Bank

Introduction:

What is Bank?

The term Bank is originated from the Italian word 'Banco' which means a bench. The term 'Banco' was used to refer the monetary transactions carried out by sitting on a bench.

A bank is a financial institution whose primary function is to accept idle money as deposit and provides loans to the needy people at a certain rate of interest.

The following are the different types of Bank:
a) Central Bank
b) Commercial Bank
c) Development Bank.

Q1) Define a bank and describe the functions of a bank.

Ans: A bank is a financial institution whose primary function is to accept idle money as deposit and provides loans to the needy people at a certain rate of interest. According to World Bank, " Banks are financial institutions that fund in the form of deposits repayable on demand or in short notice."

The following are the functions of Bank;

i) Acceptance of deposit: The main function of a bank is to accept deposit from the customer under different accounts such as saving account, fixed deposit account and current account.

ii) Provide Loan: A bank provides loan to people and organizations for different time periods as short-term, medium-term and long-term loan. It provides loan against security if certain assets.

iii) Deal with securities:  A bank purchases and sells securities on behalf of its customers. The securities like shares and debentures are dealt through stock exchange. 

iv) Creation of credit: A bank creates credit by supplying money as loan to traders and industrialists. 

v) Exchange of foreign currency: A bank exchanges foreign currency under the direction of the central bank. 

vi) Remittance:  A bank provide the facilities of remittance. Remittance means transferring money from one place to another place.

vii) Agency Functions: A bank also offers a wide range of services to the clients. These include issue of credit cards and debit cards, remittance of money, payment of expenditure, etc.

viii) General Utility service: A bank provides some general utility services to the clients. Such services include lockers facility, travelers' cheques and letter of credit. It also provide the facility of credit instruments like, credit cards, debits cards, ATM cards to the clients.

The first bank of Nepal is Nepal Bank Limited established in 1994 B.S.