Banking 2nd year 10 year solved.

from the desk of    

I.COM,B.COM, M.A ECONOMICS.

M.A. f Saleem 

 Banking 2nd-year commerce 10-year question paper solved.||Banking 2nd year 10 year solved.

Q.1Definition of a bank? and Types of Consumer Loans?

bank, an institution that deals in money and its substitutes and provides other money-related services. In its role as a financial intermediary, a bank accepts deposits and makes loans.

*Types of Consumer Loans

Mortgages: Used by consumers to finance the purchase of a house.

Credit cards: Used by consumers to finance everyday purchases.

Auto loans: Used by consumers to finance the purchase of a vehicle.

Student loans: Used by consumers to finance education.

Describe the forms of advertising money to its customer by commercial banks?

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Q. 2 Which ways are used by commercial banks to lend money to their customers?

Loans. Commercial banks lend money to consumers in the form of car loans, mortgages, and personal loans. The money distributed for these loans comes from the deposits of other bank customers, whose withdrawals may be restricted by a minimum balance, or by the term of their certificate of deposit accounts, for instance.

Q. 3 How does the commercial bank make money?

Commercial banks make money by providing and earning interest from loans such as mortgages, auto loans, business loans, and personal loans. Customer deposits provide banks with the capital to make these loans.

Q. 4 How do commercial banks make credit?

All commercial banks create credit by advancing loans and purchasing securities. They lend money to individuals as well as to businesses out of deposits accepted by the public.

Commercial banks are not allowed to use the entire amount of public deposits for lending purposes.

Q. 5 Define bank funds and explain the principle of employing Bank funds?

Banking funds.

Banking funds are open-ended equity funds that invest only in the banking sector. The portfolio of these funds consists of both private and public sector banks

EMPLOYMENT OR ADVANCING FUNDS:-

When we talk about advancing funds by commercial banks, it means the profitable and safe use of funds.

The main business of the commercial bank is to obtain money from the customer and invest this money. It earns a profit and pays interest to the customers from this profit. So it keeps in view its own interest and also the customer, so there are two objectives :

i. It earns profit for the customers.

ii. To meet the demand of the customers it should keep sufficient cash.

So profitability and liquidity are two main objectives.

A bank provides loans to companies, firms, and individuals. So major function is that it should advance the loans. But lending money is very risky. Before advancing the loans keeps in view some precautions or principles. These are the following :

1. Profitability:-

It is the major objective in the banking business. Bank can earn maximum profit by investing its deposits in securities yielding height returns while advancing the loans this factor is considered by the banker.

2. Liquidity:-

If assets are in a short time with minimum cost is called liquidity. It is the basic principle for investing the funds before the banker. If the investment is not liquid then the bank will fail to meet the demand of its depositors. So every bank tries to invest the funds in ready convertible securities.

3. Ability To Repay:-

It is the most important principle for investing funds. The bank keeps in view the borrower's ability to repay the debt before lending the money. The character goodwill and business integrity of the borrower must be checked.

4. Productive Purpose:-

A banker should advance the loan for productive purposes. It will be a very secure and definite source of repayment. Unproductive loans must be discouraged. It is observed that short-term productive loans are very ideal.

5. Reasonable Security:-

While advancing the loan a banker secures a loan by getting reasonable security from the borrower. It is called insurance against the risk of non-repayment. The security offered against the loan must be adequate and it can be disposed of without a loss or delay.

6. Ready Cash:-

A bank must keep the ready cash to meet the demand of the depositors. Any particular limit can be fixed keeping in view the daily experience.

7. Advance Distribution:-

In the case of lending, there is a risk of loss every time, so it is better that the loan may not be given to any single particular area. It may be given to a large number of borrowers over a large number of areas. It minimizes the risk.

8. Preference To National Interest:-

The bank must keep in view the policy of the state. If Govt. asks to provide loans to agriculturists and small businesses, it should not be ignored it.

Q.6 What are the 3 types of funds?

A fund is a pool of money set aside for a specific purpose. The pool of money in a fund is often invested and professionally managed in order to generate returns for its investors. Some common types of funds include pension funds, insurance funds, foundations, and endowments.

• 1. Equity Funds.
• Equity funds invest primarily in equities, i.e. in shares in listed companies. 
• 2. Bond Funds. 
• Bond funds invest in interest-bearing securities such as corporate bonds and sovereign bonds.
• 3. Balanced Funds.
• Balanced funds combine various investments, such as equities and bonds or money market instruments.

Q.7 In what circumstances can a bank account be closed?

Generally, banks may close accounts, for any reason and without notice. Some reasons could include inactivity or low usage.

Reasons for Closing a Bank Account

-You're moving to a new city or state.

-You can get better interest rates.

-You're switching to an online bank.

-You qualify for a bank bonus offer.

-You want to escape poor customer service.

-You're being charged expensive fees.

-You can get better features and services elsewhere.

Q.8 For businessmen and salaried people which account is better and why?

Current accounts are generally used by businessmen who have a large number of regular transactions with the bank. Money can be deposited or withdrawn any number of times in a day.

 Salary Account is a type of Savings Account, in which the employer of the account holder deposits a fixed amount of money as 'salary' every month.

 Salary Account is a type of Savings Account, in which the employer of the account holder 

Q.9 What Is a Debit Card?

A debit card is a payment card that makes payments by deducting money directly from a consumer’s checking account, rather than on a loan from a bank or card issuer. 

Q.10 What Is a Credit Card?

A credit card is a card issued by a financial institution, typically a bank, and it enables the cardholder to borrow funds from that institution. Cardholders agree to pay the money back with interest, according to the institution’s terms.

Q.11 Difference between Debit Card and Credit Card?

difference between a Debit card and a credit card.