Banks serve important economic functions by converting deposits into loans and providing credit to individuals, businesses, and governments. They offer a variety of services including checking and savings accounts, loans, financial advising, and more. Common types of banks include commercial banks, savings banks, investment banks, and others that differ in their focus and services. Banks face competition from other financial institutions like credit unions, mutual funds, and insurance companies. Technological changes and globalization are trends affecting both banks and other financial institutions.

1. Bank

2. Meaning of Bank
• An old joke attributed to Bob Hope says “a
bank is a financial institution where you
can borrow money only if you can prove
you don’t need it.”
• Banks are the principal source of credit
(loanable funds) for millions of individuals
and families and for many units of
government and businesses
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3. Meaning of Bank
• A bank can be defined in terms of (1) the
economic function it serves, (2) the
service it offers its customers, or (3) the
legal basis for its existence.
(1) Converting deposits into loans
(2) Various services offered
(3) Definition given by legal
authority
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4. Meaning of Bank
• Prof. Kinley “ A bank is an establishment
which makes to individuals such advances
of money as may be required and safely
made, and to which individuals entrust
money when not required by them for
use.”
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5. Types of Banks
• Commercial banks
Sell deposits and make loans to businesses and
individuals
• Money center banks
Large commercial banks based in leading financial
centers
• Community banks
Small, locally focused commercial and savings banks
• Savings banks
Attracts savings deposits and make loans to business
and individuals 5

6. Types of Banks
• Cooperative banks
Help farmers, ranchers and consumers acquire
goods and services
• Mortgage banks
Provide mortgage loans on new homes but do not
sell deposits
• Investment banks
Underwrite issue of new securities from customers
• Merchant banks
Supply debt and equity capital to business 6

7. Types of Banks
• Industrial banks
State chartered loan companies owned by financial
or non-financial corporations
• International banks
Commercial banks operations in more than one
nation
• Wholesale banks
Large banks serving corporations and Government
• Retail banks
Small banks serving primary households and small
businesses 7

8. Types of Banks
• Limited purpose banks
Offer narrow menu of services such as credit card
companies
• Bankers’ banks
Supply services (for eg: cheque clearing) to banks
• Minority banks
Focus on customers belonging to minority groups
• National banks
Function under a federal charter
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9. Types of Banks
• State banks
Function under a state charter
• Insured banks
Maintain deposits backed by FDIC
• Member banks
Part of Federal Reserve System
• Affiliated banks
Wholly or partly owned by holding company
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10. Types of Banks
• Virtual banks
Offer services only via Internet
• Fringe banks
Offer payday, cash checks or pawn shops (eg:
branchless banking)
• Universal banks
Offer all financial services available in today’s
marketplace
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11. Leading Competitors with Banks
• Savings associations
Sell saving deposits and grant home mortgage loans and
household credit to individuals and families
• Credit unions
Collect deposits and make loans to members as non-
profit associations sharing a common bond
• Money market funds
Collect short term liquid funds and invest in securities of
short durations
• Mutual funds
Sell shares to public against investment in stocks, bonds
and other securities 11

12. Leading Competitors with Banks
• Hedge funds
Sell shares to upscale investors
• Security brokers and dealers
Buy and sell securities on behalf of customers
• Investment banks
Provide professional advice
Raise funds in financial marketplace
Make business acquisitions
Trade securities
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13. Leading Competitors with Banks
• Finance companies
Offer loans by borrowing funds in the open market
• Financial holding companies (FHCs)
Credit card companies, insurance and finance
companies, security broker/dealers operating
under one umbrella
• Life and property/casualty insurance
companies
Insurance companies
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14. Services Offered by Banks
(For Centuries)
• Carrying out currency exchanges
• Discounting commercial notes (making loans
by selling account receivables) and making
business loans
• Offering savings deposits
• Safekeeping of valuables and certification
of value
• Supporting government activities with
credit 14

15. Services Offered by Banks
(For Centuries)
• Offering checking accounts (demand
deposits)
• Offering trust services
Managing financial affairs and property of
individuals and firms (For eg: Trustees for
wills, Managing Deceased person estate
against claims, Safekeeping of valuable
assets, Pension plans for business, etc)
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16. Services Offered by Banks
(in the past century)
• Granting consumer loans
• Financial advising
• Managing cash
• Offering equipment leasing
• Making venture capital loans
• Selling insurance policies
• Selling and managing retirement plans
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17. Services Offered by Banks
(in the past century)
• Dealing in securities: offering security
brokerage and investment banking
services
• Offering mutual funds, annuities and other
investment products
• Offering merchant banking services
• Offering risk management and hedging
services
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18. Trends affecting all FIs
• Service proliferation
• Rising competition
• Government deregulation
• An increasingly interest sensitive mix of
funds
• Technological change and automation
• Consolidation and geographic expansion
• Convergence and globalization 18

19. Trends affecting Nepalese Banks
• Mergers
• Liquidity scenario
• E-banking (Branchless banking, Mobile
banking, Internet banking)
• Investment in productive sectors like
hydropower and tourism
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20. • Checking the sampling process
• Preparation of questionnaire
• Pilot survey
• Fix procedures
• Use of competent manpower
• Provide information
• Provide training
• Use of experts
• Checking data processing and analysis