There are different types of the bank as well as different opinions about the derivation Bank”. Before discussing the types of bank, let’s see what is a bank and from where the word bank had derived. Some authors say that the bank is derived from the word ‘Banco” which means bench.
According to another opinion the word bank is derived from the German word “back” which means joint-stock fund and after some time the word back became “Bank”.
According to Hart “Bank is a person who in his ordinary course of business honorer’s cheques drawn upon him by the person from and for being he receives money on current accounts”. According to Kinley “Bank is an institution which receives deposits from peoples and advance loans to other”.
In view of the above definitions, in simple words a bank can be defined as an institution dealing in money, accepting deposits and advancing loans in a country. There are various types of bank working in different countries, but most types of the bank are almost same in all over the world.
8 Different Types of Bank
The main types of the bank are discussed as under;
- Central Bank
The central bank is at the head of the banking structure of the country. Every country of the world has now its own central bank. It controls Monetary Policy and the banking system of a country. It is not a profit hunting concern like other banks. It is the note-issuing authority and controller of foreign exchange of the country.
- Commercial Bank
These types of the bank are a profit motive institution. These banks accept the deposits from the people and advances loans to needy persons. These banking & finance, internal and external trade and deals in short term credit. Commercial banks collect savings and opening different types of accounts and provide loan by different methods.
- Exchange Bank
This Kinds of Banks deals in foreign exchange. These banks finance foreign trade by the transaction of foreign currencies in the form of a bill of exchange, drafts and earn their profit through different buying and selling rates.
- Saving Bank
Commercial banks and national saving centres perform the duties of saving bank. A saving bank encourages the saving of the people, with small means. National Saving Center collects the saving of low-income group of different schemes and allows them a good profit.
- Industrial Bank
These banks provide long term credit to the industries which need a large amount of capital especially for financing their fixed asset like building, machinery, land and other equipment’s. The industrial credit and investment corporation provides long term credit to the industry in home and foreign currencies.
- Agricultural Bank
Another kind of banking is an agricultural bank. Which are established for the purpose of providing short and long term loans for financing agricultural which is an important sector of the economy? These types of bank help in the improvements inland and its production through modern machinery and quality seeds.
- Mortgage Bank
These are concerned with the direct negotiations of loans upon the security of an individual’s mortgage for the acquisitions of real estate.
- Co-operative Bank
Basically these types of the bank are founded on the principals of co-operative societies. Their major function is to provide loans to a farmer and small landowners for the improvement of agriculture.
Scope of Banking
As already defined that banking activities are the lifeblood of modern economics. Now their areas or sphere of activities is not restricted to only their basic function like acceptance and advancing of money. Their area of operation is considerably changed and widened with the passage of time and the particular stage of economic development in the countries.
About the scope of the bank, Mr Thomas says that the existence of sound banking organization, tends to the encouragement of savings, thefts and investment facilitates the interchange of goods and create general feelings of security and prosperity which increase national income and encourages the morale of the people.
Banking is an important economic activity in human society. Its extent and sufficiently depends on its proper advancement. It is, therefore, organized and controlled by the most competent people, who have the necessary ability and honesty to inspire public confidence.
Such people should be familiar with the requirements of each industry and every section of the community and adopt recognized banking practice in peculiar circumstances, especially since the fate of industry and commerce ultimately linked with these financial institutions.
It is also desirable that the banks should be run on purely national lines. The success of banking also depends upon the nature and state of literacy of the people living in the country. So, it should be the duty of the bankers to educate the people in the matter of savings and investments and other banking operations and advantages to achieve fruitful results.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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