Fundamentals of Banking Domain

Fundamentals of Banking Domain, What is a Bank?, Banking Channels, Types of Bank Accounts, Functions of Banks, and Banking Software Applications.

What is a Domain?

A domain is an area, we have several scenarios for a domain, suppose a domain name (or just “domain”) is the name of a website. It’s what comes after “@” in an email address, or after “www.”

Software Domains, Data Science, AI & ML, Cyber  Security, etc.

Ours is Software Application Domain, suppose Banking software application, Insurance software application, BFSI software application, ERP software application, Ecommerce software application, Healthcare software application,  Telecom software application, Logistics software application, Retail Market software application, etc.

In our scenario, domain means an industry for which a software application was developed.

Fundamentals of Banking Domain

What is a Bank?

A bank is a financial institution with a license to hold and lend money. It can provide checking and savings accounts, Deposits, credit cards, mortgages, auto loans, personal loans, small business loans and more.

A bank can also offer services such as cashier’s checks, money orders, wire transfers, safe deposit boxes, currency exchange, and investing or wealth management.

I. Banking Channels
II. Types of Banks
III. Types Of Bank Accounts
IV. Primary Functions of Banks
V. Secondary Functions of Banks

I. Banking Channels

Nowadays banks have several channels for delivery of Banking Services.

1. Branch Banking:

It is an important channel of banks, a branch of a bank is a place, office, unit where all banking operations are done under the single roof. People go to the branch for their banking requirements.

Extension Counter:

The Extension Counter is a part of Branch Banking. It is arranged whenever any Branch deals with some huge Business House. Extension counters provide limited banking services.

Branch Banking Functions:

  • Account opening
  • Cash receipts
  • Cash payments
  • Money transactions through cheques
  • Fixed deposits
  • Retail loan products
  • Issue of DDs and banker’s cheque
  • Safe deposit lockers
  • Foreign exchange services
  • Gold retail
  • DeMat services
  • Deliverables, such as cheque books, debit cards, PINs and passwords
  • Acceptance of queries and complaints
  • Investment services
  • Standing instructions
2. ATM Banking:

The ATM is known as Automated Teller Machine. You can withdraw money 24 hours a day without going to bank through an ATM installed in a nearby place. It provides customers an option to access the banking services beyond the regular banking hours.

The ATM performs many functions. These functions include:

  • Money Withdrawals
  • Cash Deposits
  • Balance Inquiries
  • Money Transfers
  • Stamp Purchases
  • Payment for goods and services purchased at stores and restaurants
  • Withdrawing local currency at a foreign bank’s ATM machine at a fair exchange rate
  • Purchase of airtime
3. Internet Banking/Online Banking/E-Banking:

Nowadays most of the banks have their own websites for the purpose of offering banking services on the internet.

Internet Banking Functions

  • Account Balance Check
  • View and Export Bank Statements
  • NEFT & RTGS Fund Transfer
  • IMPS Fund Transfer
  • Utility Bill Payment
  • Start a Deposit
  • Open/Close a Fixed Deposit
  • Make Merchant Payments
  • Issuance of Cheque Book
  • Start Investments
  • Buy General Insurance
  • Recharge Prepaid Mobile/DTH
  • Check Mortgages,
  • Loans
  • Chang ATM Card PIN, Block ATM Card, and Applay for New Card.
  • Set-up/Cancel Automatic Payments
  • Manage/Change Account Details
  • Book Online Tickets Buy/Sell on E-Commerce Platforms
  • Invest and Conduct Trade
4. Mobile Banking/Phone Banking/Tele-Banking:

Like ATM it is another electronic banking Channel which provides round the clock 24 hours banking for the customers. But it provides a limited banking services only.

  • View account balance (balance enquiry)
  • Transaction history
  • e-statement of account
  • Loan statements
  • Card statements
  • e-Passbooks
  • Bank to bank transfers
  • Transfer of funds to self
  • Payments to third parties (rent payments, bill payment, etc.)
  • Giving standing instructions for periodic payments
  • Payments via NEFT/IMPS/RETG/UPI/MMID
  • Opening fixed deposit/recurring deposits
  • Mutual fund investments
  • Portfolio management services
  • ATM locators
  • Branch locators
  • Lodging complaint/ tracking applications
  • Ordering new cheque book
  • Cancelling/stopping an issued cheque

II. Types of Banks in India

There are several types of banks in India.

1. Central Bank

A chief bank that keeps a check on and synchronizes with all the other banks in a particular country is known as the Central Bank of the country.

2. Cooperative Banks

Such banks operate under the state government’s act. The main objective of these banks is to ensure the social well – being of the public.

3. Commercial Banks

Such banks operate under the Banking Companies Act of 1956. These are often run by either the government or any private firm. The major aim of such banks is to earn maximum profit through their commercial policies.

These further have 3 major types:

a. Public Sector Banks:

Ex: State Bank Of India, Andhra Bank, Bank Of India, Punjab National Bank, Indian Bank, Canara Bank, Bank Of Baroda, etc.

b. Private Sector Banks:

Ex: HDFC Bank, ICICI Bank, Axis Bank, Karur Vysya Bank, Kotak Mahindra Bank, Yes Bank, etc.

c. Foreign Banks:

HSBC, CITI Bank, J.P. Morgan Chase Bank, Bank Of Bahrain & Kuwait BSC, Standard Chartered Bank, etc.

4. Regional Rural Banks

Operating under the Regional Rural Bank Act. These banks aim at the development of rural and agricultural areas with the help of concessional loan offerings.

5. Local Area Banks

Operating under the Companies Act, 1956. These are commercially driven banks with the aim of earning profit.
These are run by private firms.

6. Specialized Banks

Banks which started for determined purposes are Specialized Banks. The ‘Export and Import’ (EXIM) Bank is a part of the specialized banks. Export and import finances take place and loans occur via these banks.

7. Small Finance Banks

Responsible for offering finances and loans to minor businesses and trades such as farming or the poor unorganized sector. These banks regulated and controlled by the national government of the country.

III. Types Of Bank Accounts

A financial account maintained by a bank for a customer is said to be a bank account.

1. Savings account

A savings bank account is a regular deposit account, where you earn a minimum rate of interest. Here, the number of transactions you can make each month is capped. Banks offer a variety of Savings Accounts based on the type of depositor, features of the product, age or purpose of holding the account, and so on.

2. Current account

A current account is a deposit account for traders, business owners, and entrepreneurs, who need to make and receive payments more often than others.

3. Salary account

Among the different types of bank accounts, your salary account is the one you have opened as per the tie-up between your employer and the bank.

4. Fixed deposit account

To park your funds and earn a decent rate of interest on it, there are different types of accounts like fixed deposits and recurring deposits.

5. NRI accounts

There are different types of bank accounts for Indians or Indian-origin people living overseas. These accounts are called overseas accounts.

IV. Primary Functions of Banks

All banks have to perform two major primary functions namely:

1. Accepting of deposits
2. Granting of loans and advances

1. Accepting of Deposits

A very basic yet important function of all the commercial banks is mobilising public funds, providing safe custody of savings and interest on the savings to depositors. Bank accepts different types of deposits from the public such as:

i. Saving Deposits

ii. Fixed Deposits:

iii. Current Deposits

iv. Recurring Deposits

2. Granting of Loans & Advances

The deposits accepted from the public are utilised by the banks to advance loans to the businesses and individuals to meet their uncertainties. Bank charges a higher rate of interest on loans and advances than what it pays on deposits. The difference between the lending interest rate and interest rate for deposits is bank profit.

Bank offers the following types of Loans and Advances:

i. Bank Overdraft

ii. Cash Credits

iii. Loans

V. Secondary Functions of Banks

1 Overdraft Facility

2 Discounting Bills of Exchange

3 Agency Functions:

i. Collect and clear cheque,
ii. Make payment of rent, insurance premium, etc.
iii. Deal in foreign exchange transactions.
iv. purchase and sell securities.
v. Accept tax proceeds and tax returns.

4 General Utility Functions:

Commercial banks render some general utility services like;

i. Locker Facility
ii. Traveler’s Cheques
iii. Letter of Credit
iv. Underwriting Securities
v. Collection of Statistics

Domain Knowledge for Software Testers

Domain Knowledge for IT Professionals.

1. Banking Domain Fundamentals

2. Banking Domain Knowledge for Testers

3. Interview Questions on Banking Domain

4. Banking Software Projects

5. Insurance Domain Knowledge

6. Insurance Domain Fundamentals

7. ERP Domain Knowledge

8. Healthcare Domain Knowledge

9. Ecommerce Domain Fundamentals

10. Interview Questions on Ecommerce Domain

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