Question

Prem is running a business of manufacturing invertors in Delhi. He is involved in daily dealings of cash through his current account in Axis Bank. Due to unavailability of funds and an urgent need to pay to his creditors in the beginning of the new financial year, he approached the bank to withdraw more than the balance available in his account, using the card facility provided to him by the bank owing to his creditworthiness. Next month, he received an order for the supply of 20 inverters from Better Electronics in Jaipur. As the amount of payment is more than rupees 2 lakhs, Better Electronics decided to transfer the funds instantly and electronically from their bank account. Today, he is overjoyed because his daughter got selected at a reputed engineering college. He went to his bank to get a financial instrument in the form of a cheque, which will be used to make a guaranteed payment of admission fees to his daughter’s college.

1. Identify the service of bank which was used by Better Electronics. (1)
2. Differentiate between the above identified service and NEFT on any three bases. (3)
3. Identify the form of e-banking facility used by Prem in the beginning of the year along with any two features. (2)
4. Which type financial instrument did Prem obtain from his bank to make guaranteed payment of admission fees to his daughter’s college? Can this instrument be obtained online? If yes, how will the bank charge the amount to the customer? (2)

Answer 1

1. The service used by Better Electronics is RTGS (Real Time Gross Settlement).
   This is because the amount is more than ₹ 2 lakh, and the transaction was completed instantly and electronically.
2. 
   

   Basis	RTGS	NEFT
   Minimum Limit	₹ 2 lakh	No minimum limit
   Settlement	Real-time, individual transaction settlement	Batch-wise settlement (half-hourly batches)
   Transaction Time	Immediate	May take a few hours depending on batch timings

3. The form of e-banking facility used by Prem is Overdraft Facility.
   Two Features:
   1. Overdraft allows the customer to withdraw more than the balance available in his account.
   2. It is usually provided to customers with good creditworthiness.
4. • The financial instrument obtained by Prem is a Banker’s Cheque (Pay Order).
   • No, a Banker’s Cheque cannot be fully obtained online, as it is a pre-printed instrument issued by the bank. However, the request for a banker’s cheque can sometimes be made through net banking or mobile banking, but the physical cheque must be collected from the bank branch.
   • Bank charges:
     The bank charges a nominal fee/commission for issuing a Banker’s Cheque based on the amount and service charges policy.