Scribd
Upload
54 views

6.2 Scope of Banking Activities

Banks play an important role in the economy by accepting deposits, making loans, providing safe places for money and valuables, and facilitating payments. They mobilize savings from deposits and use those funds to make loans and invest in other financial instruments. Banking activities are vital for trade, commerce, and economic growth as they provide safe custody for money and valuables, credit facilities, means of transferring funds, and other services that support business transactions and trade.

Uploaded by

Shruti Singh
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
54 views

6.2 Scope of Banking Activities

Banks play an important role in the economy by accepting deposits, making loans, providing safe places for money and valuables, and facilitating payments. They mobilize savings from deposits and use those funds to make loans and invest in other financial instruments. Banking activities are vital for trade, commerce, and economic growth as they provide safe custody for money and valuables, credit facilities, means of transferring funds, and other services that support business transactions and trade.

Uploaded by

Shruti Singh
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

CHAPTER NO.

1 INTRODUCTION

Banking systems have been with us for as long as people have been using money. Banks and other
financial institutions provide security for individuals, businesses and governments, alike. Let's recap
what has been learned with this tutorial:

In general, what banks do is pretty easy to figure out. For the average person banks accept deposits,
make loans, provide a safe place for money and valuables, and act as payment agents between
merchants and banks.

Banks are quite important to the economy and are involved in such economic activities as issuing
money, settling payments, credit intermediation, maturity transformation and money creation in the
form of fractional reserve banking.

To make money, banks use deposits and whole sale deposits, share equity and fees and interest from
debt, loans and consumer lending, such as credit cards and bank fees.

In addition to fees and loans, banks are also involved in various other types of lending and operations
including, buy/hold securities, non-interest income, insurance and leasing and payment treasury
services.

6.2 SCOPE OF BANKING ACTIVITIES


Banking activities are considered to be the life blood of the national economy. Without banking
services, trading and business activities cannot be carried on smoothly. Banks are the distributors and
protectors of liquid capital which is of vital significance to a developing country.

Efficient administration of the banking system helps in the economic growth of the nation. Banking is
useful to trade and commerce.Banking activities are useful to trade and industry in the following
ways.

a) Money deposited in a bank remains safe. Precious articles too can be kept in the safe custody of
banks in lockers.

b) Banks provide credit facilities to their customers. Customers with bank accounts also enjoy better
credit in the business world.
c) Banks encourage the habit of saving and thrift among people.They mobilise savings and invest
them in productive activities.Thus, they help in increasing the rate of savings and investment in the
country.
d) Banks provide a convenient and safe means of transferring money from one place to another
and facilitate business dealings/transactions.
e) Banks collect and realise bills, cheques, interest and dividend warrants etc. on behalf of their
customers.
f) Foreign trade is facilitated considerably with the help of banks which receive and make
payments, provide credit and deal in foreign exchange.
g) Banks meet the financial needs of small-scale business units which are located in economically
backward areas.

SERVICE ACTIVITIES OF BANKS AGENCY SERVICES


Banks undertake/various agency services for their customers. These are outlined below. a) Collection
of cheques, drafts, and bills of exchange on behalf of customers.
b) Collection of dividend and interest warrants of customers.
c) Collection of pension of government employees.
d) Purchase and sale of securities on the instructions of customers.
e) Executing standing orders for payment of rent, electricity bill,insurance premium etc.

GENERAL SERVICES
A commercial bank also performs the following services of general utility to the public: a) Issue of
letters of credit, traveller’s cheques and circular notes.

b) Supply of trade information.


c) Acting as a referee as regards financial status of customers.
d) Acceptance of bills of exchange on behalf of customers.
e) Underwriting loans floated by government and public bodies.

You might also like