Basic Banking, types of banks, functions of banks, definition, meaning

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Lesson # One
Preamble
Bankingis inevitable as it occupies one of the most important positions in
the modern economic world. It makes trading and industrial activity
possible.Although banking in one form or another has been in existence
from very early times, modern banking is of recent origin. It is one of the
results of the Industrial Revolutionand the child of economicnecessity. Its
presence is very helpful to the economic activityand industrialprogress of
a country.
Meaning
A commercial bankis a profit-seekingbusiness firm, dealingin money and
credit. It is a financial institution dealing in money in the sense that it
accepts deposits ofmoney from the publicto keep them in its custody for
safety. Banks use these funds to make loans to businesses, farmers, and
individuals for commercial and personal purposes. It thus, helps in
mobilizingsavings in the economy and channelizing them into productive
avenues which otherwise wouldn’t be possible.
A bank is, therefore like a conduit through which savings and surplus
money of households flows into productive economic activities.

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Definition of Bank
“A Bank is a financial institution which accepts money from the public for
the purpose oflendingor investment repayable on demand or otherwise
withdraw able by cheques, drafts or order or otherwise.”
Bank is a financial institution which deals in deposits and loans. It accepts
deposits, lends money and also creates money. It bridges the gap
between those who have more money than theycan productivelyuse and
those who have several productiveideas,projects,businesses etc.but lack
financial muscle to complete them. Banks necessarily act as a conduit
between these two sections of the population of any country.
Types of Banks
Broadly speaking, banks can be classified into commercial banks and
central bank.Commercial banks are those which provide banking services
for profit. The central bank has the function of controlling commercial
banks and various other economic activities. There are many types of
commercial banks such as
 Commercial Banks
 Investment Banks
 Specialized Banks
 Leasing Companies
 Asset Management Firms