What is Bank? Meaning of Bank, Types of Banks

What is Bank? Meaning of Bank, Types of Banks

What is Bank? Meaning of Bank, Types of Banks .Welcome to the www.letsstudytogether.co online Study Portal. If you are preparing for SBI Clerk, SBI PO, IBPS RRB Officer Scale-1, IBPS RRB Office Assistant and NABARD, SSC CGL, SSC CHSL, MTS exams 2017-18.Here we are providing you Detail Info “What is Bank? Meaning, How It works?”.

This “What is Bank? Meaning of Bank, Types of Banks” is also important for other banking exams such as SBI PO, IBPS Clerk, SBI Clerk, IBPS RRB Officer, IBPS RRB Office Assistant, IBPS SO, SBI SO, SSC CGL, SS CHSL, MTS and other competitive exams.

What is Bank? Meaning of Bank, Types of Banks

Meaning of Bank :- The Banking Companies Act of India defines Bank as “A Bank is a financial institution which accepts money from the public for the purpose of lending or investment repayable on demand or otherwise withdrawable by cheques, drafts or order or otherwise.”

Thus, we can say that a bank is a financial institution which deals in debts and credits.It accepts deposits, lends money and also creates money. It bridges the gap between the savers and borrowers. Banks are not merely traders in money but also in an important sense manufacturers of money.

Types of Banks

tyPES OF BANKS

1.Deposit Banks:- The most important type of deposit banks is the commercial banks.They have connection with the commercial class of people. These banks accept deposits from the public and lend them to needy parties. Since their deposits are for short period only, these banks extend loans only for a short period. Ordinarily these banks lend money for a period between 3 to 6 months. They do not like to lend money for long periods or to invest their funds in any way in long term securities.

Types of Commercial Banks

2. Industrial Banks:- Industries require a huge capital for a long period to buy machinery and equipment. Industrial banks help such industrialists. They provide long term loans to industries. Besides, they buy shares and debentures of companies, and enable them to have fixed capital. Sometimes, they even underwrite the debentures and shares of big industrial concerns. The important functions of industrial banks are:

1. They accept long term deposits.
2. They meet the credit requirements of industries by extending long term loans.
3. These banks advise the industrial firms regarding the sale and purchase of shares and debentures.
The industrial banks play a vital role in accelerating industrial development. In India, after attainment of independence, several industrial banks were started with large paid up capital. They are, The Industrial Finance Corporation (I.F.C.), The State Financial Corporations (S.F.C.), Industrial Credit and Investment Corporation of India (ICICI) and Industrial Development Bank of India (IDBI) etc.

3. Savings Banks: These banks were specially established to encourage thrift among small savers and therefore, they were willing to accept small sums as deposits. They encourage savings of the poor and middle class people. In India we do not have such special institutions, but post offices perform such functions. After nationalisation most of the nationalised banks accept the saving deposits.

4. Agricultural Banks:- Agriculture has its own problems and hence there are separate banks to finance it. These banks are organised on co-operative lines and therefore do not work on the principle of maximum profit for the shareholders. These banks meet the credit requirements of the farmers through term loans, viz., short, medium and long term loans. There are two types of agricultural banks,
(a) Agricultural Co-operative Banks, and
(b) Land Mortgage Banks. Co-operative Banks are mainly for short periods. For long
periods there are Land Mortgage Banks. Both these types of banks are performing useful functions in India.

5. Exchange Banks: These banks finance mostly for the foreign trade of a country.Their main function is to discount, accept and collect foreign bills of exchange. They buy and sell foreign currency and thus help businessmen in their transactions. They also carry on the ordinary banking business.In India, there are some commercial banks which are branches of foreign banks.These banks facilitate for the conversion of Indian currency into foreign currency to make payments to foreign exporters. They purchase bills from exporters and sell their proceeds to importers. They purchase and sell “forward exchange” too and thus minimise the difference in exchange rates between different periods, and also protect merchants from losses arising out of exchange fluctuations by bearing the risk. The industrial and commercial development of a country depends these days,largely upon the efficiency of these institutions.
6. Miscellaneous Banks:- There are certain kinds of banks which have arisen in due course to meet the specialised needs of the people. In England and America, there are investment banks whose object is to control the distribution of capital into several uses. American Trade Unions have got labour banks, where the savings of the labourers are pooled together. In London, there are the London Discount House whose business is “to go about the city seeking for bills to discount.” There are numerous types of different banks in the world, carrying on one or the other banking business.


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