01 Operation

Capital

Bank owners make an investment - this is called the capital. A part of the bank’s capital goes towards increasing the size of the capital.

Liabilities/ Borrowed money

They also borrow money from investors - in other words, investors deposit money in a bank. The bank promises a return on investment to the depositor, but this return on investment is but a part of the profit the bank makes using that money.

The amount of money added to the deposit (principal) is called the interest. The amount of interest accrued per dollar per year may be specified using an interest rate/ fraction.

Compounding

Interest is often compounded ie added to the principal with a certain frequency- daily or monthly or quarterly or annually. For fluid accounts - where the deposited money varies daily, interest is calculated on the money available in the deposit account for each day and is added to the principal/ compounded usually at a lower frequency - eg: quarterly.

When interest is compounded, a number called ’annual percentage yield’ (APY) may be used to specify compound interest accrued per dollar per year. Or, one may simply specify the simple interest which, together with the compounding frequency, determines the compound interest: In case it varies (and is applied) daily, this simple interest is often stated as 7-day yield.

Assets/ Lent money

Banks lend money and get a greater amount of money, determined by a rate of interest, by some time - usually in installments. They sometimes tend to make other investments too.

The bank’s assets may be liquid or illiquid (eg: mortgages for houses when the real estate prices are falling).

The assets may be good or toxic, depending on their risk/ projected/ current return on investment.

With risky lending (ie: where the probability of default is higher than usual), the bank charges a higher rate of interest in order to mitigate the risk by purchasing or acting as insurance against default.

USA

Joint accounts

Custodial accounts

Ally - Minors can’t be joint account holders with adults. But can open custodial account It is owned by ONE minor, but operated by a custodian till he reaches majority. There can be a “successor custodian” named.

India

  • PayTm payments bank - buggy unfriendly UI. But useful for amazon payment.

OTPs

  • Even with joint accounts and credit cards, bank often send OTPs (One Time Passwords) to a device (usually a mobile phone). In case of joint account operation, one may need to autoforward them to emails/ alternate number (there exist apps for this).

Digibank

  • relatively high interest rate savings account.
  • fully online.
    • 150Rs debit card annual fee.
  • Fair mobile UI.
  • No joint accounts
  • So, demand drafts are tough.
  • Not recognized by some downstream finance apps.

UCO

  • Branch nearby
  • UI is a quite cumbersome. WebId gets deactiviated if unused for over a year. Can be reenabled by clicking the “forgot password” link. Did not get OTPs one day in 2022.
  • Charges for NEFT!

IDFC first

  • Highly rated app.
  • min balance 25k. No neft etc. fees. No ATM fees, free debit card, unlimited withdrawals from any ATM, 2L/day limit. 4.5% interest rate.

Customer service ladder

  • Branch
    • experienced very poor service (including false claims) and follow-up when adding a joint account. Remote customer service is markedly better - though they often redirect back to the branch.
    • Some branch staff respond to whatsapp queries (either in kind or by phone) - till they decide not to.
    • Emailing sahakarnagar.branch AT idfcfirstbank yielded no results.
  • Customer service help-line (oft experienced 5min wait time).
    • Can register complaint online. This will lead to a call-back.
  • banker AT idfcfirstbank .
  • Final recourse - head.customerservice AT idfcfirstbank
Tracking
  • Service request numbers are given.
  • Often, no email notification is received for change in service request status.
  • Status (but nothing else) can be tracked on mobile app (only numbers are displayed - no context info). On net banking, they are not displayed.

Others

  • Axis
    • App rating 4.7. Much fees.
    • Liberty account
      • 25k min balance
      • Debit card - 200 issuance, 300 annual.
  • ICICI
    • 15Rs/ quarter sms fees.
    • ATM - 50k Rs / day limit.
    • privileged account
      • 50k min balance.
      • no charges
    • 10k min balance
      • Annual fee 590 per debit card
  • HDFC
    • 25k min. no charges. 1L withdrawal. ATM card free.
    • But on website - Cash withdrawal limit 10k per day (ATM card), 25k+ per day (debit card).

Balance sheet

The bank should be capable of returning the money to the depositors whenever they demand it - as long as they do not do it all at once (a ’run on the bank’). So, always lent money <= borrowed money + capital. In order for the bank to be making the maximum possible safe profit, this should hold: lent money/ investments = borrowed money + capital. Banks for which this holds are said to be solvent.

Transfers

  • Free transfers - DBS.

Unified Payments Interface UPI BHIM

  • Max 1L.
    • IDFC - max 25k per transaction, 1L per day, 3.5L per week, 5L per month.
  • Instant
  • Charges 2021
    • Axis Bank, ICICI Bank and Kotak Mahindra Bank charge Rs 2.50 for amounts of up to Rs 1,000 and Rs 5 for transfers above Rs 1,000 on person-to-person UPI payments beyond 20 transactions a month.
    • UCO - Transaction limit 1L daily.

NEFT

  • Half hourly settlement
  • Charges 2021
    • UCO
      • incoming free.
      • outgoing 2.25 to 29.5 per transaction (pdf). no charge upto 50k online.
    • Digibank - Free if online.
    • SBI - free for staff offline. 0 charge online.
    • Axis - RBI max offline, 0 online.
    • upstox (MF) - no charges.

RBI limits-

  • Ref
  • The RBI levies no charges from member banks for NEFT Transactions. Effective January 2020, the RBI has advised banks not to impose any charges for online NEFT Transactions made from a Savings Account.
  • ₹ 2.50 up to 10k, ₹ 5 up to 1L, ₹ 25 (+ Applicable GST) beyond 2L

RTGS

  • Realtime
  • Min 2 lakhs
  • Charges 2021
    • UCO - incoming free, outgoing 24.5 to 49.5 per transaction (pdf)
    • Digibank - Free
    • SBI - free for staff

IMPS

  • Real time
  • Max 2 lakhs
  • Charges 2022
    • idfc, Digibank- Free
    • UCO - 17Rs

ACH USA

  • Free usually.