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Banks are important financial institutions. The bank is a financial institution that is licensed to accept deposits and lend loans. The main function of banks is to provide people with the necessary loans and to protect people’s deposits. Banks may also provide financial services such as asset management, currency exchange, and secure deposit boxes. In most cases, banks are controlled by the national government or the central bank but there are also private banks.
What are the Main Functions of a Bank 2022?
1. Accepting the deposit
One of the main functions of a bank is to accept the deposit from the people and to secure it. Banks accept deposits from individuals with active sources of income. You must have a bank account to make a deposit. There are many ways in which banks take deposits from people. The bank takes deposits in the form of savings, current and fixed deposits. The residual balance collected from the company and individuals is used for temporary commercial operating needs.
2. Lend loans
One of the most important banking activities to lend to entrepreneurs and the people who need it, at the right interest rates. Deposits are provided as loans to people who need them. In this process, the bank maintains a minimum deposit amount as a deposit and provides the remaining amount to borrowers with the required loan, overdraft, cash loan and short-term loans.
When a customer borrows credit or borrows money from a bank. In this way banks make more money. The money is not credited directly to the person cash in hand but the person is directed to take an account from the bank. Then the money is transferred from the bank to the borrower’s account. Through this way banks make most of the money.
What are the essential functions of a bank?
1. Exchange discount bills
It is a type of contract or agreement that was used to pay for goods purchased later. The amount can be deducted before the quoted time using a commercial bank holding method. Consumers often seek commercial credit from retailers while purchasing goods or services. Therefore, an exchange bill is provided by traders regarding temporary transactions.
2. Overdraft facility
It is a type of short-term loan that is provided for repayment over time. Lenders will pay the interest the borrower has to pay, in accordance with the terms and conditions of the bank. Overdraft Facility is a financial tool used by the borrower. you can withdraw money from your current or savings account, even if your account balance is zero. This feature is provided by almost all financial institutions, including banks. Lenders will charge interest on which the borrower is required to repay, in accordance with the terms and conditions of the bank.
3. Buying and selling securities
Since most banks do not sell stocks, they offer joint ventures. You can just go to almost any corner bank and buy mutual funds or bonds right away. The bank has the resources to sell and buy securities from them.
Most of the banks have the locker facilities for storing the valuables and documents of their customers. For the locker facility most of the banks receive small amounts of money.
In competitive exams, the topic ‘Functions of the Bank’ forms an important part of the question paper, and its knowledge is crucial to score good marks.
Especially, candidates appearing for various bank exams such as IBPS Exam, SBI Exam, or RBI exam definitely encounter questions related to important banking functions in the paper or at the time of interview.
For other graduate-level government examinations such as the SSC exam, the questions related to bank functions are asked under the professional knowledge heading. Therefore, this article will walk you through important banking functions, their categories, and more.
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