1.

Difference between common law and statutory law

Law can be understood as the body of rules established by the appropriate authority and
adopted by the country as a rule and principle that govern the action of its member, which
can be put into practice by the imposing of penalties.There are two types of law that are
adopted by many country namely common law and statutory law.
On the other hand the statutory law means a formal written law that the legislature adopted
as a statute. The basic difference between common law and statutory law lies in the way
that two legal systems are created the authority that set down the acts and their relevance.

BASIS FOR
COMMON LAW STATUTORY LAW
COMPARISON
Meaning The law that emerges Statutory law is the system of
out of judicial decisions principles and rules of law
is called common law. put forth by the statute.
Alternately known Case law Legislation
as
Nature Instructive Prescriptive
Based on Recorded judicial Statutes enforced by
precedent. legislature.
Operational level Procedural Substantive
Amendment Amended by statutory Amended by a separate
law statute

2.What is banking and what is the role of banking in economy

Bank has developed around 200 years ago. The nature of bank have changed as the time has
changed, the term bank is related to financial transaction.

A bank is a financial institution which performs the deposit and lending function. A bank
allows a person with excess money (Saver) to deposit his money in the bank and earns an
interest rate. Similarly, the bank lends to a person who needs money (investor/borrower) at
an interest rate. Thus, the banks act as an intermediary between the saver and the borrower.
The bank usually takes a deposit from the public at a much lower rate called deposit rate
and lends the money to the borrower at a higher interest rate called lending rate.
The difference between the deposit and lending rate is called ‘net interest spread’, and the
interest spread constitutes the banks income.
In simple words banking can be defined as business activity of accepting and safeguarding
money owned by the other individual and entity and then lending out this money in order to
earn the profit.
The banking services, this days include issuance of debit and credit card, providing, safe
custody of valuable items, locker, ATM services and online transfer of funds across the
country/world.
It is well said that banking play a silent, yet crucial part in our day to day lives. The bank
performs financial duties by saving of money and money provides for the purpose of invest
through maturity and risk transformation.
Banking business has done wonder for the world economy. The simple looking method of
accepting money deposit from saver and then lending the same money to the borrowers. In
the absence of banking business saving would sit ideal in our homes.
3.What is a bank? Define a bank?
In a simple word we can say that bank is a financial institution that undertake the banking
activity, it accept the deposit and then lend the same to earn certain.
1) F.E. Perry: ―The bank is an establishment which deals in money, receiving it on deposit
from customers, honoring customer‘s drawings against such deposits on demand, collecting
cheques for customs and lending or investing surplus deposits until they are required for
repayment.‖
2) Walter Leaf: ―A banker is an institution or individual who is always ready to receive
money on deposits to be returned against the cheques of their depositors.‖
4.What is banking system?
Banking system can be defined as means through which the money supply of the country is
created and controlled.
5.Which are the oldest banks in India?
In 1839, some Indian merchant in Calcutta established India’s first bank known as “Union
Bank” but it couldn’t survive for long, failed in 1848, due to economy crisis of 1848/49.
Similarly in 1863 “Bank of Upper India” was formed but it was failed in 1913.
In 1865, “Allahabad Bank” was established as a joint stock bank, this bank has survive till
date and now considered as the oldest surviving bank in India.
6.How the bank does work/what is the most important element for the bank to survive
Trust is the most important element for the bank to survive. People keep the money in a
bank only when they trust that it will be given back to them as and when they demand or
they ask or on at least on the date of maturity. In case the same has be given in form of FD
of course there are other reasons also for which people prefer to keep money in bank rather
than keeping at home on their own safe. They can earn extra money when the money kept
in saving or in FD. They can make payment for issuance of cheque and not need to carry
money for their day to day needs.
7.Commercial bank
A commercial bank is a type of bank that provides services such as accepting deposits
making business, loan and offering basic invest products i.e., operated as a business for
profit. The commercial bank satisfy the financial needs of the sector such as agriculture,
industry, trade etc., that means they play very significant role in a process of social economic
needs.
8.Function of Commercial Bank
I.Primary Function
i.Accepting Deposit – Commercial Bank accept various types of deposit from public. It
increase Saving Account deposit, Recurring Account Deposit, Fixed Deposit etc. these
deposits are payable after a certain time period.
ii.Making advances – The Commercial Bank provides loan and advances of various forms, it
includes an overdraft facility, cash credit, bill discounting etc. they also give demand and
term loans to all types of clients against proper security.
iii.Credit Creation – It is most significant function of Commercial Bank, while sanctioning a
loan to an customer, a bank doesn’t provide cash to the borrower instead it open a deposit
account from where, the borrower can withdraw.
In other words while sanction a loan a bank automatically create deposit, this is known a
credit creation from Commercial Bank.
II.Secondary Function
The Commercial Bank along with the primary function each Commercial Bank has to
perform several secondary functions. The Secondary Function includes many agency
function or general utility function. The secondary function of Commercial Bank can be
divided into agency function and utility function.
i.Agency function
The Commercial Bank has various agency functions which are as follows:
(i)To collect and clear cheque, dividends and interest work
(ii)To make payment of rent, insurance premium etc.
(iii)To deal in foreign exchange transaction
(iv)To purchase and sale securities
(v)To accept tax proceed and tax return
(vi)To act as trustee, correspondent and executive, ad hoc
ii.General utility function
The general utility function of the Commercial Bank includes:
(i)To provide safety lockers facility to customers
(ii)To provide money transfer facility
(iii)To issue check
(iv)To accept various bill for payment like phone bill, water bills, electricity bills, education
fee bills.
(v)To provide merchant banking facility.
9.International Trading Service
International Trading Services is the exchange of goods and services between countries. This
type of trades help to build a world economy, in which supply and demand affect and are
affected by global event, global trade provide consumers the application to be exposed to
good and services not available in their home countries.
Characteristics of International Trade
I.International trade services offer wide range of benefits to both importing and exporting
parties within the international trade agreement.
For example, if a country export their products throughout the world that mean their
product are in demand. If there have high demand then they need large work force to more
production for supply.This basic economic principle of supply and demand builds the
workforce infrastructure of a country which is what an ultimate necessity within a world
which builds on global trade.
II.Product variety:-International trade services provide people around the world with a
diversity of product that they could not have access.
III.Cost reduction:-One of the most immediate benefits of International trade is lower cost to
consumers. The lower cost is result of two factors
a.Company can produce items, overseas, saving money on a labour and material cost
b.An increase in a competition forces – companies to make their product more attractive to
consumer either through features or lower cost.
IV.Increase product efficiencies –
The increase in company production pressure from important goods, forces companies to
become more efficient in their production manner. Company achieve effect in several way,
they may invent new methods of production or improve the process they already have in
their place, this efficiency ultimate tries for Cost reduction.
V.Increase surplus output
Without international trade a company patent market is limited the people of the company
can do work on which it is operating. However international trade expands the total market
size, to every nation with which the US motion the trade relation.
Increased jobs in central sectors of economy, certain aspects of global trade can take away
the jobs mostly on the large manufacturers. However global sales opportunities have
created hundreds of thousands on job, ultimately the small business sector of national
economy. These small businesses often don’t have the ability to outsource most of their
business.
10.Information services:
Several services offered to the customer by the bank. Following information services cover
most of the services provide by the bank

i.Account opening
ii.Cash receipt
iii.Cash payment
iv.Cheque book issuance
v.Stock payment of cheque clouser of premature FD
vi.Issue of DD and Banker cheque
vii.Safe deposit lockers
viii.Foreign exchange services
ix.Gold retain
x.Demat services
xi.Acceptance of clearing cheque
xii.Cheque book, Debit card issuing with code and PIN, password of such card.
xiii.Acceptant of query and complain
xiv.Investment services
xv.Standing instruction
xviRetail loan products.

12.Banking companies in India

13.System of bank
i.Unit banking
It refers to a bank that is a single, usually, small banks that provide financial service to its
local community.
A unit bank is independent and doesn’t have any connecting bank branch in other area.
ii.Branch banking
It refer to a bank which is connected to one or more other banks in an area or
This bank provides all the usual financial services but it is backed and ultimately control by a
larger financial institution. For example – a large banking corporation such as situated in the
U.S., owns such bank branches which are situated in other 20 states.
Historically many states have restriction or even pro habited branch banking to promote
more localized unit bank and independent unit bank removal relatively common. However in
1994 most of this restriction were repealed, giving rise to Branch Banking unit common in
U.S. today.
 Serving and stability
Unit banking and branch banking offer the same financial services, However branch banking
is more capable or to provide the services during the financial crisis.
Unit banking is a type of bank under which the banking operation are carried by a single
branch with single office and limited their operation to a limited area. Normally, unit bank
may not have any branch or it may have one or two branch. This unit banking system
originated from United Stated of America and each Unit Bank has its own share holder and
BoM.
An industrial unit banking is a co-operated that operates one office and that is not related to
other bank through ownership or control.
iii.Group banking
Group banking is a plan offered by banks that generally provides incentives for groups, such
as employees at a company, if the group establishes a banking relationship with the
institution. For example, a bank may offer loans or other banking products to all employees
of an organization through a promotion. Or, a bank might offer employees of a large
employer special perks if they open a checking account with direct deposit, lower rates on
home-equity loans or mortgages, or higher interest rates on CDs.
iv.Chain Banking
Chain Banking is a form of banking when a small group of individuals control three or more
banks which are independently chartered. Individuals secure enough stocks to get the
controlling interest in the banking corporations involved. The management can also be
established via a board of directors that can effectively create a network and undertake
supervision of banking activities.
Conceptually, chain banking is a form of bank governance that occurs when a small group of
people control at least three banks that are independently chartered. In
general, the controlling parties are majority shareholders or the heads of interlocking
directorates. Chain banking as an entity has declined along with the surge in interstate
banking

MAIN FUNCTIONS OF COMMERCIAL BANKS

The main functions of commercial banks are accepting deposits from the public and
advancing them loans. However, besides these functions there are many other functions
which these banks perform. All these functions can be divided under the following heads:
1. Accepting deposits
2. Giving loans
3. Overdraft
4. Discounting of Bills of Exchange
5. Investment of Funds
6. Agency Functions
7. Miscellaneous Functions
1. Accepting Deposits:
The most important function of commercial banks is to accept deposits from the public.
Various sections of society, according to their needs and economic condition, deposit their
savings with the banks.
For example, fixed and low income group people deposit their savings in small amounts
from the points of view of security, income and saving promotion. On the other hand,
traders and businessmen deposit their savings in the banks for the convenience of payment.
Therefore, keeping the needs and interests of various sections of society, banks formulate
various deposit schemes. Generally, there are three types of deposits which are as follows:
(i) Current Deposits:
The depositors of such deposits can withdraw and deposit money whenever they desire.
Since banks have to keep the deposited amount of such accounts in cash always, they carry
either no interest or very low rate of interest. These deposits are called as Demand Deposits
because these can be demanded or withdrawn by the depositors at any time they want.
Such deposit accounts are highly useful for traders and big business firms because they have
to make payments and accept payments many times in a day.

(ii) Fixed Deposits:

These are the deposits which are deposited for a definite period of time. This period is
generally not less than one year and, therefore, these are called as long term deposits.
These
deposits cannot be withdrawn before the expiry of the stipulated time and, therefore, these
are also called as time deposits..
(iii) Saving Deposits:
In such deposits, money up to a certain limit can be deposited and withdrawn once or twice
in a week. On such deposits, the rate of interest is very less. As is evident from the name of
such deposits their main objective is to mobilize small savings in the form of deposits. These
deposits are generally done by salaried people and the people who have fixed and less
income.

2. Giving Loans:
The second important function of commercial banks is to advance loans to its customers.
Banks charge interest from the borrowers and this is the main source of their income.
Banks advance loans not only on the basis of the deposits of the public rather they also
advance loans on the basis of depositing the money in the accounts of borrowers. In other
words, they create loans out of deposits and deposits out of loans. This is called as credit
creation by commercial banks..

(i) Cash Credit:

In this type of credit scheme, banks advance loans to its customers on the basis of bonds,
inventories and other approved securities. Under this scheme, banks enter into an
agreement with its customers to which money can be withdrawn many times during a year.
Under this set up banks open accounts of their customers and deposit the loan money. With
this type of loan, credit is created.

(iii) Demand loans:

These are such loans that can be recalled on demand by the banks. The entire loan amount
is paid in lump sum by crediting it to the loan account of the borrower, and thus entire loan
becomes chargeable to interest with immediate effect.

(iv) Short-term loan:

These loans may be given as personal loans, loans to finance working capital or as priority
sector advances. These are made against some security and entire loan amount is
transferred to the loan account of the borrower
3. Over-Draft:
Banks advance loans to its customer‘s up to a certain amount through over-drafts, if there
are no deposits in the current account. For this banks demand a security from the customers
and charge very high rate of interest.
4. Discounting of Bills of Exchange:
This is the most prevalent and important method of advancing loans to the traders for
shortterm purposes. Under this system, banks advance loans to the traders and business
firms by discounting their bills. In this way, businessmen get loans on the basis of their bills
of exchange before the time of their maturity.
5. Investment of Funds:
The banks invest their surplus funds in three types of securities—Government securities,
other approved securities and other securities. Government securities include both, central
and state governments, such as treasury bills, national savings certificate etc.
Other securities include securities of state associated bodies like electricity boards, housing
boards, debentures of Land Development Banks units of UTI, shares of Regional Rural
banks etc.

6. Agency Functions:
Banks function in the form of agents and representatives of their customers. Customers give
their consent for performing such functions. The important functions of these types are as
follows:
(i) Banks collect cheques, drafts, bills of exchange and dividends of the shares for their
customers.
(ii) Banks make payment for their clients and at times accept the bills of exchange: of their
customers for which payment is made at the fixed time.
7. Miscellaneous Functions:
Besides the functions mentioned above, banks perform many other functions of general
utility which are as follows:
(i) Banks make arrangement of lockers for the safe custody of valuable assets of their
customers such as gold, silver, legal documents etc.
(ii) Banks give reference for their customers.
(iii) Banks collect necessary and useful statistics relating to trade and industry.
(iv) For facilitating foreign trade, banks undertake to sell and purchase foreign exchange.
(v) Banks advise their clients relating to investment decisions as specialist
(vi) Bank does the under-writing of shares and debentures also.
(vii) Banks issue letters of credit.
(viii) During natural calamities, banks are highly useful in mobilizing funds and donations.
(ix) Banks provide loans for consumer durables like Car, Air-conditioner, and Fridge etc.

BANK SUBSIDIARIES
• Bank Controls One or More Subsidiaries
• Subsidiaries Offer Other Services Such as Insurance and Security Brokerage Services
• Profits and Losses of Each Subsidiary Impact Parent Bank
AGENCY SERVICES OF COMMERCIAL BANKS
Agency Services or Agency functions of commercial banks are elaborated in detail below
1. Collection of Cheques, Dividends, Interests etc.: Collecting cheques, drafts, bill of
exchange, dividends, interests etc. on behalf of its customers and credit the amount in
their account is one of the most important agency services rendered by the banks.
Banker accepts standing instructions from the customers and arranges to collect
dividend, interest, pension, salaries, bills etc. on behalf of his customers.
2. Payment of Subscription, Rent, Insurance Premium etc.: Banks undertake the payment
of subscriptions, rent, insurance premium etc. on behalf of the customers and debit the
account with the amount. It accepts the standing instructions of the customer and arranges
for. The payment of such expenses on their behalf. It charges a small amount by way of
commission for these services.
3. Conduct of Stock Exchange Transactions: Banks purchase and sell various securities
such as shares, debentures, bonds etc. of joint stock companies both private and
Government
on behalf of their customers.
4. Acting as Executor, Trustees, Attorneys etc.: Banks act as executors of will, trustees,
attorneys and administrators. As an executor it preserves the ―Wills‖ of the customers and
executes them after their death. As a trustee, it takes care of the funds of the customers. As
an attorney, it signs transfer forms and documents on behalf of the customer.

5. Preparation of Income Tax Returns: Banks prepare income tax returns for their
customers through their tax service departments.

6. Conducting Foreign Exchange Transactions: Commercial banks purchase and sell

foreign exchange for their customers.

7. Banker acts as an agent to the customer. When a customer deposits cheques, drafts,
bills or any other promissory notes, the banker collects them and on realization credits the
account of the customer. For this activity, the banker is given commission. Banks also act as
a correspondent, representative of their customers. Some banks may even get the travelers‘
tickets, passport etc. for their customers