Banks
You need to store your cash you choose a bank, you need a loan you choose a bank, you need to transfer the money you do it via bank. But what is a bank exactly? Or how does it operate? We are here to answer all these questions for you.
About Banks
As a financial services provider, banks provide a safe place to store your cash. As such, they play a vital role in the economy by providing essential services both to consumers and businesses. The economy relies heavily on banks. Bank https://www.fltraditionsbank.com/ definition goes to a financial institution authorized to accept deposits and provide credits.
These institutions may also give economic assistance such as:
capital management
foreign exchange
Safe deposit boxes are commonly known as locker services.
Banks of a country are usually regulated by a central bank or the national government, in India all the banks are regulated by the central bank, the Reserve Bank of India (RBI).
Characteristics of a bank
It provides credit opportunities: These financial institutions lend short-term cash (deposits) to others for long-term debt (loans) such as house mortgages, car loans, business loans, etc. This process creates market liquidity that creates money and keeps the supply chain going.
The goal is to earn profit: Just like any other business, the goal is to earn profits for its stakeholders. In order to achieve this, banks charge higher interest rates on loans and other debt they issue to borrowers than accountholders. For eg, banks give 4% to account holders and give the same money on loans to debtors at a 9% interest rate. This is how they earn a gross profit of 5
The size of the bank: From small, community banks to large commercial banks, banks differ in size depending on their location and clients.
Types of banks
There are four broad categories of a bank, these are:
Retail Banks: Commonly known as general or personal banking institutions, retail banks deals with the general public. They provide services such as savings accounts, current accounts, short-term loans, overdraft protection, etc.
Corporate or Commercial Banks: These banks deal with businesses from small businesses to large corporate entities. They provide services such as cash management, commercial real estate, etc.
Investment Banks: These banks majorly focus on corporate clients dealing in complex services such as mergers and acquisitions or underwriting.
Central Banks: Unlike others, central banks do not deal with the public or corporations. They are not market-based. Its primary responsibility is to control inflation, regulate monetary policy, oversee currency stability etc.
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