What do you mean by bank | Evolution and Classification of bank

What do you mean by bank | Evolution and Classification of bank

What do you mean by bank?

Bank is a financial institution that keeping, lending and exchanging of money. There is so many definitions of bank but according to W. Hock, “The bank is a financial institution which creates money with money” which is more accurate than others.

Finance is a blood of trade, commerce and industry and now-a-days, banking sector mainly acts as the backbone of modern business. A bank is a financial institution which deals with deposits and advances and other related services. It recieves money from those who want to save in the form of deposits and advances and other related service like lending money to grow the economy. Banks act as a bridge between the people who save and people who want to borrow. It recieves money from those who want to save as deposits and it lends lends money to those who want to borrow. Evolution of Banking:

The term bank is executed from Italian word banca or from a French word banque which means a bench or money exchange table. In older days, European money lenders or money changers used to display coins of different countries in big heaps or benches or tables for the purpose of lending or exchanging. According to some authorities, the word bank itself is derived from the bancus or banque, that is a bench.

Other authorities say that the word bank is originally derived from the German word back. And its meaning is a joint stock fund which was italianized into banco when Germans were great part of Italy. But in fact the origin of the word bank would vestige the history of banking in Europe from the middle ages.

✍️ Important: Bank is a financial institution that keeping, lending and exchanging of money.

Classification of bank

Banks are classified into several types on the basis of their functions, ownership, domicile, status etc. The main types of banks are showed below:

  • Central Bank: Central bank is the summit institution of a country which regulates and supervise the monetary and credit system.Its main function is to issuing currency.
  • Commercial Bank: A commercial bank isna profit seeking business firm which accepts deposits and provides loan and other services.
  • Industrial Bank: An industrial bank provide long term credit to industries for the purchase of machinery,equipments etc.
  • Exchange Bank: Exchange banks are engaged in foreign exchange.
  • Co-operative Bank: This is a group of financial organisation which organized under the co-operative societies.
  • Savings Bank: This type of bank collect the periodical saving of the general public.
  • Land mortage bank: The land mortage banks supply long term loans to the farmer for the development of land.
  • Agricultural Bank: These banks supply loans to the farmer for the development of agriculture.
  • International bank: International banks are those which are operating in different countries.

✍️ Important: 9 types of bank have been discussed.

Types of Banking System

There are several types of banking system.We can classify them into following categories:
  • Unit Banking system- Unit banking means a system of banking which banking services are proved by a single banking organisation.
  • Group Banking system- Group banking is the system in which two or more banks are brought under the control of a holding company.
  • Chain Banking system- Chain banking is the system of banking under which a number of separate banks are brought under the common control by a device.
  • Branch Banking system- Branch banking means a system of banking in which banking services are provided by more than one place.This system of banking is prevalent throughout the world.
  • Deposit Banking system- Deposit banking is those banking in which accepts deposits and withdrawal in short term period.
  • Correspondent Banking system- Correspondent banking system is developed to remove the difficulties of unit banking.
  • Mixed Banking system- Mixed banking is the system which perform the dual function of commercial and investment banking.
  • Investment Banking System- These banks are those financial institutions which provide long term finance to business.

✍️ Important: 8 types of banking system have been described.

By this discussion, we have known the definition,evolution,banking system and classification of bank.

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