The word bank is derived from the German word "banco" which means exchange money. Slowly the people develop faith in them. People started deposited their money for security to mahajan and shahukar. After sometime they give money to the people and received interest. Bank plays a very important role for the economic development of the country. Economic development depends on the industrial development. Industrial development is not possible without the help of finance. Bank provides finance to the industry and trade.
Function of bank: various types of functions of bank which are explained in below:
- primary function
- secondary function
- social function
Primary function: It is also known as assets test function. It can also divide into two categories:
- Accepting deposit
- Advances loan
A. Accepting deposit: people deposit their money in account for the small saving. They also received interest from the bank. People deposit their money in bank in following category.
- fixed deposit
- recurring deposit
- saving account
- current account
- Fixed deposit: when any person deposits a lumsum amount for a long period in a bank. In fixed period person received high rate of interest as compared to the other account. When any person need money before the due date in case of emergences then bank charges some commission on this amount and balanced paid to the customer.
- Recurring deposit: person deposit money in a bank not in lumsum amount. It can deposit money monthly basis. Its rate of interest is lower than the fixed deposit.
- Saving account: It is especially for the lower or middle class people for saving. Its rate of interest is very low. When any need arises it can easily withdraw from the bank.
- Current deposit: This type of account only for the businessman. For the current account a person not received the interest from the bank however gives to the bank for the current account. It is so because bank can’t use this money because person withdrawn this amount ta any time.
2. Advances loan:
- Cash Credit: when person take the loan from the bank then bank charges interest from the customer under the following two conditions:
- When bank deposit the money in the customer account then bank charge interest on the sanction amount. Customer withdrawn this money at any time when need arises.
- When not credit the amount in the customer account when need arises take from the bank. In such case interest are not charged on the sanction amount only on the borrow amount.
- Overdraft: when businessman deposit the amount in the bank then gives opportunity bank overdraft to the customer. It means customer use the amount more than which are deposited in bank account for the shorter period and bank charges low rate of interest.
Secondary function: it is also known as ancillary function. Now, it will discuss in below:
- Collection and payment of various items on the behalf of the customer: Bank collects cheque for the customer and payment of tax, insurance premium on the behalf of the customer.
- Locker facility: Bank provides locker facility to the customer then customer keep their precious document, jewelry in this place.
- Bank charges interest for the locker facility.
- Bank also purchased and sale of security on the behalf of the customer.Bank also provides business information to the customer time to time.
- Bank provides traveller cheque to the customer.
Social function:
- Bank provides employment opportunity to the customer.
- Bank provides credit facility to customer for satisfaction of his wants. In other words we can say that it is very helpful to increase the demand.
