Bank
Updated on July 18, 2023
Banks are financial institutions that provide various financial services to individuals, businesses, and other organizations. Their role is to act as intermediaries, facilitating the flow of funds in the economy. The key function of the bank is to accept deposits from the general public and utilises those funds to provide loans and advances to individuals, businesses, and other entities in need of financing. This process allows the bank to generate revenue by obtaining deposits at a relatively lower cost and lending them out at a higher interest rate.
What is the role of banks in the society?
The key role of banks is highlighted below.
Safekeeping Money – Banks offer secure storage for individuals’ funds, providing a safer alternative to keeping cash at home.
Borrowing and Lending – Banks provide loans to individuals and businesses, assisting them in achieving their financial goals and supporting economic growth.
Managing Payments – Banks facilitate convenient and secure payment methods, allowing individuals to pay bills, shop, and transfer money easily.
Savings and Interest – Banks encourage saving by offering interest on deposits, helping individuals grow their savings over time.
Foreign Exchange – Banks assist in currency exchange for international travel and trade, facilitating transactions between different currencies.
Financial Advice – Banks offer guidance on investments, insurance, and retirement planning to help individuals make informed financial decisions.
Economic Growth – Banks contribute to economic growth by providing loans to businesses, which promotes expansion, job creation, and overall development.
Risk Management – Banks assess and manage financial risks to maintain the stability of the banking system and protect the interests of depositors and borrowers.
