Understanding the Functions of Banks
by Yuvi K - December 16, 2023
Understanding the Functions of Banks
Banks are an important part of the financial system and provide essential services to individuals, businesses, and governments. They are the backbone of the economy. In order to understand the roles of banks, it is important to understand their main functions.
Accepting Deposits (जमा करना)
One of the most important functions of banks is to accept deposits from individuals, businesses, and governments. For individuals, these deposits may include cash and cheques. For businesses, banks accept deposits that can be used to finance operations or as collateral for obtaining loans.
The deposits received by banks are required to be maintained as legal reserves and used for various purposes. A portion of these deposits may be lent out to borrowers, while the rest may be used to purchase government bonds or other financial assets.
Lending (ऋण देना)
Banks also lend money to individuals and businesses. A loan is generally obtained when an individual or business needs to purchase a new car, a house, or some other asset. The borrower repays the loan plus interest over a period of time.
When a loan application is made, the bank carries out a credit check to determine the risk associated with the borrower. If the borrower is deemed to be a low-risk borrower, the bank may approve the loan and disburse the funds.
Payment Services (भुगतान सेवा)
Banks provide payment services that enable individuals and businesses to transact with each other. These services include debit cards, credit cards, and electronic payment services such as PayPal and Google Wallet.
With these services, customers are able to make payments online or in person. Banks also provide services to facilitate online transfers, standing orders, and more.
Investment Services (निवेश सेवाओं)
Banks offer investment services that enable customers to invest their money in various financial instruments such as stocks, bonds, and mutual funds. They provide guidance and advice to their customers on suitable investments and also manage their customers’ investments.
Banks may also buy and sell financial instruments and securities in order to make a profit for their customers.
Currency Exchange (मुद्रा विनिमय)
Banks provide currency exchange services to individuals and businesses who need to convert their money to another currency. This may be required when travelling abroad or when conducting business with international customers.
Financial Advice (वित्तीय सलाह)
Banks provide financial advice to their customers on various topics such as budgeting, saving, investments, taxes, and estate planning. They help individuals and businesses to make sound financial decisions in order to achieve their short-term and long-term financial goals.
Conclusion
Banks are an integral part of the economy and provide a number of services to individuals, businesses, and governments. From accepting deposits to providing investment advice, banks are the backbone of the financial system. It is important to understand their main functions in order to use them effectively for personal and business needs.
