A bank is a financial institution that accepts deposits and channels the money into lending activities. Banking as an activity involves acceptance of deposits and lending or investment of money.
The role and importance of banking. Banks provide funds for the business and play an important role in the development of a nation. It acts as an intermediary between people having surplus money and those requiring money for various business activities.
The main functions of banks are accepting deposit and lending loans. Fixed deposits for instance mature after a considerable long period like one year or more. The rate of interest is fixed the amount deposited cannot be withdrawn before maturity date.
With a Current deposit these are mainly maintained by business community to facilitate frequent transaction with big amounts. Generally no rate of interest or very low rate of interest is paid on this account.
A Savings account it’s kind of demand deposits which is generally kept for the sake of safety. This facility is given for small saver and normally a small rate of interest is paid.
While with some of the lending loans there’s Short term loans these are sanctioned for a period up to one year. Medium term loans are authorised for the period varying between one and five years.
And with an Overdraft the bank grants overdraft facility to its reliable and respectable depositors. It enables companies, firms and businessmen to withdraw amount over and above their actual balance in their current account.