A bank is an institution that makes loans to individuals, companies, and other institutions. The banks lend money to individuals who do not have their own resources to back them up. Banking institutions are usually governed by a board of directors appointed by the government. There are three types of banks namely private, public, and commercial.
Banks are mainly based on the principle of banking. A bank is an establishment that lends or accepts payments for loans from individuals, companies, and other financial institutions. The banks may also make loans directly to individuals by issuing checks or giving electronically as per the customer’s requirements. Lending activities may be done directly by the banking institution or indirectly via financial markets. The banks can also access June to invest the lent amount for further growth of the organization.
All types of banking such as savings, merchant banking, commercial banking, and money lending are handled by the banks. The banks lend funds to businesses or individuals in the form of check or cash, securities such as bonds and equities are also traded, and it also forms a reserve asset system that acts as a safety net for depositors. All the activities related to banking such as interbank lending, discounting of risks, offering financial products, and clearing transactions take place in a coordinated manner through a central bank. Central banks facilitate smooth functioning of the banking system by controlling the supply of and creating money.
In United States, most of the banking operations are administered at the national level. There are two types of banks namely savings bank, savings, and credit unions, and commercial banks. The main difference between these banks is on the basis of services extended and nature of the business. The narrow banking services are generally made use of for the day-to-day financial inclusion and borrowing, whereas the broad banking services are required for long-term financial inclusion and banking purposes.
Broadly speaking, there are two major categories of banks namely savings banks and commercial banks. The savings bank provides various financial products such as checking accounts, bill payments, ATM cards, short-term loans, and cash advances. Such financial transactions are generally made on the basis of credit worthiness of customers through deposit or credit cards. On the other hand, commercial banks engage in the wholesale banking aspect where they undertake the direct trading in securities including equities, derivatives, and mortgage-related securities. Such financial transactions involve higher risk involve higher charges.
Apart from that, banking refers to the provision of loan making facilities to customers, wherein the customers are given cash in the form of check or cashiers’ checks, credit cards, debit cards, and internet banking facility. In some countries, banks could also be chartered or registered institutions. Such institutions offer certain specialized banking services and have been granted recognition status by the government. Most of these banks offer various online banking facilities and allow customers to make online deposits and withdraw money from their account. Such online banking is very easy, fast, and hassle-free.