Banking is an enterprise that handles coins, credit, and other economic transactions. Banks provide a Safe to Store extra cash and credit score. They offer financial savings bills, Certificates of Deposit, and checking money owed. Banks use these deposits to make loans. These loans include home mortgages, enterprise loans, and vehicle loans, etc.
A Bank is a financial institution licensed to receive deposits and make loans.
Banking is defined as “Accepting of deposits of cash from the public for the cause of Lending or Investment, repayable on call for or in any other case and withdrawable through cheque, draft, or card”
However, with the passage of time, the activities covered by banking enterprise have widened and now various different services also are offered by way of banks. The banking services nowadays consist of the issuance of debit and credit score cards, imparting safe custody of treasured objects, lockers, ATM services.
A bank is a monetary institution certified to acquire deposits and make loans. Banks can also provide economic offerings which include wealth management, forex, and safe deposit containers. There are numerous one-of-a-kind types of banks which include retail banks, business or company banks, and funding banks.
Features of Banking
Deals with money:
The bank always deals with money that is maybe $, yen, yen, Inr, etc.
The bank accepts deposits from the public and provides loans to needy people. The deposits may be current, fixed saving, etc. The band provides interest on the deposit amount and charges on the loan amount.
The bank’s main sources of income are to provide loans and charge interest on them. Bank provide different loan such as home loan, study loan, business loan, vehicle loan, education loan, etc.
The bank plays a middle man role also, it takes a risk on the behalf of debtors to complete the transaction. Banks collect the money from its customer and provide money to needy people, so that bank is the middle man between the depositors and needy people.
Deposits must be withdrawable
The customer’s amount must be withdrawable at any time or when its maturity period complete. The bank has no excuses for customers because all banks are controlled by the central bank.
A bank that is controlling the functions of guiding and regulating the banking system of a country is known as a Central bank. Such a bank does not deal with the public. It is a superior bank in the country. Its main function is to issue the new notes, currency to the market, and provide international currency.
The Central Bank provides guidance to other banks like commercial banks, Development banks, investment banks whenever they face any problem. It is therefore known as the banker’s bank. No other bank than the Central Bank can issue currency.
Commercial Banks are banking institutions that accept deposits from the public and grant short-term loans. In addition to giving short-term loans, commercial banks also give medium-term and long-term loans to business enterprises. Nowadays some of the commercial banks are also providing housing loans on a long-term basis to individuals. The rate of interest offered by the banks to depositors is called the borrowing rate while the rate at which banks lend out is called the lending rate. The difference between both rates is called ‘spread’ which is appropriated by the banks.
The business needs a large no. of capital to buy machinery, equipment, for research and development. Such financial assistance is provided by Development Banks. Development banks are those which have been set up mainly to provide infrastructure facilities for the industrial growth of the country.
They provide medium and long-term finance to the industrial and agricultural sectors both. They provide finance to both the private and public sectors. Development banks are multipurpose financial institutions.