1.Introduction to Banking
Banking is a fundamental pillar of the modern economy, playing a crucial role in
facilitating financial transactions, promoting economic growth, and ensuring financial
stability. At its core, banking is the business of accepting deposits from the public
and lending money to borrowers. This seemingly simple definition, however,
encompasses a vast array of activities and services that banks offer to individuals,
businesses, and governments.
2.The Functions of a Bank
Banks serve as intermediaries between depositors and borrowers, connecting those
who have surplus funds with those who need them. This intermediary role is central
to the functioning of a modern economy, enabling the efficient allocation of capital
and promoting economic growth.
Accepting Deposits: Banks accept deposits from individuals and businesses in
various forms, such as savings accounts, checking accounts, and fixed deposits.
These deposits serve as the primary source of funds for banks to lend out.
Lending Money: Banks lend money to individuals and businesses for a variety of
purposes, including personal loans, mortgages, business loans, and agricultural
loans. Lending money is a core function of banks, and it plays a vital role in
stimulating economic activity.
Payment Services: Banks provide a range of payment services, including check
clearing, electronic fund transfers, and debit and credit card transactions. These
services facilitate the smooth flow of money within the economy and make it easier
for individuals and businesses to conduct transactions.
Investment Services: Banks offer a variety of investment products, such as mutual
funds, insurance products, and investment advisory services. These services help
individuals and businesses to grow their wealth and achieve their financial goals.
Other Services: Banks also provide a range of other services, such as safe deposit
boxes, locker facilities, foreign exchange services, and credit card services. These
FUNDAMENTALS OF BANKING
