Banking

The word bank is derived from the Italian word Banco which means a place for keeping, lending and exchanging money. 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 bank is a financial institution, which deals with money. It accepts deposits from individuals and organizations and grants loans to them. It allows interest on the deposits made and charges interest on the loans granted. Since, it accepts deposits and grants loans, it is regarded as the trader of money. Further, it creates credit and supports for the formation of capital and hence it is regarded as the manufacturer.

Importance of Bank

The bank is said to be the financial wheel of an economic system. It plays an important role in the economic development of the country by performing various functions. Perhaps, nobody can imagine the present day life without performing banking activities. The main importance of the bank can be highlighted as follows: -

1. Capital formation: - The bank accepts deposits of spare money from its customers. The deposits are utilized for formation of capital in the productive sectors like industry, trade and service areas of the country.
2. Granting loan: - The bank grants loan to individual as well as an organization against the security placed. It grants loan in productive sectors like industry, trade and service areas, which enhances the economic development of the country.
3. Encouraging saving: - The bank provides full security for the money deposited and allows interest on such deposits. It thus, encourages people to save as much as possible which supports capital formation.
4. Issuing notes: - The bank issues coins and paper notes which help for exchanging goods and services. Such coins and notes make easier for measuring the value of goods and services.
5. Exchanging foreign currencies: - The bank exchanges foreign currency as per the direction of the central bank. It fulfills the requirement of foreign currencies, which promotes foreign trade.
6. Promoting trade and industry: - The bank provides different types of financial as well as technical services to the trader and manufacturer, which encourage and improve the quality of industry and trade. It supports the development and expansion of industrial and trading activities.
7. Assisting the government: - The bank provides necessary financial data and information to the government, which facilitate for preparing monetary, tax and fiscal policies of the country.

In Nepalese context, banks are classified into three types. They are as follows: -

Things to remember

• Bank is a financial institution that deals with monetary business by accepting deposits, granting loan, transferring money, for the economic development of a nation.
• Bank encourages the public for saving for the economic development.
• In Nepalese context, banks are classified into three types: central bank, commercial bank and development bank.

• It includes every relationship which established among the people.
• There can be more than one community in a society. Community smaller than society.
• It is a network of social relationships which cannot see or touched.
• common interests and common objectives are not necessary for society.

Questions and Answers

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