What is a bank and information about the work of the bank

What is a bank ? Whenever it comes to money in our mind, the picture of the bank definitely comes before us. A place where you will get millions of crores of money in one place. Now the question arises that what exactly are these banks?

In simple language, a bank (bank in Hindi) is such an intermediary between saver (saver) and borrower (borrower). Here people either come to keep money or they come to get money.

What is a bank
What is a bank

There was a time when we had to go to the bank for any work of money, whether to deposit (recruit) or withdraw (withdraw) money. In the banks, we had to stand in long queues and wait for our opportunity.

But now the time has changed, now you do not need to go to bank for many tasks. You can easily do all your tasks through Internet Banking and Mobile Banking right from home.

So today I thought, why should I provide you complete information about what banks are, how many types are there and how they work, so that you also have no doubt about the banks. So without delay let’s start the information about the bank .

What is a bank ?

A bank is a financial institution that performs the task of giving and receiving money. At the same time, a bank keeps the extra money of people, which is called Money Deposit. At the same time they are given interest or interest by bank for these money.

At the same time, the bank provides money to the people who need the money, but here those people have to provide the interest of this money to the bank. Therefore we can say that the bank performs the function of a medium between Saver (money collector) and Borrower (money taker).

The word bank is derived either from the old Italian word banca or from a French word banque , where both mean a Bench or money exchange table .

What are Deposit Rate and Lending Rate?

Banks often take a deposit of money from the public (when people open their account and deposit money), that too in very low interest it is called Deposit Rate .

At the same time, these banks provide these money to those who are in desperate need of money, at a very high interest rate, it is called Lending Rate .

What is a Net Interest Spread?

The Deposit Rate and Lending Rate of difference to the ‘ Net interest spread ‘ is called , and that the interest spread is the basic premise of the income of the bank.

Definition of bank

According to the Oxford Dictionary , a bank is ” an establishment that provides money to its consumers when they petition for it.” 

If we talk about finance, then it is the basis of any trade, commerce and industry. Talking about the present time, the backbone of any modern business is this banking sector .

Essay of Bank 

We can say that the development of any country depends completely on its banking system. The better the country’s banking system is running, the better the country will be progressing.

Which bank introduced the first ATM in India?

Hongkong and Shanghai Banking Corporation first introduced the concept of ATM in India in 1987. This first ATM was set up in Andheri East, Mumbai.

Which Indian bank first opened its Overseas Bank and when?

Bank of India opened the first overseas branch in London in 1946 .

Which commercial bank was first owned and managed by Indians themselves?

The first Indian commercial bank which was owned and managed by Indians themselves is Central Bank of India.

Which is the oldest Public Sector Bank in India?

The oldest public sector bank in India is Allahabad Bank .

Which bank of India got the first ISO Certification?

Canara Bank was the first to receive ISO Certification.

Which Indian bank was the first to launch a mobile ATM?

ICICI Bank first started mobile ATM.

Which is the largest bank in India?

The largest bank in India is State Bank of India . State Bank of India is the largest commercial bank in India as of now. It is owned by Government Of India. At the same time, its headquarter is located in Mumbai, and six regional offices in SAT are located all over the world.

It is the largest commercial bank in the country whose asset value is close to US $ 881.95 billion in the 2018 financial year. The bank has around 14,000 branches , with 190 international branches in about 36 countries.

SBI started with the Bank of Calcutta since 1806, while it is the oldest bank under Asia-Pacific. It provides many banking products and financial services through its network.

What is banking?

According to the Indian Banking Regulation Act, ‘ Taking money from the public on the basis of the deposit that they have to repay also, if there is a demand, then put these money in some place that they can benefit from .’

In simple words, in this, the bank invests the money deposited by its consumers in such places from where they can profit, while it also provides interest to consumers.

Bank features

Let us now know about some characteristics of the bank.

  • It can be either Individual or Firm or a Company.
  • It is a profit and service oriented institution.
  • It works as a connecting link between borrowers and lenders.
  • It does business of money.
  • It accepts deposit from public.
  • It provides Advances / Loans / Credit to customers.
  • It also provides Payment and Withdrawal facilities.
  • In addition, it also provides agency and utility services.

Bank classification

There are many types of banks in each country. Every type of bank performs certain functions. Banks are classified according to their functions.

Banks are mainly classified as scheduled and non-scheduled banks .

Scheduled banks are then classified as commercial banks and cooperative banks .

Commercial banks are then classified as public sector banks, private sector banks, foreign banks and regional rural banks (RRBs) .

At the same time cooperative banks are classified in urban and rural. At the same time, the concept of Payments Bank is becoming very popular in recent times.

Types of Banks

There are many types of banks. Different banks have been created for different works. Let’s all know about the bank.

Scheduled Banks

Schedules banks are covered under the 2nd Schedule to the Reserve Bank of India Act, 1934. A bank that has paid-up capital of about 5 Lakh or more. Only such banks qualify to come under Schedule Bank category. These banks are eligible to take loan from RBI at the bank rate also.

Commercial Banks

Commercial banks are regulated under the Banking Regulation Act, 1949. At the same time, their business model is designed to make profit.

Their primary function is to accept deposits and provide loans to general public, corporates and government.

At the same time commercial banks are divided –

  • Public sector banks
  • Private sector banks
  • Foreign banks
  • Regional Rural Banks (RRB)

Public Sector Banks

These are actually nationalised banks and are responsible for more than 75% of our country’s banking business .

Majority of stakes in these banks are shared by the government itself. In terms of volumes, SBI is India’s largest public sector bank. This happened when its 5 associate banks joined it. At the same time its position in the entire world also comes under the top 50 banks .

There are total 21 nationalised banks in India across the country.

Private Sector Banks

These include banks in which major shareholders or equity hold private shareholders. All the banking rules and regulations which are decided by RBI are all applicable in these private sector banks also.

Foreign Banks

A foreign bank is called a person whose headquarters is located abroad, but it is operating on the basis of a private entity in India.

These banks have to follow the rules of both countries, one from where they are operating and the other where their headquarters are located.

For example Citi Bank, Standard Chartered Bank and HSBC are some of the leading foreign banks in India.

Regional Rural Banks

These are also scheduled commercial banks but they are set up to provide these main objective with loans to the weaker section of the society such as farmers, laborers and small enterprises etc.

These operate in regional levels in different states of India. While most of their branches are kept in selected urban areas.

Other important functions performed by RRBs

  1. Providing banking and financial services in rural and semi-urban areas.
  2. Government operations such as providing salary to MGNREGA workers, pension to employees.
  3. Para-Banking facilities such as debit cards, credit cards and locker facilities.

Small Finance Banks

This is a niche banking segment in the country. At the same time, its main goal is to provide financial inclusion to such sections of society that banks do not serve.

These small finance banks have customers in micro industries, small and marginal farmers, unorganized sector entities and small business units. They have been licensed under Section 22 of the Banking Regulation Act, 1949 and are governed under the RBI Act, 1934 and FEMA.

Co-operative Banks

Co-operative banks are registered under the Cooperative Societies Act, 1912. It is run by a chosen managing committee.

They work on a no-profit no-loss basis and primarily serve entrepreneurs, small businesses, industries and self-employment in urban areas.

In rural areas, they mainly finance agriculture-based activities such as agriculture, livestock and hatcheries.

Payments Bank

Payments Bank is a very new model of bank in Indian Banking industry. It has been conceptualized by RBI and it allows to accept a restricted deposit.

At the same time its amount is currently limited to Rs. Up to 1 Lakh per customer only. At the same time it offers services such as ATM cards, debit cards, net-banking and mobile-banking.

Commercial Banks

Commercial banks are banks that accept money and provide loans and advances from the public on the basis of deposits and charge their customers as well as interest.

They mobilize small savings and promote growth of trade and commerce. Generally, commercial banks provide money for a very short period of time. At the same time, they only provide to working capital organizations. But in recent times, commercial banks are providing long-term capital to other organizations as well.

Exchange Banks

The main job of banks is to buy and sell foreign currencies and also accept foreign bills of exchange.

What are Non-Banking Financial Company (NBFC)?

According to RBI, it is a financial institution which is a company and also a non-banking institution, whose principal business is to receive deposits under different schemes and make arrangements or lending in some other way.

It is classified into: Merchant Banks, Commercial Banks, Indigenous Banks .

What are the features of banks?

Let us now know about the features of banks.

1. Dealing with money

A bank is a financial institution that deals only with other people’s money, ie Depositors’ money.

2. Be either Individual / Firm / Company

A bank can either be a person, firm or even a company. A banking company means a company that is employed in the banking business.

3. Accepting Deposit

A bank accepts money from people in the form of deposits that are often repaid on demand or after its fixed period is expiry (in case of fixed deposit). It provides safety to customers above their deposits. At the same time, it plays the role of a custodian of its customers’ funds.

4. Offers You Loans

A bank provides you money in the size of loans that you can use in your place of need.

5. Payment and Withdrawal

A bank provides easy payment and withdrawal facility in the form of checks and drafts to its customers. At the same time, it also brings bank money in circulation. This money is in the form of cheques, drafts.

6. Agency and Utility Services

A bank provides many types of banking facilities to its customers. Under this comes general utility services and agency services.

7. Profit and Service Orientation

Bank is a profit making institution which works from service oriented approach.

8. Its functions are always increasing

Banking is an evolutionary concept. This means that there is always continuous expansion and diversification, on the basis of its functions, services and activities.

9. Connecting Link

A bank works as a connecting link between borrowers and lenders of money. Banks take money from those people who have a surplus of money on the basis of deposit and while the need of the mind provides money to the people in the shape of loan with interest.

10. Having Banking Business

The main activity of a bank should be to do banking business which is not subsidiary of any other business.

11. Designating Your Identity

A bank should always use the word “bank” with its name so that everyone can know that it is a bank that deals with money.

Bank Work

Though banks are functions of many functions or banks, but some of them are very prominent. These functions are divided into two classes.

  1. Bank’s Primary Functions
  2. Secondary Functions of Bank

Primary Functions of a Bank in Hindi

Now these primary functions are also divided into two parts:

1. Saving / Fixed / Current Deposit

Deposits are the amount of money that a customer hands over to the bank. It is also called deposit.

There are also some types of deposits

  • Saving Deposit
  • Fixed Deposit
  • Current Deposit
  • Recurrent Deposit.

Different types of deposit schemes are based on the type of deposit and depositing frequency.

For example, a fixed deposit in a fixed deposit is provided to the bank for a few years. This interest is compounded only when the deposit term is fully completed.

Providing this type of deposit services is a very primary function of any one bank.
So what happens if you need money? In such a situation, should there not be any other primary function of the bank? Let’s know further.

In a saving deposit, the amount and rate of interest are quite low. Withdrawals are allowed to be done here but that too in a limited number. This account is most suitable for those people who are working somewhere and their income comes from salary.

At the same time, a fixed deposit is a fixed sum that is provided to the consumer bank for a fixed time. It is not allowed to do withdrawals before that fixed time.

In other words, in the current account or deposit, no interest is provided, and in this the customer can withdraw and deposit money as many times as he wants.
Now let’s look at another function:

2. Granting approval for loans and advances

In this bank gives money to other people on a time-interest basis. Every loan amount is passed here after the bank has considered a lot and together after securing the bank’s profit.

The bank also provides advances to its customers. These are the primary functions of all banks. The bank provides services such as overdraft, cash credits, loans, and discounting on bill of exchange.

Let us now consider the secondary functions of banks.

Secondary Functions of a bank in Hindi

If we talk about the secondary functions of the bank, then these are to sell gold coins to the public or to sell them insurance products, mutual fund products etc.

Let us now get a little information about what are the important secondary functions of the bank:

1. Agency Functions

Banks are a kind of agent for their customers, where they invest money on behalf of their customer. By working on the basis of an agent, they do a lot of customer work such as transferring funds, collecting checks, filling periodic payments, portfolio management, making periodic collections, and other agency functions.
All these functions are secondary functions of the bank.

2. Common Utility Functions

Banks also do many utility functions. Some of the most important utility functions are to issue drafts, letter of credits, provide locker facility, underwriting shares, deal with foreign exchange, project reports, run social welfare programs, and other utility functions.

Banks also provide other services such as safe deposit locker facilities, safe custody facilities and demat accounts.

By opening a demat account, the account holder can easily trade in the stock exchange or in the money market directly. The same customer who has demat account can buy or sell shares directly from share market.

General Utility Functions are also called Social development functions. In some areas, banks help you a lot in all kinds of transactions that you have to do in future.

For example, you have to pay your phone, electricity and other utility bills from a center that is being run by banks. These were some of the important functions of banks.

what did you learn today

I hope you have liked this article of my bank (What is Bank in Hindi) . It has always been my endeavor to provide complete information about the work of the bank to the readers, so that they do not have to search in reference to that article in any other sites or internet.

This will also save their time and they will also get all the information in one place. If you have any doubts about this article or you want that there should be some improvement in it, then for this you can write down comments.

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