Basic functions of banking

[hassen1]

The basic functions of banking are:


The collection of funds from the public.


The safeguarding of those funds.


The transfer of those funds from one person to another without their leaving the bank (this is done by means of cheques or automatic transfer through the banking system, or via the Internet etc)


The lending of that money to other parties for a return or reward called interest.

Loans made by a bank are based on the amount of funds held by the bank at any time, after taking into account sums that must be held in reserve in case the owners of the funds require them from time to time.

The loans are, of course, made with proper security in place in case there is default. The interest received is shared between the bank (i.e. their income for managing those funds) and the true owner. (The true owner's reward is a share of the interest, which is paid to him/her for not using his/her money.)

A bank is therefore an institution that deals in money, as well as providing other financial services. They accept deposits of money from customers and they make loans of those funds to generate a profit. This profit is the difference between the interest they receive from the borrowers and the interest they pay to the customers who own the funds.

Banks are essential to any country's economy as well as the world economy. The function of banks is to administer the funds given to their care and using it to make a profit.

[humpty]

err? this is a anking lesson 101? hahahahha

[mini_0]

That was a good lesson though I think it is more important to know what is happening behind the scenes in a banking and how they really work and maintain as people are keeping their money in it and it is still theirs and where from banks make money and all . Banks make money by lending your money out at interest and by charging you for services provided. When they lend your money they have to balance their objectives of creating as much income as possible for themselves, with their obligation to play it safe and maintain security for that money. They also have to maintain a good liquidity position in case you and all other customers want to draw cash out.