Financial Institution

Introduction:

What is Financial Institution?

Ans: Financial institutions are those institutions which are involved in monetary transactions such as collecting fund, depositing public money, providing loans, buying and selling shares and debentures.

According to A.T.K. Ukrant, " Financial institutions are investment intermediaries linking the savers and users of capital."

Types of Bank:

There are different types of financial institutions. In Nepal, we find the following financial institutions.
     a) Bank
     b) Insurance Company
     c) Employees' Provident Fund
     d) Citizen Investment Trust
    e) Financial Cooperative Society

 We can classify financial institutions into two types as Depository Financial Institution and Non-Depository Financial Institution.

Depository Financial Institution
Commercial bank, Development Bank and Finance Companies are the examples of Depository Financial Institution. The Pay interest on deposits and use the deposits to make loans.
Non-Depository Financial Institution.
Insurance companies and citizen investment trust are the examples of Non-Depository Financial Institution.

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.