Banks manage the customers’ current and savings accounts, pay out checks that have been drawn on the bank by account holders, and also perform the collection of checks deposited in their customers’ accounts. Banks implement a number of other procedures for payments to customers, such as: ATM’s (Automated Teller Machines), telegraphic transfer, and EFTPOS (Electronic Funds Transfer at the Point of Sale), or Debit Cards.
The borrowing process of banks is carried out by receiving funds in savings accounts and current accounts and receiving term deposits, as well as through issuance of debt securities, such as bonds and banknotes. Banks also provide loans to customers that are repayable in installments as well as lending through investments in tradable debt securities and other types of lending.

Banks offer a comprehensive variety of payment facilities, and a bank account is regarded as indispensable by the majority of governments, business enterprises, and individuals.

Banks perform the following commercial functions:

They process payments with the help of online banking, telegraphic transfer, EFTPOS or Debit Card, and other methods
They issue banknotes, such as promissory notes
Acceptance of funds on term deposits
Issuance of bank checks and bank drafts
Offering performance bonds, guarantees, letters of credit, and other types of documents related to underwriting commitments for securities
Safe custody of important documents and other valuable items in safe deposit vaults or safe deposit boxes
Providing loans through installment loans, overdrafts, and others
Selling and brokerage services related to unit trust and insurance products
Foreign exchange services

Banks can be categorized into the following types:

Retail Banks

Postal savings banks
Commercial banks
Community banks
Private banks
Savings banks
Community development banks
Offshore banks
Building societies

Investment Banks

Merchant Banks
Investment Banks

The different types of banking channels offered to customers for accessibility of banking services include the following:

ATM’s (Automated Teller Machines)
Bank Branches at different locations
Telephone banking
Online banking

In order to operate as a bank, a financial services provider has to obtain a banking license. The banking license is issued by the banking regulation authorities.


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Last Updated on : 27th June 2013

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