Thursday, May 24, 2012

Characteristics / Features of a Bank

From the Definition of Banking mentioned in earlier post, the Characteristics / Features of a Bank may be listed as follows:

1. Dealing in Money
Bank is a business activity which deals with other people's money i.e. getting money from depositors and lending the same to borrowers.
2. Banking Business
A bank is a financial institution which does banking activities of selling financial services like home loans, business loans, lockers, fixed deposit etc., In order to enable people to confirm that it is a bank and is dealing in money, for easy identification, a bank should add the word "bank" as its last name.
3. Acceptance of Deposit
A bank accepts money from the people in the form of deposits where there is an obligation to refund deposits on demand or after the expiry of a fixed tenure as they feel it is a safest place to deposit money.
4. Lending Money
A bank provides advance money in the form of loans to needy persons for promotion & development of business, purchase of home, car etc,.
5. Easy Payment and Withdrawal Facility
Payment & Withdrawal of money can be made through issuance of cheques & drafts, ATM, Online Fund Transfer without the need for carrying money in hand. A bank provides easy payment and withdrawal facility to its customers in the form of cheques, drafts, ATM’s, ETF.

6. Motive of Profit with Service Orientation
A Bank has a motive of employing funds received as deposits from the public in a profitable manner with service oriented approach.
7. Linking Bridge
A bank acts as a bridging link between borrowers and lenders of money. Banks collect money from those who have surplus money and give the same to those who are in need of money. It acts as a trust / custodian of funds of its customers.

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