The Four Main Functions Of A Bank


The existence of the banking system has improved the lives of individuals and has also made doing business much simpler. Banks nowadays offer a range of services which makes the process faster and convenient. Banking institutions have had to develop a number of services that exist mainly as a result of the digital revolution. 

Despite this, a bank has core functions which it must maintain. 

What are the main functions of a bank? 

Accepting Deposits 

Individuals and organisations trust the bank to keep their deposits safe. The bank also typically pays a certain amount of interest for storing their money with the bank. These deposits are then used by the bank to loan money to its other customers. The interest that is charged by the bank will then be the profit it makes. 

Granting Loans 

The deposits vary and include fixed deposits, savings, current deposits and recurring deposits. 

Banks are known to provide access to a range of loan solutions and this is one of the main functions of a bank. Overdrafts, cash credits, personal and temporary loans and discounting of bills of exchange are just some of the loan offers. If an individual is interested in furthering their studies, a student loan is an offer that is tailored for these needs. A car loan is another kind of loan that has been created for a specific reason. If someone needs a loan for covering rent at the end of the month or in between paycheques, a temporary loan may be ideal. Banks often have stringent qualifying criteria. 

Investment of funds 

Banks offer a number of investment options and customers can choose which ones will be best for their goals. 

Agency Functions 

Banks act as an agency in cases of when it provides a number of additional financial services. For example, paying insurance premium for customers or sending money from one place to another.


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