banking in india

Topics: Bank, Fractional-reserve banking, Central bank Pages: 19 (5662 words) Published: November 4, 2013


What is a bank ?
A bank is a financial institution that provides banking and other financial services to their customers. A bank is generally understood as an institution which provides fundamental banking services such as accepting deposits and providing loans. There are also nonbanking institutions that provide certain banking services without meeting the legal definition of a bank. Banks are a subset of the financial services industry.

A banking system also referred as a system provided by the bank which offers cash management services for customers, reporting the transactions of their accounts and portfolios, throughout the day. The banking system in India, should not only be hassle free but it should be able to meet the new challenges posed by the technology and any other external and internal factors. For the past three decades, India’s banking system has several outstanding achievements to its credit. The Banks are the main participants of the financial system in India. The Banking sector offers several facilities and opportunities to their customers. All the banks safeguards the money and valuables and provide loans, credit, and payment services, such as checking accounts, money orders, and cashier’s cheques. The banks also offer investment and insurance products. As a variety of models for cooperation and integration among finance industries have emerged, some of the traditional distinctions between banks, insurance companies, and securities firms have diminished. In spite of these changes, banks continue to maintain and perform their primary role—accepting deposits and lending funds from these deposits.

Finance is the life blood of trade, commerce and industry. Now a days banking sector worked as a backbone of the modern business. Development of the country mainly depends upon the banking system.

The term bank is either derived from old Italian word banca or from a French word banque both means a Bench or money exchange table.

Oxford dictionary defines a bank as “ an establishment for custody of money, which it pays on customers order.”

Features of a bank

1. Dealing in money

Bank is a financial institution which deals with other people’s money i.e money given by depositors.

2. Individual / Firm / Company

A bank may be a person, firm or a company. A banking company means a company which is in the business of banking.

3. Acceptance of deposit

A bank accept money from the people in the form of deposits which are usually repayable on demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It also acts as a custodian of funds of its customers.

4. Giving Advances

A bank lends out money in the form of loans to those who require it for different purposes.

5. Payment and Withdrawal

A bank provides easy payment and withdrawal facility to its customers in the forms of cheques and drafts. It also brings back money in circulation. This money is in the form of cheques, drafts etc.

6. Agency and Utility Services

A bank provides various banking facilities to its customers. They include general utility services and agency services.

7. Profit and Service Orientation

A bank is a profit seeking institution having service oriented approach.

8. Ever increasing functions

Banking is an evolutionary concept. There is contious expansion and diversification as regards the function, services and activities of a bank.

9. Connecting Link

A bank acts as a connecting link between borrowers and lenders of money. Bank collects money from those who have surplus money and give the same to those who are in need of money.

10. Banking Business

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