Bank: Definition and Characteristics:-
- Definition of Banks
- Characteristics of Banks
- Functions of Bank.
Bank definition ( Definition Of Banks):
The term bank is easy to understand but it is difficult to define it. Many scholars have given definitions of bank.
Which can be divided mainly into three headings:
(1) Definitions based on work,
(2) definitions based on legality and
(3) Definitions based on credit business.
These definitions are as follows:
(1) Functions Based Definitions:
Pro. Gilbert – “Bank is the business of capital or in proper words “money”.
Pro. Sarjan Paget – “No institution can be called a bank unless it deposits the money of the general public, opens current accounts in its name and pays and collects its customers.
Pro. A.G. Hart – “A bank is one which receives money in the course of its ordinary business and from which it pays checks of persons from or into whose accounts it receives money.
In the above definitions, importance has been given to the bank’s permanent and current deposits, payment of cheques and collection of cheques. But in these the most important functions of the bank – the business of lending and credit have been forgotten. Therefore, these definitions are not considered complete.
(2) Definitions based on Legality:
British Bills of Exchange Act – Bank includes a group of persons (regular and irregular) carrying on banking business.”
Indian Banking Act Section 5 (b) – “Banking means the deposit of money from the public for the purpose of lending or appropriation, which may be returned on demand and may be withdrawn by cheque, draft and other means.”
The above definitions are faulty because:
(a) He did not even explain the meaning of the word bank. They assume that everyone knows the meaning of the word.
(b) It does not include all the work done by the bank.
(3) Definitions based on Credit Transactions:
Pro. Crowther – A banker is a trader of his own and other people’s debts. That is, the business of a banker is to take loans from other people. And giving loans in return and thus creating money.
Pro. Sears – “Bank is an institution whose loans are widely accepted for reciprocal payment by other persons.
Pro. Findlay Shiraz – “Banker is a person or firm or company having a place of business where accounts are opened for deposits or collection of currency or collection of drafts and amounts to be paid or recovered by check or on bond and metal basis. advances or loans of money are taken and bills of exchange and letters of credit are accepted for deduction and sale.
In the above definitions, only the important function of the bank is said to be creation of credit. Hence, these definitions do not reflect the true nature of the bank.
Appropriate definitions ( Proper Definitions):
There is some flaw in the above definitions. Hence the definition given in Webster’s dictionary can be kept as the proper definition.
Webster’s Word Fund – “Bank is an institution that deals in money, is an establishment where money is deposited, preserved and issued and facilities of credit and deduction are provided and arrangements are made to transfer money from one place to another”. She goes.
The above definition is appropriate because in it the meaning of the word “business in money” has been taken very broadly. In “transaction of money” all the activities of the bank are broadly covered. Thus, the ideal definition of a bank is given as, “Bank is that institution which performs all the functions of money related transactions for its customers”.
Bank Characteristics ( Characteristics Of Banks):
Pro. Sarjan Paget has given the following three characteristics of being a banker to an individual or institution :
(i) Main Business:
A bank or banker is an institution or person who carries on the business of banking as its “core business”. He is not a banker if his financial dealings are secondary.
( ii) Reputation and Popularity:
Bank or banker is the same institution or person who is famous for the work of banker in the society.
( iii) Source of Income:
A person or an organization is a banker only if his only source of income is banking business. If he does not adopt this business as his main means of subsistence, then he is not a banker.
The Bank’s work ( Functions of Bank):
The aptly described definition of the word bank throws light on the function of the bank.
The major functions of commercial banks , in brief, are as follows:
(1) Acceptance or Deposits:
The main function of the bank is to accept deposits from the public. Banks accept deposits in different types of accounts such as savings account, fixed deposit account, current accounts (such as savings account, fixed deposit account, current account etc.) Provides facilities and provides escape. These deposits are payable on demand.
(2) Acceptance Loans and Advances:
Another major function of commercial banks is to accept loans and advances. Accepting deposits with low interest in public and lending most of it at high interest and making profit from this difference is the main business of the bank. Banks are very important means of commercial credit in the modern economy.
Banks accept loans and advances in different types like Cash Credit, Bank Overdraft, Advances, Purchase and Deduction of Bills etc. Apart from this, many special types of loan schemes for the weaker sections of the society, self-employment, schemes for unemployed youth, agriculture, cottage and small scale industries etc. have also been run by commercial banks.
( 3) Services:
Banks also provide a variety of services to their customers , some of the important ones are as follows:
(i) Collection of cheques, bills etc. for the customers.
(ii) Payment of checks drawn by customers and payment of their dues.
(iii) Remittance facilities from one place to another.
(iv) Buying and selling of shares and debentures and other securities.
(v) Underwriting of securities.
(vi) To act as Trustees, Executors etc. (Trustees, Executors etc.).
(vii) To make payment as per the standing orders of the customers.
(viii) Advising clients regarding capital investment etc.
(ix) To keep the valuables of the customers safe in the lockers.
(x) To give references about the financial condition etc. of the customers.
(xi) To provide facilities of Travelers Checks and Letters of Credit.
(xii) Providing consumer credit.
(xiii) Arranging foreign exchange.
(4) Development Functions:
In addition to the traditional banking services, modern banks have to perform many other important functions. The participation of banks in the programs of economic development and socio-economic progress of the country is increasing. Development Banking is a new dimension of banking business.
After nationalization of major commercial banks in India, many participation of commercial banks in programs like poverty alleviation, self-employment schemes, backward class upliftment programs, development of small and cottage industries and handicrafts, rural development, industrial development, import-export trade etc. Has been . Now commercial banks are no longer commercial institutions lending money by accepting deposits. They have now become important catalysts of socio-economic progress.