As a financial service organization, a bank offers instant account opening, deposits, withdrawals, advances, loans, and other financial services. There are different types of banks, which include commercial banks, investment banks, central banks, and retail banks. Banks offer financial support to both individuals and businesses.
Today, anyone can open bank account online to deposit and store their funds safely in banks and withdraw anytime whenever they need it. And today, in this modern era, the banking system has become more advanced. We can perform banking activities and transactions using our mobile phones. Anyone can receive and transfer money by making a few clicks over the mobile screen.
Following are some of the significant characteristics of banks, which will help you to understand banks and their services more precisely:
Deals with money –
A bank deals with the money, i.e., providing services to the customers to deposit their money safely and withdraw anytime from their bank account. In addition, banks also offer other financial services to the customers, such as loans, insurance, etc.
Individual/ firm or company –
A bank can be a person, firm, or company that provides customers with banking services.
Accept deposits and withdrawals –
A bank accepts deposits from people to store their funds safely. And the deposits need to be repayable on demand of the customers or whenever the fixed period is over. Customers can withdraw their money anytime, anywhere. You can withdraw your deposited funds by visiting a bank or your nearby ATMs (Automatic Vending Machine).
Provide advances –
Banks also provide loans or financial support to their customers in an emergency. For example, banks lend money to customers to fulfill their financial needs when they do not have a budget. One can apply for loans for various purposes, such as pursuing higher education, buying a dream home or a car, marriage, medical emergencies, etc.
Online payment services –
Banks also provide online payment services to customers. For example, using online payment services, you can pay for your recharges, bills, rent, cab, flight, hotel, and shopping.
So, these are some of the significant characteristics of banks that you should know. Now, let’s know about some of the major functions of banks. There are two major functions of every bank: primary and secondary. Following are some of the essential functions of banks:
Primary functions of banks –
The primary functions of banks include accepting deposits and granting loans.
- Accepting deposits: Banks accept deposits and provide interest on the savings. The different types of bank deposits are fixed, saving, current, and recurring.
- Granting loans: Banks offer different types of loans and advances to the customers, such as bank overdrafts, cash credits, discounting bills of exchange, business loans, personal loans, etc.
Secondary functions of banks –
The secondary functions of banks include agency and utility functions.
- Agency functions: Banks are also known as agents for the customers as they involve various agency functions, such as the transfer of funds, periodic payments, periodic collections, portfolio management, collection of checks, etc.
- Utility functions: The utility functions of the banks deal with foreign exchanges, project reports, social welfare programs, underwriting shares, debentures, etc.