Sbi's Financial Statement

32
Nature and Scope of Banking

32.1 Introduction
You have studied in lessons 7 and 10 that banking is an important aid t idsr ad tae ad ta i as poie a vrey o srie o nuty n rd, n ht t lo rvds ait f evcs to the public in general. Indeed banking may be regarded as an indispensable part of the economy of every country. The significance of banking has increased all over the world with the rise in income levels and growth in the volume of financial transactions.
In this lesson, we shall study about the nature and socpe of banking ad is atvte. n t ciiis

32.2 Objectives
After studying this lesson, you will be able to — l describe the terms bank and banking;

l

distinguish between banks and money lenders;

l

classify the various types of banks;

l

explain the nature and scope of banking activities;

l

enumerate the advantages of commercial banks;

l

describe how suspension of banking activities will affect trade, commerce and industry.

2 :: Business Studies

32.3 Meaning of the terms Bank and Banking
Bank is an institution which deals in money and credit. It accepts deposits from the public and grants loans and advances to those who are in need of funds for various purposes.
Banking is an activity which involves acceptance of deposits for the purpose of lending or investing. In addition to accepting deposits and lending funds, banking also involves providing various other services alongwith its main banking activity. These are mainly agency services, but include several general services as well.
A banker is one who undertakes banking activities, accepting deposits and lending money for different purposes. The Banking Regulation
Act, 1949 defines banking as an activity of accepting funds from the public for the purpose of lending or investment.
The essential features of banking activities are as follows:i
)

accepting deposits from public;

i i )

lending or investment of such deposits;

ii
i)