Name: Husnain

Arshad

Roll no: LCM-4003

Subject: Modern Money and Banking

Class: BBA-5A-Morning

Submission Date: 21/03/2022

Submitted to: Mam Momina Sajid

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Bank, its types and Functions
Bank:
A bank is a financial institution that accepts deposits from the public and creates a demand
deposit while simultaneously making loans. Lending activities can be directly performed by the
bank or indirectly through capital markets.

Types of bank:
CENTRAL BANK:
The Central Bank is the principal bank in a country. It is the head of the banking system in a
country. It is the banker’s bank. It is the banker of the government. The deposits of the
government are maintained with it, it lends money to the government and has the responsibility
of adjusting all the responsibilities in monetary and financial matters which the government
bestows upon it. In addition to this Central Bank has the role authority of controlling the credit
and money supply of the country. It controls the value of currency by its role right of issuing
notes. It controls commercial banks through the various techniques such as discount rate,
manipulations, open market operations, changes in the reserve ratio and the selective credit
control.

COMMERCIAL BANKS:
The main function of commercial banks are accepting deposits, lending money through over
draft, loans, discounting of bills etc. working as an agent of its customers in the tasks assigned by
their customers and financing of trade and industry. But it must be noted that these banks lend
money on short term basis. Besides doing the function of commercial banking they also deal in
foreign exchange and may do some other banking functions also.

INDUSTRIAL BANKS:
Industrial banks arrange long term loans for industry. These banks accept long term fixed
deposits. These banks mainly deal in the financing of industry for long periods. Such loans are
also given for specific purposes which are productive and expected to yield return after the
allowed time

LAND-MORTGAGE BANKS:
These banks provide loans to the cultivators by mortgaging their land whenever the cultivator
has to do some permanent reforms in his land viz making boundary around the field, purchase of
machine, digging of well on for any other work. He can borrow money from land mortgage bank
by mortgaging his land such banks arrange short, medium and long term loans.

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EXCHANGE BANKS:
These banks mainly deal in foreign exchange. They purchase foreign currencies and sell then to
those people who have to make payments abroad. Though commercial banks deal in foreign
exchange as their specific function, yet these banks are specific in the task. Exchange banks
besides financing foreign trade, also finance the internal trade.

CO-OPERATIVE BANKS:
These types of banks are nothing else then commercial banks, but their organization is carried on
co-operative lines. The principles of co-operation are different from all other forms of the Joint
Stock Organizations. They are treated on different stand due to some peculiarities in regard to
their fund and character.

SAVING BANKS:
Though all commercial banks have saving accounts with them, there may be some specialised
banks which deal in the small amounts of the savings of the people.

Functions of Bank:
Accepting the Deposits:
The major source of funds in the bank’s deposits. This deposit consists only of money and not of
any assets. For these deposits held, the commercial banks provide the interest.
Thus, it helps in the mobilizing of the savings. For the deposits, there are a variety of options
available. These include current account, savings account, recurring accounts, and fixed deposit
accounts.

Advancing the Loans:

This is another primary function of commercial banks. When a bank receives the money, a
certain part of it is deposited in the reserves. While the remaining is dispatched in the form of
loans. There are two types of loans advanced by the banks. These are money at call and
discounting of the bills. Money at call is a loan given for a very short period of time. This
generally varies from 1 to 14 days. Discounting of the bills means the advance payment of loan
reflected against repayment in the future.

Credit Creation:
Whenever a loan or credit is provided to the customer, he/she is not given any cash. In fact, a
bank account is opened in the name of that person and amount is transferred to that account.
Through this process, the bank is able to create money.

Money Remittance:

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This is the function that the commercial banks provide. Thus, they remit the funds on behalf 0f
their customers from one place to another.

Information Banks:
Commercial banks are primarily an information bureau that collects the economic, statistical, and
financial data related to the trade, commerce, and industry.

Locker Facilities:
Lockers are provided to the customers by banks. In these lockers, people can keep their jewelry
and other important documents. For this, the banks charge a very nominal annual fee.

Thrift Industry:
A thrift institution is a financial institution that obtains the majority of its funds from the savings
of the public. The term can include several cooperative banking models:
1. Savings and loan association
2. Mutual savings bank
3. Credit union

Savings and Credit Union:

A savings bank is a financial institution whose primary purpose is accepting savings deposits and
paying interest on those deposits. They originated in Europe during the 18th century with the aim
of providing access to savings products to all levels in the population
A credit union is a nonprofit financial institution that's owned by the people who use its financial
products. Credit union members can access the same kinds of products and services as offered by
a traditional bank, such as credit cards, checking and savings accounts and loans.

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