Banking System

The banking sector is the section of the economy devoted to the holding of
financial assets for others, investing the financial assets as leverage to create more
wealth, and the regulation of those activities by government authorities.
A bank is a financial institution licensed to receive deposits, make loans and
provide related services to its customers. This type of bank is referred to as a
commercial bank.  A bank that operates as a commercial bank accepts customer
deposits in the form of deposit accounts, savings accounts, and pay interest to the
depositors on these accounts.
Just like any other businesses, a bank’s goal is to earn a profit for its owners.   It
does this by earning more on the interest it charges its borrowers than it loses on the
interest it pays to depositors.
Because banks deal with money belonging to individuals and other firms, they are
carefully regulated. A national bank is the bank that monitors the activity of other banks.
A state bank is a commercial bank that is chartered by the banking authorities in the
state it operates.
Banks perform two basic functions:
- They offer depositors a place to keep their assets, either in a savings account
which pays interest, or in a checking account, which provides convenience, and
- They accumulate money which can be loaned to individuals or businesses-
these loans may be of short-term duration for family and business use, or they
may be long term in the form of mortgages.
The most important banking services are accepting and protecting money,
accepting deposits, making loans and providing electronic funds transfers.
Typical loans include short-term loans, car loans, mortgages, large loans to
businesses to fund capital purchases and lines of credit.  Some commercial banks also
issue credit cards as part of their services.
Banks can also grant credits, make payments and carry out many other services
on commission basis. Banks receive money in the form of deposits and then lend it at
interest to borrowers.
 ONLINE BANKING

Electronic banking is the general term given to the possibility of performing

banking transactions through electronic communications, mainly the Internet. That’s why
many people prefer to use the terms online banking or Internet banking. Online services
can be provided by traditional banks, which through the use of these new technologies
become online banks. Banks that don’t have physical branches or ATMs are called virtual
or Internet banks. To use these services you need a computer with Internet access.
Customers can also log in with a mobile phone. The use of wireless networks to access
financial institutions is known as wireless banking.
So, what do we use online banking for? We pay bills online. We’ve got a list in our
computer with all our account details. When we have to pay, we select the amount and
the name of the payee. We can also schedule the payments, or fix the date for payments.
The bank will transfer the funds, or send the money, to the selected account.
We check account balances. We can access and view our accounts any time, from
any PC. Also, we don’t need to wait for the post to get written statements from the bank.
We can see and then save online statements on the bank’s website. It saves time and
paper.
We find online banking extremely convenient. We don’t need to remember when
our credit card expires or the date of a payment. Internet banks send short message
notifications, warnings or other information services to our e-mail or mobile phone. We
can also trade stocks online. We contact an online broker to invest our money, and to buy
and sell shares.
Many people doubt about online security. Thus, most online banks have introduced
the concept of two-factor authentication, the simultaneous use of at least two different
devices or layers of security to prevent fraud. When you open an Internet account, you
are given a confidential PIN, personal identification number, and a password and
username.For some transactions, customers are required to use a TAN, transaction
authorization number, from a list provided by the bank. It can only be used once, and it
acts as a second password.
Security tokens are microchip-based devices that generate a number that has to be
typed by the user or read like a credit card. They are becoming a common form of two-
factor authentication. One of the best methods of identifying the user of a bank account is
biometric authentication, the use of a physical trait, such as a fingerprint, to allow a
person to log in. Some laptops have built-in fingerprint readers, which makes online
banking easier and more secure.

Name the advantages of online banking

Comment on online banking security