Category All About Money

          One of the biggest arguments against the move is that violators and tax evaders do not always hoard money in 500 and 1000 notes- most of it is either in the form of assets or investments. In the case of liquid money too, they could possibly be deposited in the Swiss banks, or in other banks through false accounts, or benami accounts. Hence, critics believe that black money cannot be totally controlled with demonetization.

          Yet another complaint is that there was not enough planning, or time given before making such a historic change. Such a sudden and drastic move as this in India has caused much inconvenience to the people.

          People in many parts of the country, especially in rural areas, had a tough time as they could not exchange their currency immediately. There are villages without banks, and people without bank accounts.

             Banks and other financial institutions were running without enough currencies of 100s, or the new 2000s, to give in exchange.

             People in hospitals who could not manage to get the equivalents, were among the worst affected.

             Even as demonetization intends to wipe off financial malpractices, many fake notes of the new Rs 2000 note were found circulating immediately after they were introduced. This made it clear that counterfeiting is still possible.

          Canadian dollar is the fifth most valuable reserve currency in the world. It has also become popular among the central banks all over, thanks to the country’s strong and stable economic system.

          One of the major attractions of the currency is the presence of the imagery of a bird called loon on the one-dollar coin. The Canadian dollar in general, is nicknamed as ‘loonie’ for this reason. The first loonies were circulated on June 30th, 1987. Interestingly, when the two-dollar coin was introduced in 1996, it was called ‘toonie’, referring to ‘two loonies’.

          In April 1871, the Canadian Parliament passed the Uniform Currency Act which replaced all the other currencies with the present day one.

          Set up in July, 1934, the Bank of Canada acts as the central bank in the country. Under its contract, banknotes are printed by the Canadian Bank Note Company, and coins by the Royal Canadian Mint.

Think of a situation in which you have no place other than your home to keep your valuables like money, jewellery etc. It’s tough!

But there was indeed such a time in history when people did not have many safety options. It was at this time, sometime around the 3rd century BC, that temples in Mesopotamia started accepting precious things from people for safe keeping.

Since these temples were already wealthy, they could also give loans to the needy. It is believed that the first steps of banking began here.

History notes that there were ‘grain banks’ in Egypt to store and loan grains, which were as important as currencies. Under the rule of the Ptolemies, government granaries formed a network of grain banks to help people. They also had a central bank in Alexandria to keep a record of transactions. This acted as the first governmental bank in the country.

Later, during the Middle Ages, trade and businesses started flourishing, and people earned more. It was then in Italy that moneylenders began to set up stalls called ‘bancas’. The idea was to accept coins and exchange currency.

In 17th century London, banking began when people deposited currencies and gold with goldsmiths. This was because the goldsmiths already had safes and locks, so they thought their valuables would be secure there. Slowly these goldsmiths started moving from town to town to transfer money. Later, they came to be known as goldsmith bankers.

        We all know that a bank is perhaps the safest place for us to keep our valuables. But have you ever wondered how they work? Let’s find out.

        For any favour that you seek from a bank, you need to open an account in the beginning. You deposit money in this account, which later goes into a larger pool of money that is formed by similar deposits.

        To give you more details about your account, the bank officials will issue a pass book, and a cheque book.  The latter helps you withdraw money from the account.

Continue reading “How do banks work?”

         Every bank offers different kinds of accounts for its customers. Some of them are the savings account, fixed deposit accounts, recurring deposit accounts, and current deposit accounts.

        The most popular among the four is the savings account. Here, if one deposits an amount, he will earn a small interest from the bank. The user is also free to withdraw money from it whenever needed. But the withdrawals are subject to certain conditions.

        In the case of fixed deposits, the deposited amount has to remain in the account for a fixed term, say five years. This account is used mainly for saving larger sums of money. The interest a bank gives for this account too, would be more.

        Another type is the current deposit account, meant mainly for businessmen. Here, there is no limit for depositing or withdrawing money.

        Recurring deposit accounts are for smaller savings. They are used by people who deposit a specific amount for a small period, say six months or one year, and earn it back with a small interest. 

Centuries ago, when the concept of banking arose, cash transactions were made manually. That means that one had to literally meet the other and deliver money. Later the system improved, and money was transferred between accounts. Even so, a person responsible had to move around with money, and it took days to transfer.

          Today, if one wants to make a transaction, it will take just minutes, thanks to the Internet. Some of the most common payment methods involve technologies like debit card, credit card, and e-banking. And for people who are not familiar with Internet technology, there are ways using cheques or demand drafts that is DDs.

           In the case of debit and credit cards, money is transferred directly from the user’s bank account, to the one it has to be given to. For example, when you go shopping, you can pay the bills using these cards, instead of giving money. The money gets debited from your account and goes to the shopkeeper’s.

           E-banking also helps in the same way, where bill payments can be made online. For instance, while paying your phone bill, e-banking helps. 

        All of us may have at least once got bank-notes that are torn or soiled. Have you ever wondered what is done with such currencies? Let’s tell you.

        As per the rules set by the Reserve Bank of India or RBI, such currencies can be exchanged in any bank even if you don’t have an account there.

        The banks which accept these notes will later submit them to the RBI. The central bank would then categorize these notes. Some of them are reissued in good shape. But some others, which cannot be repaired, are cut into tiny pieces so that they never get back into circulation.

        This happens in the case of coins too. The reusable ones are issued again. The others are melted. 

        You must have heard about the concept of inflation from your parents or teachers. Let’s keep it simple inflation is a general rise in the price of goods and services.

        An example for this is the increase in petrol price. Till a few years ago, it cost less than Rs. 40 for a litre of petrol. But today, the price has reached Rs. 70. This rise is caused by inflation, because of which, the value of goods go up.

        This happens due to many reasons. Some of them can be sudden wars, high wages, uncontrolled spending by the government, or even that of families etc. But the impact falls hard on all of us. The prices of all things that you need in your daily life increases. That means, money more than what we already have, will be required to meet our expenses.

        The annual rate of inflation is usually calculated in percentage. If the rate is 5 per cent, it means the price of something is 5 per cent higher than it was a year ago. 

         Deflation is the opposite of inflation. It causes a decrease in the price of goods and services in a country. This in turn, helps consumers buy more than what they could before, with the same amount of money.

         So is deflation a good phenomenon? Absolutely not. One of the major problems caused by deflation is that it always leads to lesser demand for goods and services. So naturally, their production also goes down. With this, many people lose their jobs or their salaries get cut. This in turn badly affects the economy of that nation.

         Again, what is the use in having lots of money but not enough goods to purchase? So, when prices fall in deflation, it does not help people at all. Deflation occurs when the government reduces its expenditure or when the citizens start spending less. However, it is not as common as inflation. 

         The term ‘Swiss banks’ may seem familiar as they are often quoted in news reports. However, they are not always famous for the right reasons!

           We have seen that Switzerland is considered a stable country with an equally stable economic system. This inspires investors across the globe to make investments in this country.

           Yet another reason is the rule of bank secrecy that the country has maintained since the Middle Ages. That is, because of the privacy and protection given by the banks, details of an account holder cannot be accessed by government authorities. In some cases, the account holders are identified by certain numbers, and not even using names.

           It was continuously reported that banks in Geneva and Zurich served as safe places for corrupt people with hidden money, tax evaders etc., because nobody could track their accounts. It was as per the Banking Law of 1934 that Switzerland maintains secrecy in its banking system.

           However, recent changes in the bank rules have made things easier than before. However, Swiss banks are still not as transparent as those in other countries.