Banking Function

Definition:
“Banking can be defined as the business activity of
accepting and safeguarding money owned by other individuals
and entities, and then lending out this money in order to earn a
profit.”
Meaning:
“Banking means transacting
business with a bank; deposting or
withdrawing funds or requesting a loan
etc.”

History

The history of banking refers to the development of banks and
banking throughout history, with banking defined by
contemporary sources .

The history begins with the first prototype
banks of merchants of the ancient world.

Functions Of A Bank:

Primary Function

Secondary Function

The main functions of banks are accepting deposit and lending
loans:
A – accepting deposits
1. Fixed deposits: These deposits mature
after a considerable long period like 1 year or
more than that the rate of interest is fixed .
Primary Function:
2. Current A/C deposit: These are
mainly maintain by business community to
facilitate frequent transaction with big
amounts.

3. Savings bank A/C: It is kind of demand deposits which
is generally kept by the people for the sake of safety. .
4. Recurring deposit A/C: In case of
recurring deposit the fixed amount is
deposited in a bank every month for a fixed
period of time.
Primary Function:

Primary Function:
BLending loans
1. Call loans: These loan are called back at any time.
Normally, this loans are taken by bill brokers or stock brokers
2. Short term loans: These are sanctioned
for a period up to 1 year.
3.Medium term loans: These are
sanctioned for the period varying between 1
and 5 years.

Long Term Loans:
These loan are sanctioned for a period of more than 5 years it
includes:
1. Overdraft: The bank grants overdraft facility to its reliable
and respectable depositors.
2. Cash credit: Under this facility, the bank
allows the borrower to withdraw cash against
certain security.
3. Bills of Exchange: The bank provide
funds to their customers by purchasing or
discounting bills of exchange.

Secondary Function:
Apart from the main functions, the banks also provide financial
services to the corporate sector and business and society. They are
as follows:
1.Merchant Banking: Merchant
banking is an organization which
underwrites securities for companies, advises
in various activities.

Secondary Function:
2. Leasing: Banks have started funding the fixed assets
through leasing. It refers to the renting out of immovable
property by the bank to the businessmen.
3.Mutual funds: The main function of
mutual fund is to mobilize the savings of the
general public and invest them in stock
market and money market.

Secondary Function:
4. Venture Capital (VC): Venture Capital is financial capital
provided to earlystage, highpotential, high risk, growth startup
companies.
The venture capital fund makes money
by owning equity in the companies it invests in,
which usually have a novel technology
or business .

Secondary Function:
5. ATM: An ATM is also known as cash point. The banks
nowadays provide ATM facilities. The customers can withdraw
money easily and quickly 24 hours a day. .
6. Telebanking: Telebanking is a throwback
to the days when people would call into a
central number at their bank/financial
institution in order to get balance.

Secondary Function:
7. Credit cards: Credit cards allow a person to buy goods and
services up to a certain limit without immediate payment. The
amount is paid to the shops, hotel, etc. by the commercial banks.
8. Locker Service: Under this service,
lockers are provided to the public in various
sizes on payment of fixed rent.

Secondary Function:
9. Underwriting: This facility is provided to the joint stock
companies and to the government. The banks
guarantee the purchase of certain proportion of shares,
if not sold in the market.
10.BCSBI:The Banking Codes Standards
Board of India is an independent banking
industry watchdog that protects consumers of
banking services in India.

Created By: Deepika Sharma
Powered By: BankingDB

Banking Function

More Related Content

What's hot (20)

Similar to Banking Function (20)

Recently uploaded (20)

Banking Function