Various Types of Banking Instruments

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Let's Talk about Various Banking Instruments
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• Banks offer various types of instruments through
  which the financial transactions can take place.
• In our daytime day life, one might have
  encountered use of deposit slip, withdrawal slip
  or even checks but there are other types of
  instruments which banks do use for transactions
  and among them, some are open instruments which
  mean, any account holder could use that
  instrument for financial transactions.

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• Before going into details of the banking
  instruments, one should think about two types
  instruments.
• One is negotiable bank instruments and the other
  one is nonnegotiable bank instruments.
• Negotiable instruments are those instruments
  which can be transferred from one person to
  another. Since it is negotiable, it can
  transferable.

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• Non-negotiable instruments are those instruments
  which aren't transferable from one person to the
  other and hence, they are specific in nature.
• This s the main difference between negotiable and
  non-negotiable instruments where one can be
  transferred and the other one doesn't give
  permission to be transferred.
• When we talk about negotiable instruments and
  there are mainly 4 primary types of instruments
  which serve their own purpose.

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• Those instruments are checks, bank draft, bill of
  exchange and promissory notes.
• They are characterized by the fact that, they are
  uninhibitedly transferable, unconditional, in
  writing and payable on demand.
• On the other hand, the characteristics of
  non-negotiable instruments are that it can be
  transferred. For example, government bonds are a
  perfect example of non-negotiable bonds.

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• They can only be redeemed by the owner and others
  cannot redeem it at any cost.
• In our daily life, we use one instrument more
  than the other. For example, someone will love to
  deal with checks but he or she may not be
  comfortable while dealing with cash.
• As such, it gives a convenient of not having to
  carry a lot of money. And since these are written
  they are generally secured.

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• Moreover, promissory notes or demand drafts also
  play a key part in banking instruments.
• For example, a demand draft guarantees to pay
  that exact amount to the person/organization
  whose name is written in the demand draft.
• Thus it is the bank instruments which have the
  power to make economy greater and more efficient
  in nature.

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• This kind of instrument plays a pivotal part in
  the economy.
• It is these instruments through which
  transactions can actually take place.
• Hence, these instruments are the essential part
  of the financial system of an economy.

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