1.
Advancing of Loans
Banks are profit-oriented business organizations.
So they have to advance a loan to the public and generate interest from them
as profit.
After keeping certain cash reserves, banks provide short-term, medium-term
and long-term loans to needy borrowers.
2. Overdraft
Sometimes, the bank provides overdraft facilities to its customers through
which they are allowed to withdraw more than their deposits.
Interest is charged from the customers on the overdrawn amount.
Related: Difference between Bank Overdraft and Cash Credit
3. Discounting of Bills of Exchange
This is another popular type of lending by modern banks.
Through this method, a holder of a bill of exchange can get it discounted by
the bank, in a bill of exchange, the debtor accepts the bill drawn upon him by
the creditor (i.e., holder of the bill) and agrees to pay the amount mentioned
on maturity.
After making some marginal deductions (in the form of commission), the bank
pays the value of the bill to the holder.
When the bill of exchange matures, the bank gets its payment from the party,
which had accepted the bill.
4. Check/Cheque Payment
Banks provide cheque pads to the account holders. Account holders can draw
cheque upon the bank to pay money.
Banks pay for cheques of customers after formal verification and official
procedures.
5. Collection and Payment Of Credit
Instruments
In modern business, different types of credit instruments such as the bill of
exchange, promissory notes, cheques etc. are used.
Banks deal with such instruments. Modern banks collect and pay different
types of credit instruments as the representative of the customers.
6. Foreign Currency Exchange
Banks deal with foreign currencies. As the requirement of customers, banks
exchange foreign currencies with local currencies, which is essential to settle
down the dues in the international trade.
7. Consultancy
Modern commercial banks are large organizations.
They can expand their function to a consultancy business. In this function,
banks hire financial, legal and market experts who provide advice to
customers regarding investment, industry, trade, income, tax etc.
Related: When Banks Required to Disclose Customer Information
8. Bank Guarantee
Customers are provided the facility of bank guarantee by modern commercial
banks.
When customers have to deposit certain fund in governmental offices or
courts for a specific purpose, a bank can present itself as the guarantee for the
customer, instead of depositing fund by customers.
9. Remittance of Funds
Banks help their customers in transferring funds from one place to another
through cheques, drafts, etc.
10. Credit cards
A credit card is cards that allow their holders to make purchases of goods and
services in exchange for the credit card’s provider immediately paying for the
goods or service, and the cardholder promising to pay back the amount of the
purchase to the card provider over a period of time, and with interest.
11. ATMs Services
ATMs replace human bank tellers in performing giving banking functions such
as deposits, withdrawals, account inquiries. Key advantages of ATMs include:
24-hour availability
Elimination of labor cost
Convenience of location
12. Debit cards
Debit cards are used to electronically withdraw funds directly from the
cardholders’ accounts.
Most debit cards require a Personal Identification Number (PIN) to be used to
verify the transaction.
13. Home banking
Home banking is the process of completing the financial transaction from
one’s own home as opposed to utilizing a branch of a bank.
It includes actions such as making account inquiries, transferring money,
paying bills, applying for loans, directing deposits.
14. Online banking
Online banking is a service offered by banks that allows account holders to
access their account data via the internet. Online banking is also known as
“Internet banking” or “Web banking.”
Online banking through traditional banks enable customers to perform all
routine transactions, such as account transfers, balance inquiries, bill
payments, and stop-payment requests, and some even offer online loan and
credit card applications.
Account information can be accessed anytime, day or night, and can be done
from anywhere.
15. Mobile Banking
Mobile banking (also known as M-Banking) is a term used for performing
balance checks, account transactions, payments, credit applications and other
banking transactions through a mobile device such as a mobile phone or
Personal Digital Assistant (PDA),
16. Accepting Deposit
Accepting deposit from savers or account holders is the primary function of a
bank. Banks accept deposit from those who can save money but cannot utilize
in profitable sectors.
People prefer to deposit their savings in a bank because by doing so, they
earn interest.
17. Priority banking
Priority banking can include a number of various services, but some of the
popular ones include free checking, online bill pay, financial consultation, and
information.
18. Private banking
Personalized financial and banking services that are traditionally offered to a
bank’s digital, high net worth individuals (HNWIs). For wealth management
purposes,
HNWIs have accrued far more wealth than the average person, and therefore
have the means to access a larger variety of conventional and alternative
investments.
Private Banks aim to match such individuals with the most appropriate
options.
A bank is a financial institution that accepts deposits from the public and creates credit.[1] Lending
activities can be performed either directly or indirectly through capital markets.
The term bank is either derived from Old Italian word banca or from a French word banque
both mean a Bench or money exchange table
History apart, it was the ‘merchant banker’ who first evolved the
system of banking by trading in commodities than money. Their
trading activities required the remittances of money from one place to
another. For this, they issued ‘hundis’ to remit funds. In India, such
merchant bankers were known as ‘Seths
Gradually the goldsmiths began to lend the money out on behalf of the depositor, which led to the
development of modern banking practices; promissory notes (which evolved into banknotes) were
issued for money deposited as a loan to the goldsmith.[5]
The Bank of England was the first to begin the permanent issue of banknotes, in 1695
The Royal Bank of Scotland established the first overdraft facility in 1728.[
Activities undertaken by banks include personal banking, corporate banking, investment
banking, private banking, transaction banking, insurance, consumer finance, foreign exchange
trading, commodity trading, trading in equities, futures and options trading and money market
trading.
Types of banking[edit]
Banks' activities can be divided into:
retail banking, dealing directly with individuals and small businesses;
business banking, providing services to mid-market business;
corporate banking, directed at large business entities;
private banking, providing wealth management services to high-net-worth individuals and
families;
investment banking, relating to activities on the financial markets.
Most banks are profit-making, private enterprises. However, some are owned by government, or
are non-profit organizations.
impacts
Due to the nationalization of banks, the efficiency of the banking
system in India improved. This also boosted the confidence of the
public in banks.
The sectors that were lagging behind like small-scale industries and
agriculture got a boost. This led to an increase in funds and thus
increase in the economic growth of India.
The nationalization of banks also increased the penetration of banks.
This was mainly seen in the rural areas of India.
