What is Bank in simple words? What is types of bank?

Introduction of Banks

 The word ' bank ' has derived from German language , which has the literal meaning ' to collect . Initially the basic function of a bank was to collect money from public in the form of deposits . Banks entered into other areas of function like lending of money  , in the next stage of their evolution  Banking institutions are a group of financial intermediaries ' which are engaged in the business of carrying out the banking activities after getting necessary approval from the Central Bank of the country , viz . Reserve Bank of India under the provisions of Banking Regulation Act , 1949 .

Features of Banks

 Banks are characterized by the following features : 

1 ) Acceptance of deposits and borrowing / raising of money ;

2 ) Lending of money either against appropriate tangible securities or without any security ;

 3 ) Dealing in various types of financial instruments like bills of exchange , hundies , promissory notes , coupons , drafts , bills of lading , railway receipts  

 4 ) Issuing of letters of credit ( L / C ) , traveller's cheques , drafts , circular notes , etc. on behalf of their customers ;

 5 ) Buying and selling of foreign exchange and different forex currencies ;

 6 ) Buying and selling of various commodities like metals , agricultural produce , etc .

; 7 ) Dealing in various financial instruments like stocks , funds , shares , debentures , bonds , obligations , securities and other investments on their own and on behalf of their customers , through their acquisitions , holding , issuing on commission , underwriting , etc 

Types of Banks

1 ) Central Bank : A central bank is a monetary institution which is responsible for controlling the production , circulation and supply of the money in the market . Central bank also acts as " lender of last resort " to the banking sector at the time of financial crises . It has been set - up in about all the countries of the world . " The Reserve Bank of India ” is the central bank of our country . It acts banker's bank , controller of credit and money supply , and also it enjoys the exclusive right of issuing currency of the country except one rupee coin . The government of our country controls the central bank .

 2 ) Commercial Bank : A commercial bank is a financial institution which works on profit and deals in accepting deposit and loan services , provided to corporations and large / middle sized enterprise . It provides financial services to general public , businesses and companies in order to ensure economic stability and sustainable growth of the country . 

3 ) Co - operative Bank : Co - operative banks are the banking institution which takes deposits and lend money in most parts of the world . It helps in formulating a better credit system in the rural sector , especially for agriculture .

 4 ) Payments Bank : It ensures the delivery of banking services at affordable cost to the large section of low income group ( i.e. Financial Inclusion ) , so as to attract more people of low - income group into the banking system , by giving them the facilities of Small Savings Accounts , Payment or remittance services .

 5 ) Small Bank : Small banks are the banks which perform only the basic functions of banking like , accepting deposits and granting loans on small scale . Its purpose is to provide banking services to the unserved section of the society and provide credit to small business units , small farmers etc.

 6 ) Development Bank : A development bank is a financial institution whose prime motive is to provide finance for the basic needs of the society . It is an institute which acts as the amalgamation of the activities of the finance corporation and a development corporation . As a financial corporation , these banks provide financial support to the medium - sized businesses by providing loans , underwriting and investment . These banks function as casual agents in enhancing sustainable development , by presuming advancement role by undertaking feasibility studies , giving technical , financial and managerial support for the execution of the project . Industrial Development Bank of India is one of the major development banks of our country .

7 ) Indigenous Bank : These are the banks which are controlled by the private lenders  in order to fulfill the need of the money of the small business units and the farmers , before Independence . These private lenders try to exploit people of the rural areas by giving them money on a higher rate of interest and by mortgaging their jewelry , land or their precious items . These banks are still in existence , even after the establishment of financial corporations and banks in India . 

8 ) Exchange Bank : Exchange banks are the banks which aim at promoting foreign trade amongst various countries . They promote foreign trade by providing the facility to the businessmen of exchanging their money into any other currency . Their main function is to do general banking functions , to provide finance to encourage export and import and foreign investment . Many of the foreign banks have their branches in India , whose main objective is to provide export and import trade in order to promote them . 

            

9 ) Saving Bank : Saving banks are those bank which acts as the facilitator for the collection of the small savings from the public . Commercial Banks also acts as a facilitator for providing the facilities ( i.e. Savings Bank ) for saving their money to the lower income group . Some of the saving banks are Trustee Savings Bank , Post Office Saving Bank , Commercial Saving Banks etc. Amongst these , the reason why commercial saving banks are the most popular is due to its number of branch , large network and better facilities to the depositors .

 10 ) Export - Import Bank : Export - Import banks are those banks which are initiated with the objective to provide financial assistance to the foreign trade . Their main focus is to provide finance in the form of medium and long - term financing . Export and Import Bank of India ( EXIM Bank ) was initiated on January 1 , 1982 as a statutory corporation , governed by the Central Government of India . Its main function is to provide support to the export of engineering and capital goods from the country .