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Banking

By Author: Santhosh Kumar
Total Articles: 58

Bank is a lawful organization, which accepts deposits that can be withdrawn on demand. It also lends money to individuals and business houses that need it.

A bank is a financial institution that provides banking and other financial services to their customers. A bank is generally understood as an institution which provides fundamental banking services such as accepting deposits and providing loans. There are also non-banking institutions that provide certain banking services without meeting the legal definition of a bank. Banks are a subset of the financial services industry.

Role of Banking

Banks provide funds for business as well as personal needs of individuals. They play a significant role in the economy of a nation. Let us know about the role of banking.

• It encourages savings habit amongst people and thereby makes funds available for productive use.
• It acts as an intermediary between people having surplus money and those requiring money for various business activities.
• It facilitates business transactions through receipts and payments by cheques instead of currency.
• It provides loans and advances to businessmen for short term and long-term purposes.
• It also facilitates import-export transactions.
• It helps in national development by providing credit to farmers, small-scale industries and self-employed people as well as to large business houses which lead to balanced economic development in the country.
• It helps in raising the standard of living of people in general by providing loans for purchase of consumer durable goods, houses, automobiles, etc.

Need of the Banks
Before the establishment of banks, the financial activities were handled by money lenders and individuals. At that time the interest rates were very high. Again there were no security of public savings and no uniformity regarding loans. So as to overcome such problems the organized banking sector was established, which was fully regulated by the government. The organized banking sector works within the financial system to provide loans, accept deposits and provide other services to their customers. The following functions of the bank explain the need of the bank and its importance:

• To provide the security to the savings of customers.
• To control the supply of money and credit
• To encourage public confidence in the working of the financial system, increase
Savings speedily and efficiently.
• To avoid focus of financial powers in the hands of a few individuals and
Institutions.
• To set equal norms and conditions (i.e. rate of interest, period of lending etc) to all
types of customers.
Services provided by banking organizations
Accepting Deposits or savings functions from customers or public by providing bank account, current account, fixed deposit account, recurring accounts etc.

• The payment transactions like lending money to the public. Bank provides an effective credit delivery system for loan able transactions.
• Provide the facility of transferring of money from one place to another place. For performing this operation, bank issues demand drafts, banker’s cheques, money orders etc. for transferring the money. Bank also provides the facility of Telegraphic transfer or tele- cash orders for quick transfer of money.
• A bank performs a trustworthy business for various purposes.
• A bank also provides the safe custody facility to the money and valuables of the general public. Bank offers various types of deposit schemes for security of money. For keeping valuables bank provides locker facility. The lockers are small compartments with dual locking system built into strong cupboards. These are stored in the bank’s strong room and are fully secured.
• Banks act on behalf of the Govt. to accept its tax and non-tax receipt. Most of the government disbursements like pension payments and tax refunds also take place through banks. Government disbursements like pension payments and tax refunds also take place through banks.

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