NAME : sameen hussain

REGESTRATION NO : 1611-116009

PROGRAM : bba hons

COURCE TITLE : intro to banking

ASSIGHMENT NO : 1

COURCE INSTRUCTOR : Sir F R tariq

UNIVERSITY : preston university

1. Commercial Banks
Commercial banks are the banks that accept money in the form of deposits from the public and
give loans and advances to its customers by charging interest. They mobilize small savings and
promote the growth of trade and commerce. Generally, commercial banks lend money for short
period only. They only provide working capital to the organizations. Now recently commercial
banks are providing long-term capital also to the organizations. These banks play the important
role in modern economic organisation. Their business mainly consists of receiving deposits,
giving loans and financing the trade of a country. They provide short-term credit, i.e., lend money
for short periods. This is their special feature.

There are several types of deposits which are accepted by the commercial banks like

 Savings Deposits

 Current Deposits

 Fixed Deposits

 Seasonal Deposits

 Recurring Deposits,

2. Co-operative Banks
Cooperative bank is an institution established on the cooperative basis and dealing in ordinary
banking business.it is retail and commercial banking organized on a cooperative basis.
Cooperative banking institutions take deposits and lend money in most parts of the world. they
includes retail banking carried out by credit unions, mutual savings banks, building societies and
cooperatives, as well as commercial banking services provided by mutual organizations (such as
cooperative federations) to cooperative businesses.

Cooperative banks are owned by their customers and follow the cooperative principle of one
person, one vote. Co-operative banks are often regulated under both banking and cooperative
legislation. They provide services such as savings and loans to non-members as well as to
members, and some participate in the wholesale markets for bonds, money and even equities
3. Central Bank
A central bank is a financial institution given privileged control over the production and
distribution of money and credit for a nation or a group of nations. In modern economies, the
central bank is usually responsible for the formulation of monetary policy and the regulation of
member banks Central banks are inherently non-market-based or even anticompetitive
institutions. Although some are nationalized, many central banks are not government agencies,
and so are often touted as being politically independent. However, even if a central bank is not
legally owned by the government, its privileges are established and protected by law.

 central banks control and manipulate the national money supply: issuing currency and setting
interest rates on loans and bonds. Typically, central banks raise interest rates to slow growth
and avoid inflation; they lower them to spur growth, industrial activity, and consumer
spending. In this way, they manage monetary policy to guide the country's economy and
achieve economic goals, such as full employment.

 they regulate member banks through capital requirements, reserve requirements (which
dictate how much banks can lend to customers, and how much cash they must keep on hand),
and deposit guarantees, among other tools. They also provide loans and services for a nation’s
banks and its government and manage foreign exchange reserves.

 a central bank also acts as an emergency lender to distressed commercial banks and other
institutions, and sometimes even a government. By purchasing government debt obligations,
for example, the central bank provides a politically attractive alternative to taxation when a
government needs to increase revenue

4. Industrial Banks
Industrial banks are also called as Investment Banks. Industrial banks provide long-term loans to
the industries. Industries require long-term capital for buying machinery, construction of
buildings, expansion of operations, etc. These capital required by industries is provided by
industrial banks for industrialists to grow their businesses. Industrial banks accept long-term
deposits from the public. They secure capital by issuing shares and debentures.

The loans offered by these industrial banks are mostly secured by a third party who acts as a
guarantor for the loan disbursed. Industrial banks differ from the commercial lenders because
they also accept deposits. The difference between commercial banks and industrial banks is that
they do not offer the option of checking accounts. Another aim of an industrial bank may be to
disburse loans for specific purposes that are somewhat related to the proprietor of the institution
5. Savings Bank
Savings Banks mainly concentrates on the mobilization of savings of the people. In India Post
offices run by Postal department act as savings banks. Since Commercial banks are providing
these facilities of savings banks to the public, the need for separate savings bank is fading These
banks (perform the useful service of collecting small savings. Commercial banks too run “savings
departments” to mobilise the These are financial institutions that primarily receive savings
accounts and pay interest to depositors. Most people are used to this kind of bank because they
are customer oriented, and it’s the bank of low income earners.savings of men of small means.

6. Exchange Banks
Exchange Banks are the banks which operate by financing the imports and exports of the country.
These banks are mainly concerned with providing foreign exchange to their customers and help to
promote international trade. They also offer to discount of foreign bills of exchange to their
customers. an exchange bank allows customers to exchange one money currency for another one.
Often they are a stand alone business but may be part of a larger institutio

7. Private Banks
Private Bankers are the individuals who do banking business individually or as a partnership. It is
purely an unorganized sector.Most of the private bankers do not receive or accept any deposits
from the public, they do banking business with their own capital. They lend money to the people
for high-interest rates.

Private banking is banking, investment and other financial services provided by banks to high-
net-worth individuals (HNWIs) with high levels of income or sizable assets. Private banking
forms a more exclusive (for the especially affluent) subset of wealth management. The term
"private" refers to customer service rendered on a more personal basis than in mass-market retail
banking, usually via dedicated bank advisers. It does not refer to a private bank, which is a non-
incorporated banking institution.

8. Consumers Banks
These are banks that provide services to individual consumers, rather than to companies,
corporations or other banks. The main objective of this bank is to give loans to consumers for
purchase of the durable products like cars, etc. The consumers have to repay the loans in easy
installments. etail banking, also known as consumer banking, is the typical mass-market banking
in which individual customers use local branches of larger commercial banks.
 FUNCTIONS OF BANKS

A. Primary Functions of Banks

1. Accepting Deposits

The bank collects deposits from the public. These deposits can be of different types, such as

a. Saving Deposits

This type of deposits encourages saving habit among the public. The rate of interest is low. At
present it is about 4% p.a. Withdrawals of deposits are allowed subject to certain restrictions. This
account is suitable to salary and wage earners. This account can be opened in single name or in
joint names.

b. Fixed Deposits

Lump sum amount is deposited at one time for a specific period. Higher rate of interest is paid,
which varies with the period of deposit. Withdrawals are not allowed before the expiry of the
period. Those who have surplus funds go for fixed deposit.

c. Current Deposits

This type of account is operated by businessmen. Withdrawals are freely allowed. No interest is
paid. In fact, there are service charges. The account holders can get the benefit of overdraft
facility.

d. Recurring Deposits

This type of account is operated by salaried persons and petty traders. A certain sum of money is
periodically deposited into the bank. Withdrawals are permitted only after the expiry of certain
period. A higher rate of interest is paid.
2. Granting of Loans and Advances

The bank advances loans to the business community and other members of the public. The rate
charged is higher than what it pays on deposits. The difference in the interest rates (lending rate
and the deposit rate) is its profit.

The types of bank loans and advances are

a. Overdraft

This type of advances are given to current account holders. No separate account is maintained.
All entries are made in the current account. A certain amount is sanctioned as overdraft which can
be withdrawn within a certain period of time say three months or so. Interest is charged on actual
amount withdrawn. An overdraft facility is granted against a collateral security. It is sanctioned to
businessman and firms.

b. Cash Credits

The client is allowed cash credit upto a specific limit fixed in advance. It can be given to current
account holders as well as to others who do not have an account with bank. Separate cash credit
account is maintained. Interest is charged on the amount withdrawn in excess of limit. The cash
credit is given against the security of tangible assets and / or guarantees. The advance is given for
a longer period and a larger amount of loan is sanctioned than that of overdraft.

c. Loans

It is normally for short term say a period of one year or medium term say a period of five years.
Now-a-days, banks do lend money for long term. Repayment of money can be in the form of
installments spread over a period of time or in a lumpsum amount. Interest is charged on the
actual amount sanctioned, whether withdrawn or not. The rate of interest may be slightly lower
than what is charged on overdrafts and cash credits. Loans are normally secured against tangible
assets of the company.

d. Discounting of Bill of Exchange

The bank can advance money by discounting or by purchasing bills of exchange both domestic
and foreign bills. The bank pays the bill amount to the drawer or the beneficiary of the bill by
deducting usual discount charges. On maturity, the bill is presented to the drawee or acceptor of
the bill and the amount is collected.
B. Secondary Functions of Banks
The bank performs a number of secondary functions, also called as non-banking functions

1. Agency Functions

a. Transfer of Funds

The bank acts as an agent of its customers. The bank performs a number of agency functions
which includes :-The bank transfer funds from one branch to another or from one place to
another.

b. Collection of Cheques

The bank collects the money of the cheques through clearing section of its customers. The bank
also collects money of the bills of exchange.

c. Periodic Payments

On standing instructions of the client, the bank makes periodic payments in respect of electricity
bills, rent, etc.

d. Portfolio Management

The banks also undertakes to purchase and sell the shares and debentures on behalf of the clients
and accordingly debits or credits the account. This facility is called portfolio management.

e. Periodic Collections

The bank collects salary, pension, dividend and such other periodic collections on behalf of the
client.

2. General Utility Functions

The bank also performs general utility functions, such as

a. Issue of Drafts and Letter of Credits

Banks issue drafts for transferring money from one place to another. It also issues letter of credit,
especially in case of, import trade. It also issues travellers' cheques.

b. Locker Facility

The bank provides a locker facility for the safe custody of valuable documents, gold ornaments
and other valuables.