What is a Bank?
Ans: In simple words, we can say that Bank is a financial institution that undertakes the banking activity i.e.it accepts deposits and then lends the same to earn certain profit. The features of a Bank are:
• A Bank is a profit seeking commercial enterprises.
• It deals in money, i.e., it accepts deposits from the public and advances loans to the needy borrowers.
• It deals with credit. It creates credit for the purposes of lending money.
• The deposits made with the bank are repayable on demand and can be withdrawn by the depositor by means of any instruments whether a cheque or otherwise.
Q: -What are the primary functions of a Bank?
Ans: The primary functions of a Bank are:
•Acceptance of Deposits: It is the most important function of a bank. According to this function, the commercial bank accepts deposits from different individuals and organizations. The bank accepts deposits from them and provides all securities to them.
•Making loans and advances: The second important function of bank is advancing loan. The commercial banks earn interest by lending money.
•Investment of funds: Besides loan and advances, banks also invest a part of its funds in govt. and industrial securities. Banks purchases both govt. and industrial securities like govt. bills, share, debentures, etc from their market.
•Credit Creations: The banks create credit. When a bank advances a loan, it does not give cash to the borrower. It opens an account in the name of the borrower. The borrower is allowed to withdraw money by cheque whenever he needs.
