings account and fixed deposit (low), debt mutual funds and PPF (moderate), equity shares and equity funds (high).

Public Provident Fund (PPF) has a 15-year term, statutory interest set quarterly, and partial withdrawal and loan facilities after specified years.

A mutual fund pools money from many investors; NAV (Net Asset Value) equals total scheme assets minus liabilities divided by units outstanding.

Life insurance pays a sum assured on death or maturity; general insurance covers fire, marine, motor and health risks on indemnity principles.

Insurable interest and utmost good faith (full disclosure) are core insurance principles; non-disclosure can void a policy claim.

Diversification reduces unsystematic risk by spreading funds across assets; it does not remove systematic market risk.

A recurring deposit builds savings through fixed monthly instalments and earns interest similar to a fixed deposit of matching tenure.

NEFT settles in batches, RTGS settles in real time with a minimum transaction of Rs 2 lakh, and IMPS is available 24x7 through mobile banking.

UPI is a real-time payment system by NPCI using a Virtual Payment Address (VPA) such as name@bank; it links multiple bank accounts to one app.

Aadhaar Enabled Payment System (AePS) allows basic banking using Aadhaar number and biometric authentication at a business correspondent point.

Card security: CVV is a 3-digit code on the card's reverse; the PIN must never be shared, and OTP validates online transactions.

Phishing is fraudulent email or message soliciting credentials; vishing uses phone calls; smishing uses SMS to steal financial data.

Mobile banking vs internet banking: both are bank-run channels, whereas a payment app or wallet may be a third-party prepaid instrument.

Two-factor authentication combines something you know (PIN/OTP) with something you have (card/device), reducing unauthorised access risk.

Report unauthorised electronic transactions promptly; RBI rules limit customer liability when the fraud is reported within three working days.

Accounting equation: Assets = Liabilities + Capital (owner's equity); every transaction keeps this equation balanced.

Double entry rule: every transaction has equal debits and credits; total debits always equal total credits in the ledger.

Debit increases assets and expenses; credit increases liabilities, capital and income. Debit the receiver, credit the giver applies to personal accounts.

Golden rules: real accounts - debit what comes in, credit what goes out; nominal accounts - debit expenses/losses, credit incomes/gains.

Journal is the book of original entry; posting transfers entries to ledger accounts, and the trial balance tests arithmetical accuracy.

Capital expenditure acquires long-term assets; revenue expenditure covers day-to-day running costs and is charged to profit and loss.

Depreciation allocates an asset's cost over its useful life; straight-line method charges an equal amount each year.

Bank reconciliation statement reconciles the cash book balance with the passbook balance, explaining cheques issued but not presented and deposits not yet credited.

Service quality dimensions: reliability, responsiveness, assurance, empathy and tangibles; reliability is usually the most valued by customers.

Communication process: sender, message, encoding, channel, decoding, receiver, feedback and noise; feedback confirms the message was understood.

Active listening means attending fully, paraphrasing and confirming, rather than preparing a reply while the customer speaks.

Grievance redressal: a bank must display the internal ombudsman and RBI Integrated Ombudsman Scheme details; complaints are acknowledged and time-bound.

A service failure recovered promptly and fairly often raises loyalty more than a faultless transaction; this is the service recovery paradox.

Confidentiality is a banker's duty; customer data must not be disclosed except under law, court order or with consent.

Written communication in banking should be clear, courteous, concise and correct; avoid jargon and ambiguous promises.

Diversity and accessibility: provide ramps, Braille signage, and multilingual assistance so services reach all customer segments.

A business plan covers the idea, market analysis, operations, management, financial projections and funding requirement; it is required for most loan applications.

Business structures in India: sole proprietorship (unlimited liability), partnership (joint liability), LLP (limited liability), and private limited company.

MUDRA loans under Pradhan Mantri MUDRA Yojana: Shishu up to Rs 50,000, Kishore Rs 50,001 to 5 lakh, Tarun above Rs 5 lakh to 10 lakh.

Startup India and Stand-Up India support new ventures; Stand-Up India funds SC/ST and women entrepreneurs for greenfield projects.

Break-even point in units equals fixed costs divided by contribution per unit, where contribution equals selling price minus variable cost per unit.

Working capital cycle equals inventory days plus receivable days minus payable days; a shorter cycle reduces the need for borrowed funds.

A business correspondent or banking correspondent agent earns commission by delivering banking services in rural and underserved areas.

Financial self-employment options include insurance agency, mutual fund distribution, accounting and tax filing services, and loan consultancy.

A project report structure: title, objectives, methodology, data collection, analysis, findings, conclusion and bibliography.

Primary data come from surveys, interviews and observation; secondary data come from RBI publications, bank annual reports and government statistics.

A field visit report should record the institution's name, date, purpose, observed processes, staff interaction and learning outcomes.

Internal assessment typically combines project work, practical file, viva and classroom participation; marks are awarded against a rubric.

A cheque-filling practical must show date, payee name, amount in words and figures matching, signature and account number, with no overwriting.

Data presentation: tables for precision, bar charts for comparison, pie charts for composition; label axes and state units.

Maintain a sample collection file with deposit slip, withdrawal form, cheque, passbook entry and account opening form for practical assessment.

Ethical project work means citing sources, avoiding plagiarism, and keeping customer data anonymised in any survey or case study.