A financial institution is a banking or non-banking institution established under the certain act to contribute for the economic development by collecting the funds and investing in various productive sectors. It acts as a mediator between savers and users of money. It collects funds from individuals and organization by offering various deposits schemes and invests it into various profitable sectors.
Financial institutions can be classified into banking and non-banking institutions. They are as follows:
The word bank is derived from the Italian word ‘Banco’ which means a place for keeping, lending and exchanging money. The bank is a financial institution that accepts deposits from individual, organization and pubilc and creates credit. It allows interest on the deposits made and charges interest on the loans granted. It is also known as trader of money as it accepts deposits and grants loans. Bank can be regarded as the wheel of the business. It is the manufacturer as well as a trader of money. It collects spare money. Providers’ security invests into productive sectors and forms additional capital. It promotes industrial, agricultural as well as commercial sectors of the economy. It is the signal of economic prosperity and civilized society. It plays the role of agent, which performs all monetary transactions on behalf of its clients. It is the connecting link between business houses, which helps in settling accounts. It is a means for promoting foreign trade.
The following are the main definitions of the bank: -
“Banks are financial institutions that fund in the form of deposits repayable on demand or in short notice.” – World Bank
“Bank is an institution which collects money from those who have it to spare and who are saving it out of their income and lends this money out to those who require it.” – Crowther
“Bank refers to a corporate body which has been established and got permission to perform financial transactions.” – Bank and Financial Institute Ordinance 2060
Importance of Bank
It plays an important role in the economic development of the country by performing various functions. The main importance of the bank can be highlighted as follows: -
Types of Bank
There are different types of banks emerged in the banking sectors specializing the different functional areas like industrial, commercial, agricultural and rural development. The following are the different types of bank: -
The word bank is derived from the ______.
The word bank is derived from the Italian word ______.
The word 'Banco' means ______.
a place for keeping, lending and exchanging books
a place for keepingmobile phones
a place for keeping, lending and exchanging money
a place for exchanging information
A financial institution, which deals with money is called ______.
“Bank is an institution which collects money from those who have it to spare and who are saving it out of their income and lends this money out to those who require it.” Who said this?