Portable Savings Account
by VARMA
Portable savings account is designed and developed by Varma for new banking system in order to expand it to the ultimate level. This portable bank account can be shifted from any bank to any bank at any time. It is multipurpose savings account with permanent account number
Liberalize the banking sector to establish a bank branch at every village or colony having population of 2500 so that each bank shall handle approximately 2000 portable bank accounts. The purpose of liberalized banking sector is
*To give every citizen above the age of 15 years a portable bank account. This portable savings account number is permanent from birth to death. The portable savings account can be shifted from any bank to any bank at any time.
* To make India a fully digital nation and to usher in 100% e-governance.
* To expand Banking to the ultimate level so that many State and Central Government departments can be integrated in the banking system to cut the present government size and non plan expenditure to 1/3 level.
*To make the banking as intermediary between the Government and people
*To integrate the Government and governance in the banking system vertically and horizontally
*To know up to date bank profits at any time and to avoid nonperforming assets
* To make money supply automatically expands or contracts in the banking system according to demand for money, growth rate and population growth.
*To achieve zero deficit fiscal and revenue budget
* To make budget preparation simple and easy.
* To eliminate black money and corruption
* To make every bank branch an E-seva center.
* To streamline the PDS to keep subsidies out of the reach of the rich
*To streamline agriculture subsidies to stop farmer suicides and keep subsidies out of the reach of rich farmers, high income group people, industrialists, contractors, political leaders and business people.
* To stop illegal migration effectively and permanently.
* To control unemployment, provide social security to all, and stop child labour.
* To get the updated population figures at every day.
* To provide health care and the highest quality education to all people alike
* To enforce land ceiling act in totality.
* To achieve 100% food security, energy security and national security
* To help people get passports, birth certificates, death certificates, loans, monthly rations, pensions, natural calamity compensations instantly at any bank branch.
* To prepare and supply electoral rolls for the election commission and help it conduct one day polling in single phase for general elections page - 69
* To build toll free highways
* To make India one fully open market without any check posts
* Before you read this document please down load and study the working modules of this new banking system from the website www.vijayavarma.com www.taxreforms.net www.singletax.org
The concomitant study of this text document along with the working modules will help it understood more easily.
My suggested regulations and guidelines for issuing licenses for banking business
* Banking licence should be given to any promoter or institution that has capital investment of minimum one thousand crore rupees. The qualification to start banking business should be a minimum capital investment of 1000 crore rupees. There should be no upper limit for bank’s capital investment. Even individuals or a set of people with capital of minimum Rs. 1000 crores shall be allowed to operate banking business.
* Banks should be allowed to operate any number of branches.
* Banks should be allowed to handle portable savings accounts through its branches whose cumulative total money should not exceed 18 times the bank’s own capital money.
* Banks should handle citizens’ bank accounts and not own them. These bank accounts should be portable with portable account numbers.
* Customer should have absolute right to shift his account from one branch to another branch of the same bank or another branch of different bank.
* The money in the customers’ accounts should not have any storage value. It should have only transaction value.
* The PLR rates on loans should not be more than 3% per annum up to Rs. 10 lakhs and should not be more than 4% per annum on loans/advances more than Rs 10 lakhs.
* The banks should not be allowed to take deposits from the customers. That means there should be no fixed deposits. There is zero interest on demand deposits. Demand deposits mean money in the savings accounts.
* A Bank should be allowed to handle any number of accounts through its branches. But the total digital money in these accounts should not exceed 18 times the value of bank’s capital money. So the number of accounts a bank handles through its branches depends upon the total digital money in all these accounts. It can increase the number of accounts until the cumulative digital money in all its customers’ accounts reaches 18 times the value of the bank’s capital money. For example if a bank has Rs. 1000 crore has its capital money, the total money it should be allowed to handle from all its customers’ accounts is 18,000 crore rupees. The total money in all customers’ accounts handled by all branches of a bank should not be more than 18 times the value of the bank’s capital money. If the bank wants to handle more number of accounts with more money supply it will have to increase its capital money.
* Banks should be allowed to generate loan money up to the 47.37% of the value of total digital money in all customers’ accounts it handles + its own capital money in digital and physical form. The loans sanctioned by bank should not be more than 47.37% of total money in all customers’ accounts it handles + its own capital money. For example if a bank’s capital money is Rs. 1000 crore and with the maximum money handling capacity of 18000 crores the bank’s maximum loan generating capacity is Rs 9000. That means a bank’s maximum loans capacity with 1000 crore capital money is [47.37% of (1000 + 18000 =19000) = 9000]
* At the same time Banks should be allowed to generate loan money and sanction loans/advance to customers up to 9 times the value of its capital money but not more than 9 times of its capital money.
That means if a bank’s initial capital money is Rs 1000 it can generate and sanction loans/advance up to Rs 9000 crores if it handles Rs 18000 crore in all its customers’ accounts.
* So a bank’s loan generating capacity depends on two factors 1] its capital money 2] it total money handles. [For example if a bank has 1000 crore has its capital money, the total money it will be allowed to handle from all its accounts is 18,000 crore rupees. So with the capital of 1000, the total money supply the bank can handle is 1000+18000= 19000. With this total money supply this bank handles, the loans sanctioned by this bank should not exceed the value of 47.37% of 19000crores] = 9000. With the 1000 as it capital money, the maximum level of this bank’s money handling capacity of 19000 crores = 9,000crore loan money [maximum level] + 10,000 crore real money]. As the bank’s capital money increases its money handling and loan generation capacity will increase correspondingly.
*A bank’s money supply handling capacity with 100 as its capital will be at the level of 100 when the bank has zero accounts at the launching time and it can reach up to at the maximum level of 1900 with increase of accounts.
*A bank’s loan money generation capacity with 100 as its capital will be at the minimum level of 47 and at the maximum level of 900 when the bank reaches the maximum level of total money it handles reaches 1900. On the first day with 100 as its capital the bank, without any accounts, can generate and sanction loans up to 47 only. If their accounts increase, the money it handles also increases and correspondingly the money generation capacity also increases up to the maximum level of 900 when total money it handles in all its accounts reached the maximum level of 1900.
* Banks should not be allowed to use or withdraw its capital money by its promoters for any purpose other than paying salaries, stationery or other running or operating costs of the bank. That means the initial capital money cannot be used for any other purpose or withdrawn by its promoters. The bank should not lend its capital money and it should remain in its own bank account. It should be remained stationery in the bank account or its branch accounts as long as it runs the banking business. But he promoters or owners shall be allowed to withdraw profits, if any, over this initial capital money at their own choice.
* Whenever branch issues its loans/advances to customers the loan amount generated by a bank increases and whenever a customer repays loans the bank’s generated loans decrease. The total loans generated by a bank should be within the two limits as prescribed above.
* The interest on the loans, when paid by a customer, should be added to bank’s capital money. When customers pay interests the bank’s capital increases. Bank’s profits will also increase when customers pay user charges for different services the bank provides. When bank pays salaries or spends towards operating cost its capital decreases. Bank’s capital money minus its initial capital money = bank’s profits.
* A bank’s profits include the total interest paid by its customers and the service charges paid for different services it provides minus its operating cost.
* A bank’s income from interest payments alone would be as follows.
1] When Bank’s own capital money = Rs 1000 Crores
If total money in all its customers’ account = 0
Then the bank’s maximum loan generating capacity = 47.37% of 1000 = 473 crores
The bank’s annual income from interest alone = 3.5% of 473 = 16.5 crores per annum [excluding user charges + service charges]
2] When a bank’s own capital money = Rs 1000
If total money in all its customers’ accounts at the bank’s maximum money handling capacity = RS.18000 crores
The bank’s total loan generating capacity at maximum level = 47.37% of [1000 + 18000 =19000] = Rs 9000 crores
The bank’s income at the maximum loan generating capacity = 3.5% of 9000 = 315 crore
So with Rs 1000 as capital money, a bank can earn income up to 315 per annum at the maximum loan generating capacity of Rs.9, 000 crores which is possible at the maximum money handling capacity of 18,000 crores in all its customers’ accounts. In addition to this income there will be income from service charges and user charges paid by customers for different services.
The total bank profits = the income accrued from interest and user charges – bank’s operating cost.
*When the bank starts the business it has to exchange 0.6% of its digital capital money with physical money at the Central Bank. Now the newly started bank’s capital money will be in 99.4% digital money and 0.6% in physical money
*The central bank’s physical money decreases by that amount and its Digital money increases by the same amount when the new bank transfers its capital digital money to the Central bank’s digital money.
When the newly started bank opens branches it has to transfer sufficient amount of its digital capital money and physical capital money into new branches’ accounts to start the business
* The bank shall be allowed to operate any number of branches.
* Some portion of this bank capital money [physical and digital money] shall be transferred to its branch accounts to exchange cash with digital money with customers.
*When a customer withdraws money at the branch or its ATM, the digital money in the customer’s account decreases, and the digital money in the branch account increases while branch’s physical money decreases -When a customer deposits physical money at the branch, the digital money in the customer’s account increases and the digital money at the branch account decreases and its physical money increases
*At all times the capital money [digital + physical] at bank branches should remain the same. The expenditure cost of all branches should be paid from the bank’s capital money. The bank’s capital money in its account and [digital money + physical money] in all its branches’ accounts is the total bank’s capital money.
* Interest payments on loans, user charges service charges should be added to the bank capital.
Bank’s initial capital increases when interest payments, user charges and services charges are added to the bank capital. The bank capital decreases when banks spend money towards salaries, stationery, rents etc.
* From time to time the bank shall transfer its capital money to branches if necessary for smooth functioning of the branches.
*Bank’s capital money should be used for exchange of digital money or physical money with customers and paying for running expenditure.
* The customer can change the host bank for his account at any time if he has not taken any loans from the bank. If he has taken loans, he has to repay all loans to the present host bank before he shifts his account to the new host bank. If the new bank agrees to take all customers’ loans from the present host account to its account then the customer can shift his account to the new host bank without repaying the loans to the present host bank.
* Each bank shall handle on an average 2,000 accounts. India need 5,00,000 branches. There shall be many banks which will run banking business through thousands of braches. Every citizen should have a bank account and it should be made compulsory. Each bank branch will have an ATM at its own premises. Total number of ATMs =Total number of Bank branches. Money will be put in the ATM machines by bank branches. So No third party or agencies are required to deposit cash in the ATMs.
Money types, percentages and Volume of money supply in new expanded banking system
Total money supply = total digital money 99.4% + total physical money [0.6%]
Total physical money = Physical money in banks + physical money at the public
Total digital money = customer digital money < 94.5% + Bank capital digital money > 5.5%
Banks Total capital money = Banks’ capital digital money + Banks’ physical money
Total money supply = Banks total capita money + customer digital money
Customer digital money = Loans generated by banks < 47.37% + Real money 52.63%
Real money = Total money supply – Loans generated by banks
Bank’s capital money should be more than 11.11% of total loans generated by a bank
Bank’s capital money should be more than 5.55% of total digital money of all customers it handles
Total money supply varies between 0 to 0.6%
If we assume that half of the total physical money of 0.6% is at the public then the total unaccounted money in this new banking system is just 0.3% of total money supply that is equal to 0.3% of GDP value. Only this small 0.3% of total money supply will be unaccounted and out of the economic system. That means 99.7 % total money supply is fully accounted and the black money will be almost gone.
Bank capital money -
1. Government should give licences to any individual or financial institution or public limited companies which have capital investment of minimum Rs. 1000 crores.
2. This is security deposit to run banking business.
3. This deposit in Bank’s Account is bank’s capital money. It is called as fixed money or static money because the bank should not use its capital money as long as the bank runs banking business. It should remain untouched by the banks. The bank’s profit like interest payments on its advance, services charges, user charges will be added it its capital money. This profit money got from interest on loans, service charges and user charges can be used to pay salaries and towards other operating costs of that bank. Bank’s profits are from interest payments, service charges, ownership transfer charges
There may be hundreds of banks in the country. Each bank may have thousands of branches. Each bank may handle thousands of accounts. There should be a bank for the population of every 2500 people. For example in India it requires 5, 00,000 bank branches. So on an average a bank will handle roughly 2000 accounts. [Every citizen above the age of 15 years should have Main Savings Account]
All these banks are under the total control of Central Bank.
1. Total Money Supply handled by a bank branch
The money recorded in any account is called digital money. The digital money of all accounts handled by a bank branch is total digital money it handles at a particular point of time.
The total digital money handled by a bank branch + the total physical money at the branch and in its ATM is the total money supply handled by the bank branch at a particular point of time
The total loan money/advance given to all its customers is equal to total loan money/advances given by that branch at a given particular point of time. Note- All these figure will continuously change at every transactions made at the branch
2. Total Money Supply handled by a Bank
The digital money handled by all its branches and the bank’s capital money is the total digital money in that bank at a given particular point of time.
The total digital money handled by all branches of a bank + the total physical money at all the branches and in all ATMs + the physical money at it own chest + bank’s capital money is equal to the total money supply handled by that bank at a particular point of time.
The loans/advances given by all the branches of a bank is the total loans/advances given by that bank at a particular point of time.
The total money supply handled by a bank minus the total loans/advances given = the total real money handled by that bank.
Note- All these figure will continuously change at every transaction.
The total loans/advances given by a Bank through all its branches should not be more than 47.37% (if CRR = 10%) of the total money supply the bank handles. That means the total loans/loans given by a bank through all its branches should not be more than 90% of the total real money the bank handles. In other words the real money handled by any bank should be at the minimum level of 52.63% total money supply the bank handles. Note – These restrictions do not apply at the branch level.
The total loans/advance of any bank should not exceed the 9 times the value of its capital money/security deposit money.
The total money supply that can a bank can handle through all its branches should not be more than 18 times the values of its capital money.
3. Money Supply at Central Bank - Total Money Supply handled by the Central Bank
*The digital money handled by all banks in a country + the digital money in government account and the Central bank’s digital money = the total digital money in that country at a particular point of time.
*The total digital money [D] handled by all banks in a country + the total physical money handled [C] by all banks and in all ATMs + the physical money at Central bank [C1] + digital money [D1] at Central bank + digital money in government account is equal to the total money supply in the entire country at a particular point of time. All this money supply will be controlled and handled by Central bank.
*Loans/advances given by all banks in a country are the total loan money in the country.
*Total money supply [K] minus total Loan money = total real money in the country.
Here are the examples of A bank’s branch account, the bank account and Central Bank Account
A Bank's Branch Account module - Download this bank account module from website – www.vijayavarma.com or www.singletax.org
– A Bank shall have many branches. The figures in Table – 1 show the total value of money supply of all accounts a branch handles. These figures are given for example only and they are imaginary figures
table
The Central Bank Account Module – This is an example of central bank account. There will be only one Central bank under which all banks operate with thousands of branches at the ratio of one bank branch for every 2500 people in a country. The Central bank account handles the cumulative money supply in the country assisted by many banks through thousands of branches.
Table- 3 Figures in crores [example] shows total money supply in the economic system operated by Central Bank through all its licensed banks with lakhs of branches that are equal to one branch for every 2000 people
* The minimum capital to run banking business should be Rs 1000 Crore.
1. The bank can generate loan money up to 47.37% value of total digital money it handles in all accounts through all its branches.
2. The total loans/advance should not exceed 9 times the values of its own capital money
3. The total digital money in all customers’ accounts it handles should not exceed 18 times the value of the bank’s capital money.
4. The total digital money in all customers’ accounts + the total bank capital money [digital money and physical money] = the total money supply it handles
5. Bank’s capital money should not be less than 1/18 times the value of the total digital money in all its customers’ accounts it handles. That means bank capital money should be more than 5.5% of total digital money in all its customers’ accounts.
6. The total money supply – total loans generated = Real Money
7. The real money should always be more than 52.37% total money supply a bank handles
8. The generated loan money /advances will be added to the customers’ digital money and money supply increases. When bank generates money the money supply increase
9. When customer repays loans the loan generated by a bank decreases and money supply decreases.
10. The interest paid will be added to bank’s capital money and it increases. Money supply remains the same when interests on loans are paid.
*Each customer should be allowed to withdraw only Rs 5,000 per month from his/her savings account even though he/she has huge amount of money in his/her savings account. The customer has to spend his/her remaining earning through debit card, cheque or online money transfers. The monthly withdrawal limit in cash should be Rs. 5000 per month.
*Total physical money of a Bank = total money in its own chest and at all its branches and ATMs
Bank capital money = It’s initial capital amount + profits if any
Total digital money = Total digital money in all customers’ accounts handled by all branches and bank’s own digital capital money.
Total loan money = Total loan money given by all its branches. The total loans/advances should not be more than 90% of the total real money in all accounts it handles and it should not be more than
47.37% of total money supply in that bank. Total real money = Total money supply - Total loan money.
Total number of ATMs =Total number of Bank branches. There should be a bank branch for every 2500 people. Each bank branch will have an ATM at its own premises. Money will be put in the ATM machines by bank branches. So No third party or agencies are required to deposit cash in the ATMs.
The money supply change at every transaction that takes place at a branch or at a bank or at the Central bank [From above tables] Money changes Module
Download full document and money changes modules from website - www.vijayavarma.com
Posted by VIJAYA KRUSHNA VARMA
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Download the working modules for this new banking system by clicking on this links
https://bankingredefined.files.wordpress.com/2015/01/portable-bank-account.xlsx
https://bankingredefined.files.wordpress.com/2015/01/shares-account.xlsx
https://bankingredefined.files.wordpress.com/2015/01/money-supply-module.xlsx
https://bankingredefined.files.wordpress.com/2015/01/land-savings-account.xlsx
https://bankingredefined.files.wordpress.com/2015/01/vehicles-savings-account-module-varma.xlsx
http://taxreforms.net/wp-content/uploads/2012/06/Bank-account-module.xlsx
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