Many operations related to banking can be carried out through financial organizations that accept deposits from both individuals and other entities. These financial organizations will use this money to make loans and profit-making investments afterward.
Due to the services, it offers to people and businesses, including loans, checking accounts, enabling online banking application and other services, banking is regarded to be crucial to the economy. Giving economic stability and confidence is the goal of banking systems. A banking system manages the flow of money between individuals and businesses. The following list includes a list of a bank’s duties:
- Accepting deposits and withdrawals
- Loaning money
- Presenting a range of account types
- Elements of online banking
- Consumer service
- Cards of credit and debit
- Remittance of funds
- Bill payments
Every nation has a central bank that handles all of the different banks in that nation. The central bank’s primary duties include directing and supervising all other banking institutions in the nation and serving as the government’s bank. The responsibilities of a nation’s central bank are mentioned below:
- Supporting other banks
- Creating money
- Putting the monetary policies into action
- The financial system’s overseeing
In other words, because it supports the nation’s other banks and oversees the nation’s financial system while working under the government’s direction, the nation’s central bank may also be known as the banker’s bank.
Profit is the primary goal of these commercial banks, which function on a commercial basis. They are held by the state, federal, or any private body and have a uniform structure. They focus on all economic areas, from rural to urban. They also implement online banking application nowadays to make their customer access the banking processes comfortably.
Unless advised otherwise by the RBI, these banks don’t offer discounted interest rates. The primary source of funding for these institutions is public deposits. The commercial banks are divided into:
- Public sector banks – A bank primarily owned by the nation’s central bank or the government.
- Private sector banks – A bank that is mainly owned by a private company, person, or group of persons.
- Foreign Banks – This category of banks includes institutions that have their main offices abroad and branches here.
These banks were established in accordance with state law. They give short-term loans to the agriculture sector and other connected sectors. Cooperative banks’ aim is to advance social welfare by offering low-interest loans. They are set up in a three-tiered establishment:
- State cooperative banks that are part of Tier 1 (at the state level) are supported by the government, the RBI, and NABARD. Thereafter, funds are allocated to the general public. Concessional CRR and SLR are applicable to these banks. (SLR: 25%; CRR: 3%).
- Central/District Cooperative Banks make up Tier 2 (District Level).
- Banking with primary agricultural cooperatives at the village level (Tier 3).
Hence, the above-mentioned are the various types of banks. You can open a bank account by getting an application for account opening in the bank, which is provided by the banker. The banking sector is vital to a nation’s economic status and growth.