TYPES OF MONEY

Commodity Money - Commodity money value is derived from the commodity out of which it is made. The commodity  itself represents money, and the money is the commodity.  

 Representative Money - is money that includes token coins, or any other physical tokens like certificates, that can be reliably exchanged for a fixed amount/quantity of a  commodity like gold or silver. 

 Fiat Money - Fiat money, also known as fiat currency is the money whose value is not derived from any intrinsic value or any guarantee that it can be converted into valuable commodity (like gold). Instead, it derives value only based On government order (fiat) 

Commercial Bank Money - Commercial bank money or the demand deposits are claims against financial institutions which can be used for purchasing goods and services. 

Reserve Money (M 0)

Currency in circulation + Bankers‘ ‘deposits with the RBI + ‘Other’ deposits with the RBI = Net RBI ‘credit to the Government + RBI credit to the commercial sector + RBI's claims on banks + RBI's net is foreign assets + Govemment’s currency liabilities to the public - RBI's net non-monetary liabilities.

M1=Currency with the public + Demand deposits with the banking system + 'Other' deposits with the RBI

M2=M1 + Savings deposits of office savings banks. 

M3=M1+ Time deposits with the banking system = Net bank credit to the Government + Bank credit to the Commercial sector + Net foreign assets of the banking sector + Goveinment’s currency liabilities to the public - Net non monetary liabilities of the banking sector.

M4=M3 +All deposits with post office savings banks (excluding

National Savings Certificates)

Note:

Bhartiya Reserve Bank Note Mudran Private Limited

(BRBNMPL)

The Reserve Bank established BRBNMPL in February 1995 as a  wholly-owned subsidiary to augment the production of bank notes in India and to enable bridging of the gap between supply and demand for bank notes in the country.

No Frill Account

'No Frills 'account is a basic banking account. Such account requires either nil minimum balance or very low minimum

balance. Charges applicable to such accounts are low.

The RBI in 2005-06 called upon Indian banks to design a ‘no frills

account’ – a no precondition, low ‘minimum balance maintenance’ account with simplified KYC (Know Your Customer) norms.

But all the existing ‘No-frills’ accounts opened were converted

into BSBDA in compliance with the guidelines issued by RBI in

2012.

BSBDA

I n 2012, RBI introduced BSBDA. Some important points are:

This account shall not have the requirement of any minimum

balance.

The services available in the account will include: deposit and withdrawal of cash at bank branch as well as ATMs; receipt/credit of money through electronic payment channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and departments;

While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals.

 Facility of ATM card or ATM-cum-Debit Card.

Business Correspondent

 Business correspondents are bank representatives. They personally go to the area allotted to them and carry out banking. They help villagers to open bank accounts, in banking transactions etc.



Business Correspondents get commission from bank for every new account opened, every transaction made via them, every loan-application processed etc. 

Important initiatives for Financial Inclusion

Financial inclusion involves

1) Give formal banking services to poor people in urban & rural

areas.

2) Promote habit of money-savings, insurance, pension investment

among poor-people.

3) Help them get loans at reasonable rates from normal banks.

So they don’t become victims in the hands of local moneylender.

Some Important initiatives for Financial Inclusion

•  Lead banking scheme (LBS).
•  No frills account.
•  BSBDA
•  Business Correspondents (BC) system.
•  Swabhiman Campaign PMJDY

Lead Bank Scheme 

 The Lead Bank Scheme, introduced towards the end of 1969, envisages assignment of lead roles to individual banks (both

in public sector and private sector) for the districts allotted to them.

 A bank having a relatively large network of branches in the rural areas of a given district and endowed with adequate financial and manpower resources has generally been entrusted with the lead responsibility for that district.

Accordingly, all the districts in the country have been allotted to various banks.

 The lead bank acts as a leader for coordinating the efforts of all

credit institutions in the allotted districts.

Parties of a Cheque

There are three parties to the cheque 

•  Drawer or Maker 
• The bank - on whom the cheque is drawn (i.e. the bank with whom the account is maintained by the drawer)  
• Payee – Payee is the person whose name is mentioned on thecheque to whom or to whose order the money is directed to bepaid.

BANKING OMBUDSMAN SCHEME 2006

1) The Banking Ombudsman Scheme enables a bank customer for filing of complaints relating to certain services rendered by banks.

2) The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services.

3) All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

4) The Banking Ombudsman does not charge any fee for filing and resolving customers’ complaints.

5) The maximum compensation which a BO can help a complainant to get is Rs. 10 lakhs.

6) If a complaint is not settled by an agreement within a period of one month, the Banking Ombudsman proceeds further to pass an award. Before passing an award, the Banking Ombudsman provides reasonable opportunity to the complainant and the bank, to present their case.

7) If one is not satisfied with the decision passed by the Banking Ombudsman, one can approach the appellate authority who is the Deputy Governor of the RBI.

NEGOTIABLE INSTRUMENTS & Cheques

According to section 13 of the Negotiable Instruments Act, 1881,

a negotiable instrument means “promissory note, bill of exchange, or cheque, payable either to order or to bearer”.

Cheque

It is an instrument in writing containing an unconditional order, addressed to a banker, sign by the person who has deposited

money with the banker, requiring him to pay on demand a certain sum of money only to or to the order of certain person or to the bearer of instrument."

Types of Cheque

1. Bearer Cheque or open Cheque

When the words "or bearer" appearing on the face of the cheque are not cancelled, the cheque is called a bearer cheque. The bearer cheque is payable to the person specified therein or to any other else who presents it to the bank for payment. 

2. Order Cheque

When the word "bearer" appearing on the face of a cheque is cancelled and when in its place the word "or order" is written on

the face of the cheque, the cheque is called an order cheque. Sucha cheque is payable to the person specified therein as the payee, or to any one else to whom it is endorsed (transferred).

3. Crossed Cheque

Crossing of cheque means drawing two parallel lines on the face of the cheque with or without additional words like "& CO." or "Account Payee" or "Not Negotiable". A crossed cheque cannot be encashed at the cash counter of a bank but it can only be credited to the payee's account.

4. Ante-Dated Cheque

If a cheque bears a date earlier than the date on which it is presented to the bank, it is called as "ante-dated cheque". Such a

cheque is valid upto 3 months from the date of the cheque. 

5. Post-Dated Cheque

If a cheque bears a date which is yet to come (future date) then it is known as post-dated cheque. A post dated cheque cannot be honoured earlier than the date on the cheque.

6. Stale Cheque

If a cheque is presented for payment after 3 months from the date of the cheque it is called stale cheque. A stale cheque is not honoured by the bank.

7. A self cheque

A self cheque is written by the account holder as pay self to receive the money in the physical form from the branch where he holds his account.

8. “A truncated cheque” means a cheque which is truncated during the course of a clearing cycle, either by the clearing house or by the bank whether paying or receiving payment, i mmediately on generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing. The expression “clearing house” means the clearing house managed by the Reserve Bank of India or a clearing house recognised as such by the Reserve Bank of India.