Banking Operations and Services
What the domain tests
Banking Operations and Services tests account selection, KYC, payment instruments, loans and routine bank procedures. Questions often ask which account or service fits a situation.
Core rules and concepts
- Savings account: for individuals, interest-bearing, with withdrawal restrictions. Current account: for businesses, usually no interest, with high transaction freedom. Fixed deposit: lump sum for a fixed term at a fixed rate, with premature-withdrawal penalty. Recurring deposit: monthly deposits that mature after a set term.
- KYC means identity, address and photograph verification. It is mandatory before opening an account or taking many loans. Joint accounts require KYC of all holders. A nomination is optional but recommended.
- In a cheque, the drawer writes it, the drawee bank pays and the payee receives. An account-payee or crossed cheque is credited to a bank account and cannot be encashed at the counter. Dishonour for insufficient funds can lead to bank charges and legal consequences.
- A demand draft is a prepaid bank instrument. NEFT, RTGS and IMPS are electronic transfer services. A passbook or statement records transactions.
- Loans have principal, interest, collateral, fees and a repayment schedule. Default damages the credit record.
Worked example
A shopkeeper deposits and withdraws cash many times daily. A current account fits better than a savings account because it is designed for business transactions, although it usually pays no interest. A salaried person saving monthly could use a savings account plus a recurring deposit for a goal. If the shopkeeper issues a ₹25,000 cheque with only ₹18,000 available, the cheque will be dishonoured; the bank may charge a fee and the payee can pursue legal remedies. Reasoning: account choice follows the transaction pattern, and cheque payment depends on available funds and mandate.
Traps that cost marks
Do not say a current account earns high interest. Do not treat KYC as optional. Do not assume a nominee becomes the owner of the money; nomination guides settlement. Do not say an account-payee cheque can be cashed over the counter. Do not ignore loan interest and fees when comparing repayments.