In this JAIIB article, we have got some important notes on an important topic from the applicable Syllabus of JAIIB PPB 2022 for NOV 2022 Exams. The topic i.e Functions of Banks for Principles & Practices of Banking (PPB) Preparation is explained in the below paras:



Banks were set up to keep the People’s money safe and secure as well as to provide loans to the people who required them. People would deposit their money in banks and then banks would lend this money. These are the most basic functions a bank performs. 

Today, banks perform many other functions along with the above-mentioned basic functions to their customers. 

This expansion of products & services had emerged because of increased competition in the banking industry, technology advancement, and many other factors. 

The concept of the time value of money is very common among the public, they now understand the future opportunities that are available for their money. Now, they have many other investment schemes to choose from instead of just having savings account in the name of investment. 

This is one of the main reasons why banks today cannot depend on deposits made by the customers and have to find out other financial services through which they can earn profits. 

These other services which are provided by the are known as ancillary services which are mentioned: 

  • Bank drafts
  • Fund Transfer (NEFT/RTGS)
  • Traveler’s cheque
  • Custodial Services
  • Merchant banking
  • Retail banking
  • Factoring
  • Bank assurance/ Guaranty
  • Mutual funds
  • Insurance
  • Foreign exchange / Forex services
  • Bank cards
  • Internet banking
  • Mobile banking

Bank Drafts: As per section 85(A) of the Negotiable Instrument Act, it is an order to pay money drawn by one bank to another for a specified sum of money payable to order on demand. 

In simple words, it is a payment made on behalf of a payer having a guarantee of the Issuing Bank. 

It is just like a cheque in which payment has been guaranteed by the issuing Bank after confirming that there is enough balance in the payer’s account, the process of issuing a bank draft is more Complex than the issuing of a Bank cheque.

Fund Transfer (NEFT/RTGS):-

RTGS: It stands for Real-Time Gross Settlement which as per RBI is a system of continuous and real-time settlement fund transfers transaction by transaction. It is an instant fund transfer service that doesn’t take any time to transfer the fund meant to transfer large sums of money. (>/= Rs.200,000.00 with no upper limit).

Reserve Bank has rationalized the service charges of RTGS as under:

Transactions Charges (exclusive of tax)
Inward transactions Free
Outward transactions

₹ 2,00,000/- to 5,00,000/-

₹ 5,00,000/- & above

₹ 24.50/-₹ 49.50/-


Note: Banks may charge a lower rate but cannot charge > the rates RBI prescribed.


NEFT: As per RBI, a national payment system facilitates the one-to-one transfer of funds. Anyone, individuals from firms to Corporates, can transfer funds from one bank account to another bank account in the country by or to from the bank which is a participant in this scheme. 

NEFT is quite similar to RTGS with the distinction that there is no minimum limit transfer of funds under NEFT. But there is a maximum cap of Rs.50,000.00 for cash remittance within India and to Nepal. 

Related Links:-

Principles & Practices of Banking Syllabus 2022 JAIIB PPB Study Material PDF 2022 JAIIB PPB Notes PDF 2022 JAIIB PPB Mock Test PDF 2022
Accounting & Finance for Bankers Syllabus 2022 JAIIB AFB Study Material PDF 2022 JAIIB AFB Notes PDF 2022 JAIIB AFB Mock Test PDF 2022
Legal & Regulatory Aspects of Banking Syllabus 2022 JAIIB LRAB Study Material PDF 2022 JAIIB LRAB Notes PDF 2022 JAIIB LRAB Mock Test PDF 2022

JAIIB/CAIIB Full Video Course


NEFT takes time to transfer funds, usually, 30 minutes. Then NEFT charges are mentioned as below: 

Transactions Charges (exclusive of tax)
For credit to beneficiary accounts Free
Outward transactions

₹ 1.00 to ₹ 10,000.00

₹ 10,000.00 to ₹ 1,00,000.00

₹ 100,000.00 to ₹ 2,00,000.00

₹ 2,00,000.00 & above

₹ 2.50/-₹ 5.00/-

₹ 15.00/-

₹ 25.00/-


Traveler’s cheque: These cheques are for a fixed amount that is prepaid and operate just like cash so as to enable the purchaser to purchase goods and services when he or she is traveling. 

These types of cheques are most often used by travelers because they are safer and more convenient instead of traveling with currency notes. 

In the event of losing the traveler’s cheque, we can get our check canceled by your bank and can get the new one issued instead.

Although today, plastic money has taken its place because it is more convenient.

Custodial Services: These services are known by the name of bank locker services where customers can keep their valuables such as documents. jewels or anything valuable to them in the bank lockers. 

The locker facilities can be availed in the bank and after paying a fee for the locker facility. If a theft occurs in the bank, then the bank will pay only the amount that has been insured to the customers instead of the actual value of the articles that were kept in the locker.

Merchant banking: Corporations get their capital by issuing various financial securities such as equity shares, debentures, bonds (increase case of Public sector units), mutual funds, etc. When going for these options, they have to face many disputes and problems related to them. 

To overcome the dispute and problems that arise on account of capital generation, various financial, as well as known Financial Institutions, provide specialized services of merchant banking. 

Merchant banking is basically the provider of Consultancy Services to its clients in the matters of finance, marketing, managerial & legal matters related to financial and banking services.

Retail banking: Retail banking is often termed consumer or personal banking. In this branch of Banking, banking services are offered to the general public which offers a way to the banking customers to manage their money, access credit, and deposit money.

Services of retail banking also include checking and savings accounts, offering services of mortgages, credit cards, personal loans, & certificates of deposit (CoD). These services are provided to most of the branch visiting customers of the banks where banks representatives and managers will provide customer services & financial advice to them in different matters.

Factoring: The financial services in which all the services are provided starting from selling goods & services and ending with the collection of receivables. 

A factor is basically an intermediary agent who provides the services of financing the receivables. A factor is essentially a source of funding that agrees to pay the company the value of an invoice after a discount on account of service commission and service fees.

Bank assurance: The service of bank assurance is the same as a bank guarantee. Under this service, the lending institution ensures that the debtor’s liabilities are met. 

In simple words, a bank provides assurance to another party on behalf of the customer that the bank will not fail to mitigate the promises in the case is the client doesn’t meet his liability. 

In case the bank customer fails to keep his or her promise, the bank will compensate another party and will recover the losses incurred from the later party who had taken the bank guarantee from the bank. 





Mutual funds: The primary function of mutual funds is to collect the investment from a large number of people (investors and depositors) to be utilized to invest in the capital in a diversified manner. These Mutual Funds try to bring up the investment schemes which help in reducing the risk of loss. This service is very much beneficial for investors who have no knowledge or just know a little of the investment and equity market. 

Insurance: Banks also provide a number of insurance services such as health insurance, vehicle insurance, life insurance as well as loan insurance. Banks can provide lease insurance services by entering into joint ventures with insurance companies such as SBI Life, PNB MetLife, etc.

Foreign exchange/Forex services: Banks also deal with foreign currency, which mainly includes the conversion of currencies. Other than this, they also help the customers to sell & purchase foreign exchange.

Bank cards: Banks provide various types of cards to the customers like debit cards, credit cards, gift cards, etc. With the help of these cards, the cardholder can transact without the help of hard cash currency. These cards are also known as plastic money.

Internet Banking: In this branch of internet banking, the banking services are provided to complete all the banking transactions without requiring the customer to even require visiting the bank physically. Sometimes, banks charge a nominal maintenance fee for offering internet services to their customers.

Mobile banking: As the name suggests mobile banking services are available on smartphones via banking applications. These work like internet banking but with some limitations. The mobile applications can be installed on this smartphone without any payment of fees.


PPB Syllabus Priority 2022
AFB Syllabus Priority 2022


So, these are some of the ancillary services which are offered by the banks to their customers other than the basic services of accepting deposits and providing loans. They have helped the banks to earn some income from other sources.

Today, these services are as essential as the basic services that are offered by the banks. These services are helping businesses to operate smoothly.



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