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Bank

A bank is a financial institution that accepts deposits, provides loans, and facilitates financial transactions, playing a vital role in the economy. Its main functions include accepting various types of deposits, lending money, creating credit, offering payment services, and providing investment management. There are several types of banks, including commercial, central, investment, cooperative, and development banks, each serving different purposes.

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21 views2 pages

Bank

A bank is a financial institution that accepts deposits, provides loans, and facilitates financial transactions, playing a vital role in the economy. Its main functions include accepting various types of deposits, lending money, creating credit, offering payment services, and providing investment management. There are several types of banks, including commercial, central, investment, cooperative, and development banks, each serving different purposes.

Uploaded by

christyalexpanicker
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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What is a Bank?

A bank is a financial institution that accepts deposits from the public and creates credit. Banks play a
crucial role in the economy by providing a safe place for people to store their money, offering loans
to individuals and businesses, and facilitating various financial transactions.

Main Functions of a Bank

1. Accepting Deposits
People and businesses deposit money in banks. These deposits can be:

o Savings deposits (earn interest)

o Current/checking accounts (used for daily transactions)

o Fixed deposits (locked in for a fixed term with higher interest)

2. Providing Loans
Banks lend money to individuals, businesses, and governments. Loans help people buy
homes, start businesses, or cover expenses.

3. Credit Creation
When banks give out loans, they don’t hand out physical cash. Instead, they credit the
borrower’s account, effectively creating new money in the economy.

4. Payment and Transfer Services


Banks allow people to transfer money, pay bills, and use services like credit/debit cards,
checks, and online banking.

5. Foreign Exchange Services


Many banks offer currency exchange and international money transfers.

6. Investment and Wealth Management


Some banks help individuals and companies invest money or manage their financial
portfolios.

Types of Banks

• Commercial Banks: Serve the general public and businesses.

• Central Banks: Manage a country’s currency, money supply, and interest rates (e.g., the
Reserve Bank of India, the Federal Reserve in the USA).

• Investment Banks: Help companies raise capital and offer financial advisory services.

• Cooperative Banks: Owned and run by their members, often for rural or small-scale sectors.

• Development Banks: Provide long-term capital for industries and development projects.

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