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BANK AND ITS FUNCTION

Courtesy/By: PRATIBHA SINGH | 2021-02-19 15:35     Views : 227

BANK AND ITS FUNCTION

The bank is an organization that accepts deposits that can be withdrawn. It is a lawful institution, where people deposit money in order to get interested in money in exchange. Banks are institutions that help the people in the management of their finances. Public deposit money in the banks with the assurance that their money is safe and can be withdrawn at the time of demand.

Bank accepts money from the public and business community and provides the following assurances:

  • Safety of deposit
  • Withdrawal of deposit

Banks give interest on deposits. Interest amount adds to the original deposited amount and is a great incentive to the depositor. It helps to promote the idea of savings. It is an industry that handles cash, credit, and other financial transactions. It provides a safe place to store money, extra money, or credit. Bank uses these deposits to make loans. These loans include loans like cars, businesses, houses, etc., and home mortgages.

Banks are a safe place to deposit cash, the FDIC that is Federal Deposit Insurance Corporation insures them. All the banks are regulated by the Reserve Bank of India guidelines.

FUNCTIONS OF BANK

PRIMARY FUNCTIONS OF THE BANK HAVE TO PERFORM TWO MAJOR FUNCTIONS:

Accepting deposits – it is a very important function of all commercial banks providing safe custody of savings, mobilizing public funds, and interest on the savings to the depositors.

  1. Saving deposits
  2. Fixed deposits
  3. Current deposits
  4. Recurring deposits

Granting of loan and advances – the public deposits money in the bank, the bank uses their deposits for granting loans to the businesses and individuals to meet their uncertainties. Bank provides less interest rate on deposits but charges a high rate of interest on loans. The difference between the lending interest rate and the interest rate of deposits is called bank profit.

  1. Bank overdraft
  2. Cash credits
  3. Loans
  4. Discounting the bill of exchange

SECONDARY FUNCTIONS OF BANK

It is classified into two parts:

AGENCY FUNCTIONS – Banks are the agents of their customers. Hence it must perform various agency functions:

  1. Transfer of funds.
  2. Periodic collections
  3. Periodic payments
  4. Collection of cheques

UTILITY FUNCTIONS OF BANK – Issuing letter of credits, travelers’ cheque, etc. undertaking safe custody of valuable, important documents, and securities by providing safe deposits. Provide customers with facilities of foreign exchange dealings. Underwriting of shares and debentures. It helps in dealing with foreign exchanges, etc.

 

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.

Courtesy/By: PRATIBHA SINGH | 2021-02-19 15:35