BANK MONEY / DEPOSIT MONEY Flashcards
What is the primary purpose of a cheque?
A cheque is a written instruction to a bank to pay a specific amount of money from one person’s account to another person or business.
Name the three parties involved in issuing a cheque.
Drawer (the person writing the cheque)
Drawee (the bank paying the money)
Payee (the person or business receiving the money)
Explain the difference between a stale cheque and a post-dated cheque.
Stale cheque: A cheque that is over 3 months old and may not be accepted by the bank.
Post-dated cheque: A cheque written with a future date, and can only be cashed on or after that date.
What is an open or bearer cheque?
An open or bearer cheque has no lines crossed through it. This means anyone who has it can cash it.
What is the purpose of the IFSC code on a cheque?
The IFSC code is a unique code that identifies the specific bank branch where the money should be taken from. It’s like the branch’s address.
What does the MICR code on a cheque do?
The MICR code is printed with magnetic ink and contains important cheque details. It helps machines quickly read and process the cheque for payment.
What is a demand draft?
A demand draft (DD) is a payment method where your bank issues a document guaranteeing a specific amount of money to the receiver. It’s like a pre-paid check where the bank itself verifies the funds.
How does a demand draft work?
You visit your bank and request a DD for the desired amount and payee (receiver).
Your bank deducts the amount from your account.
The bank creates a DD document that includes your name, the receiver’s name, and the amount.
You provide the DD to the receiver, who deposits it in their bank.
Why would someone use a demand draft instead of a regular check?
Security: A DD is guaranteed by the bank, less likely to bounce due to insufficient funds.
Long-distance payments: DDs can be physically mailed and cashed in different cities.
Are there any disadvantages to using demand drafts?
Yes.
Slower: Getting a DD created and deposited takes more time than instant online transfers.
Inflexible: Difficult to cancel a DD once it has been issued.
What is an overdraft?
An overdraft is a bank-provided facility allowing customers to withdraw money from their account even if they have insufficient funds. It’s essentially a short-term loan.
Does the Pradhan Mantri Jan-Dhan Yojana (PMJDY) offer overdraft facilities? If so, what is the limit?
Yes, the PMJDY offers overdraft facilities of up to Rs 10,000 under specific conditions.
Explain the key difference between overdrafts and loans.
Overdrafts are designed for short-term, smaller operating expenses. Loans are intended for longer-term, higher-value financial needs.
What are some potential costs associated with using an overdraft?
Banks usually charge interest on overdrafts. Additionally, you might incur fees for overdrawing your account.
Can frequent overdrafts negatively impact your financial standing?
Yes, regularly overdrawing your account can harm your credit score.
What is a cheque?
A cheque is a written instruction to your bank to pay a specific amount of money from your account to the person or company named on it.
What is NPCI’s Cheque Truncation System (CTS)?
CTS is a system that speeds up cheque clearing by using digital images instead of physically transporting cheques. This leads to faster money transfers.
Explain in detail how NPCI’s Cheque Truncation System (CTS) works.
CTS streamlines cheque clearing through this process:
Scanning and Imaging: The cheque is scanned at the bank where it’s deposited, creating a digital image.
Data Extraction: Key information is extracted from the image: date, payee, amount, bank codes, etc.
Electronic Transmission: The image and data are sent electronically through the CTS network.
Clearing and Settlement: The receiving bank verifies the information and authorizes the transfer of funds.
