Banks management and how to manage a Bank

About bank management

1. Chapter 6: Cheque and Banks

2. Cheque? It is an written order by the account holder to the bank to pay money from his/her account. According to N.I. Act, cheque is a bill of exchange drawn on a specified banker. Cheques are treated as a debit vouchers and evidence of withdrawal by the bank. No separate voucher for withdrawal is required.

3. Features of Cheque An instrument to be a cheque must have the following features: It must be an unconditional order. It must be a written order It must be for certain amount of money It must be drawn on a specific bank Payee to be certain It must be payable on demand.

4. Is Cheque Money? Cheques are the pieces of printed paper issued by the banks. There is no legal bindings upon the people to accept payment in cheques. So cheque is never money or legal tender, but it is convertible into legal tender.

5. Important Terms Related To Cheques A drawer should have adequate knowledge about some of the important terms in connection with the cheques. These are: Apparent tenor Stale cheques Ante-dated and post-dated cheques Countermanding of cheques and Conversion of cheques

6. Specimen of A Cheque

7. Kinds of Bank Transactions All the transactions of banks can be broadly classified into the following categories: Cash Transactions Clearing Transactions, and Transfer Transactions

8. How To Judge Bank’s Strength? Alongside the world’s banks, our banks are also rated on the basis of Capital (reserves) which are created to augment and strengthen the capital base. Provision against non-performing loans and The ability to maintain the liquidity in order to meet the customers’ day to day demand.

9. Banks To Maintain Liquidity Banks are not left to themselves to maintain liquidity as they like. Central bank requires them to maintain the following issues: Statutory Liquidity Ratio (SLR), and Cash Reserve Ratio (CRR)

10. Statutory Liquidity Ratio (SLR) SLR restricts the bank’s leverage in pumping more money into the economy. To meet SLR, banks can use cash, gold or approved securities. SLR is maintained in liquid form with banks themselves. The present SLR is 13%. SLR verses CRR

11. Cash Reserve Ratio (CRR) It is the portion of deposits that the banks have to maintain with the Central Bank . It has to be only cash. This serves as a measure to control inflationary forces in economy. Present rate of CRR is 4%. SLR verses CRR