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Question
Explain the following term/concept:
Bank
Solution
1) Bank is a financial institution that deals in money. It is an institution which accepts money as deposits and lends money in different forms. It accepts money as deposits repayable on demand with interest, through cheques, draft, and order or otherwise. Bank earns a margin of profit by the lending amount collected as deposits at a higher rate of interest to trade and industry. It is a financial institution in which those people who have surplus and idle funds deposit in it and those who need funds borrow from it.
(2) Bank is an important institution in the money market where money itself is a commodity. It provides various types of services by performing two types of functions viz. Primary functions and secondary functions. The primary function of the bank includes accepting deposits and lending funds. Section 5 (c) of the Banking Regulation Act, 1949 defines a Banking Company “as any company which transacts the business of banking in India.”
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