Electronic Benefit Transfer (EBT)
Electronic Benefit Transfer (EBT) is a system used for the direct credit of social security benefits such as MGNREGA wages, old age pensions, widow pensions, and cash transfers for subsidies like LPG. The funds are credited directly to beneficiaries' bank accounts, eliminating intermediaries and reducing delays and leakages associated with manual processing. Beneficiaries can withdraw the funds from their accounts whenever needed and access other banking services.
Remittance
Remittance refers to the transfer of money from one person to another, often across long distances. Banks facilitate safe, speedy, and efficient money transfers between accounts. For example, you can send money to your child studying in a different city or receive funds from relatives working far away.
Understanding Interest
Interest is the amount earned on savings or paid on borrowed money. When you deposit money in a bank, the bank lends it out to others and pays you interest as a share of the income earned from lending. Conversely, when you borrow money, you pay interest on top of the principal amount.
Example:
Deposit ₹1,000 in a bank.
The bank lends it and earns ₹100 in interest after one year.
The bank pays you ₹40 as interest for your deposit.
Interest Rates: Banks vs. Money Lenders
Interest Rate Comparison:
Banks: Advertise interest rates on an annual basis. For example, a 12% interest rate means 12% per year.
Money Lenders: Often quote interest rates on a monthly basis. For example, a 3% monthly interest rate equates to 36% annually (3% × 12 months).
Thus, even though the quoted rates may seem similar, money lenders typically charge higher annual interest rates than banks, resulting in more expensive borrowing costs from money lenders.
*The information in this document has been adapted from articles and posters available on https://www.rbi.org.in/FinancialEducation/Home.aspx . The original articles can be accessed directly for more comprehensive insights.
Commentaires