Global Challenges In Banking

INTRODUCTION

Financial Sector reforms initiated in the country as a part of the economic reforms since the year 1991, has brought about revolution in the structure of banking environment. While deregulation has opened up new opportunities for banks, liberalization has intensified competition in the banking industry by opening the market to new foreign and private sector banks. Declining interest rates and reduced lending margins have thrown up new challenges to banks, particularly public sector banks .Banks
need to equip themselves sufficiently to operate in such a competitive environment .

GLOBAL CHALLENGES IN BANKING

1. Enhancement of customer service.

2. Innovations in technology.

3. Improvement of risk management systems.

4. Diversifying products.

Globalisation challenges are not restricted only to global banks. Banks in India also need to face them. Overcoming these challenges makes them more competitive and will also equip them to launch themselves as global players.

COMPETITION

Globalisation has brought fierce competition from international banks. In order to compete with new entrants effectively commercial banks need to posses strong balance sheets which indicate the real strength of the bank. The entry of new private sector banks and foreign banks equipped with latest technology and technology -driven product lines have really sensitized the ordinary customers of the banking services to the need for quality in terms of innovative products as well as delivery process These banks are aggressively targeting the retail business and consequently grabbing the market share of public sector banks.

ELECTRONIC BANKING

In the future, banking will be driven more of technology and telecommunication systems. Aided by improved telecommunication and technology, Public sector banks have made rapid strides in product innovation and delivery, thereby improving quality of customer service. Technological changes have brought about paradigm shift in the process today’s banking may be redefined as ‘Triple A.’ banking-anytime anywhere, anyhow banking .Internet banking will enable three profit centres, namely treasury, corporate banking and retail banking, to launch new products and provide quality service to a wider customer base.

TECHNOLOGY

With the help of innovative information technology, banks are able to reduce the transaction cost and handle a large number of transaction in no time. Now banks can provide customized products easily and customers could access many services through internet by sitting at home. To provide better services to their customers, banks are embracing Customer Relationship Management [CRM] facilitated by the availability of conductive technology. Innovation is technology is also helping banks to cross sell the products of insurance and securities firms, which are swelling their fee-based income in the total income.

Innovative technology not only brings benefits, but risks too. Major impediments and risks associated with the implementation of innovative technology are;

o Cost associated with adoption of new technology might not bring cash flows required to cover that cost.

o Increased capacity due to a new technology could result excess capacity in the financial institution.

o Another problem banks face with implementation of latest technology is integration of existing system with the new one.

o Banks could face cost overrun or cost control problems.

o Innovative technology has brought new risks like daylight overdraft risk

INNOVATIONS IN HOUSING LOANS

Housing loans are one of the products that banks are concentrating more. The booming housing loans market positively affects many industries. So to provide impetus to any economy, booming housing market is vital. Banks benefit from higher security ,low risk weights and reasonable margins.

RISK MANAGEMENT

Globalisation and liberalization are forcing banks to take more risk to compete effectively in the global market place. One of the important risks is compliance risk. It is the risk to comply with laws, rules and standards such as market conduct, treating customers fairly, etc. To mitigate this risk, banks should develop compliance culture in their organization. It is not only the duty of compliance specialists, but banks can also manage compliance risk by putting in place compliance functions that are in consistence with compliance principles.

Liquidity risk arises when banks unable to meet their obligations when they become due. To manage the mismatch of assets and liabilities, banks should analyse the accounting data both on static as well as dynamic basis. Deposits of higher value are the most important item to be monitored regularly, as sudden withdrawal of these deposits might cause liquidity problem for the bank. Also incentives to these deposits in the time of falling interest rates could create strain on liquidity.

INNOVATIONS IN CUSTOMER SERVICES

Satisfied customer is the best guarantee for stability of the organization in the long-run. Banks can satisfy their customers only by providing customised, cost effective and timely services .With the help of technology banks are able to provide plethora of products and services to their customers which suit them. Major services provided by the Indian banks that are of international standards are Any time banking, Anywhere banking, Global ATM and Credit Cards, Internet banking facility etc.

CONCLUSION

Given the new environment, Indian banks can’t remain unaffected by the changes round and challenges before them. Therefore Indian banks need to restructure themselves. The following practices need to be adopted on urgent basis;

o Greater professionalism.

o Greater emphasis on diversification and sources non interest income.

o Consultancy services.

o Equipping themselves to operate in the deregulated environment.

o Necessary changes in the legal stipulations.

o Cost management.

o Bench marking of service standards to improve productivity and Proficiency.

o A self- regulatory organization to monitor the activities of banking

With the increasing levels of Globalisation Liberalisation, Privatisation and new reforms of the Indian banking sector, competition will intensify further. Therefore, the banks who understand the market dynamics, perceive threats, anticipate volatility, show high degree of professionalism and dynamism in their functioning and respond promptly to the market needs would survive and prosper.

Image Exchange: Quality Is Essential to Streamlining Procedures

Image exchange has opened up numerous opportunities to customers, financial institutions, and transaction processing centers. The ability to scan a physical document for transfer between facilities was provided when the Check 21 act was put into effect in 2004. This federal legislation has allowed banks to offer their customers a greater level of convenience at a lower cost. How paper transactions are converted and at what point in the deposit process it takes place is imperative. The readability of a supplied image is an easy feature to overlook; however, quality is an important part of this change in practices. Banks or consumers must be capable of creating an easy to read duplicate to simplify the verification process. Institutions putting an immense amount of effort into designing a bank image capture system and obtaining the necessary resources could end up with various problems when this factor is not taken into consideration.

Bank Image Capture: What Features Enhance Electronic File Generation?

Bank image capture delivers various benefits throughout deposit, processing, and settlement practices; however, the wrong choices are capable of creating the same inefficiencies of paper transaction handling. Low quality images are sent back by the receiving bank, consequently delaying collection procedures and adding cost to the clearing process. The right technology must be implemented to prevent keying errors, sending delays, and settlement problems. A receiving institution has no control over the quality they are supplied. The sending institution must ensure this component is sufficient to receive the benefits of an image exchange system. New technology aids in the production of superior capture results and meets the individual file formatting requirements of financial institutions. A scanning solution should provide a readable image and supply simplicity through automation. The following issues typically cause less than desirable bank image capture results:

Damaged Physical Documents
Dirty Sorter
Sorter Jams
Rejected Items
Syncing Complications
Physical Check Qualities (Ink Types, etc.)

Certain features are able to avert most of these complication scenarios to deliver better quality copies and prevent loss of information or documents. Recovery features aid users in determining how items should be distributed to prevent sorting issues. These features decrease the amount of exceptions experienced at a branch or processing facility. The promised imaging capabilities of scanning devices must also be taken into account prior to implementation to ensure each piece of equipment is capable of supplying the required superiority.

Adaptive thresholding is a feature worth looking into because it uses multiple thresholding settings to automatically select the most superior image. This feature improves throughput while decreasing the number of experienced exceptions during electronic file generation. Financial entities implementing electronic capture procedures should also evaluate the read rates, feeding capabilities, pocket capacity, camera quality, and diagnostic tools supplied with a product to make certain it is able to meet performance requirements. Equipment implementation options include solutions for back-end, front-end, and centralized approaches. A financial institution should carefully evaluate equipment capabilities before making a decision to guarantee their image exchange system will provide beneficial results.

Essential Information About a Career in Banking

Careers in banking and related fields are hot careers today, but before you decide on your career path, you may want to learn a bit more about the banking field and what it has to offer you. This particular field offers a great deal of diversity and is well paid as well, but the field is not for everyone. Read on to find out the essential information about careers in banking and decide whether or not a career in banking is the right choice for you. Career Choices in the Banking Industry

While you may only think of bank tellers when you think of the banking industry, there are actually a variety of different career choices available within the banking world. Of course, probably the most obvious is the bank teller, who deals with cash and customers. You may also want to consider a career as a customer service representative or a new accounts clerk in a bank as well, which involves opening and closing accounts, answering customer questions, and dealing with any customer concerns.

Another side of the banking industry includes those who deal with the loan process. There are loan clerks, loan officers, and loan processors that deal with various parts of loan processes within a bank. There are also banking jobs available in collections, accounting, and support areas like office managers, secretaries, and data entry.

The careers that many people have in their sights when they think about banking are management positions. There are many different management careers in the banking industry, including bank managers, financial managers, investment managers, and trust officers. While these types of positions may be better paying, they also require a great deal more work as well.

Education Needed

The education that you will need for a career in banking will highly depend on which particular career you are planning on pursuing. Some jobs, such as bank tellers or customer service managers only require that you have a high school diploma or a GED. Other jobs, such as loan officers, and investment officers, will require that you become certified within your state to sell special products such as IRA’s and Annuities. Some careers in this field may require that you have a degree in business or another similar type degree as well. The great thing about a career in banking, is that once you start out in this field, many times the bank you work with will help you get the education you need to advance in your career, which can save you a great deal of money and make you an extremely valuable employee.

What You Can Expect to Earn

The earnings that you can expect in this field are quite diverse, and depend on your specific job within the field. Tellers are generally the lowest paid people in the banking industry, but still they usually will make between $8-11 per hour, and sometimes more if they have been with the same company for a long time. Clerks and secretaries can expect to make between $10-12 an hour, while customer service reps and bookkeepers will make $11-13 per hour. If you are able to climb the ladder to become an executive secretary or even an administrative assistant, you will see a significant rise in pay and will probably make between $15-17 per hour. Loan officers and financial managers usually make the most in this field, with loan officers making around $20 per hour and financial managers making about $30 per hour.

Quality Companies

If you decide that you would like to pursue a career in the banking industry, you will want to be sure that you find a job with a quality company that will pay you a competitive salary and offer you quality benefits, such as health insurance, vacation days, and 401K as well. If you are looking for jobs in banking in the United States, several companies to consider are Wachovia, SunTrust, Chase Bank, Morgan and Stanly, and Bank of America. In the event that you are looking for a banking job in Canada, some companies you may want to check into include The People Bank, Bank of Canada, and the National Bank. Once you find a quality company to work for, you can start working on advancing your career in banking and working your way up towards success.

Indonesia’s Banking Outlook and Risks in 2013

In 2012 we saw solid performance of Indonesia’s banking industry, however, the question now is how it will perform in 2013, and if it would be able to maintain the momentum.

For the last one year, the banking industry remained strong. As of June 2012 the key performance drivers shown remarkable results. Operating Profit increased by 40%, Net Profit grew 23% on year on year, asset quality also showed improvement with Non Performing Loan (NPL) declined to 2.2% level from 2.7% with flat NPL balance.

These excellent results were contributed by aggressive lending strategy taken by the banks, with 26% increase in credit growth year on year, that was driven by strong economy reflected by Gross Domestic Product (GDP) growth at the level of 6%, one of the highest in the world.

Besides strong top line results, another strategy taken by banks to drive performance was improvement in efficiency. Efficiency indicator, operating cost divided by operating profit, reduced significantly to 75% from 86% last year. Many initiatives, particularly in technology, such as electronic banking, contributed to cost saving in banking operational process, which in turn affecting favourably the bottom line performance of the banks. In spite of many critiques on bankers’ salary, banks show that they were able to run the businesses more efficient.

A stable non – performing loan (NPL) confirmed that growing asset was followed by prudential principle to maintain booking quality. Banks were able to balance the asset growth and solid Risk Management process. This was crucial aspect to ensure the sustainable growth of the banking sector in the future.

In terms of capital adequacy, banks have been able to maintain it at healthy level. Capital Adequacy Ratio (CAR) stayed stable compared to 2011, stood at 17.5%, which was above the regulatory requirement of 8% CAR. Amidst the fast growth in credit, which required significant capital to support it, capital position remained strong. Bank was in solid condition to face any adverse internal or external shocks.

Considering solid performance in 2012, banks have a strong base to enter 2013.

However, the banks should be prepared to face several risks in 2013.

First, liquidity risk. The fast credit growth in 2012 was not followed by same growth at funding, putting pressure on the gap between credit and funding. Loan Deposit Ratio (LDR), which is the parameter applied by Indonesia’s central bank to monitor the gap, currently stands at high-end range of 83%, with the highest being 100%. Looking even deeper into the bank segments, pressure in LDR is more pertinent in middle size banks, as some banks have LDR > 90%. However, this is not a new trend, as LDR has been increasing since 2006 level of 62%.

Second, banks should be watchful with the trend of fast consumer lending growth. Given the fact that consumer lending portion is still relatively low compared to other credit types, faster growth rate in this segment should be expected in 2013. While the consumer lending’s high margin is very attractive, it also tends to have higher risk profile. Banks must prepared themselves with the right and timely strategy, infrastructure and expertise; in order to avoid condition whereby the risk of consumer lending is disproportionately higher than the revenue. Newcomers or banks with limited prior experience in this credit segment must be extra vigilant in entering the segment.

Third, various regulations that were launched in 2012 will start to have bigger impact in 2013. Bank of Indonesia issued several important regulations, such as new maximum level of Loan to value (LTV) ratio for mortgage and new minimum down payment percentage for auto loan, which have been effective in 2012, and new Credit Card regulation which will be effective in Jan-13. Close monitoring is a must to ensure any adverse effect of new regulations to banks’ performance could be mitigated timely and accordingly.

Overall, 2012 was a very good year for Indonesia’s banking industry. This fact enables the banks to enter 2013 with good performance base and more solid fundamentals to face challenges in 2013, although uncertainties still linger in global economy.

Banking Operation

Bank is an institution where you can deposit your money and borrow loans. Where by banking is a process by which bank provide different facilities to its customer related to their needs and also advance loans by taking securities in return. Banking operation means how bank operates or simply what facilities bank provides. Banking is a wide term which normally base on two major parts deposits and advancing loan (credit).

Deposits are in form of cash and securities; these were received by the individuals, firms and corporations, and are repayable on demand of customer or may be invested in short term loans. Current, fixed and saving accounts are used to deposit money in the bank. Borrow loans means advancing the money in term of loans to individual, groups and organization. Banking operations includes functions of banking, creation of credit, transfer of funds or services, saving, mortgage, private banking, online banking, projects developments, capital markets and treasury, trade finance, issuing bill of exchange, bill of exchange is issue on three basis at par, at discount and at premium.

Operation of commercial banking are of two sided; involve attracting funds from depositors, and employment of funds in viable investments. The bank creates credit by issuing credit cards, ATM cards, visa cards etc. Banknotes and current accounts are used by the bank to issue the money. Claims are negotiable and repayable on demand, while drawing a cheque or creating banknotes claims are effectively transferable. Banks provides the facilities of collection and paying agents for all their customers. It also internally takes part in clearing and settlement department to present, collect and pay payments instruments. For creating more credit and to increase the transaction banks work as a middle men and borrow and lend loans. Mostly bank lend money to those who deposit securities or bond etc. the security on banknotes and deposits are comparatively low.

Bank borrows short term loans from one person and lends long term loans to another person and also charged high rate of interest. For creating stronger credit quality banks have to maintain high reserves to clear the unexpected claims or for economic stability, more investment in marketable securities. Banks used different ways or channels to elaborate banking operations ATM machines are used to withdraw money by using a ATM card, its contain a special code which relates to the same account. Call center and branches are also means of exchange of information which is necessary and important for every customer. Online and mailing banking is also used to access to the customers problems and many transaction and disbursement are used to be done by online banking. Mobile banking is also done by many banks these activity is more advance than other payments of bills and other disbursements are done through mobile phone. Telephone and video banking is also a mean or a channel to communicate with the customers or the persons who need to know abut banking operations more descriptively.

Bank Reference Letters Treated As Suspicious Transactions

Executive Summary – It has come to our attention that the USA is starting to treat “Bank Reference Letters” as “Suspicious Transaction” events that require reporting to the USA government. We highly suspect that many other governments are doing the same thing with their banks when a reference letter is requested.

Many clients have noticed in recent months that many banks are reluctant to issue one and many banks outright refuse to write it. The banks are refusing to issue reference letters because they would then have to write a suspicious transaction report and they try to minimize the amount of these that they generate to avoid government audits and investigations. Panama banks all require a bank reference letter even if you are opening the account in person. This is the case with almost all the banks around the world. Do not do this. We can assist with opening a bank account where a bank reference letter is not required.

Apostille – The next alarm bell concerns getting documents apostilled. An apostille is a government worker who certifies notarized documents. Basically they are there to certify the fact that the notary is in fact a notary. In many countries the apostille works for the national government. In the USA the apostilles work for the various state agencies, generally found in the Department of State that each of the states has. Many offshore banks ask their new account applicants to notarize and then apostille documents like passports. Panama banks all require this unless you open the account in person.

Recently the apostilles in the USA are starting to ask the people to fill out a form explaining what the apostille is to be used for. This is similar to the bank reference letter in that it is probably being reported whenever anyone wants a copy of a passport to be apostilled. Do not get any ID documents or anything else you want to keep private apostilled. Notarized only. So far we have not been seeing any notaries report any suspicious events or even ask what the notarized document is to be used for. Do not use a notary at a bank, credit union, savings and loan, or a stockbroker’s office. These are tightly regulated businesses that are required by law to report any and all suspicious transactions. No apostilles is the safest course of action.

Implications – It is a common practice for the offshore banks around the world to require a bank reference letter when opening a new account be it a corporation, trust or a personal account for a foreigner. It would be rare for a country to require a bank reference letter for citizens of their own country. Bank reference letters are required when opening a bank account in another country. It is the early warning flag to the government about an offshore account being opened. Opening bank accounts requiring a bank reference letter are now ill advised. Under no circumstances should one obtain a bank reference letter. We can arrange bank accounts that do not require such a bank reference letter in a few select banks located in tax havens with bank secrecy.

We can also arrange “International Trust Account” banking in quality banks in tax havens with bank secrecy where the bank does not know who you are. For more information on this click here.

What is Bank Reconciliation?

Why is it necessary to prepare bank reconciliation? Bank reconciliation is necessary only for a demand deposit or checking account. It is very seldom that we find our cash balance per book equals or balances with the balance per bank statement. I guess you are familiar with what a bank statement is.

A bank statement is a monthly report of the bank to the depositor showing the cash balance per bank at the beginning, the deposits entered, the checks paid, other charges and credits and the daily cash balance during the month. Actually, it is an exact copy of the depositor’s ledger in the bank’s records.

To answer the question, let us illustrate some fundamental transactions affecting the depositor and the bank.

Assume that Quilts & Shams Corporation (depositor) collected $10,000 from a customer in settlement of an account. The collection is deposited at Manhattan Bank. On the books of the corporation, the entry to record the collection and deposit is:

Debit Cash or Cash in bank.. 10,000; Credit Accounts receivable.. 10,000

On the books of the bank, the entry is:

Debit Cash.. 10,000; Credit Demand deposit.. 10,000

(The same is posted to the subsidiary ledger of Quilts & Shams Corporation).

When the bank credits the account of the depositor, it recognizes liability to the depositor. The law acknowledges a debtor-creditor relationship between the bank and the depositor. The bank is the debtor and the depositor being the creditor. Hence, when the account of the depositor is increased the same is credited.

Let us assume further, Quilts & Shams Corporation issued a check for $3,000 in payment of accounts payable. On the books of the company, the entry is:

Debit Accounts payable.. 3,000; Credit Cash in bank.. 3,000

The entry on the books of the bank is:

Debit Demand deposit.. 3,000; Credit Cash.. 3,000

When the company issued check, the payee will present the same to the bank for payment. The depositor is actually ordering the bank to pay the payee or holder of the check out of its deposit in the bank. This is the reason the bank debits the account of the depositor thereby reducing its liability to the depositor. Thus, when the depositor’s account is decreased, the same is debited.

When the balances are extracted, the cash in bank account on the depositor’s book has a balance of $7,000 and Quilts & Shams on the book of the bank has also a balance of $7,000.

The two accounts have equal balances because they are reciprocal accounts. This means that when one account is debited, the other account is credited. The reason for this is that the two accounts cover or reflect the same items or transactions. Thus, if no errors are committed in recording, and the same information has been recorded by both accounts, the two must have equal or the same balances.

Most often, there are items on the depositor’s book which do not appear on the bank records as of the same date. For example, checks issued by the depositor are not yet presented for payment to the bank or deposits may have been made after the bank statement has sent out to the depositor.

Frequently, there are items on the bank records which do not appear on the depositor’s book. For example, the bank may have charged the depositor’s account with services charges which the depositor may not know about until a statement is received from the bank. Notes endorsed to the bank for collection may have been collected by the bank and credited to the depositor’s account but notice of collection has not yet received from the bank.

In view of the foregoing, it becomes necessary to reconcile the balances. A bank reconciliation statement is prepared that brings into agreement the cash balance per book and cash balance per bank. It is usually prepared monthly because the bank provides the depositor a bank statement at the end of every month.

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Savings and Loan Banks – Still an Option Today

Savings and loan banks are also known as savings and loan associates. These are building associations, banks homestead associates, cooperative or partnership of American and other countries financial worlds. Now they are cross between a commercial banking institution and credit union which accept deposits and make loans mainly for real estate or be a mutual association or stock associates.

The original savings and loan bank is set to help persons that could not use more conventional banking resources to obtain purchases such home or a house. The function is to raise funds from depositors to invest in a long term residential mortgages and other types of mortgage investment where in the bank can also fund refinancing, or repair residential units and construction.

Savings bank is a type of bank where in it specialized in savings and checking accounts which are made available to the public. It is typically some kind of lend out the deposits in the form of mortgages to its clients.

Most people want to deal with the safest banks as possible in savings, loans and credit union. You need to determine what the safe from potential unsafe. As client or customer, you need to understand the features that indicate safety or instability. Safe and clear policies, procedures and management quality of banking company or institution are important to everyone. Remember that even banking institution with good quality insurance can only protect the depositors’ principal balance up to limits.

Most of bank safety stems from unclear lending practices where in borrower can encounter problems when the lenders have financial issues while specific loan terms cannot be unilaterally changed.

Safety is more subjective and complex in operating strategy, operating techniques and take note that strategy are critical to a long term viability and profitability so one must be careful to which saving and loan banks you deposited your money.

Your hard earning money should be in a safe and good hand so you have it deposited to a bank. Before doing it, try to shop around which saving and loan banks are more credential and having serving the people for a quite period of years.

Let us compare savings bank to savings and loan banks. In savings bank is also much like to a commercial bank but it is more in line with savings associates in its form of charter and operations or for short, a financial institution which primary purpose is saving banks and accept savings deposit only wherein your savings deposit will have an interest.

In savings and loan bank, you can have a loan as short term loans for your savings and remember that you also have to pay an interest on it. This savings and loan bank is good only if you know how to make your money profitable like for instance, planning to have a business. Most people want to deposit their hard earning money it is because it has an interest and same time, when they have financial problem they have something to use.

So bear in mind that banks are also a business. You deposited your money and at same time, they let your money borrow from other business establishment through loans. Bank earns profit through the interest of the loans and in the interest they got from the borrower will also be shared to the depositors. But only in minimal percentage rate depending to the amount of your savings deposit.

In Bank Reconciliation, What Are Reconciling Items?

If you are maintaining a checking account with a bank, I guess you are familiar with bank reconciliation. You always receive a bank statement with attachments, didn’t you? All checks you issued and paid by the bank are attached with stamped canceled. You will also find attached thereto, debit and credit memos that have affected your account balance. What do you call these items? Did you notice that as always, your cash balance per your record does not agree or balance with that shown in the statement?

At the end of every month, comparing the cash records of the depositor with the bank statement received from the bank will bring forth the following reconciling items:

1. Book reconciling items:

a) Credit memos

b) Debit memos

c) Errors

2. Bank reconciling items:

a) Deposits in transit

b) Outstanding checks

c) Errors

What are credit memos? Credit memos have the effect of increasing the bank balance. They are items credited by the bank to the account of the depositor but not yet recorded by the depositor as cash receipts.

A typical example of a credit memo is a note collected by the bank in favor of the depositor and credited to the account of the depositor. Other good examples are matured time deposits transferred by the bank to the current account of the depositor and proceeds of bank loan credited to the depositor’s account.

What about debit memos? Debit memos have the effect of decreasing the bank balance. They refer to items paid by bank which are charged or debited by the bank to the account of the depositor but not yet recorded by the depositor as cash disbursements. Typical examples are, as follows:

a. NSF or no sufficient fund checks – checks deposited but returned by the bank for insufficiency of funds.

b. Technically defective checks – checks deposited but returned for having no signature or countersignature, erasures not countersigned, mutilated checks, or the amount in figures conflicts with the amount in words.

c. Bank services charges – charges for interest, collection, checkbook and penalty.

d. Reduction for loan- decrease in current account balance of the depositor deducted by the bank in payment for loan owed to the bank which has already matured.

The preceding are the reconciling items in the book balance of the depositor. These are items that require adjusting entries on the book of the depositor to bring the cash in bank balance to its correct amount for balance sheet purposes.

To proceed with the bank reconciling items, deposit in transit are collections already recorded by the depositor as cash receipts but not yet reflected on the bank statement.

Examples of deposit in transit are collections already forwarded to the bank for deposit but too late to appear in the bank statement; and undeposited collections or those cash on hand awaiting delivery to the bank for deposit.

Outstanding checks are checks already recorded by the depositor as cash disbursements but not yet reflected on the bank statement. They include checks drawn and already released to payees but not yet presented for payment to the bank.

Errors will have to be analyzed for proper treatment. These are reconciling items of the party who committed them.

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Banking Operation

Bank is an institution where you can deposit your money and borrow loans. Where by banking is a process by which bank provide different facilities to its customer related to their needs and also advance loans by taking securities in return. Banking operation means how bank operates or simply what facilities bank provides. Banking is a wide term which normally base on two major parts deposits and advancing loan (credit).

Deposits are in form of cash and securities; these were received by the individuals, firms and corporations, and are repayable on demand of customer or may be invested in short term loans. Current, fixed and saving accounts are used to deposit money in the bank. Borrow loans means advancing the money in term of loans to individual, groups and organization. Banking operations includes functions of banking, creation of credit, transfer of funds or services, saving, mortgage, private banking, online banking, projects developments, capital markets and treasury, trade finance, issuing bill of exchange, bill of exchange is issue on three basis at par, at discount and at premium.

Operation of commercial banking are of two sided; involve attracting funds from depositors, and employment of funds in viable investments. The bank creates credit by issuing credit cards, ATM cards, visa cards etc. Banknotes and current accounts are used by the bank to issue the money. Claims are negotiable and repayable on demand, while drawing a cheque or creating banknotes claims are effectively transferable. Banks provides the facilities of collection and paying agents for all their customers. It also internally takes part in clearing and settlement department to present, collect and pay payments instruments. For creating more credit and to increase the transaction banks work as a middle men and borrow and lend loans. Mostly bank lend money to those who deposit securities or bond etc. the security on banknotes and deposits are comparatively low.

Bank borrows short term loans from one person and lends long term loans to another person and also charged high rate of interest. For creating stronger credit quality banks have to maintain high reserves to clear the unexpected claims or for economic stability, more investment in marketable securities. Banks used different ways or channels to elaborate banking operations ATM machines are used to withdraw money by using a ATM card, its contain a special code which relates to the same account. Call center and branches are also means of exchange of information which is necessary and important for every customer. Online and mailing banking is also used to access to the customers problems and many transaction and disbursement are used to be done by online banking. Mobile banking is also done by many banks these activity is more advance than other payments of bills and other disbursements are done through mobile phone. Telephone and video banking is also a mean or a channel to communicate with the customers or the persons who need to know abut banking operations more descriptively.