Question

Write short notes on:
1. Derivative deposit
2. E-banking facility
3. D-mat account
4. Long term loans

Answer 1

1. Derivative deposits also known as secondary deposits are the deposits in excess of the minimum cash reserves to be held by the banks. These deposits are used to grant loans to the borrowers. In this way, derivative deposits form the basis of credit creation by the commercial banks.

2. Electronic banking is a new form of banking facility provided by commercial banks to their customers. Under this facility, with the use of internet, all banks and their customers are interlinked. Customers using the e-banking facility can make payments or transfer funds from their accounts to others accounts at any point of time and from anywhere. For providing such facilities, banks charge some commission from their customers.

3. A D-mat account refers to the account opened for electronic transactions of securities (used for purchase and sale of shares and debentures, futures, options and other securities) and keeping securities in the electronic form instead of in the form of a paper document (physical form). Transactions of a D-mat account are made through an investment broker.

4. These are the loans provided by the commercial banks to the borrowers for a period of more than 5 years. The rate of interest charged on this kind of loan is the highest as compared to short term and medium term loans. These are taken for the purposes of buying buildings, plants and machinery etc.