INTRODUCTION Historically before 2000 B.C. temple was used as a bank. InExrope were used to sit on bench to exchange their money andexhibit their coins. They called this banch as ‘Banco’.InGermany, the word ‘Bank’ is derived from ‘joint fund’. A common person knows only that bank means to depositmoney in the bank and withdraw as and when it requires. In factbank performs many other function. Directly or indirectly bank is connected with all economictransaction of human-being. Banks have provided contribution isgiven to solve the problem of unemployment and economicdevelopment of the country . Bank has provided oxygen in theform of loan to big and small industries. Banks have also startedto give loan to those educated unemployed who wants selfemployment . In import-export trade also the services of bankbecome essential.
BANKING An institute providing banking services isknown as bank. This institute continuosly tries to maintainbalance balance between profitability and liquidity. Formaintaining this balance the management of the bankmust be of a high level. In modern age, bank becomecentres of faith of millions of person, that is why in reallife its meaning has been derived as a place of puttingfaith. For expressing faith it is said proverbially, ‘I bankon you.’ By keeping this concept at heart indian bankingact has defined banking has : “A service to accept depositfrom people with the intention to invest or lead with thecondition of returning it immediately whenever demandedat any predetermined time. As institute providing thisservice is a bank.
TYPES OF BANKS1 STRUCTURE OF AUTHORITY central regional primary
(1) Central bank Every nation has one central bank. It has to control the banking service industry of the nation. It is a centre of authority of banking service industry. It has to see faith of people in bank endures and it has to work for taking steps for it. Central bank enlist those banks which satisfy the specific condition and declares them as scheduled. The name of the cantral bank of our nation is Reserve Bank of India
Structure of authority(2) Regional/Central Bank By co-ordinating with central bank, Regional/ central bank takes steps to control directly the banking service industry in different regions. It works to take steps for running this industry smoothly. State Bank of India is doing this work in our nation.
Structure of authority(3) Primary bank Primary banks are providing service directly to the people. They perform many function of opening accounts,accepting,deposits,leading,etc. they work under the control of central and regional central bank.
The first type of banks fromownership point of view is public sector banks.The ownership and management of these banksare of the government. It is accountable to thelegislative assembly or the parliament like anyother public sector units. Some banks of privatesector were nationlized in independent india. NOTE => Public sector banks do not becomeinsolvent, so deposits and other investmentgiven to these banks remain safe.
(2) Private banks The ownership point of view, if the ownership and management of banks remain with certain citizen, those banks are as private banks.Note=> Private banks are registered as companies having limited liability. Banking service companies like H.D.F.C bank known as shroffs, shahukars and multanis in our country are private enterprises. Private banks are regulated by central and regional central banks.
(3) CO-OPERATIVE BANKS Co-operative banks come into existence underCo-operative Act as a form of organization. Comparatively, it iseasy to start an organizational unit under Co-operative Act. So,Co-operative banks are established on a big scale in centralareas. Consent of the central banks is required to start this typeof bank. The central Bank regulates its day-to-day operationalsoe.g
Joint sector is run by thegovernment and private individuals jointly. Theimplementation of government programme is done throughjoint sector banks as done by any public enterprise.Besides, they nourish the elements of efficiency and profitof private enterprise. Some nationalized banks have beenmade joint sector banks by offering their shares to public.
(1) ORGNISED SECTOR BANKS Banking service industry is divided in organized ad un organized work organisation like any other industries. Organised sector bank work according to declared rules. They are regulated by the central bank. Their operation are kept transparent. The internal set-up is also run according to the declared rules . Banks like Bank of india.
(2) Unorganized bank People known as ahroffs, shahukar, vaniya, multani, Pathan are un organized banks in India. They provide banking services. Regulation are negligible for them. Rural areas and people having small requirements in India are utilizing banking services of unorganized sector on a big scale. Generally, the rate of interest of these banks is high and recovery of their lended money is very stringent.
FIELD OF WORK VIEWPOINTSCOMMERCIAL AGRICULTURAL INDUSTRIAL BANKS BANKS BANKS
(1) Commercial banks In modern time, special elements are seen in the scope of a bank of organised banking services. This type of banks are seen in three main sector of economy. (1) Agriculture (2) Industry and (3) services, and they have specialised in providing the services. Commercial banks take the deposits from the public and land the money for a short period and for a different activities of different areas. Their aim is to earn profit as like trade and hence they, are known as commercial Bank. Most of the businessmen want short term finance and it fulfill by this banks. Hence, they are also called Mercantile Bank.
Agriculture sector based on nature. Hence, there ismore uncertainty regarding the possibility of crope and quantityof the crope. In these circumstances, farmer borrow money frommoney from unorganised banks at high rate of interest and for thepayment of there debt they become ruined. Considering this fact,to fulfil the requirement of agriculture sector some organisedbanks are established, which are known as Agriculture Banks.This banks have adopted remarkable specialisation. Someagriculture banks lead money for development of land. Somebanks lead money on security or mortgage. This type of banksgive guidance to farmer regarding how to increase productivity.
(3) INDUSTRIAL BANKS To fulfil different requirement of industries, the banks came in to existence are known as industrial banks. All industries require money to purchase different gear & resources for the production. Moreover long-term and short term financial need aries to face uncertainty and risk of the market. To pay the different expences of factory and office, long-term financial requirement aries. To satisfy the financial requirement of the industry, industrial banks lead money for medium and long-term. In this type of banks. Also bank, specialization is seen. Some banks lead money only small scale industries e.g. small scale bank, and some bank lead money to large scale industries e.g. Industries Development Bank of India (IDBI) and I.C.I.C.I Bank.
(1) Scheduled banks Central Bank has declared different measure such as capital of the bank, size of bussiness, capability of management etc. The banks, which possess this are registered and included in the scheduled of central bank are called scheduled bank. Central Bank and Regional central Bank keep watch on such banks. Besides this , when financial crisis arise in this banks, central bank immediately give them financial and other help. Hence, these scheduled banks are more trustworthy e.g. Industrial Development Bank of India (IDBI) and I.C.I.C.I Bank.
(2) Non-scheduled banks The banks, which do not posses the standards decides by Central Bank or due to no desire, are not listed and included in the scheduled are called as non-scheduled bank. This bank should compulsory declared to their depositor and public that this bank is Non-scheduled Bank. The management of this bank should be on professional base.
(1) LOCAL BANKS This type of bank is formulated by keeping geographicalareas as point of view. Banks which are serving city, block or a districtare known as local bank. The working of this bank is very compact.Most of the co-operative banks are local.
(2) National banks Most of the banks are national. As most of the economic activities are taking place within the country. These national banks, while adapting to the situation, are performing their activities at national level. Their branches are in the big cities of the country . So, their expected services are provided in big economic centres ,i.e. cities, e.g. Dena Bank.
(3) Global or foreign banks : Those banks which are working in various countries are known as global banks. With the increase in international economic operation, the development of these banks also take place. International tourism also helps greatly in the development of these banks. These banks are working as national banks in their original nations.
(1) Urban banks In the city area of the country proportion of industries and population is more. The need of the city area is also different than rural areas. To satisfy this needs, the banks established in cities are called urban banks. These banks work formaly as per the rules decided by the government. Their work-load is more.
Rural Banks are established to provide financial help to agricultureactivities run on small scale in rural areas. The administration of such banksis done by very limited persons. In rural banks the proportion of unorganized bank is more. In this type of banks restrictions regarding time andformalities is very less and activity oriented concept is is more. Hence, theymake changes in their time requirement. Such banks remain in contact withtheir district or taluka’s central bank.
In the beginning of banking profession, its administration was run by individual or family and it had no any branches. Hence, it was called Unit Banks. Before many year in Gujarat, people who gave Banking services were called ‘Nanavati’. Unit Banks were found in Bania caste. With the change in time and circumstance existence of this banks are not seen.
The bank which posses their own officies in different areasto provide banking service over above on the place of theirhead office, is called Banks with the branches. In this bank highlevel skill and management is necessary for recording thetrancation between the branches and between branch andhead office. As stated above, different types of bank can be noted atdifferent viewpoint. Any one type of bank can be included alsoin other type e.g Mehsana Nagarik Co-operative Bank is aprimary Bank, also a Co-operative Bank is a primary Bank, also aCo-operative Bank, Non-scheduled Bank, bank with branchesand at the viewpoint area it is also a Nagarik Bank.
Function of commercial banksMEANING Commercial banks do the function of acceptingdeposits and lending funds to trade, industry and other individuals.Mostly commercial banks do the function of making short termadvances to the businessmen. The intention behind of such activityof banks is to earn profit, hence they are termed as commercialbanks. Mostly such banks provide service to business class.Similarly the banks are known as Mercantile Banks. In our countrysuch banks have development on large scale. Bank of India, Bankof Baroda, etc
(1) ACCEPTING DEPOSIT Bank accepts the financial saving of the people as a deposit. Bank gives interest on the amount of the deposit to depositor. The responsibility of bank is to return the basic amount of the depositors in time and to maintain their trust . Bank recive deposit in three ways. Saving account Current account Fixed deposit account
bank receive deposit mainly throughsaving account. The accountholder can do thetransaction in limited number. Accountholdercan withdrow money from their account by hisown sign on the cheque or through withdrawalslip. He can deposit his own cash, cheque anddraft received, in his account. Account holderhas to keep minimum balance in his account asdecided by the bank. Bank can force to theiraccountholder regarding this, and hence maredeposit can be obtained by this method
In current account there is norestriction on the number of financialtransaction. Hence, current account becomemore popular in businessman. Currentaccountholder has also to keep minimumbalance in his account as like savingaccountholder, decide by the bank.
Fixed deposit account To use amount of the depositorsfor specific period, bank accept the fixed termdeposit and gives the receipt to depositor forreceiving the amount. The bank giveguarantee in writing to return the amount ofdeposit with interest to depositor afterfinishing decided time i.e date of maturity.Depositor can not withdraw their amountbefore date of maturify and hence bank givesmore interest on the deposit compare tosaving account.
It is also an improtant function of a bank to lendthe money received through saving account and fixed termdeposit to needy person. Bank earn because bank givesinterest at low rate on deposit and charge high rate ofinterest on advances. After paying expenses from theearning bank gets profit. If, after receiving thedeposit, that amount is not landed deposit, that amount isnot landed then bank has to suffer loss. Beside this, ifrecovery is not done in time after lending the money thenalso lending activity become loss making. Lending ofmoney done in three ways as like Overdraft, Cashcredit, Loan.
(3) MAKING INVESTMENT If lending is less then the sum of bank’s own capital and the total movement of deposit, the cash on hand of deposit is without any earning. So, third core function of banks is to invest this cash. By monitoring the inflow and outflow of cash, investment is to be made on the basis of flawless calculation. Liquidity is to be maintained continously while making investments. Arrangement of getting cash immediately from investment is to be made inevitably during emergencies and contingencies. It seems that it always advisable to invest in government securities and in the cent per cent sound institutes.
(4) Doing inter banking transaction Banks are also executing function of transacting with different banks. At times certain bank needs money for 24 hours or for lesser period than that. On the other side there are some banks where unutilized money is lying idle. Such banks internally strike an exchange of money; and overcome their difficulties. Such money when called for are returned immediately. Hence’ the same is known as ‘call- money’. In fact in such transaction one bank lends money and another bank receives the same as advances.
COMMERCIAL BANK FUNCTION OTHER FUNCTION1. Financial transaction of customer2. Doing transaction pertaining to foreign exchange3. To issue letter of credit4. Providing service of draft5. Providing information of credit of related parties6. Become an under-writer7. To issue credit card and debit card8. To provide teller service
Banks has mainly two types ofcustomer; (1) depositor and (2) Borrowers. Thesecustomer are having their own financialtransaction. Financial transaction ultimately resultinto payement or receipt. Bank provides service atthis last stage. It conduct transaction from thepayement of electricity bill to collecting money ofbills receivable. Customer are having many typesof financial transaction, the list of which alwaysremain incomplete.
(2) Doing transactionpertaining to foreign exchange Banks provide services of bringing money from forign countries and of sending it. It provides services of receiving and dispatching documents connected with foreign trade. Only those banks which have been permitted by the central bank can do this job.
Letter of credit is a letter written by onebank to another bank regarding the credit oftheir accountholder. How much credit is grantedto the accountholder is pointed out in his letter.Before granting the credit bank collect thatmuch amount from that person or bank demandthe security of that much amount. This letter ofcredit makes the financial transaction very easyand reliable because in this letter name of thatperson, amount granted as credit, payementperiod, etc. is pointed out.
(4) PROVIDING SERVICE OF DRAFT Draft is known as demand draft. Bank provide service of pay-order, telegraphic transfer, telephone transfer, E-mail and mail transfer also.
(7) To issue credit card and debit card Bank perform an important function to give credit card.Bank study very carefully regarding the credit of a person, whohave applied for credit card. After this study if feel thatapplicant is capable and willing to pay the debt of specificamount, than bank give credit card for that much amount toapplicant. In recent time master card, BOB Card etc. Creditcards become more popular. Debit card is also in the existence. This type ofcardholder has to deposit specific amount in advance as pertheir desire, in the bank. Then after while purchasing, he has topresent his debit card and amount of purchased goods isdebited from his account.
The bank come to knowabout the financial soundness of manypersons with whom it has frequent financialtransactions. As the bank has to earn faith ofpeople so related ones also have to earnfaith of the bank. Third party knows that thebank does know about the financialsoundness of those persons with whom itdeals. Within the limit of law and with noonus on it, the bank does the work ofproviding the information of soundness of theparty.
When a new company enters thecapital market and collect through shares, it isapprehensive whether it can collect at least theminimum subscription to start the business. It is afraidof non-start of business in this situation. So, it requestbank also to give an undertaking that in the absence ofreceipt of minimum subscription bank will fill up thedeficiency.
(8) To provide teller service This service is given by bank is known as ATM. When depositors or accountholder by depositing money or by investing gives surety of their solvency, then bank issue them ATM card. In spacified branches of the bank machine are kept for receiving this card. When cardholder wants to withdraw the amount of less than the credit balance, then he has to insert the card in machine and after indicating the amount by pressing the button, he can get money at anytime during 24 hours.