essay on advantages of bank

• Essay On Bank

Essay on Bank

500+ words essay on bank.

Banks are an integral part of the modern economy. They play a major role in the economic growth and development of a country. The idea of banking evolved with the idea of money. In India, public sector banks (PSBs) have been working to provide banking services in urban and rural areas since 1970. These public sector banks account for nearly 70% of banking activity in India. With the help of this essay on banks, students will get to know the functions performed by banks and their importance for individuals and the country. To help students in improving their essay-writing skills, we have also compiled a list of CBSE Essays on different topics. By practising these essays, they can boost their writing skills and also score good marks on the English exam.

Meaning of Bank

Banks are mainly linked to depositing and lending money. In Indian society, moneylenders used to give money to people in ancient times. They charged a high rate of interest to people as there were no banks or banking systems available at that time. But, with the change in time, the banking system was introduced in India. Now, we have public sector banks and private banks.

A bank is a financial institution that deals with deposits, withdrawals and other related banking services. Bank receives money from those who want to save in the form of deposits, and it lends money to those who need it. A bank is a financial institution that works as an intermediary to accept deposits and channels those deposits into various lending activities. It does so through loans or capital markets. A bank establishes the connection between the customers who have capital surpluses and those with capital deficits. In India, all banks operate under the guidelines of the Reserve Bank of India, which is known as the banker’s bank.

Functions of Bank

Banking is the lifeline of the modern economy. It has played a very important role in the economic development of all the nations of the world. We can not think of modern commerce without banking. Banking is a business which seeks profits like any other business. The banking business mainly constitutes borrowing and lending as their basic functions. Now, banks are providing many other services to people, such as net banking, online shopping, mobile banking, granting loans and advances, short-term credit, pension payments, acting as a dealer in foreign currency etc. A common person can safely deposit their money in the banks.

How Important are Banks for Development?

Banks are the most important financial pillars. They play a vital role in the economic development of a country. The financing requirements of industries, trades, agriculture and other business are met with the help of banks. Therefore, if the banking system of a country becomes strong, then the development of the country will also be at a faster rate. In today’s economy, banks are not only dealing with money, but they are also contributing to the development of the nation. They play a crucial role in the disbursement of credit and the mobilisation of deposits to various sectors of the economy. Banks also represent the economic health of the country. The strength of a nation’s economy depends on the strength of the financial system, which depends on the banking system.

In India, banks play a crucial role in the social and economic growth of the country after independence. The banking sector in India accounts for more than half the assets of the financial sector. The Indian banks have shown much growth after the implementation of financial sector reforms.

Banks are the backbone of any country’s economy. They are responsible for running the economy and controlling the price of the markets. They perform various important functions. However, there are default NPAs, cases of corruption and security threat-related issues, but these can be resolved by implementing strict laws and rules by the government.

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Essay on Bank: Origin, Meaning and Functions | Banking

After reading this article you will learn about:- 1. Origin and Development of Bank 2. Meaning and Definition of Bank 3. Classification 4. Functions 5. Advantages or Importance.

Origin and Development of Bank:

There is no unanimity of opinions about the origin of the word ‘Bank’. According to some monetary experts, the word ‘Bank’ is derived from ‘Banco’. ‘Bancus’, ‘Banque’ or ‘Banc’ all of which mean a bench upon which the early money­lenders used to display their coins and transact business across the bench in the market place. Banks in past used to be known as seths, shroffs, goldsmiths, etc.

Banks are indispensable in every walk of life. Banks are the nerve centre of trade, commerce and business of an economy. Banking plays a very important role in the economic development of all the nations of the world. In fact, banking is the life-blood of commerce.

Meaning and Definition of Bank:

A bank as understood in the present day world in simple language is an institution which deals in money. Broadly speaking, banks draw surplus money from the persons who are not using it at the time and lend to those who are in a position to use it for productive purposes.

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The important definitions of ‘Bank’ are given below:

1. According to Prof. Sayers – “Bank is an institution whose debts (bank deposits) are widely accepted in settlement of other people’s debts to each other.”

2. According to Dr. H.L. Hart, “A bank is one cho, in the ordinary course of his business, honours cheques drawn upon him by persons from and for whom he receives money.”

3. According to Findlay Shiras, “Bank is as a person, firm or company having a place of business where credits are opened by the deposit or collection of money or currency subject to be paid or remitted upon drafts, cheques or orders or where money is advanced or loaned or stocks, bonds, bullion and bills of exchange and promissory notes are received for discount and sale.”

4. According to Crowther, “A banker is a dealer in debts, his own and of others.”

5. According to Kinley, “Bank is an establishment which makes to individuals such advances of money or other means of payment as may be required and safely made and to which individuals entrust money or means of payment when not required by them for use.”

6. According to Banking Regulation Act, 1949, “The word banking as “the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and with draw able by cheque, draft, order or otherwise.”

From the above definitions of bank we come to the conclusion that bank is an institution which deals in cash and credit.

Classification of Banks:

Commercial banks are the most important type of these institutions. Besides the commercial banks there are central bank, industrial banks, co-operative banks, etc. These different institutions conduct their operations in a different manner.

The banking institutions can be classified into following types on the basis of their functions:

1. Commercial Banks:

These are the most common and important type of banking institution. A commercial bank is a monetary institution which serves the interest of its depositors by providing with security vaults for the surplus resources and, on the other hand, makes profits by investing its resources in the productive measures by extending loans.

Commercial banks may be owned by the government or they may be run in the private sector. For instance, 20 major commercial banks are nationalised in India. The other private sector banks are organised on the lines of a Joint Stock Company. Commercial banks are therefore dealers in loanable funds of the community.

2. Industrial Banks:

These banks have come up for the promotion of new industrial concerns. Industrial banks or investment banks provide medium and long-term loans and also supply fixed capital to the industrial concerns by subscribing to the shares and debentures of the industrial enterprises. Indian Finance Corporation and Investment Corporation of India are the examples of industrial banks in India.

3. Exchange Banks:

Exchange banks are those banks which deal in foreign exchange, that is, to convert the rupee into foreign currencies and vice versa. Dealings in foreign exchange are also handled by the commercial banks. In our country, dealings in foreign exchange are conducted by the foreign exchange banks as well as Indian commercial banks.

4. Co-Operative Banks:

Co-operative banks have been set up to meet the requirements of very poor farmers and small scale industrial concerns.

These banks are classified in two groups, such as:

(i) Central Co-Operative Banks:

Members of these banks can be individual or the societies. These banks can get capital resources from their shares, from public deposits and also get loans from the State Co-operative Banks.

(ii) State Co-Operative Banks:

These banks are also called ‘apex banks’. Their area of operation extends over a state. These banks get short and medium- term loans from the Reserve Bank of India. The co-operative banks play a very useful role in agriculture credit.

5. Land Mortgage Banks:

These banks provide long-term credit to farmers and agriculturists against the security of their land. The loan is extended for the purchase of tools, implements, equipments and for financing permanent improvements with a view to increase yield from land. These banks raise their resources in the form of shares and by issuing of long-term debentures.

6. Central Bank:

At present there in no country in the world, which has not set up a Central Bank of its own. A Central Bank is so-called because it occupies a central position in the monetary and banking system of a country and is the highest financial authority. It is the apex bank and the statutory institution in the money market of a country.

In India, it is named Reserve Bank of India. The main function of this bank is to regulate and supervise the whole banking system. It is banker’s bank and controller of credit in the country. Now a day’s Central Bank in every country has been given the sole right of note-issue. It is a lender of last resort and custodian of foreign balances of the country.

According to Prof. Dudly Johnson, “A Central Bank is an institution charged with the responsibility of regulating the supply and cost of money in the interests of the general public.”

7. Saving Banks:

These institutions have been set up to promote the savings of the middle income group of the society. In our country, postal saving banks arc a good example of such banks. These banks collect the small savings of the public and operate savings accounts. Savings accounts are also operated by the Indian commercial banks.

8. Indigenous Banks:

These banks have been called by different nams in different parts of the country, such as, seths, shroffs, mahajans, sahukars, chettis, etc. The indigenous bankers generally lend money and finance the internal trade of our country. The rate of interest is comparatively higher.

9. Regional Rural Banks:

Rural banks, meant for the development of rural economies, have been established by the Central Government at the request of commercial banks who have sponsored such proposal and are called the Sponsor Banks. Each rural bank will have an authorised capital of Rs. 1 crore and issued and paid-up capital of Rs. 25 lakhs. These banks grant loan to small farmers, small entrepreneurs and agricultural labourers.

Functions of a Bank:

The functions/services of a bank may be categorised in the following heads:

1. To Receive Deposits:

To receive money from the public is an important function of a bank. There are many people who have surplus funds but cannot use their funds profitably or ideally. They deposit these surplus funds with the bank.

Deposits are received by the banks in the following three forms:

(i) Fixed Deposits:

Fixed deposits are known as Time Deposits. Under fixed deposits money is deposited for a fixed period and cannot be withdrawn before the expiry of the time as decided by the customer. These deposits fetch comparatively higher rate of interest.

(ii) Current Deposits:

These are mainly concerned with businessmen who have to visit the bank every now and then for the purposes of money transactions. Current deposits can be withdrawn any time by any amount. Generally no interest is paid on such deposits.

(iii) Saving Bank Deposits:

The main objective of saving deposits is to encourage saving among the persons. The rate of interest on such deposits is 5 percent. Some banks have placed restrictions on the number of withdrawals but others permit free withdrawal policy.

2. To Lend Money:

This is one of the important functions of a bank. It is also the chief source of profit to most of the banks. Banks accept deposits from those who have surplus money and grant loans and advances to those who need them. Banks charge comparatively higher rate of interest on the amount advanced as a loan.

Loans are advanced by the bank in the following forms:

(i) Cash-Credits:

Banks may advance cash-credits. This system of granting cash-credits is very popular in Scotland. According to H.D. Macleod, “Cash-credit is to Scotland what the river Nile is to Egypt, a fertilizer.” Cash-credits in India are not given against the personal security of the borrower. On the other hand, cash- credits are based on the promissory notes of the borrowers backed by the collaterals like shares, stocks, bonds or goods.

(ii) Overdrafts:

It is a temporary help being extended by the banks. ‘Overdraft’ means giving money in excess of the deposits of the depositor. Secured overdrafts are granted against several types of securities. The interest is charged on daily overdrawn balances.

(iii) Loans and Advances:

Banks also advance loans to businessmen, consumers, farmers-, etc. In case of a loan, a specified amount is sanctioned by the bank to the customer. The borrower is required to pay interest on the entire amount of loan from the date of sanction.

(iv) Discounting of Bills and Hundies:

The bank may also lend by discounting bill of exchange. Discounting a bill of exchange amount to the advancing of a loan against a promise to pay in future. This is the most popular method of lending by the commercial banks as the loans are self-liquidating.

3. Agency Functions:

Apart from lending and investing activities, the banks perform a number of useful services for their customers. In doing so, banks act as agents to their customers.

These services include the following:

(i) The banks remit funds on behalf of their clients, by mail transfer or drafts.

(ii) The banks also collect and pay the cheques, bills, promissory notes, dividend warrants, subscriptions, rents, insurance premium and other periodical receipts and payments of their clients.

(iii) Banks also sell and purchase shares, stock, debentures and bonds etc. on behalf of their customers.

(iv) Commercial banks also act as executors, trustees and attorneys for their customers.

(v) Banks also help their customers to get refund of income-tax, if any.

4. Other Functions:

In addition to the above functions being performed by commercial banks, a large number of other functions called ‘miscellaneous services’ are also being rendered by these banks.

(i) Issuing of letters of credit to their customers to help and enable them to go abroad.

(ii) Receiving the valuables, ornaments, jewels and documents of their customers.

(iii) Issuing of bank drafts and traveller’s cheques in order to facilitate the transfer of funds from one part of the country to the other.

(iv) The commercial banks also do the underwriting business.

(v) The banks also collect statistical information pertaining to trade, commerce and industry.

(vi) Furnishing guarantees on behalf of customers.

Advantages or Importance of a Bank:

Banks are the nerve centre of trade, commerce and business in a country. Banking is the life-blood of modern commerce. Banking plays a very important role in the economic development of all the nations of the world. There are a large number of banks which are working in all types of economic systems in the world. Banks are beneficial for all.

The main advantages of banks are as follows:

1. To Cultivate Habit of Saving:

Banks cultivate the habit of savings in the public. Savings in the bank on the one hand are safe and on the other hand earn interest for its depositors are prompted to save and deposit in their bank accounts. This is the main advantage of a bank.

There is always a risk in keeping cash with one’s own self. The money with the bank remains in safe custody. Every businessman likes to keep money with the bank to avoid the risk.

3. Facility in Making Payments:

It is also an important function of a bank. Payments are greatly facilitated through cheques which is always convenient and safe and avoids disputes. There is no need of counting money, when payment is made by means of cheques.

4. Collection of Cheques, etc.:

Banks also collect the amount of cheques, drafts, bills of exchange, etc. on behalf of their customers.

5. Securing Loans and Overdrafts:

Banks grant loans and credit facilities to the people. In this way, banks help merchants and traders. Banks also allow overdraft facilities to their customers. Under overdraft facilities the bank allows its customers to over-draw his current account upto an agreed limit.

6. To Provide Credit Information and Letter of Credit:

Banks provide information relating to the creditworthiness of their customers. Whenever anybody wants to know the financial position of a business, he is referred to its banker, who supplies him the detailed information. Banks also issue letters of credit to their customers to help and enable them to go abroad.

7. Safety of Valuable Articles:

Valuables, jewels, ornaments, documents, deeds, etc. can be put in the bank for safe custody. Banks provide lockers to their customers to store these valuable articles.

8. Representation and Correspondence:

Many a time banks procure passports, tickets for their customers and act as their representatives. Banks also make correspondence on behalf of their customers.

9. Sale and Purchase of Securities:

Banks also sell and purchase shares, stocks, debentures and bonds etc. on behalf of their customers.

10. Other Services:

In addition to the above mentioned services banks also provide various other services to their customers, such as-collection and payment of dividends, bills etc., remittance of funds, payment of insurance premium, travellers’ cheques, etc.

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How Much Money Do Bank Managers Earn?

The pay rate of customer service reps at banks, bank trust officers compensation & average salary.

• Job Description of a Branch Relationship Banker
• Job Description for an Equity Dealer

If you are exploring business careers or simply writing an essay on the banking system, you'll likely find that many banks in your community have been in business for decades. The banking industry has existed for centuries, and it's expected to be a prominent part of society for the foreseeable future. But the sustainability of the industry and the positive outlook that creates for jobs are not the only perks of a banking career. Your career research or short essay on bankers and banking will reveal many tangible advantages to being part of this lucrative industry.

Fulfilling Career

Banking is a fulfilling career choice for individuals who want to help the public. Bankers play an essential role in society by protecting, investing and lending money. Many play a direct role in helping clients' make some of the most important decisions of their lives, such as saving for college, purchasing homes and planning for their business and retirement needs. Bankers also have opportunities to fulfill their civic desires. TD Bank says it gives millions of dollars to community-based nonprofit organizations every year, sponsors community events and programs and encourages its employees to contribute and volunteer to their communities.

Flexible Schedule

Bankers' schedules generally allow them to be off nights, weekends and holidays. But banks are opening more branches in more diverse locations, such as inside grocery stores or big-box retailers, which provides opportunities for people who want to work alternative schedules. TD bank, for example, intentionally provides employees with a variety of work options to address employees' varying needs. Bank of America offers wholistic wellness programs to help employees live well-rounded lives and stay healthy.

Attractive Compensation

Compensation can vary greatly depending on a person's position, tenure and the bank for which she chooses to work. Still, bankers are usually paid competitive salaries. According to the U.S. Bureau of Labor Statistics , in 2019 the median annual salary of loan officers was ​ $63,270 ​ and the top 10 percent of loan officers earned more than ​ $132,680 ​. Financial managers earned a median annual salary of ​ $129,890 ​ with those in the 90th percentile earning at least ​ $208,000 ​, the BLS further notes.

In addition to their base salary, many bankers receive commissions, performance incentives and annual bonuses. High-level investment bankers who work in corporate finance or mergers and acquisitions receive bonuses that exceed their base salaries.

Generous Benefit Packages

Most bankers enjoy comprehensive benefits packages. Large banks typically offer medical, dental and vision insurance to its bankers and their families. Bankers have access to a retirement plan, life insurance, disability insurance and flexible spending accounts for health care and child care. Other commonly offered bank job benefits include paid time off, free financial services, adoption assistance and fitness programs.

Advancement Opportunities

Banks also tend to offer educational development and tuition assistance programs. Getting a degree or continuing education is not a waste of time in the banking industry. Financial firms are well-known for providing advancement opportunities and a career ladder for those who are talented and highly motivated. The BLS says many investment banks use an "up or out" policy where entry-level investment bankers are either promoted or terminated after two or three years, keeping the pipeline of opportunity flowing for newcomers.

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• >> Business

6 pros and cons of traditional banks

Here are the reasons why you might or might not want to keep your money in a traditional bank account.

The future of banking is changing. With high interest rates, low fees and a propensity for digital technology, online banks are successfully competing with traditional brick-and-mortar banks, forcing the big banks — like Wells Fargo and Bank of America — to go mobile.

Traditional banks are simplifying their organizational structure to reduce overhead costs and are focusing on their core competencies rather than trying to excel at everything, according to a recent report by Deloitte. In light of the rise of the financial technology — also known as fintech — industry, startups, and online banking companies looking to exploit the weaknesses of large financial institutions, there’s little doubt that the banking landscape must keep up with the changing times.

But progressive options in the financial sector don’t necessarily mean that traditional banks are a poor choice — it just depends on each customer’s particular needs. Banks are adding electronic banking, mobile check deposit and alerts to their services while continuing to provide the traditional services most customers are used to — in-person assistance, mortgage loans and more. And as traditional banks up their game to compete with the more flexible online alternatives, consumers can benefit from these changes. Learn about the advantages and disadvantages of banks so you can decide what kind of financial institution is best for your money.

Pros of Traditional Banks: More Options

Although using a traditional bank might seem old-school or too conventional, there are certain advantages unique to banking with a financial institution that has brick-and-mortar branches. Knowing some of the benefits of using a traditional bank can help you decide if it’s a good solution for keeping and handling your money:

• More options: Whether you want a personal savings or checking account, trust fund, certificate of deposit, Roth IRA, or business checking account, most major financial institutions can provide all these services in one place. Many traditional banks offer wealth management and investment services, too.
• Convenience: The leading banks, like Chase, Wells Fargo and Bank of America, have brick-and-mortar locations and ATMs — which are free to customers — all over the country.
• Best of both worlds: Many banks offer customers the flexibility of being able to walk into a branch to deposit cash or to transfer money via a smartphone. Chase Bank, for example, offers QuickPay — a free online service to send or receive money by email — which competes with fintech apps like Venmo and Square Cash. With online banks, you only have the electronic transfer option.
• Cash deposits: Despite all the progress that fintech has made, the industry still has to contend with a traditional form of currency: cash. For banking customers who deal with cash frequently, a traditional bank is an attractive and convenient option.

Cons of Traditional Banks: Low or No Interest Rates

Banks can offer critical conveniences but are not without their flaws. To help you decide if a traditional bank is the right solution for your financial needs, review some of the drawbacks to banking at a larger institution:

• Low or no interest rates: Brick-and-mortar banks are notorious for their lower interest rates on savings accounts, compared with online banks. In fact, in a recent survey by GOBankingRates, the best savings accounts were all with online banks: MySavingsDirect, Ally Bank, Barclays, iGObanking and CIT offered the top five highest interest rates.
• Wide range of fees: When you think of a traditional bank, you might also think of bank fees. Bank of America, for example, charges a $35 nonsufficient funds fee, whereas Alliant Credit Union — one of the largest credit unions open to the public — charges just $25 for an NSF fee.
• Poor customer service: A 2015 study by Consumer Reports suggested that one of the major downfalls of big banks is that they don’t understand customers’ needs or and don’t provide personalized service. According to the survey, the four mega banks — Bank of America, Chase, Citibank and Wells Fargo — which hold approximately 40 percent of all U.S. commercial bank assets, landed in the bottom fifth of the customer satisfaction rankings. Smaller financial institutions have a smaller demographic, but this seems to help them gain insight into who’s banking with them and what those customers want.

Alternatives to Large Banks

When deciding where to put your money, there are many options to consider, including credit unions, online banks and local brick-and-mortar banks. Each of these alternatives to megabanks offers advantages, depending on your needs.

• Credit unions: Credit unions are financial institutions that are cooperatively owned by all members and democratically run by members who volunteer as board members. The members vote on issues like interest rates, and because these institutions are not for profit, account holders usually get better rates on both loans and savings interest. Credit unions are insured by the National Credit Union Administration, so members’ money is secure.
• Online banks: Serving as another alternative to traditional banks, online banks such as Ally Bank, Simple or Bank 5 Connect tend to offer more favorable services and rates. For example, Ally Bank offers 0.60% APY on its checking accounts whereas Bank of America offers just 0.02% APY. Online banks don’t have to spend money on supporting many physical locations, so they’re able to pass on these savings to customers.
• Community and local banks: Community banks are a vital part of many areas, especially rural and farming communities, which depend on local banks for loans and basic services. Because these areas are usually tight-knit, these types of banks are more flexible with loan requirements than big banks. For example, the Independent Community Bankers of America Association says it considers character, family history and discretionary spending in making loans; this is not the kind of service you could typically expect to find in a big, traditional bank.

No Matter What You Choose, Safety Rules

Regardless of your choice in banking, the FDIC recommends that consumers verify the legitimacy of the bank and that all deposits are federally insured. The FDIC has a database of all insured banks that the public can access, so you can easily confirm if your bank is covered. And whether you choose a traditional bank with online banking features or an online-only bank, be aware of copycat websites that deliberately use a web address similar to that of a real bank to lure in unsuspecting customers.

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• Budgeting & Savings

Why Saving Money is Important

Amy Fontinelle has more than 15 years of experience covering personal finance, corporate finance and investing.

Pete Rathburn is a copy editor and fact-checker with expertise in economics and personal finance and over twenty years of experience in the classroom.

If you don’t earn much and you can barely pay your bills, the idea of saving money might seem laughable. When you only have $5 left at the end of the month, why even bother to try saving? Because everyone has to start somewhere, and if you work at it, your financial situation is likely to improve over time. Saving money is worth the effort. It gives you peace of mind, it gives you options, and the more you save, the easier it becomes to accumulate additional savings.

Peace of Mind

Who hasn’t lain awake at 3:00 a.m. wondering how they were going to afford something they needed? If money is really tight, you might be wondering how you’re going to pay the rent next week. If you’re a little further up the financial ladder, you might be worried about how many months you could pay the bills  if you lost your job. Later in life, the money thoughts that keep you up at night might center around paying for your kids to go to college or having enough money to retire.

As you accumulate savings, your financial worries should diminish, as long as you’re living within your means . If you already have next month’s rent taken care of by the first week of the current month, if you know you can get by without work for three to six months, if you have savings accounts for your children’s education and your own retirement that you’re regularly funding, you’ll sleep better at night. The reduced stress from having money in the bank frees up your energy for more enjoyable thoughts and activities. Finding the best savings account is key to making sure that the money that you do put away earns you the highest interest.

Expanded Options

The more money you have saved, the more you control your own destiny. If your job has you on the verge of a nervous breakdown, you can quit, even if you don’t have a new job lined up yet, and take time off to restore your sanity before you look for new employment. If you’re tired of living in an unsafe neighborhood, you can move to a safer area because you’ll have enough for a deposit on a better apartment or a down payment on a nicer home .

If you get sick and need expensive healthcare that your insurance doesn’t cover, you’ll have a way to pay for it even though you can’t work while you’re getting treatment. And knowing that you have options because of the money you’ve socked away can give you even more peace of mind.

No, money doesn’t solve every problem. If you are laid off, it might take as long as two years to find a new job. Some illnesses won’t go away no matter how many procedures you can afford, and random crime can happen even in a supposedly secure, gated community. But with more money in the bank to deal with issues like these, you give yourself better odds of coming out on top.

Money Working for You

Most of us put in hundreds of hours of work each year to earn most of our money. But when you have savings and stash your funds in the right places , your money starts to work for you. Over time, you’ll need to work less and less as your money works more and more, and eventually, you might be able to stop working altogether.

What does it mean to have your money working for you ? When you’re first starting to save, you’ll want to put your money somewhere safe, where you can access it right away for unforeseen expenses. That means an online savings account, where you might earn 1% interest annually and not even keep up with inflation , which tends to run around 1% to 2% per year. You’ll even have to pay taxes on your meager 1% earnings. Anything is better than earning 0%, though, or not having savings and going into credit card debt , which will cost you 10% to 30% in interest per year.

Once you’ve saved three to six months’ worth of expenses in your emergency fund , you can start saving money in a tax-advantaged retirement account. That’s where the magic starts to happen. These accounts, such as a Roth IRA or 401(k), allow you to invest in the stock market. You won’t pay any taxes on those investment gains along the way, which will help your money grow even faster. With a Roth IRA, you contribute after-tax dollars, and everything that’s in the account after that is yours to keep. With a 401(k), you get to contribute before-tax dollars, giving you more money to invest upfront; you’ll pay taxes when you withdraw the money in retirement. (If you’re not sure whether it’s better to pay taxes now or later, you can hedge your bets and contribute to both your employer-sponsored retirement plan and a Roth IRA.) The third choice, a traditional IRA, allows you to contribute before-tax dollars as you do with a 401(k).

If you have a high income and low expenses, you might accumulate enough to retire in 10 years. For most people, it takes closer to 40 years. But at some point, if you save and invest regularly, you should be able to live off the income generated by your investments—the saved money that’s working for you. The earlier you start, the more time a small amount of money has to grow large through the miracle of compounding .

The Bottom Line

Saving money is incredibly important. It gives you peace of mind, expands your options for decisions that have a major effect on your quality of life , and eventually gives you the option to retire. Most people who are wealthy got there through a combination of their own hard work and smart savings and investment decisions. You can become one of those people, too.

U.S. Bureau of Labor Statistics. " Inflation Rates ."

Internal Revenue Service (IRS). " Topic No. 403 Interest Received ."

Consumer Financial Protection Bureau. " The Consumer Credit Card Market ," Page 57.

Internal Revenue Service. " Roth Comparison Chart ."

Internal Revenue Service. " Traditional IRAs ."

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Pros and Cons of Online Banking

Online-only banks offer advantages like competitive interest rates, but consumers may miss brick-and-mortar services.

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Some online banks belong to ATM networks, but not all of them.

In its truest form, online banking means doing business with an online-only bank. This differs from conducting business with a traditional bank that offers online banking services. Find out more about how online banking works, the pros and cons of banking online and what you can do to keep your deposits safe.

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What Is Online Banking?

Unlike a traditional bank, an online-only bank doesn’t operate brick-and-mortar branches where you can seek help from tellers and other bank personnel. Instead, a customer of an online-only bank takes care of banking tasks on a website or app accessed with a computer, smartphone or tablet. These tasks can include depositing checks , transferring money and paying bills. In addition, a customer can typically use a debit card to deposit or withdraw money at an ATM or to make purchases online or in stores.

Financial products that an online-online bank might offer include checking accounts, savings accounts, certificates of deposit and loans.

Market research company J.D. Power reports that more than one-fourth of Americans (27%) use an online-only bank. A 2023 study by J.D. Power found that customer satisfaction with online-only banks is "climbing steadily," thanks to high marks for competitive interest rates and the ease of managing accounts and transferring money .

Pros of Online Banking

There is a lot to like about conducting business with an online-only bank.

Potentially Higher Interest Rates

Online-only banks normally pay higher annual percentage yields on savings accounts , CDs and and other accounts that earn interest . Gary Zimmerman, founder and CEO of cash management platform MaxMyInterest.com, explains that online-only banks are able to do this because they don't bear the costs of maintaining physical branches.

"Investors who want to safeguard their cash while earning more interest know that online banks are a smart choice," Zimmerman says.

Potentially No Fees

In some cases, only-online banks don't charge any fees . Before opening an account, investigate what fees, if any, an online-only bank imposes. In 2022 alone, U.S. banks charged a total $7.7 billion in fees just for overdraft and nonsufficient fund transactions, according to the Consumer Financial Protection Bureau.

Deposits Are Insured

The Federal Deposit Insurance Corp . insures deposits at member banks, and the National Credit Union Administration insures deposits at member credit unions. This applies to both traditional and online-only banks and credit unions, meaning an account-holder's money is protected up to a certain dollar amount.

Keep in mind that most, but not all, banks and credit unions are federally insured .

Robust Mobile Apps

Online-only banks might have mobile apps with more robust features than traditional banks' apps. For instance, an online-only bank app might include financial management tools that enable automatic savings or automatic investing.

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Cons of Online Banking

There are some downsides to banking online you should consider before opening an account.

No Branches

Online-only banks don't operate branches where you can do business. For some banking customers, that's not a problem. But others might be put off by the inability to chat face-to-face with a teller or other banking professional, or to access services that may not be available online (such as getting a cashier's check or renting a safe deposit box ).

Kate Sullivan, vice president of marketing and communications at The Cooperative Bank, notes that some traditional banks offer the same online services as online-only banks but still operate branches that you can visit or call. Sullivan's bank maintains four branches in the Boston area.

ATM Access Varies

When you're a customer of an online-only bank, you'll need to be familiar with your bank's ATM fee reimbursement policy. Some, but not all, online-only banks belong to ATM networks that offer fee-free transactions.

Not All Online Banks Are the Same

Consumers might question the banking prowess of online-only banks. Why? Because some of these banks technically aren't banks. Rather, they're financial technology companies whose banking services are backed up by a traditional bank.

Savings Calculator

Use this free savings calculator to project how your money can grow over time.

Is Online Banking Safe?

Digital banking is on the rise. A May 2022 survey by polling company Morning Consult found 52% of U.S. consumers do most of their banking online or via mobile app, whether that's with a traditional bank or an online-only bank.

Some folks riding this digital wave may be wondering whether online banking – doing business with a bank that lacks physical branches – is safe. Good news: In general, online banking is considered safe.

In most cases, deposits at online-only banks are insured just like deposits at traditional banks. Furthermore, online-only banks are regulated the same way as traditional banks. On top of that, online-only banks adopt security measures aimed at shielding your information from harm.

Fraud Protection

Maryalene LaPonsie Jan. 22, 2021

Fighting Cybersecurity Threats

Even though all digital banking operations face cybersecurity threats, the ISACA professional organization for IT professionals points out that an online-only bank might be "a high-profile target for cybercriminals." That’s due in part to the banks' heavy dependence on technology.

Still, the Consumer Financial Protection Bureau emphasizes that online banking is safe as long as you follow the best practices for keeping your information secure. Here are four tips for improving the safety of online banking:

• Set up strong passwords for bank accounts and digital devices. Each hard-to-guess password should be at least eight characters, with a combination of uppercase letters, lowercase letters, numbers and symbols. Passwords should be changed regularly, perhaps every three months.
• Use multifactor authentication. Multifactor authentication requires at least two methods of verifying your identity before you can gain access to an online account or digital device. For instance, you might be prompted to type in a username and password, and then enter a temporary PIN that's sent to you via text message.
• Steer clear of public Wi-Fi. Public Wi-Fi is not as secure as the Wi-Fi at your home or workplace. Therefore, it's best to avoid online banking when you're on a public network.

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Bank Runs, Fragility, and Regulation

We examine banking regulation in a macroeconomic model of bank runs. We construct a general equilibrium model where banks may default because of fundamental or self-fulfilling runs. With only fundamental defaults, we show that the competitive equilibrium is constrained efficient. However, when banks are vulnerable to runs, banks’ leverage decisions are not ex-ante optimal: individual banks do not internalize that higher leverage makes other banks more vulnerable. The theory calls for introducing minimum capital requirements, even in the absence of bailouts.

The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis, the Federal Reserve System, or the National Bureau of Economic Research.

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Privatization of Banks: Benefits and Concerns – Explained, pointwise

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• 1 Introduction
• 2 About the Ownership Trend in Banking Sector in India
• 3 What have been the benefits of nationalization of banks?
• 4 What are the arguments in favour of Privatization of Banks (NCAER Report)?
• 5 What are the challenges in Privatization of Banks?
• 6.1 Recommendations of the NCAER report
• 6.2 Recommendations of PJ Nayak Committee
• 6.3 Recommendations of Narashimham committee
• 6.4 Other Measures
• 7 Conclusion

Introduction

A report by National Council of Applied Economic Research (NCAER) has recommended  that the Union Government should privatize all Public Sector Banks (PSBs), except the State Bank of India (SBI). The Report further states that the Government ownership hinders the ability of the RBI to regulate the sector. The recommendation of complete privatization of banks has led to sharp reactions from the critics. According to them complete exit of the Government will give rise to systemic risks in the financial sector. The Union Government is aggressively pursuing the exercise of disinvestment.   For the ongoing fiscal year FY22, the Government has set a disinvestment target of Rs 1.75 lakh crore. The plan includes privatization of two public sector banks, public listing of the Life Insurance Corporation of India, Shipping Corporation of India, and many other PSUs.

About the Ownership Trend in Banking Sector in India

After the formation of Reserve Bank of India in 1935, to the period till Independence (1947), there were 900 bank failures in India. From 1947 to 1969, 665 banks failed. The depositors of all these banks lost their deposited money. T he Government nationalized 14 major banks in 1969. After this 36 banks failed but these were rescued by merging them with other government banks. This included even bigger banks like Global Trust Bank. 6 more banks were nationalized in 1980.

However, since the liberalization of the economy in 1991, the discourse on bank onwership has changed significantly. Guidelines for setting up private banks were established in 1993 and the ICICI Bank was set up in 1994. Since then the Private Banks have expanded their footprint.

Simultaneously, the approach of the Government has been to reduce its presence in the Banking Sector and reduce the number of Public Sector Banks. In 2019, after a massive consolidation exercise, the number of PSBs reduced from 28 to 12.

During the Union Budget 2020-21 presentation, the Government announced a new policy for strategic disinvestment of public sector enterprises. This policy provides a clear roadmap for disinvestment in all non-strategic and strategic sectors. The Banking Sector falls under the strategic sector. The Government  announced privatisation of two PSBs as a part of its disinvestment plan. 

What have been the benefits of nationalization of banks?

The nationalization of private banks in 1969 resulted in the penetration of banking sector in the rural areas of India. Private Banks were reluctant to open branches in rural India due to low profitability. However, nationalized banks followed the mandate of the Government and helped in financial inclusion.

The Share of Bank Branches in rural areas increased from <18% in 1969 to ~60% by 1990. This shift happened due to several initiatives by Public Sector Banks like the Lead Bank Scheme launched by the RBI in 1969.

Only after nationalization of banks could small borrowers get credit and there was a shift from class banking to mass banking .

Banks were used to bring about a revolution in agriculture and to carry out activities related to it.

The Sectoral allocation of Bank Credit underwent a change after nationalization of banks. The Share of Agriculture improved from 2.2% in 1968 to 16% in 1989. The share of credit to Industry decreased from 67.5% in 1968 to 37.5% in 1989. This shift happened due to expansion of rural branches and Priority Sector Lending norms.

The proliferation of branches created job opportunities for large section of educated youth. It also benefitted local rural economies.

There was an increased public confidence in the banking system . The growth rate of saving bank deposits witnessed a rapid rise post 1969.

42 crore ordinary people have opened bank accounts as a result of the immense contribution of state-owned banks in opening Jan Dhan Yojana accounts .

What are the arguments in favour of Privatization of Banks (NCAER Report)?

First , private banks have emerged as a credible alternative to PSBs with substantial market share.  PSBs have lost ground to private banks, both in terms of deposits and advances of loans. Since 2014-15, almost the entire growth of the banking sector is attributable to the private banks and the SBI.

Second , Government ownership hinders the ability of the Reserve Bank of India (RBI) to regulate the sector.

At present PSBs are under the dual control of the RBI and the Department of Financial Services of the Ministry of Finance. The RBI handles the governance side of the PSBs under the RBI Act, 1934 . The Department of Financial Services maintains the regulation of PSBs under the Banking Regulation Act, 1949. Thus, RBI does not have the powers to revoke a banking license, shut down a bank, or penalize the board of directors for their faults. Privatization will provide the powers to RBI to control them effectively.

Third , barring SBI, most other PSBs have lagged behind private banks in all the major indicators of performance during the last decade. These PSBs have attained lower returns on assets and equity than their private sector counterparts. The non-performing assets (NPA) of PSBs remain elevated as compared to private banks even as the government infused US$ 65.67 billion into PSBs between 2010-11 and 2020-21 to help them tide over the bad loan crisis.

The market valuation of PSBs, excluding SBI, remains ‘hugely’ below the funds infused in such banks as of May 31, 2022.

Fourth , the under-performance of PSBs has persisted despite a number of policy initiatives aimed at bolstering their performance during this period. These initiatives include: (a) Recapitalisation of PSUs; (b) Constitution of the Bank Board Bureau to streamline and professionalize hiring and governance practices; (c)   Prompt corrective action plans ; (d) Consolidation through mergers .

Fifth , the steady erosion in the relative market value of PSBs is indicative of a lack of trust among private investors in the ability of PSBs to meaningfully improve their performance.

Sixth , the current fiscal position of the Union Government is not strong enough to provide huge sums for recapitalization and keep on sustaining sick PSBs.

Seventh , the privatization of banks will have a positive impact on the economy by bringing stability at the macroeconomic level. Privatization of a few loss-making PSBs will ensure that market discipline forces them to rectify their strategy, and this will have a ripple effect on other PSBs. 

The pandemic has led to the severe decline in the economic curve of the nation and has made a negative impact on banks as a whole, which makes it imperative to take all possible steps to revive the banking sector.

What are the challenges in Privatization of Banks?

First , as per the stated policy of the Reserve Bank of India, banks cannot be run by industrial houses .  However, excluding the industrial houses, there are no entities that have the required financial capability to take over any of the government banks.

Second , private banks have a long history of failures, as noted above (>1500 banks failed between 1935-1969). Recently, the RBI had to come to the rescue of Lakshmi Vilas Bank and YES Bank by pumping of capital by other entities to save these banks. Bank failures and lack of Government intervention will increase the risk in the banking system.

Third , Banks owned by the sovereign government provide more comfort level to depositors . Expansion of private sector in banking will reduce consumer confidence in the sector.

Fourth , Private banks operate with the sole aim of adding shareholder value . In contrast, the government banks also try to serve society and ensure implementation of all government programmes for the social sector. Privatization might have a negative impact on financial inclusion, agriculture credit etc.

Fifth , bank workers are opposed to privatization . as they fear loss of jobs.

What should be the approach going ahead?

Recommendations of the ncaer report.

The two banks chosen for privatization must be the ones with the highest returns on assets and equity, and the lowest NPAs in the last five years. It has recommended Indian Bank and Bank of Baroda as the two top choices for privatization. This would set an example for the success of future privatizations.

It also makes a case for corporate ownership in banks with due diligence as there is “scarcity” of potential large-scale investors in banks. The government must allow foreign investors, including foreign banks and domestic investors, as well as corporate houses to enter the auctions with due diligence

Any potential risk may be minimized by letting a consortium of corporations enter the bidding with the stake of any single corporation capped.

Recommendations of PJ Nayak Committee

Though the Government approved the Bank Board Bureau, the government has to provide enough support for proper functioning. The government can split the Chairman and Managing Director roles. Further, they should be allowed a fixed tenure of 3-5 years.

Recommendations of Narashimham committee

The Government can explore the concept of Narrow Banking. Under this weak PSBs will be allowed to place their funds only in the short term and risk-free assets. This will improve the performance of PSBs.

Other Measures

The Government must create strong recovery laws and take criminal action against wilful defaulters. The challenges in the Insolvency and Bankruptcy Code (IBC) must be addressed. This will provide a faster resolution process. In the meantime, the Government can explore alternate steps such as the concept of Bad Banks.

Privatizing all the PSBs and complete exit of the Government might have significant negative consequences. The Government must find ways to strengthen the governance of banking system and ensure safety of depositors’ money. Complete exit may not be an option, for now.

Source: Business Standard , The Hindu BusinessLine , Outlook , CNBC

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Advantages & Disadvantages of Bank Loans

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• Business Financing Risks
• What Are the Disadvantages of a High Debt-to-Equity Ratio?

When your business is still young and growing, it is likely that you won’t have sufficient capital to feed its growth so that it can realize its full potential. Such are the times when you will want to explore your options in terms of finance. One of these options is bank borrowing. It is quite popular and has been around for as long as capitalism has existed. Before you rush to the nearest bank, however, it is important that you know what the benefits and drawbacks of a bank loan are.

">Advantage: It Allows You to Make Large Purchases

Large purchases, especially those of assets important to your business, will eventually be necessary at some point or other. A bank loan can help in such instances. Some of the things you can purchase with the help of a bank loan include property, vehicles, and machinery. Banks offer a massive benefit here because, without them, it would not be easy for many people to start businesses or grow them. For some, it would be downright impossible.

Advantage: You Maintain Your Ownership in The Business

Typically, when you take a loan from a bank, the bank doesn’t tell you what you’re going to do with that money. This is one of the highlights of the importance of borrowing. With many kinds of financing, including loans from non-bank sources, there is some sort of influence exerted over the method in which you run your business. In some cases, you will have to give up a piece of your ownership in the business in order to obtain the capital.

When you take a loan from a bank, the bank won’t gain ownership of your business, unless specifically stated in the loan contract.

Advantage: Bank Loans Are Flexible

Bank loans involve a lot of different variables, including the term of the loan, the fees that apply to the loan, the requirements for application, the interest rates, and so on. These will be different from one bank to the next and are typically negotiable, allowing you to go for the terms that favor you the most. With the ability to shop around from one bank to another and to negotiate for better terms, it’s very easy to get a sweet deal with a bank loan.

Advantage: Credit Improvements

Another one of the advantages of borrowing money is that, depending on your debt situation, you can actually improve your credit in the process of taking a loan from a bank. If you take out a long term loan from a bank and make all of your payments on time, your credit score will improve over the life of the loan. In case you finish paying off the entire loan on time without any missed payments, your credit score will actually improve.

">Disadvantage: You Risk Foreclosure if You Can’t Repay The Loan

A bank won’t take ownership of your business when you first take out a loan. However, depending on how the contract is drawn up, you risk the bank foreclosing on your business in the event that you are unable to repay the loan.

Most business loans are secured, which means something is backing the loan. It could be collateral or a guarantee. If the loan is secured by collateral, then the bank can claim some asset of yours or your business in the event that you cannot repay the loan. In the most extreme cases, the bank can take over your entire business.

">Disadvantage: Guarantee Secured

If the loan is secured by guarantee, then it means that someone else has cosigned on the loan and it is their personal assets or the assets of their business that are on the line. If you don’t repay the loan, you will be putting someone else at risk.

If the bank takes over your business, it is up to them to figure out how to recover their money from your business, which might involve selling it as a whole or disbanding and liquidating it altogether. That can be devastating for many business owners.

Disadvantage: High-Interest Rates

When you take a loan from a bank, there is always the chance that interest rates could go up over time, especially if you’ve taken a loan with variable interest terms. That could potentially make the loan very difficult to repay. There is also the possibility that the terms of the loan can change during the life of the loan, making it unfavorable for your business. Many banks have been known to make stricter demands and harsher terms for loans given to businesses when those businesses undergo a period of failure.

">Disadvantage: It Could Ruin Your Credit

Your credit history is an important factor that the bank will consider when deliberating on whether to give you a loan or not. You don’t have to worry about your credit rating when you’re exploring other sources of funding, such as equity financing, but it is one of the most important factors in debt financing.

If you have a good credit rating, then you can look forward to better chances of getting your loan application approved and getting favorable terms. On the other hand, bad credit will make you unattractive to most banks and make it very hard for you to get a loan.

">Disadvantage: Risking Your Credit Score

Even if you do have good credit and manage to get a loan from the bank, you risk jeopardizing your credit score when you fail to make payments on time or fail to pay the loan back completely. Short term loans are the riskiest as they can bring your credit score down in a short amount of time. With a long term loan, one missed payment can be rectified by making future payments on time. With a short term loan, that one-time payment may be all you have to save your credit score and missing it might make all the difference at your next loan application when your credit score is less than perfect.

Advantage or Disadvantage: The Application Process Can be Complicated

The application process for a loan from a bank can be quite long and complicated because banks require the process to be thorough and comprehensive. A bank will want to cover all of its bases before it loans you any money. This is especially true when it is a small business that is applying for the business.

The statistics show that most small businesses fail, which means that banks will be risk averse when giving loans out to these customers. They will want to know a lot about the details of your business plan before they feel confident enough about giving you their money. This can make the process of obtaining financing from a bank a serious hassle.

On the flip side, as much as this is a disadvantage, it could potentially be a boon to your business. In order to make your application strong, you will end up drawing up a more solid business plan and look for more valuable referrals. This makes sure that you are thorough in your own formulation of your business plan and the core aspects of your business. The result is that your business will look attractive to the bank and earn you good terms on the loan. You might even be forced to look deeper into some important aspects of your business by the application process for a loan that you hadn’t thought about before.

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Nicky is a business writer with nearly two decades of hands-on and publishing experience. She's been published in several business publications, including The Employment Times, Web Hosting Sun and WOW! Women on Writing. She also studied business in college.

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Essay On Bank Privatisation Pros And Cons {Step by Step Guide}

Hello My Dear Friends, In this post “ Essay On Bank Privatisation Pros And Cons “, We will read the Privatisation of Bank as an Essay In Details. So…

Let’s Start…

Essay On Bank Privatisation

Introduction.

Privatization means selling Whole or Partially a Govt. Sector Company to Private Sector. Or in Other Words, Transferring Ownership to Private Sector. This Step Was also taken in 1991 in New Economic Reform to Reform India’s Economy.

Privatization is considered to bring efficiency and accuracy to a company. The market share of private banks on loans has risen to 36% by 2020 from 21.26% in 2015, while the share of public sector banks has dropped to 59.8% from 74.28%.

Competition has intensified after the RBI has allowed more independent banks since the 1990s. PSBs have higher NPAs than private sector banks. PSBs have underperformed in comparison to private banks.

PM Narendra Modi said that it is the responsibility of the government to give full support to the enterprise and business of the country. But the government itself should run the enterprise and remain its owner, in today’s era it is neither necessary nor is it possible.

The government’s focus should be on the projects related to people’s welfare and development. PM Narendra Modi also said that such a system has to be created in the country, in which there is no lack of government and there is the influence of the government.

Along with the investment, private sectors also bring top-quality manpower, management, as well as global best practices. And this makes things more modern, modernization takes place in the whole sector, the sector expands rapidly and new job opportunities are also created.

Therefore, by monetize and modernize we can increase the efficiency of the entire economy more.

Currently, the government is reportedly looking into the possibility of Punjab & Sind Bank, Maharashtra Bank, and the Indian Overseas Bank , which is currently not part of the existing consolidation program.

It is noteworthy that, there are twelve state-owned banks in India and this comes after a recent merger involving the merger of ten government lenders in four banks. The government wanted the merger of the banks so that they could increase their competition.

Niti Aayog reportedly suggested that the government provide a green flag for “long-term private capital” in the banking sector. Also, it is recommended to provide banking licenses to a few who have built industrial houses with clear instructions that they do not lend to group companies.

According to the Reserve Bank of India’s (RBI) policy on universal banking licenses, large industrial houses are allowed to enter 10 percent but are not eligible as “eligible entities” facilities for operating banks.

The ownership and management of state-owned banks are regulated by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

• Essay On NPA In Indian Banks
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Why Banks Privatise and What Will Be Its Impact

Improving the Efficiency and Performance of Public Sector Banks (PSBs) is a key element of India’s economic transformation. It is believed to help improve performance and performance.

India is the Largest Country in Southeast Asia with a Large Financial System represented by many financial institutions. India’s financial sector was well developed even before the country’s political independence in 1947.

Bank Privatisation Pros And Cons

How to privatise banks.

Public companies can be converted into private companies in two ways:

• One option is to sell a controlling stake to a private entity in India.
• The second option for the government is to let its equity States in public sector banks drop below 50%.

Conclusion (Essay On Bank Privatisation)

Any large-scale privatization of public sector banks appears to be fraught with problems. and In the medium term, the best solution is improving governance at public sector banks.

Good, timely as transparent appointments are required at PSBs. Adequate tenure is required to give to chief executive officers. Good quality independent directors are required on PSB boards.

The government is required to play as a regulator rather than the director of the bank. And nudge the PSB management through government nominees rather than through the department of financial services.

Thanks For Reading “ Essay On Bank Privatisation Pros And Cons “.

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Advantages Of Private Banks (Essay Sample)

Table of Contents

Introduction

In most countries, the banking sector is largely controlled by the government. Although the private sector normally has a stake, a bigger percentage is owned and controlled by the government. The main reason for this is security purposes so that there is a slim chance of the sector going down. Leaving the control of the banking sector could be risky since any form of mismanagement could result to a collapse of the sector. However, on the flip side, there are several advantages associated with private banks. Some of the benefits have been discussed in this paper.

Personalized Interaction

Unlike the traditional banking offered by the government, private banking goes beyond the usual. It not only focuses on investment advice but also tackles management of investments while looking at the financial situation of each client. Private banks have come up with custom made packages that will suit each client depending on their needs and financial ability. Some of the services available with the private banks include protection an asset growth specialized solutions in the financing sector, and retirement plans. Bankers in the private sector normally work very closely with their clients in order to establish the investment goals or the specific needs of their clients.  This close interaction is not possible with the public sector owing to the huge number of clients.

Parent Brand Approach

Private banks have a definition of value proposition based on two main dimensions. One of the dimensions is the use of the parent brand. The use of parent brand is mainly to gain confidence and trust from clients. Normally, the private banks have presence in various parts of the world where they introduce offers which are associated with the parent company.

The One Bank Approach involves private banks give an offer that is integrated to clients with the aim of meeting both their personal and business needs. With that kind of concern, the private banks have a better understanding of the risks of their clients as well as the nature of risks involved. The private banks also go an extra mile to ensure that they come up with tailor-made solutions that caters specifically for the needs of each client.

Majority of private banks opt to follow the platform of open product and therefore argue that their advice is impartial and unbiased. According to the open product platform, private banks make their case that there is no incentive that push the proprietary products making the clients will always get the very best of what was offered by the banks. This approach works best to ensure that customers receive the best services and have a wide selection of choices.

High Reward Space

The legal restrictions of private banks are less compared to those of the public. A huge part of accounts in private banks normally have the exemption of FDIC insurance. On one hand, this is risky because investors could lose everything in case of mismanagement of portfolio. On the other hand, this provides high gains financially for investors leadings to great rewards for the clients.

There are multiple advantages of banking with the private sector. Although there are challenges and risks involved with the private sectors, the benefits outweigh the risks. Customers are better placed to earn high rewards when banking with private banks.

Advantages and Disadvantages of Borrowing Money

Looking for advantages and disadvantages of Borrowing Money?

We have collected some solid points that will help you understand the pros and cons of Borrowing Money in detail.

But first, let’s understand the topic:

What is Borrowing Money?

Borrowing money means asking someone, often a bank, to lend you a certain amount of money. You promise to return it back, usually with some extra money called interest, within a set time.

What are the advantages and disadvantages of Borrowing Money

The following are the advantages and disadvantages of Borrowing Money:

Advantages of Borrowing Money

• Can buy needed items now – Borrowing money allows you to purchase necessary items immediately, instead of waiting to save up enough cash.
• Improves credit score – It can enhance your credit score, which is beneficial when applying for loans or credit cards in the future.
• Enables business expansion – If you’re a business owner, borrowing can provide the capital needed to grow your business, such as buying more inventory or expanding operations.
• Covers emergency expenses – In case of unforeseen expenses like medical bills or car repairs, borrowed money can provide a financial safety net.
• Funds educational pursuits – Lastly, loans can also fund educational needs, enabling you to pursue degrees or training without financial stress.

Disadvantages of Borrowing Money

• Can lead to debt cycle – Borrowing money can trap a person in a cycle of debt, where they need to borrow more to pay off previous loans.
• Interest rates increase cost – When you borrow money, you have to pay it back with interest, which makes everything you buy more expensive.
• Risk of losing collateral – If you’re unable to repay a loan, you risk losing any assets you used as collateral for the loan.
• Affects credit score negatively – If you fail to pay back borrowed money on time, it can harm your credit score, making future borrowing more difficult and expensive.
• Creates financial dependency – Relying on borrowed money can create a dependency on external financial help, preventing self-sufficiency and financial independence.
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The Psychology of Short-Form Content: Why We Love Bite-Sized Videos

: April 10, 2024

: April 09, 2024

Let me tell you the most challenging part of my job. Often, I will delete TikTok and Instagram from my phone because I can't help but waste time endlessly scrolling through these apps, watching dozens of short-form videos in one sitting.

Then, like clockwork, I redownload these apps because I must write about them for work. Thus, the cycle of endless scrolling continues.

Sure, I could blame the nature of the job, but my endless scrolling stems from the fact that I love short-form videos.

And I'm not the only one. 73% of consumers prefer to watch short-form videos to learn about a product or service, and 56% of marketers reported that short-form video was the top trend they planned to invest in in 2024.

So, why are short-form videos so popular? Turns out there are a few reasons, one of which involved a bit of psychology. Let's get into it!

What are short-form videos?

Why are short-form videos so popular.

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Short-form videos are videos that are less than 60 seconds in duration. However, some marketers and content creators agree that short-form videos can be up to 3 minutes. But, if you want my opinion, I would stick to the 60-second rule.

I take this stance because attention spans are getting shorter, but we'll get into that later.

Anyway, short-form videos deliver information in a digestible, bite-size format so viewers can quickly watch and bookmark the content if they're on the go or watch it multiple times.

There are a few reasons short-form videos are more popular than ever among consumers and marketers, and I‘ll visit those in a bit. For now, I want to get into the psychology of it all—that’s why we're here, right? Walk with me.

Consumer Attention Spans are Shrinking

Science tells us that one of the crucial reasons we love short-form videos is that our attention spans are getting shorter and shorter.

Dr. Gloria Mark, a psychologist, recently wrote a book called Attention Span: A Groundbreaking Way to Restore Balance, Happiness, and Productivity , and she says her research indicates people's attention spans have been shrinking over the last 20 years.

Dr. Mark shared her findings on Speaking of Psychology , an American Psychological Association podcast.

Her findings came from a decades-long experiment she participated in, which was first conducted by shadowing participants and tracking their activities via stopwatches.

“We would record the start time and the stop time,” she said.

She explains, “So you're on a screen where you're working in a Word doc. As soon as you get to that screen, we click start time. As soon as they turned away and checked the email, we clicked stop time for the Word document and start time for the email.”

Over time, logging techniques became more sophisticated as technology advanced, and it only made the pattern of shrinking attention spans clearer.

“So back in 2004, we found the average attention span on any screen to be two and a half minutes on average,” Dr. Mark recalls during the interview. “Throughout the years, it became shorter. So around 2012, we found it to be 75 seconds.”

Dr. Mark says the number continued to dip as the years went on.

“And then in the last five, six years, we found it to average about 47 seconds—and others have replicated this result within a few seconds. So it seems to be quite robust,” she says.

And this trend of dwindling attention spans is affecting how we consume content. And I'm not just talking about social media videos — even television and film shots are getting more brief, according to Dr. Mark.

“They started out much longer. They now average about four seconds a shot length,” she says. “If you watch MTV music videos, they're much shorter. They're only a couple of seconds. So we've become accustomed to seeing very fast shot lengths when we look at TV and film.”

Dr. Mark explains during the interview that it‘s a chicken vs. egg situation — she’s unsure which came first or what's influencing the other.

However, the fact remains that we‘re becoming more accustomed to shorter bursts of content, and it’s bleeding into the kind of content we consume and what's being created.

Studies found that most consumers will only watch an entire video if it's less than 60 seconds long . Then you have apps like TikTok, YouTube Shorts, and Instagram Reels that push short-form videos to users in an infinite scroll format.

Furthermore, our 2024 Marketing Trends Report found that almost a third of marketing professionals say their company will leverage short-form video content in 2024, and 53% said they'll boost their investment in the content type this year.

This makes sense since most marketers in our survey say short-form video content yielded them the highest ROI last year.

In case you're curious, here are a couple more reasons why many of us love short-form videos.

1. They are cost-effective and easier to create than long-form videos.

With long-form videos, marketers and creators must work extra hard to keep their audience engaged. That means strengthening the content with dynamic shots, mood-setting music, and a long but compelling script.

All that takes more time, effort, and (most importantly) money.

Short-form videos are more to the point and often require fewer frills to be effective.

For example, language learning platform Duo Lingo's TikTok account has over 10.8 million followers and is one of the most well-known accounts on the app due to its short, funny, and slightly unhinged videos.

Its most popular video has 57.7 million views and is super simple in terms of execution.

It shows a plushy of the Duo Lingo owl getting tossed down the stairs at the company's office, sitting outside on a rainy day, and getting soaked in a shower.

The caption of the video is “When you ignore my notifications.”

The video was clearly shot on someone's smartphone without fancy angles or lighting. The music is from a viral song already available via its sound archives. So simple, so cheap, yet so effective.

@duolingo sad g(owl) hours #duoplushie #duolingo #languagelearning #emo ♬ Rio romeo - .𝖒𝖊𝖓'🎧★

2. They can provide valuable information in a short amount of time.

According to a recent Adobe Survey , 2 in 5 Americans use TikTok as a search engine, and nearly 1 in 10 Gen Zers are more likely to rely on TikTok than Google as a search engine.

I even find myself taking to TikTok to look up recipes or figure out how to style a denim maxi-skirt (the trick is to experiment with different layers and silhouettes).

Between work, family, hobbies, and rest — time is precious, and short-form videos allow us to absorb the information we need in under a minute. Who doesn't love that?

3. You can watch them almost anytime, anywhere.

Bored on the train downtown? Scroll through TikTok. Need to kill some time in between classes or appointments? Pull up YouTube Shorts or Instagram Reels on your phone.

Want to use your 5-minute break between meetings to figure out why everyone is talking about the latest JLo documentary? Let's circle back to TikTok.

Short-form videos are easy to watch almost anywhere and anytime from our smartphones.

Not only is this convenient for consumers, but it also helps marketers because it means we can repurpose our content on various platforms knowing someone will see it from somewhere.

There are different reasons to love short-form videos.

Some reasons are a little more concerning than others (seriously, why are our attention spans so short?), but no matter the reason, the fact remains the same —short forms aren't going away anytime soon.

Don't forget to share this post!

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A woman in Brazil was arrested after she seemingly attempted to get a dead body in a wheelchair to sign for a bank loan

• A woman in Brazil was arrested after seemingly trying to secure a bank loan using her dead uncle's signature.
• The woman appeared to bring her uncle's body to the bank in a wheelchair and tried to use it to sign papers.
• Bank staff became suspicious when the man was unresponsive and his head kept lolling, local media said.

A woman in Brazil was arrested on Tuesday on suspicion of theft by fraud and violating a corpse after she brought her uncle to a bank to sign a loan agreement, local media outlets reported.

She had raised suspicion after she entered a small branch of Itaú Bank in a Rio suburb with a man in a wheelchair, who she called her uncle, local news organization O Dia reported, per a Business Insider translation.

The woman, named by local media as Erika de Souza Vieira Nunes, reportedly told the clerk they were there to sign off on a 17,000 reais ($3,250) loan.

In security camera footage shared by O Dia, the woman can be seen picking up the man's hand and repositioning his head to try to get him to sign the document in front of him.

"Uncle, are you listening? You need to sign. If you don't sign, there's no way, because I can't sign for you," Nunes can be heard saying in the video.

"He doesn't say anything, that's just how he is," she tells the clerk when he doesn't reply. "If you're not okay, I'm going to take you to the hospital."

But the man's unresponsive nature and lolling head caused concern among bank employees who called the local ambulance services.

Related stories

On arriving, the doctors confirmed that the 68-year-old man had been dead for several hours, O Dia reported.

His body was taken to a morgue, and Nunes was arrested on suspicion of attempted theft by fraud and violating a corpse.

The woman's lawyers argue that the man, Paulo Roberto Braga, died at the bank in his wheelchair and said they had witnesses who would testify at the appropriate time, Brazil's national newspaper Correio Braziliense reported.

A preliminary forensic analysis concluded that Braga had died between 11:30 a.m. and 2:30 p.m. on Tuesday from breathing difficulties and heart failure.

Nunes had arrived at the bank at 1:02 p.m, the report noted, according to Correio Braziliense.

An expert who signed the report said that there was not enough medical or technical evidence at this point to confirm whether Braga died on his way into or inside the bank or had already been dead.

However, the autopsy also indicated that he had likely died while lying down due to the position of blood clots in his neck.

The police were not ruling out the possibility that more people were involved.

Brazil's economic stagnation

Brazil's economy has stagnated in recent months, with growth flatlining in the final quarter of 2023 amid sky-high interest rates. The country, the largest economy in South America, currently has a rate of close to 11%.

"The stagnation in Brazil's GDP in the fourth quarter and the decline in household consumption confirmed that the economy lost momentum sharply," Capital Economics' chief emerging markets economist William Jackson said in a note in March, per Reuters.

Watch: How money laundering for the cartels actually works, according to a former undercover agent

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Bank Employee Admits Stealing Federal Benefits Intended for Deceased Customer

NEWARK, N.J. – A former bank employee admitted fraudulently withdrawing more than $105,000 in federal retirement benefits from the bank account of a deceased beneficiary at the same bank where the man was previously employed, U.S. Attorney Philip R. Sellinger announced today.

Jorge Nova, 35, of Passaic, New Jersey, pleaded guilty before U.S. District Judge Evelyn Padin in Newark federal court on April 17, 2024, to an indictment charging him with one count of wire fraud.

According to documents filed in this case and statements made in court:

In 2014, Nova was an employee at a commercial bank in Nutley, New Jersey, where a customer received Social Security Administration (SSA) retirement benefits via direct deposit. The Social Security Administration was not notified of the beneficiary’s death and continued to deposit retirement benefits into the beneficiary’s bank account for more than four years, until October 2018. Nova fraudulently obtained funds from the beneficiary’s account by causing debit cards to be issued to himself in the beneficiary’s name, which he then used to drain the retirement benefits from the beneficiary’s bank account. Nova also registered new accounts with a money service provider in the name of the deceased beneficiary and withdrew money from a second bank account held in the beneficiary’s name. Nova fraudulently obtained more than $105,000 intended for the deceased beneficiary.

The count of wire fraud is punishable by a maximum penalty of 30 years in prison and a maximum $250,000 fine. Sentencing is scheduled for Oct. 8, 2024

U.S. Attorney Sellinger credited special agents of the Social Security Administration, Office of the Inspector General, New York Field Division, under the direction of Special Agent-in-Charge Sharon MacDermott, with the investigation leading to the guilty plea.

The government is represented by Assistant U.S. Attorney Rachelle M. Navarro of the Organized Crimes and Gang Unit in Newark.

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Budget 2024 Fairness for every generation

The 2024 federal budget is the government’s plan to build more homes, faster, help make life cost less, and grow the economy in a way that helps every generation get ahead.

How our economic plan can help you

Buy or rent a home.

We’re turbocharging the construction of homes across the country, and protecting the rights of renters, first-time buyers, and homeowners.

Tax-free First Home Savings Account

Over 750,000 Canadians have opened an account to save for their first down payment, and save faster with the help of tax relief.

Protecting Renters’ Rights

Our new Canadian Renters’ Bill of Rights will protect renters from unfair practices, make leases simpler, and increase price transparency.

Enhancing the Canadian Mortgage Charter

The Canadian Mortgage Charter is helping to protect homeowners who are struggling with rising mortgage payments. We are enhancing it to make it easier for younger Canadians to buy their first home, by making sure renters get credit for their rent payments and allowing up to 30-year mortgage amortizations on new builds for first-time home buyers.

Raise your family

Transforming Canada’s social safety net to help young parents with the cost of raising a family.

National School Food Program

A new National School Food Program will ensure that children have the nutritious meals they need to succeed and get a fair start in life.

More $10-a-day Child Care Spaces

We’re on track to securing Canada-wide $10-a-day child care in every province and territory by 2026, and fees have already been cut by 50 per cent everywhere, saving families thousands of dollars. We’re building more spaces and training more early childhood educators to ensure every family can access affordable child care.

Dental Care for Canadians Who Need It

The Canadian Dental Care Plan is already rolling out for uninsured Canadians with a family income of less than $90,000, to ensure everyone can afford the dental care they deserve. By 2025, nine million Canadians will be covered.

Get a good-paying job

Creating new opportunities for younger Canadians to get the education and skills they need for good-paying jobs.

Increasing Interest-Free Student Loans

Increasing Canada Student and Apprentice Loans and Grants, because everyone who wants to go to school should have the support they need to cover the costs.

More Work Experience and Skills Training for Youth

Helping young Canadians develop the skills and gain the work experience they need to achieve their dreams and get a good-paying job.

Canadian Apprenticeship Strategy

Supporting skilled trades workers by tooling up training programs and creating more apprenticeship positions to ensure young apprentices succeed.

Afford everyday essentials

Helping Canadians keep more of their money and build a better life by stabilizing the cost of everyday essentials.

Stabilizing the Cost of Groceries

Enhancing competition and monitoring grocers’ work to help stabilize prices, and lowering costs for the farmers who grow our food.

National Pharmacare Program

New programs to help with the cost of going to the dentist and pharmacy, including the cost of contraceptives and insulin, will further ease the financial burden on Canadians.

Cheaper Internet, Home Phone, and Cell Phone Plans

Lowering costs of plans, reducing junk fees, and giving Canadians more choice to switch providers and find better deals.

Retire safely and securely

After a lifetime of working hard—Canadians deserve to know they will be secure and comfortable in retirement.

A Stronger Canada Pension Plan

Enhancing the CPP to increase pension benefits by up to 50 per cent.

Supporting Long-Term Care

Advancing the Safe Long Term Care Act to support new national long-term care standards.

Bigger Benefits for Seniors

Increased Old Age Security and Guaranteed Income Supplement ensures seniors have the financial support they need in retirement.

Budget 2024 highlights

750,000+ Tax-Free First Home Savings Accounts opened by Canadians

Solving the Housing Crisis: Canada’s Housing Plan

Unlocking 3.87 million net new homes by 2031, to ensure everyone can find an affordable place to call home. And, we’re making it easier to rent while saving for that first home.

• Changing how we build homes
• Unlocking 250,000 new homes on public lands
• The strengthened Canadian Mortgage Charter

Learn more about making homes more affordable .

Fairness for younger generations

The government is helping restore fairness for Millennials and Gen Z by making education, housing, and the everyday costs of living more affordable.

• Increasing student grants and loans to keep up with the costs of an education
• Launching a new Youth Mental Health Fund for access to support they need
• Providing job placement and employment support opportunities through the Youth Employment and Skills Strategy

90,000 new job opportunities for youth

Investing $2.4 billion to secure Canada’s AI advantage

Economic growth and productivity

Budget 2024 makes investments in innovation, growth, and increased productivity in Canada.

Budget 2024 includes new measures to accelerate job growth in Canada’s AI sector and beyond, boost productivity by helping researchers and businesses develop and adopt AI, and ensure this is done responsibly.

• Investing in Canada’s AI ecosystem
• Enhancing research support with $1.8 billion more in core research grant funding
• Creating the Canadian Entrepreneurs’ Incentive

Learn more about the government’s plan to enhance innovation and productivity in Canada .

Unlocking 3.87 million new homes by 2031.

Over 1.1 million more Canadians employed today than before the pandemic.

Affordable child care is supporting a record high 85.4% labour force participation rate for working aged women.

Economic and Fiscal Overview

The state of canada’s economy.

The Canadian economy is outperforming expectations. Both the IMF and the OECD project Canada to see the strongest economic growth in the G7 in 2025. In the face of higher interest rates, Canada has avoided the recession that some had predicted. Headline inflation has fallen significantly from its June 2022 peak of 8.1 per cent to 2.8 per cent in February 2024.

Chart 6 Consumer Price Inflation Outlook

Note: Last data point is 2024Q4.

Sources: Statistics Canada; Department of Finance Canada March 2024 survey of private sector economists.

Economic and Fiscal Projections

We’re asking the wealthiest to pay a bit more, their fair share, to keep taxes lower on the middle class, and ensure the next generation inherits not more debt, but Canada’s prosperity.

Budget 2024 is investing in fairness for every generation while delivering on our fiscal objectives. Canada is maintaining the lowest net debt- and deficit-to-GDP ratios in the G7, preserving Canada’s long-term fiscal sustainability.

Chart 21 Federal Debt-to-GDP Ratio Under Economic Scenarios

Sources: Department of Finance Canada March 2024 survey of private sector economists; Department of Finance Canada calculations.

Improving Tax Fairness for Every Generation

Tax fairness is important for every generation, and it is particularly significant for younger Canadians.

To make the tax system more fair for 99.87 per cent of Canadians, the inclusion rate for capital gains—the portion on which tax is paid—for the wealthiest with more than $250,000 in capital gains in a year will increase from one-half to two-thirds. Only 0.13 per cent of Canadians with an average income of $1.42 million are expected to pay more personal income tax on their capital gains in any given year.

Principal residences will continue to be exempt from capital gains.

Chart 8.4 Canada Has the Lowest Marginal Effective Tax Rate in the G7

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• Key Measures (available in non-official languages)
• Key Measures
• More Affordable Homes
• A Stronger Social Safety Net
• Fairness for Younger Generations
• Economic Growth and Productivity
• Growing Small Businesses
• Safer, Healthier Communities
• A Fair Future for Indigenous Peoples
• Tax Fairness for Every Generation
• The New Canadian Entrepreneurs' Incentive

Related documents

• News Release
• Address by the Deputy Prime Minister and Minister of Finance
• Canada’s Consumer-Driven Banking Framework
• Statement and Impacts Report on Gender, Diversity, and Inclusion
• Legislative Measures
• Tax Measures: Supplementary Information

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