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The term bank is either derived from old Italian word banca or from a French word
banque both mean a Bench or money exchange table. In olden days, European
money lenders or money changers used to display (show) coins of different
countries in big heaps (quantity) on benches or tables for the purpose of lending or
exchanging.
Meaning:
A bank is a financial intermediary that accepts deposits and channels those
deposits into lending activities, either directly by loaning or indirectly through
capital markets. A bank links customers that have capital deficits and customers
with capital surpluses.
Due to their importance in the financial system and influence on national
economies, banks are highly regulated in most countries. Most nations have
institutionalised a system known as fractional reserve banking, under which banks
hold liquid assets equal to only a portion of their current liabilities. In addition to
other regulations intended to ensure liquidity, banks are generally subject to
minimum capital requirements based on an international set of capital standards,
known as the Basel Accords.
Advantages & Disadvantages:
Credit Unions typically pay higher dividend rates on savings.
Credit Unions typically offer lower rates on loans
Credit Unions typically provide better service; since they are owned and
governed by their membership, they tend to prioritize the needs of their
members above all else
Credit Unions operate on a not-for-profit business model, so excess earnings
are returned back to the membership in form of competitive rates and lower
fees, and sometimes even special dividends
Many Credit Unions offer the same products and services found at banks
Credit Unions often have added-value benefits, such as free financial
education, discounted theme park tickets, and special member rates for
4. Financing Agriculture:
The commercial banks help the large agricultural sector in developing
countries in a number of ways. They provide loans to traders in agricultural
commodities. They open a network of branches in rural areas to provide
agricultural credit. They also provide financial assistance for animal
husbandry, dairy farming, sheep breeding, poultry farming, pisciculture and
horticulture.
5. Financing Consumer Activities:
People in underdeveloped countries being poor and having low incomes do not
possess sufficient financial resources to buy durable consumer goods. The
commercial banks advance loans to consumers for the purchase of such items
as houses, scooters, fans, refrigerators, etc..
6. Financing Employment Generating Activities:
The commercial banks finance employment generating activities in developing
countries. They provide loans for the education of young persons studying in
engineering, medical and other vocational institutes of higher learning. They
advance loans to young entrepreneurs, medical and engineering graduates,
and other .
7. Help in Monetary Policy:
The commercial banks help the economic development of a country by
faithfully following the monetary policy of the central bank. In fact, the
central bank depends upon the commercial banks for the success of its policy
of monetary management in keeping with requirements of a developing
economy.
Objectives
1. Rapid Industrial growth:
Industrial sector is the dynamic sector of the Indian economy. This sector
contributes to the generation of employment and income in the country.
Funds are provided by the development banks to start a new business venture,
expansion and diversification of the business in new sector etc.
2. Encouraging entrepreneurs:
Industrialisation helps in curbing economic and social problems thereby
making economies progress. Emerging entrepreneurs are encouraged to give
shape to their ideas.
3. Balanced regional development: