short essay about banks

Essay On Bank

Essay on Bank

500+ words essay on bank.

Banks are an integral part of the modern economy. They play a major role in the economic growth and development of a country. The idea of banking evolved with the idea of money. In India, public sector banks (PSBs) have been working to provide banking services in urban and rural areas since 1970. These public sector banks account for nearly 70% of banking activity in India. With the help of this essay on banks, students will get to know the functions performed by banks and their importance for individuals and the country. To help students in improving their essay-writing skills, we have also compiled a list of CBSE Essays on different topics. By practising these essays, they can boost their writing skills and also score good marks on the English exam.

Meaning of Bank

Banks are mainly linked to depositing and lending money. In Indian society, moneylenders used to give money to people in ancient times. They charged a high rate of interest to people as there were no banks or banking systems available at that time. But, with the change in time, the banking system was introduced in India. Now, we have public sector banks and private banks.

A bank is a financial institution that deals with deposits, withdrawals and other related banking services. Bank receives money from those who want to save in the form of deposits, and it lends money to those who need it. A bank is a financial institution that works as an intermediary to accept deposits and channels those deposits into various lending activities. It does so through loans or capital markets. A bank establishes the connection between the customers who have capital surpluses and those with capital deficits. In India, all banks operate under the guidelines of the Reserve Bank of India, which is known as the banker’s bank.

Functions of Bank

Banking is the lifeline of the modern economy. It has played a very important role in the economic development of all the nations of the world. We can not think of modern commerce without banking. Banking is a business which seeks profits like any other business. The banking business mainly constitutes borrowing and lending as their basic functions. Now, banks are providing many other services to people, such as net banking, online shopping, mobile banking, granting loans and advances, short-term credit, pension payments, acting as a dealer in foreign currency etc. A common person can safely deposit their money in the banks.

How Important are Banks for Development?

Banks are the most important financial pillars. They play a vital role in the economic development of a country. The financing requirements of industries, trades, agriculture and other business are met with the help of banks. Therefore, if the banking system of a country becomes strong, then the development of the country will also be at a faster rate. In today’s economy, banks are not only dealing with money, but they are also contributing to the development of the nation. They play a crucial role in the disbursement of credit and the mobilisation of deposits to various sectors of the economy. Banks also represent the economic health of the country. The strength of a nation’s economy depends on the strength of the financial system, which depends on the banking system.

In India, banks play a crucial role in the social and economic growth of the country after independence. The banking sector in India accounts for more than half the assets of the financial sector. The Indian banks have shown much growth after the implementation of financial sector reforms.

Banks are the backbone of any country’s economy. They are responsible for running the economy and controlling the price of the markets. They perform various important functions. However, there are default NPAs, cases of corruption and security threat-related issues, but these can be resolved by implementing strict laws and rules by the government.

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Essay on Bank in English for Children and Students

Table of Contents

Banks are financial institutions that deal in monetary transactions. Banks form an integral part of any society. There are numerous banks located in different parts of our country. While earlier there were limited number of banks with a few branches in big cities and towns in India, a number of new banks have opened in the last few decades with branches in every nook and corner of the country. Banks provide a lot of services based on the customer’s requirements. They provide locker facilities, safe deposits, ATM Services, Fixed Deposits, money transfer, loan for business and houses and several other monetary services to their customers.

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Long and Short Essay on Bank in English

Here are essay on Bank in English of varied lengths to help you with the topic whenever you required.

After going through these Bank essay, your knowledge about banks, their functioning and their usefulness will enhance and you will emerge as a knowledgeable person.

These essays will prove useful in your school or college assignments, especially for students of commerce or banking.

You can select any bank essay of your choice given below:

Bank Essay 1 (200 words)

The banking system that involves accepting deposits and lending money initiated centuries back in various parts of the world. The system improvised over the time and the banks these days offer various other facilities in addition to the basic depositing and lending of money.

People are encouraged to keep their money in the banks because it is a safe and secure way to store the money. The money stored in the bank in the form of fixed deposits and recurring deposits also fetches a good amount of interest. In addition to money, one can also keep jewellery and important papers in the bank lockers.

Providing loans, which is another primary function of the banks, is also beneficial for individuals and businesses in many ways. Salaried people can build their assets such as property, car, etc easily with the help of loans from the bank. Businessmen can expand their businesses with this facility. A number of other services are also provided to the businessmen to ease their financial transactions and aid in the growth of their business.

Online Banking has further enhanced the process of banking. Various banking services such as checking balance, transferring amount, applying for loan are now provided on the bank’s website. All the customers require doing is opting for internet banking service.

Bank Essay 2 (300 words)

Introduction

Banking system has been in place since centuries. The system has been prevalent in India as well as other parts of the world. Only the services provided and the functions carried out have enhanced over the time.

History of Banks

Banking service began back in the 14 th century in some parts of Renaissance Italy. It was initiated on the lines of the concept of lending and borrowing that took place among people since the ancient era. In the ancient times, the merchants gave grain loans to the traders and farmers. This was called the barter system. Over the time the system evolved to accepting deposits and lending money.

The Fuggers, the Medicis, the Berenbergs, the Rothschilds are among some of the banking dynasties that are known to play a central role in the history of banking. They dominated this sector for centuries. Modern banking services such as issuance of banknotes and reserve banking started in the 17 th century. Bank of England and The Royal Bank of Scotland are some of the oldest banks in the world.

History of Banks in India

In India, the banking system dates back to the Vedic civilization. Loans were given to the needy in that era too only the nitty-gritty’s involved in the same were different. Loans deeds in that period were known by the name rnalekhya or rnapatra.

Big businessmen and landlords gave money to the small traders and farmers on interest in the earlier times. This culture is still prevalent in some villages in the country. The lands or other valuable assets of those who were unable to pay the amount were confiscated just as the banks do these days.

The first bank established in India was the Bank of Hindustan. It was opened in the year 1770 in Calcutta. Bank of Bombay, Bank of Calcutta and Bank of Madras were set up later in the early 19 th century.

There are numerous types of banks in every country to cater to the needs of different customers. They provide various services and aid in the growth of the country’s economy.

Bank Essay 3 (400 words)

A bank is an institution that accepts money deposits from the public and provides funds on credit to individuals as well as firms. These are the primary functions of a bank but not the only functions. They provide various other services to its customers such as locker facility, transfer of funds, issuance of drafts and portfolio management to name a few.

Importance of Banks

Banks are important for the individuals as well as the development of the country’s economy. Here is why these institutions are of importance:

Provides Safety and Security

Money kept at home is not safe. It is prone to burglary. When you keep your money in the bank, it is the bank’s responsibility to safeguard it. You do not have to worry about its security.

Encourages Saving Habits

Banks offer various schemes from time to time to encourage saving habits in people. The money put in the bank is not only saved but also grows. You have the option of withdrawing it any time you want.

Eases Trade and Commerce

Banks promote trade within the country by providing loans and advances to the traders. It also eases the process of trading between different countries. They provide easy money transaction options to smoothen the process. It is easy to send and receive funds from anywhere with the advancement in the banking system.

Promotes Agricultural Sector

Agricultural sector is an important part of the economy. There are special banks that provide loans to the farmers at low interest to promote agricultural activities. Banks thus aid in promoting the agricultural sector.

Aids in Development of Industries

Banks accept deposits from individuals and businesses and provide loads to the industries. They thus aid in the development of various industries in this way. The loan can be repaid in easy instalments.

Provides Employment Opportunities

Banks provide loans for the growth and development of the agricultural and industrial sectors. As these sectors expand, a number of employment opportunities are created for the public.

Banks are an important part of any country. The modern banking services have helped in easing the process of trade, development of industries and other activities that help in the development of the country’s economy. Banks and other financial institutions that promote the growth of businesses and safeguard the money and other valuable assets of individuals are certainly play an integral role in the development of a country’s economy.

Bank Essay 4 (500 words)

Banks play an important role in maintaining financial stability in the country. They offer numerous services to help you manage your finances better. These institutions thus form a vital part of any society.

Functions of Banks

The functions of banks have broadly been classified into two categories. These are the primary functions and the secondary functions. Here is a look at these in detail:

Primary Functions

Primary functions are the main functions of the banks. These include accepting deposits and providing loans. Here is a brief look at these functions:

Accepting Deposits

These deposits are basically of four different types:

Saving Deposits: These deposits encourage public to save money. The money can easily be withdrawn and deposited in the saving account without much restriction. The interest rate here is however quite low.

Current Deposits: This account is especially for the businessmen. These accounts offer facilities such as overdraft that are beneficial for the businesses. No interest is paid in this account.

Fixed Deposits: In a fixed deposit a considerable big amount is deposited in the account for a fixed period of time. The rate of interest is high in such deposits.

Recurring Deposits: A certain amount is deposited at regular intervals in such an account. The rate of interest is high. However, the amount cannot be withdrawn before a certain period.

Providing Loans

Here are the types of loans and advances offered by the banks:

Loans: Loans are offered for both short term and long term period. The rate of interest charged on the same varies based on the type and duration of loan. It can be repaid in instalments.

Cash Credits: The customers have the facility to take cash credit up to a certain amount which is fixed in advanced. A separate cash credit account needs to be maintained for this.

Overdraft: This facility is for businessmen. It is thus provided to the current account holders. They do not require maintaining a separate account to avail this facility.

Secondary Functions

Secondary functions, also known as non-banking functions, are of two types. These are agency functions and general utility functions. Here is a brief look at both these types of functions:

Agency Functions

The bank also acts as an agent for its customers. A number of agency functions are performed by this institution. These include collection of cheques, periodic payments, portfolio management, periodic collections and transfer of funds. Banks also act as executors, administrators, advisors and trustees for their customers. They help their customers deal with other institutions.

General Utility Functions

Banks also perform general utility functions that include providing locker facility, underwriting of shares, dealing in foreign exchange, issuance of drafts and letter of credits, drafting project reports, undertaking social welfare programmes such as public welfare campaigns and adult literacy programmes.

Discounting of bill of exchange is another service provided under this.

While initially the functions of banks only included accepting deposits and providing loans; they have started providing various other services now. All these facilities are aimed at helping the customers with their finances.

Bank Essay 5 (600 words)

Banks are financial institutions that lend money and accept deposits from general public. Banks maintain the flow of money in the country and are important for its economic growth. There are different types of banks that offer different kinds of services to individuals as well as businesses.

Types of Banks

Here are the various types of banks and their functions:

National Banks

Also known by the name, Central or Federal bank, these banks manage the financial system of the government. These non-profit making institutes serve as bankers to the other banks. There is one Central bank in every country. Some of the functions of National banks include supervising foreign exchange, controlling the country’s currency and issuance of paper currency. They do not deal with the general public.

Retail Banks

These are the most common types of banks. These are mainly set up to focus on the requirements of the general public. They open your savings account, provide credit cards, give loans and provide locker facility among other services.

Saving Banks

These are especially established to inculcate the habit of saving money among the people. The deposits from the customers are turned into securities and bonds in these banks. These were set up way back in the 18 th century in European countries. Besides, accepting deposits from individuals these banks offer various other services too.

Commercial Banks

The main aim of these banks is to aid the business class. They provide loans to the businessmen and also provide other services that are useful for the business men. Some of these services include bill of exchange, overdraft and cheque collection.

Investment Banks

These banks are also set up to aid the businesses. These banks help the businessmen establish a foothold in the financial markets. Investment banks facilitate those businessmen who require selling debt to the investors or want to go public with their business.

Land Mortgage Banks

Also known as agricultural banks or Land Development banks, these are mainly set up to aid the agricultural sector by financing it. These banks also play an important part in land development. The reason why this special category of banks has come into being is that there is a lot of risk in financing the agricultural sector and the commercial banks that support other businesses are not ready to take such risk.

Co-operative Banks

Co-operative banks provide loans to small-scale farmers, small-scale businesses and salaried people. They provide both commercial and retail services to people. These banks are registered under Co-operative Societies Act, 1912.

Consumer Banks

These banks have exclusively been set up to provide loan for purchasing durable consumer goods such as car, washing machine, refrigerator, furniture, etc. These banks give their consumers the leverage to repay loans in easy instalments. These are mostly found in first world countries.

Industrial Banks

Also known by the name Development Banks, these banks are established to aid the industrial sector. These banks accept cash by issuing shares and debentures. They provide long-term loan to the industries to help them expand and develop. Many such banks have been established in the country post independence.

Exchange Banks

These banks are particularly engaged in financing foreign trade. Some of the main functions of these banks include discounting foreign bills, purchasing and selling silver and gold and providing assistance in carrying out export and import trade.

Banks are established to ease the financial issues of the general public as well as the country as a whole. Different types of banks serve different purposes and have been set up to cater to the needs of various classes.

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Essay on Bank

All of us have seen a bank and most probably have also visited them. But very few of us know about their types and all of their functions. I have brought these essays containing all the details about a bank and will also help you in wiring your essays.

Short and Long Essays on Bank in English

Essay on Bank for students of class 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and class 12 in English in 100, 150, 200, 250, 300, 500 words. Also find short Bank essay 10 lines.

Bank Essay 10 Lines (100 – 150 Words)

1) Banks are the place where people keep their money.

2) Works related to money like loans, transactions, etc are done in banks.

3) In 16 th to 19 th centuries, modern banks came into existence.

4) Banks keep our money, ornaments, important papers, etc safe.

5) The loan facility of banks provides great help to the people.

6) There are many government and private banks in India.

7) In India all the banks are controlled and managed by the Reserve Bank of India (RBI).

8) Banking sector employs a huge population.

9) The first bank of India was the Bank of Calcutta which was later named as State Bank of India.

10) Today internet and technology have made banking easier.

Essay 1 (250 Words) – Bank

Introduction

Banks are the places where we keep our money or do all our money-related work. Either it is getting a loan or something else. This type of place has been addressed as a bank. Although the word has various meanings, all of them mean the same. It is a place where you feel relaxed. When we are in pressure or have to solve some money-related problems we visit a bank.

How Banks Came into Existence

The existence of a bank was seen for the first time in Mesopotamia in 8000 BC. The evidence of bank and temples were seen in this civilization. These banks were not made for lending money because the money came afterword. These banks were made for lending seeds and agricultural stuff. They also used to keep records of trading.

Modern banking came into existence between the 17th to 19th centuries. It is said that Goldsmiths were the first bankers and they use to lend money to people and people use to keep their valuable things near goldsmiths.

The first-ever bank which offered bank noted was the Bank of England. It further developed and today we have well-established banks. We also have ATMs and Credit cards, etc. All these things have made banking easy.

Everything established in this world slowly. Either it was a man or a bank. Things develop and progress as per time. Today things seem so simple to us but they were not so simple and easy years before. A bank is one of the best examples which show development and change in society.

Essay 2 (400 Words) – Bank and Its Importance

Banks are denoted as one of the most important pillars of our economy. People keep their savings in these banks and this helps our nation to progress. Banks help people in various ways; they lend money for different work. Like if you have to buy a house, a car, even a laptop, banks give us money on certain interests and we can easily pay it in different instalments. Apart from this, there are many more uses of a bank.

Importance of Banks

Banks are important and useful in many ways and I have mentioned some of the most important uses below;

Provides Safety

We feel safe when we keep our money in a bank. Not only money people also keep other valuable things in banks like ornaments, important papers, etc. They provide overall security and many of our parents really feel thankful that they can safely keep their money somewhere. It will be not wrong if I say that we sleep peacefully because we have banks to protect us.

Saves our Money

It is a human tendency that if we have money in our pocket, we will definitely spend it. Whereas if they are in a bank, we feel a bit lazy to use and also banks provide interesting profits and sometimes they also double your money in some schemes. This saves our money and we develop a good bank balance.

Develops Employment

There are more than thousands of employees working in a particular bank and there are 34 banks and all of them have more than 3 branches in a particular city. They are also available in villages, really one of the hottest sectors which provide employment. Many of us just love to be a part of a bank because it is a reputed job.

Provides Loan Facilities

It was a time when people use to help each other and families use to do everything for their near and dear ones. But time has changed how people live in nuclear families and they do not have many contacts. People in cities hail from different places as a result they won’t trust. Then who will help you financially, who will trust you and give you some money when you need it. It is a bank which provides loan and helps you financially.

Banks are important parts of our life and have become very necessary for us. We can’t imagine a society without a bank. We can’t trust others, but we can trust a bank and they are our true friends who never ditch us and also protect our money.

Essay 3 (500 – 600 Words) – Types of Banks

We go to school for education, we visit a temple for prayer similarly there is a place where we visit to solve our money-related problems. We save our money, valuable things and also get a loan. A one-stop solution for all types of money related problems. There are many banks in India and some of them are government whereas some of them are private. All of them do the same job and help people in different ways.

The First Bank

Banca Monte dei Paschi di Siena or Berenberg Bank holds the credit of the world’s oldest bank and it was established in the year 1624.

Whereas Bank of Calcutta was the first bank of India established in the year 1806. The name was further changed as Bank of Bengal and also today known as SBI.

Types of Banks:

Banks are of different types some help people in their agricultural problems whereas some help us in our day-to-day problems. I have defined them below;

Central Banks

Banks that are controlled by legislative bodies are central banks. It can be a central bank or reserve bank. We can also state them as the main bank which decides the interest rates as per inflation in the country. They are not only a bank but they also keep an eye on other banks and controls the overall money supply. They also take care of any kind of foreign exchange as well as government bonds. We can call them as the head of all banks.

Commercial Banks

A bank, that is, specially designed for the development of business. They provide loans and some business benefiting offers. They especially support middle to big size business.

Retail Banks

Another name of Retail bank is consumer bank; these banks provide all kinds of facilities to costumers. They won’t lend money to companies or other institutions. People save their money in these banks and they have their easy access to their accounts. They can take or deposit money whenever they want. They provide credit cards, debit cards, ATM facilities, etc to the customer.

Private Banks

Private Banks are also banks having people with personal profits. They provide all facilities like other retail banks just they are not authorized by government agencies. Although the government has an eye on every bank they have very few shares owned by government sectors.

Online Banks

Online banking or internet banking is one of the most convenient forms of banking. They are easily available where ever you want on your fingertips. It is also termed as virtual banking and is a branch of banking. Digital transactions are specially used in this mode of banking and it is most popular these days.

Savings Bank

That bank where we simply deposit our money and they provide us with some interest in our money is saving bank.

Regional Rural Bank

These banks are specially designed for people living in rural areas. They are commercial banks but they are operated at the regional level. They provide all kinds of financial facilities to people living in that area and work for their betterment.

Banks are the basic structures of our economy; they are very helpful in developing a nation. They secure our money and also invest that money in other sectors and generate new income. Really banks are very important and they also help normal people in developing a new business or even buying a house. They have multiple uses and they are available everywhere. We can easily find ATMs and have our money whenever needed.

FAQs: Frequently Asked Questions

Ans . There are 12 public sector banks in India after the merge of smaller banks into larger ones.

Ans . The State Bank of India is the largest public sector bank in India.

Ans . IndusInd Bank, originated in 1994, is the India’s first private bank.

Ans . The ICICI bank is now partnered with PhonePe for UPI transactions.

Ans . The first governor of Reserve Bank of India was Osborne Smith.

Ans . The ICICI bank has recently started the Whatsapp banking services.

Ans . The best bank in India is HDFC bank.

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Essay on Bank

Long and Short Essay on Bank in English

Here are essay on Bank in English of varied lengths to help you with the topic whenever you required.

After going through these Bank essay, your knowledge about banks, their functioning and their usefulness will enhance and you will emerge as a knowledgeable person.

These essays will prove useful in your school or college assignments, especially for students of commerce or banking.

You can select any bank essay of your choice given below:

Bank Essay 1 (200 words)

Bank Essay 2 (300 words)

Introduction

History of Banks

History of Banks in India

There are numerous types of banks in every country to cater to the needs of different customers. They provide various services and aid in the growth of the country’s economy.

Bank Essay 3 (400 words)

Importance of Banks

Banks are important for the individuals as well as the development of the country’s economy. Here is why these institutions are of importance:

Provides Safety and Security

Money kept at home is not safe. It is prone to burglary. When you keep your money in the bank, it is the bank’s responsibility to safeguard it. You do not have to worry about its security.

Encourages Saving Habits

Eases Trade and Commerce

Promotes Agricultural Sector

Aids in Development of Industries

Provides Employment Opportunities

Banks provide loans for the growth and development of the agricultural and industrial sectors. As these sectors expand, a number of employment opportunities are created for the public.

Bank Essay 4 (500 words)

Functions of Banks

The functions of banks have broadly been classified into two categories. These are the primary functions and the secondary functions. Here is a look at these in detail:

Primary Functions

Primary functions are the main functions of the banks. These include accepting deposits and providing loans. Here is a brief look at these functions:

Accepting Deposits

These deposits are basically of four different types:

Current Deposits: This account is especially for the businessmen. These accounts offer facilities such as overdraft that are beneficial for the businesses. No interest is paid in this account.

Fixed Deposits: In a fixed deposit a considerable big amount is deposited in the account for a fixed period of time. The rate of interest is high in such deposits.

Recurring Deposits: A certain amount is deposited at regular intervals in such an account. The rate of interest is high. However, the amount cannot be withdrawn before a certain period.

Providing Loans

Here are the types of loans and advances offered by the banks:

Loans: Loans are offered for both short term and long term period. The rate of interest charged on the same varies based on the type and duration of loan. It can be repaid in instalments.

Cash Credits: The customers have the facility to take cash credit up to a certain amount which is fixed in advanced. A separate cash credit account needs to be maintained for this.

Overdraft: This facility is for businessmen. It is thus provided to the current account holders. They do not require maintaining a separate account to avail this facility.

Secondary Functions

Secondary functions, also known as non-banking functions, are of two types. These are agency functions and general utility functions. Here is a brief look at both these types of functions:

Agency Functions

General Utility Functions

Discounting of bill of exchange is another service provided under this.

Bank Essay 5 (600 words)

Types of Banks

Here are the various types of banks and their functions:

National Banks

Retail Banks

Saving Banks

Commercial Banks

Investment Banks

Land Mortgage Banks

Co-operative Banks

Consumer Banks

Industrial Banks

Exchange Banks

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Essay On Bank

Table of Contents

Short Essay On Bank

A bank is a financial institution that provides various financial services to its customers, including accepting deposits, granting loans, and facilitating transactions. Banks play a critical role in the economy by enabling individuals, businesses, and governments to manage their finances, access credit, and transfer funds securely.

Banks typically make money by borrowing money from depositors at a lower interest rate and then lending it to borrowers at a higher interest rate. This difference in interest rates is known as the “spread” and represents the bank’s profit. In addition, banks often charge fees for other services such as overdraft protection, account maintenance, and wire transfers.

There are different types of banks, including commercial banks, investment banks, savings banks, and central banks. Commercial banks cater to the general public and small businesses and provide a wide range of financial products and services. Investment banks specialize in providing financial advice and underwriting services for large corporations and governments. Savings banks focus on accepting deposits and granting loans to individuals and families. The central bank, such as the Federal Reserve in the United States, is responsible for monetary policy and regulating other banks.

The use of technology has greatly impacted the banking industry, with many banks now offering online and mobile banking services, allowing customers to manage their finances from anywhere, at any time. Banks are also investing in artificial intelligence and machine learning technologies to improve their operations and customer experience.

In conclusion, banks play a crucial role in the financial system and the economy by facilitating transactions and providing access to credit. Technological advancements are transforming the banking industry, making it more convenient and efficient for customers. However, banks are also facing increasing regulatory scrutiny and competition from non-traditional financial institutions, which is leading to a shift in the way banks do business.

Long Essay On Bank

Banks are an integral part of our lives, and the services they provide us with are extremely valuable. In this article, we will explore how banks work, what services they offer, and how technology has changed the banking industry. We will also discuss the impact banks have on our economy and society as a whole. Get ready to dive into an interesting journey through the world of banking!

Introduction to Banking

Banking is an institution that provides financial services to its customers. There are many types of banks, such as commercial banks, investment banks, and central banks. Each type of bank has a different function in the economy.

Commercial banks are the most common type of bank. They accept deposits from customers and make loans to businesses and individuals. Investment banks help companies raise money by issuing new stocks and bonds. Central banks manage a country’s money supply and interest rates.

Banking is regulated by governments to protect consumers from fraud and to ensure the stability of the financial system. Banks must follow certain rules, such as holding a certain amount of money in reserve, in order to operate.

The history of banking can be traced back to ancient times. The first recorded bank was in Mesopotamia in circa 2000 BCE. Banking has evolved over the millennia, with the development of new financial products and services. Today, banking is an essential part of the global economy.

Types of Banks

There are three main types of banks in the United States: commercial banks, investment banks, and savings and loan associations. Each type of bank has a different focus and provides different services to its customers.

Commercial Banks: Commercial banks are the most common type of bank in the United States. They offer a wide range of services to their customers, including checking and savings accounts, loans, and credit cards. Commercial banks are regulated by the federal government.

Investment Banks: Investment banks are less common than commercial banks, but they play an important role in the economy. They provide financing for businesses and help companies raise capital by underwriting stocks and bonds. Investment banks are regulated by the Securities and Exchange Commission (SEC).

Savings and Loan Associations: Savings and loan associations (S&Ls) are financial institutions that specialize in home loans. S&Ls usually offer lower interest rates on home loans than commercial banks. They are regulated by the Federal Deposit Insurance Corporation (FDIC).

Functions of a Bank

A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most jurisdictions. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities.

Banks provide different types of services such as: -deposit taking -safekeeping -lending money -issuing credit – facilitating transactions -foreign exchange services

They also offer other value added services such as: -financial planning -investment advice -wealth management -insurance -asset protection -payment processing -trust services -brokerage services -cash management.

Advantages and Disadvantages of Banking

There are several advantages and disadvantages of banking that should be considered when making the decision to bank with a specific institution. Among the advantages of banking are convenience, safety, and earning interest on deposited funds. Some of the disadvantages of banking include fees, minimum balance requirements, and limited access to deposited funds.

When selecting a bank, it is important to weigh the pros and cons in order to make the best decision for your individual needs. If you value convenience, online banking may be the best option for you. On the other hand, if you are concerned about safety, then a brick-and-mortar bank with physical locations may be a better choice. It is also important to consider whether you are willing to pay fees in exchange for certain benefits, such as higher interest rates on savings accounts.

Ultimately, there is no right or wrong answer when it comes to choosing a bank. It is simply a matter of finding an institution that best meets your needs and preferences.

Regulations in the Banking Sector

In the United States, the banking sector is one of the most heavily regulated industries. Banks are subject to a variety of regulations at the federal, state, and local levels. These regulations are designed to protect consumers, ensure the stability of the financial system, and prevent fraud.

The most important federal regulator for banks is the Federal Reserve System. The Fed is responsible for setting monetary policy, supervising banks, and providing financial services to the government. Other important federal regulators include the Office of the Comptroller of the Currency (OCC), which regulates national banks; the Federal Deposit Insurance Corporation (FDIC), which insures deposits at banks; and the Consumer Financial Protection Bureau (CFPB), which protects consumers from unfair and deceptive practices by banks.

State regulators also play an important role in overseeing banks. Each state has its own banking department that is responsible for licensing and examining banks within that state. In addition, many states have their own deposit insurance programs that provide coverage for deposits above what is offered by the FDIC.

Finally, local governments also regulate banks through zoning laws and other ordinances. For example, a city may require that a certain percentage of a bank’s loans go to low-income borrowers or that a certain amount of money be invested in community development projects.

The Future of Banking

Though the role of banks has changed significantly over the past few centuries, they still play a vital role in the global economy. And while the future of banking may be uncertain, there are a few things we can be sure about.

For one, banks will continue to play a crucial role in facilitating trade and investment. They will also continue to provide financial services to individuals and businesses. However, we can expect that the way banks operate will change drastically in the coming years.

Technological advancements will have a major impact on banking. For example, we can expect that more and more transactions will be carried out online or through mobile devices. This shift away from traditional brick-and-mortar banking is likely to continue as technology makes it easier and more convenient for consumers to conduct their financial affairs remotely.

In addition, we can expect that banks will become increasingly specialized. As the world economy continues to grow and become more complex, banks will need to offer more targeted services to meet the needs of their clients. For instance, we may see the rise of private banks that cater exclusively to wealthy individuals or boutique firms that focus on specific industries or regions.

Finally, we can expect that regulation of the banking industry will change in the years ahead. In response to the global financial crisis of 2008, many countries introduced new laws and regulations designed to make the banking system safer and more stable. We can expect that these changes will continue in the future as policymakers strive to protect consumers and prevent future crises.

In conclusion, banks are a vital part of our economy and can help us achieve financial security. They provide a safe place to store our money and convenient services like online banking that make managing finances easier. Banks also offer loans, investments, insurance policies and other products that are essential for long-term financial planning. By understanding how banks work, we can take advantage of their many benefits and ensure an effective management of our finances.

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Essay on Bank in 100 Words for Students and Children

In This Blog We Will Discuss

Bank: Short Essay in 100 Words for Class 1, 2, 3, 4

The banking system was a revolutionary idea that changed the economical system worldwide. The banking system was started around 2000 BC, but modern banking is not that old. The bank is a really important part of our regular life. It is really easy for any citizen to create a new bank account and store money with security.

There are different types of public and private banks in every country. We should create an account of the trusted banks that has a reputation for a long time. Right now, the online banking system has been started worldwide. It has changed the old traditional money transaction system.

TIPS: This is a very short essay on the bank in 100 words. This essay is only for children from class 1, 2, 3, and 4. They can learn this short essay easily. It is an important topic for the exam.

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Bank - List of Free Essay Examples And Topic Ideas

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What Is A Bank And How Does It Work?

Updated: Mar 31, 2022, 2:59pm

Banks and other financial institutions offer products and services to help you manage your money, but do you know how they work?

If you have a checking account , savings account, credit card, or loan, banks are integral to your financial life. Banks and the financial services industry are an important part of the economy because they provide the means for people to borrow money, make investments, save for the future and handle smaller tasks (like making deposits and paying bills).

Here’s a closer look at banks, how they work and why they matter.

What Is a Bank?

A bank is a financial institution regulated at the federal level, state level or both. The primary role of banks is to take deposits and make loans. But banks can offer a wide range of products and services, including:

Deposit accounts (checking accounts, savings accounts, CDs, money market accounts)
Loans, including mortgage loans, auto loans and personal loans
Credit cards
Check-cashing services
Wealth management services
Business banking

Most banks in the United States are insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC covers deposit accounts, up to specified limits, in the event that a bank fails. The current FDIC coverage limit is $250,000 per depositor, per account ownership type, per financial institution.

There are several types of banks (see Types of Banks below). Here we’re mainly referring to retail banks.

What Is a Financial Institution?

A financial institution is an entity that engages in transactions involving the movement of money or financial assets from one place to another. Examples of financial institutions include:

Credit unions
Savings and loan associations
Small business investment companies
Mortgage lenders
Investment broker-dealers
Credit card companies
Insurance companies

The type of financial institution typically defines the type of activities or financial transactions it engages in. For example, mortgage lenders make home loans while credit card companies extend revolving lines of credit to consumers.

Financial institutions can be subject to regulation by the federal government. Investment broker-dealers, for instance, are regulated by the Securities and Exchange Commission (SEC).

How Banks and the Banking Industry Work

Banks, whether brick-and-mortar institutions or online, manage the flow of money between people and businesses. More specifically, banks offer deposit accounts that are secure places for people to keep their money. Banks use the money in deposit accounts to make loans to other people or businesses.

In return, the bank receives interest payments on those loans from borrowers. Part of that interest is then returned to the original deposit account holder in the form of interest—generally on a savings account, money market account or CD account. Banks primarily make money from the interest on loans and the fees they charge their customers.

These fees can be tied to specific products, such as bank accounts or related to financial services. For example, an investment bank that offers portfolio management to investors can charge a fee for that service. Or, a bank may collect an origination fee when granting a mortgage loan to a homebuyer.

Banking is a highly regulated industry. The Federal Reserve System oversees banks and other financial institutions and coordinates with state regulatory agencies to help ensure banks follow the proper guidelines. Banks are also subject to regulation by other federal agencies, including the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) .

Types of Banks

“Bank” is a broad term that encompasses a number of different financial institutions. Understanding the various types of banks matters as they aren’t all alike in the services or products they provide and the functions they serve. Some are consumer-facing, meaning they directly serve the general public. Others play a more strategic role in the flow of money through the economy. Take a peek under the banking umbrella. You’ll find the following:

Central banks
Retail banks
Commercial banks
Investment banks
Shadow banks

Here’s more on how each type of bank works and what they’re designed to do.

Central Banks

Central banks manage the supply of money for a country or group of countries. These banks are responsible for setting monetary policy, overseeing the movement of currency and establishing interest rate baselines. In short, they’re the backbone of a nation’s banking system.

In the U.S., the Federal Reserve is the central bank. The Federal Reserve System is composed of 12 regional federal banks. The Federal Reserve’s earnings come from interest on securities the bank owns and net earnings are paid to the U.S. Treasury. Banks within the Federal Reserve System perform four specific duties, including:

Supervising and examining state member banks
Lending to depository institutions
Providing key financial services to help manage the nation’s payment system
Examining financial institutions

Those functions are central to how banking works in the U.S. and they make it possible for you to do everything from swiping your debit card when shopping online to getting a mortgage.

Retail Banks

Retail banks are probably what most people think of when they think of banking. These banks offer loans, deposit accounts and other banking services to everyday customers, including small business owners. Retail banks can be brick-and-mortar institutions with branches or online banks that allow you to manage your money exclusively through an app.

Banking services offered by nonbank entities may also fall into this category. For example, a growing crop of fintech startups, also called neobanks , offer deposit accounts just like you’d find at a bank. These companies partner with existing banks to offer FDIC-insured banking products and services, though they’re not banks themselves.

Commercial Banks

Commercial banks typically cater to businesses or corporations, although they can also serve individual banking customers’ needs. Similar to retail banks, commercial banks also can make loans and offer deposit accounts and other banking services such as international banking or payment processing

Commercial banks generally provide a wide range of services. A commercial bank, for example, may grant real estate loans or business equipment loans, charging borrowers interest and fees for the privilege of borrowing money. The same financial institution can offer commercial banking services alongside retail banking services.

Investment Banks

Investment banks can participate in securities trading, manage investor accounts or do a little of both. An investment bank can act as a go-between for investors who want to put money into the markets by helping with the purchase or sale of securities. They also can offer investment advice to clients.

Aside from assisting retail investors, investment banks perform other functions. For example, they can assist with the underwriting process when a company is planning its Initial Public Offering (IPO). An investment bank may also help facilitate mergers and acquisitions on behalf of corporate entities.

Shadow Banks

Shadow banks aren’t like traditional banks regarding what they do or how they’re regulated. These nonbank financial institutions are generally unregulated and primarily focus on making investments in credit and debt instruments. Insurance companies and hedge funds are examples of shadow banking institutions.

Shadow banking and shadow banks played a role in the 2008 financial crisis .

Savings and Loan Associations

Savings and loan associations aren’t strictly banks either. These financial institutions specialize in helping people borrow money to buy or refinance a home they already own. A saving and loan association may also be called a “thrift” because once upon a time, they only offered savings deposit accounts once upon a time.

Rather than being covered by the FDIC, savings and loan associations are typically insured by the Savings Association Insurance Fund (SAIF).

Credit Unions

Credit unions , sometimes called cooperative financial institutions, offer many of the same services as traditional retail banks. The difference is that while retail banks typically operate for profit, credit unions don’t.

Credit unions are formed by “members” who pool their funds together and control the institution. Membership in a credit union is required to open an account. These requirements may be based on geography, employment, religious affiliation or military affiliation. Rather than being FDIC insured, credit unions generally are insured by the National Credit Union Administration (NCUA).

Credit Union vs. Bank

Banks and credit unions both serve the same general purpose: Helping consumers and small businesses to manage their money. They also tend to offer similar banking products, such as:

Checking accounts
Savings accounts
Certificates of deposit (CDs)
Money market accounts (MMAs)
Personal loans and lines of credit
Business bank accounts
Business loans

Where they differ lies largely with how they operate. As mentioned above, banks tend to operate on a for-profit basis while credit unions do not. Credit unions may charge fewer fees to their customers or offer lower interest rates on loans.

Banks and credit unions offer the same level of protection in the event of failure, but different entities insure them. Banks are generally FDIC-insured, while the NCUA insures credit unions. There’s usually no membership requirement with banks to open an account the way there are with credit unions.

Credit Unions	Banks

Types of Bank Accounts

Consumers usually view banks as places to keep money or as places to go to borrow money. The types of accounts you can have with a bank may include:

Money market accounts
Credit card accounts
Mortgage loans
Student loans

Checking Accounts

A checking account is a deposit account that allows you to deposit money, pay bills and make purchases by writing checks or using your debit card. Checking accounts are designed to hold the money you plan to use in the near term. Depending on the bank, you may pay a monthly maintenance fee to own a checking account. Banks can charge other fees as well, including overdraft fees .

Processing transactions is another important job for banks, which goes on behind the scenes with checking accounts. When you swipe your debit card or use your ATM card to make a withdrawal, that transaction has to be approved by your bank before it can be processed. Banks also make it possible to make electronic Automated Clearing House transfers or wire transfers between individuals, businesses and financial institutions.

Savings Accounts

Savings accounts are deposit accounts designed to hold the money you don’t necessarily plan to spend right away. These accounts often pay interest to savers, though some banks may offer higher interest rates than others.

Depending on the bank, you may be able to access money in your savings account at a branch, ATM or online. While the government has suspended the federal regulations limiting you to six withdrawals per month from a savings account, your bank may cap the number of withdrawals you can make. Or, the bank may charge a fee for each withdrawal over six.

Money Market Accounts

Money market accounts typically pay interest like a savings account and provide withdrawal options similar to a checking account. For example, you may be able to write checks, make ATM withdrawals or make purchases using a debit card. Again, though banks can limit the number of withdrawals you can make from savings accounts and money market accounts each month.

A money market account may be a good option for saving money you’ve earmarked to spend later. For example, if you’re saving money toward a down payment on a home, you may choose to keep those funds in a money market account that includes check-writing abilities. When you’re ready to make your down payment, you can simply write a check from that account (or schedule a wire transfer).

Certificates of Deposit

CD accounts are time deposits that pay interest over a set period. Common CD terms typically range from 28 days to 60 months. But it’s possible to find CDs with terms as long as 10 or 20 years. Generally, the longer the term, the higher the interest rate you can earn. Banks can charge a penalty for withdrawing money from a CD before reaching its maturity date.

CDs are better suited for saving money you know you won’t need before the account matures. For example, you might use a CD to save money for a car you plan to buy in the next two years or a wedding that’s 18-months away. They’re less liquid than savings accounts or money market accounts.

How To Choose a Bank

When choosing a bank, it’s important to do your research. Start by looking at the types of products and services offered. Ideally, you want to find a bank that offers the accounts or services you need, whether a checking account, savings account or loan.

Next, consider the interest you can earn on deposits when opening a new savings, CD or money market account. You can also look at whether a bank offers interest on checking balances, though this is less common.

While banks can pay interest to savers, they also can charge them fees. The most common fees you might pay to a bank include:

Monthly maintenance fees
Excess withdrawal fees
Early withdrawal penalties for CD accounts
Overdraft or non-sufficient funds fees
Out-of-network ATM withdrawal fees
Debit card replacement fees
Cashier’s check, certified check and money order fees

You may avoid many of these fees by choosing an online bank over a traditional bank. Online banks tend to have lower overhead costs than brick-and-mortar banks, which means they can pass on those savings to customers in the form of lower fees. For the same reason, you may also find better interest rates on deposit accounts at online banks.

Finally, look at the convenience and service a bank offers. If you’re choosing a brick-and-mortar bank, how many branches does it have? Are they easily accessible to where you live and work? And does the bank offer a user-friendly online and mobile banking experience?

With an online bank, consider whether it has a robust mobile app. Can you access your accounts at an ATM and if so, will you pay a fee? Asking these kinds of questions can help you narrow down the list of banks.

Find The Best Online Banks Of 2024

Bottom line.

When comparing banks, check the range of products and services offered, as well as the fees and interest rates they pay or charge for borrowing money. Also, keep convenience in mind regarding the different ways you can access your money.

Frequently Asked Questions (FAQs)

How do central banks govern the banking industry.

Central banks implement a nation’s monetary industry and control the money supply. For example, when the economy is on the verge of overheating, the central bank may raise interest rates to cool off borrowing and spending. If the economy is sluggish, on the other hand, the central bank may lower rates to boost spending and encourage borrowing.

How do investment banks make money?

Investment banks can make money by charging fees for their services and earning commissions when they sell certain products. For example, an investment company may earn a commission for selling a certain type of mutual fund to investors.

Where is the best place to bank?

The best bank to bank with is the one that offers the products and services that best fit your needs. For example, if you need a checking account with no monthly fees or a savings account that offers a highly competitive APY, you may choose an online bank over a traditional bank. But if you need or prefer branch banking access, you may choose a brick-and-mortar bank instead.

Which type of bank account is best for everyday transactions?

A checking account is designed for everyday financial transactions, including depositing paychecks, paying bills, transferring money and making purchases via a linked debit card. Checking accounts can give you flexibility in managing and accessing your money, though it’s important to find one that offers the best combination of features and low fees.

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Rebecca Lake is a certified educator in personal finance (CEPF) and a banking expert. She's been writing about personal finance since 2014, and her work has appeared in numerous publications online. Beyond banking, her expertise covers credit and debt, student loans, investing, home buying, insurance and small business.

350 Banking Essay Topic Ideas & Examples

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Log Book for Internship With Merrill Lynch Bank As regarding to new skills, I learnt new methods of analyzing companies in the stock market and how to present information gathered to the supervisors/advisors.
The Banking Concept of Education by Paulo Freire This is one of the details that should be taken into account by the readers. This is one of the pitfalls that should be avoided.
The 2008 Banking Crisis in the Documentary “Inside Job” Using the documentary “Inside Job”, the paper presented below asserts that the malpractices of different banking experts, the ethical dilemma revolving around ratings agencies’ actions, and the Gramm-Leach-Bliley and the Glass-Steagall Acts influenced the nature […]
Money and Banking: General Information The essay gives the definition of money and gives a brief description of the functions of money. As a store of value, money can be saved reliably and then retrieved in the future.
Traditional Versus Modern Banking Essay Traditional banking is characterized by the application of strict regulations, while modern banking is differentiated by the introduction of new laws that resulted in the deregulation of key aspects of the banking industry.
The Concept of Usul Fiqh and Qawaid Fiqhiyyah: Shariah and Islamic Banking For such convictions, this essay explores the concept of Usul Fiqh and Qawaid Fiqhiyyah in respect to issues regarding the influence of Shariah on Islamic banking practices Under the Islamic community, Fiqh is a terminology […]
Role of Central Bank If central bank offers credit to the banks at a higher rate, then the rate of interest that commercial banks will offer loans to the public will be high; this reduces the attractiveness of the […]
JPMorgan Chase Bank: Ratio Analysis The ratios are debt-to-equity, the interest coverage ratio, the equity ratio, and the debt-to-asset ratio. For the years 2017, 2018, 2019, and 2020, JPM had a fixed turnover ratio of 7.
Internet Banking Effects and Results Internet banking has certainly played a key role in the increase and ease of banking services the world over and the reasons for this are not difficult to discern.
Wellfleet Bank Case Study Under Group Risk Committee, the company further delegates duties to: reputational, country, operational, group credit, market risk, business risk, and business risk committees.
Ethical Dilemma With the Bank Teller On the other hand, the bank calls for honesty in service and client protection, and given that the teller took the money without permission from an inactive account belonging to a customer it is professionally […]
Personal and Organizational Development in Banking My career plan is as in the figure below: – My career goal is to find a job in a bank and gradually grow through the ranks as I gain financial management related skills and […]
Factors Which Impact Barclays Bank Political factors refer to the government policies that affect businesses and the extent to which the government intervenes in the economy.
Wells Fargo Banking Scandal: Ethical Analysis The structure and the business model of Wells Fargo allowed the emergence of the working environment that incited the employees to unethical behaviors.
Lloyds Banking Group’s Situational Analysis These products the company has diversified in various products and markets in an attempt to grow and increase its share in the market.
Barclays Bank Description Introduction Barclays bank is a UK-based Multinational Corporation headquartered in London and operates in the financial niche. The universal bank was established in 1860 in London as a goldsmith’s lending business offering people loans and saving options. The bank’s resilience in the corporate domain made it navigate all the challenges, and it still operates to […]
Money: Evolution, Functions, and Characteristics It acts as medium of exchange where it is accepted by both buyers and sellers; the buyer gives money to the seller in exchange of commodities.
Islamic Banking The involvement of institutions and government led to the application of theory to practice and resulted in the establishment of the Islamic banks”.
Impact of Cyber Crime on Internet Banking The paper evaluates a con article on ‘The impact of cybercrime on e-banking’ [1]. H2: Identity theft will have a negative impact on the adoption of electronic banking.
Bank of America’s Business Model Elements The organizational structure leverages Bank of America in the following ways. Bank of America has categorized its throughputs into five categories, which are the core products, processes, and services offered.
Analysis of Al Hilal Bank Launch At the time when Al Hilal was launched, the situation in the world financial system was not favorable. It can be concluded that the banking market at the UAE was not favorable at the time […]
Current Problems of the Banking Industry At the rudimental level, dynamism and uncertainty of the technological, economic and political environments have made company’s see the light of flexibility and responsiveness.
Market Elasticity’s in Banking Industry Price elasticity of markets “refers to the degree of change in quantity demanded or supplied of a commodity due to a change in price of the commodity” The formula is: P.E.
Corporate Governance Statements: BHP Billiton and National Australia Bank This is to say that corporate governance requirements differ from company to company and from a broader perspective, the success or failure of a given company differs with the corporate governance statement of the company.
Islamic Banking Sector Issues The key aspects of the Islamic banks in the region are the profit and loss sharing, transparent dealing, lack of interest, lack of speculation and no gambling.
The Lebanese-Canadian Bank’s Money Laundering The bank was later banned from using the dollar by the American treasury; this resulted in the collapse and eventual sale of the bank.L.C.B.had to pay a settlement fine of one hundred and two million […]
IMF and World Bank: A Boon or a Bane for Developing Nations? The amount of interest and other overheads charged on the loans given to the nations in need is simply off the scale.
Ijtihad in Islamic Banking Even though Shariah principles forms the main legal foundation in which most of Islamic banking products and services are based, Ijtihad enables the flexibility of the Shariah principles to suit the changing needs of the […]
RBS Citizen Bank Culture and Change Secondly, RBS citizen should consider involving its employees in the design of new changes within the organization. In accordance to this, the RBS citizen administration team explains to their employees the motive of the changes.
Digital Trends & Sustainability in Banking It would be accurate to refer to banking as the financial hub of the economy because it is a major industry in the service sector.
Time Value of Money: Choosing Bank for Deposit The value of the money is determined by the rate of return that the bank will offer. The future value of the two banks is $20,000 and $22,000 for bank A and bank B respectively.
The Banking Concept of Education In the paper, I agree that knowledge gained through experience and active interaction is the most ideal form of knowledge as opposed to the “banking system” in which students are mere receivers and the teacher […]
Banking Systems Success in Canada and Australia The first reason for this stability is that banks in Canada are more robust and strong in comparison to those, which are in the United States of America.
The Wall Street Crash Impact on the World’s Banking System The Wall Street Crash of 1929 was one of the most impactful events in the financial history of the United States that also influenced the flow of the global banking operations.
The Banking Industry and Interest Rates The government and the central rates have been the major bodies used to determine the interest rates. The main purpose of this study is to determine how the interest rates affect the Competition in the […]
Safaricom’s Mobile Banking When Safaricom launched M-PESA, it commissioned agents in different parts of the country; the agent’s work was primarily to receive deposits from customers and electronically transfer this to the client’s M-PESA account.
Online Banking and Online Purchases The ethical implications of online banking and online shopping include the privacy of consumer information, the reliability of the transactions, and security.
Mobile Banking Innovation In the mobile industry, mobile banking is one of the recent innovations that have influenced the operations of the telephone/mobile phone industry positively.
A Report on Customer Driven Marketing Strategy for Easy-Pay Mobile Banking Service The company seeks to reach 2 million clients in the next two years with a possibility of gaining a comparative advantage against potential competitors due to the fact that it is has the first mover […]
The Employee Benefits Provided by the Bank of America In the process of applying for a job or assessing a certain company, it is crucial to learn about their advantages and unique features. In conclusion, Bank of America features various benefits that provide employees […]
Legal Issues in the Banking Industry The second problem is the complexity of banking operations for foreigners and the low-educated segments of the population. Thus, in banking, employees often face the problems of sexual harassment, complex mechanisms for clients, and digitalization.
Cryptocurrency and Its Impact on the Banking Industry Advanced coding is used to store and transfer cryptocurrency data between the wallet and a public ledger, and encryption is used to confirm transactions.
Overfitting and Bias-Variance Trade-Off in Banking While the training set represents most of the data, the testing set is used to test accuracy by measuring performance separately in the two separate parts of the data set.
The National Bank of Kuwait’s Improvement However, the constant improvement of technology and the introduction of innovations forced the bank to reconsider its policy and introduce a new system.
Ransomware in the US Banking Industry The mismatch can lead to a lack of trust and reputational damages. Data pertaining to the business plans and visions can also be accessed, making it vulnerable.
Tesla Inc.’s Banking Structure and Investments According to Saberi, it represents almost 4% of the world GDP, and, in the context of developed economies, 1% of automotive industry growth triggers respective 1,5% growth in the country’s GDP. Due to the specificity […]
Leadership at Qatar National Bank This paper examines in detail the phenomenon of leadership and its classic types in the light of improving the overall effectiveness of the work team.
Interpersonal Leadership Skills in Bank of America However, it is clear that the issue is not the demographics but the inefficient leadership in the company and the lack of interpersonal skills that would make people want to work at Bank of America.
Big Data Analytics in Central Banking In addition, the rate is integral to the overall cost of living, which parameter is in a cause-and-effect relationship with inflation.
Workplace Inclusivity at International Bank of Commerce Even if employees of color do not ascribe significance to the unequal distribution of power in the bank, the lack of diversity is evident.
Abu Dhabi Commercial Bank PJSC The discussion takes a general overview of the company, its mission and vision statements, strategic goals, and key objectives. The key objectives Abu Dhabi Commercial Bank wants to realize include: Growing transaction volumes and assets […]
Banking System: The Brief Analysis This is a fictional story that comes perilously near to the reality about the basic foundations of modern society. The primary objective of this story is to demonstrate reality’s simple math and the existing banking […]
Bank Pekao S. A.: Performance and Strategy Compared to its peers in Poland, Bank Pekao is uniquely placed as it launched a brokerage house and made practical biometrics technology in the banking industry, contributing heavily to the bank’s assets quality and investment […]
Financial Analysis of Al Ahli Bank of Kuwait Al Ahli Bank of Kuwait’s main competitors include Commercial Bank of Kuwait SAK, Gulf Bank KSCP, Burgan Bank SAK, and the National Bank of Kuwait.
Banking Sector of the United Kingdom At the same time, the banking sector of the United Kingdom had to balance between its financial losses and the ability to provide loans and debt-moratoria in order to support the country’s financial stability. In […]
Case Study of Hong Kong Shanghai Banking Capital From HSBC’s perspective, money laundering represents one of the most significant internal risks due to the worldwide presence, especially in certain economic areas with facilitated financial regulation and considerable economic influence, such as Hong Kong […]
Risk Factors Affecting Bank Nordik’s Operations and Risk Management Control measures adopted by the firm to manage these risk categories are explored in this investigation and the findings used as a justification for the development of a robust risk management plan.
The Albilad Capital Bank’s Mission and Vision Since the bank is striving to renew its mission and vision from the start, it is crucial to identify the values and vectors of direction.
National Australia Bank’s Sustainability Challenges One of the reasons for the success of NAB is the overall strategy of the company, which focuses its capital management on adequacy, efficiency, and flexibility, maintaining the economic balance to support and strengthen the […]
Aspects of Electronic Banking The significance of our study is in the critical issues of e-banking and the areas of improvement that the banks can eliminate or improve to boost customer satisfaction.
Alonzo vs. Chase Manhattan Bank, NA Case Study However, the author provides an insight into the matter by claiming that the policy concerning workplace discrimination took a dramatic turn in the early 1960s upon adoption of the Title VII of the Civil Rights […]
Political Theories and the World Bank Known as ‘power politics’ or means to exercise power World Bank massive financial institution which poorer nations depend on for subsidies Manner of soft power of the richer states contributing to the World Bank […]
Misconduct in Banking, Superannuation and Financial Services The company was included in the Royal Commission report due to ASL and NM releasing the trustee duties of their funds because of the AMP Group membership.
Sexual Harassment in Meritor Savings Bank vs. Vinson Case Mechelle Vinson, a defendant and a former employee of the plaintiff bank, filed a lawsuit against the bank and its bank manager Sidney Taylor. Sidney Taylor was the vice president of the bank and the […]
Considerations in Investment Banking However, to ensure a fruitful outcome, the CFO should choose a qualified and experienced investment banker to represent the facility. Secondly, the selected investment banking firm is expected to act as both a matchmaker and […]
The Impact of Bank on the Cost of Financial Intermediation Also, since the two variables are not controlled; bank concentration and national institutions, the research argues, however, that the measures of concentration capture the efficient structure theory and market power theories.
Bank’s Provided Opportunities to Attract Consumers The offers are the following, to choose the credit card which backs cash when the consumer makes an online purchase, the other option is take the credit card which backs cash when the consumer makes […]
Hongkong and Shanghai Banking Corporation: Approach to Operating in China According to Luthan and Doh, centralization played a significant role in HSBC’s success in the new market. It was also the first company to establish a locally incorporated entity in Taiwan and Vietnam.
Grameen Bank’s Socially Responsible Innovation The bank targets the poor and marginalized with both financial assistance and information to help them grow. The Grameen Bank has continued to register impeccable performance on the social, economic, and environmental dimensions.
A Problem in Implementation of CSR in the U.S. Banking Industry Corporate social responsibility is essential in this age of intense globalization and competition – essential for firms to survive in the competition and also important for firms.
The Bank of America Corporation: Planning & Organizational Analysis The Bank may use environmental adaptation planning activities to enhance external relations with stakeholders such as customers, governments, suppliers and the public.
Digitalization of E-Commerce in Bank of Ireland The interview with the Senior Director in the Property Finance division of Corporate Banking, Michael Murray, revealed the importance of the advance of digitalization for the Bank of Ireland. These and other technologies will enable […]
The 1920 Farrow’s Bank Failure and Its Causes In this context, the company would be resilient to any stresses, and the outcome of the situation may be the opposite.
The Mountain Bank’s Strategy Analysis The most suitable competitive business strategy, in the case of the Mountain Bank is to build the presence in the market of consumer lending and corporate banking.
Banking: Financial Transaction Risks In that case, even the losses-free termination of the transaction would be a failure since the goal of acquisition would remain unachieved.
Bahrain Development Bank: Analysis To identify and develop ways of assessing learning at the working station to facilitate the employees’ skills and competencies. To identify ways of integrating training capability and focus on the organizational processes through skills acquisition […]
ICBC Bank – China: Overview The shifted focus of ICBC’s policy became the major contributor to the growth of the company on the international market and the subsequent cultural changes.
Customers’ Perceptions of M-Banking To find answers pertaining to the major objectives of the study, the gathered data was analysed using SPSS v.23. An exploratory factor analysis was run to group the existing variables into factors, and also to […]
“Attitudes Towards Mobile Banking” Article by Sohail & Al-Jabri In the introduction of the article, much background information, an overall evaluation of the situation in the banking industry, and the purposes of the study are discussed.
The Bank of Toroda: A Stakeholder Approach “Stakeholders are persons, organizations and groups that have to be considered by managers, directors as well as front office workers.”
Corporate Bias in the World Bank Group’s International Centre The institution judges the Pan Rim case neglecting the El Salvador government’s views, local communities, and the Catholic Church. It does not prioritize the protection of the environment and human rights.
Alinma Bank Industry Analysis. Case Study The demand for the services is another essential factor that shows the industry is profitable. The presence of many investors in the country shows that the demand for financial services is high.
Impact of Online Banking on Dubai International Bank DIB has developed t-banking (telephone banking), e-banking (electronic banking) and m-banking (mobile banking) from this trend.
Phishing Victimization on Internet Banking Awareness Therefore, the study is meant to determine and evaluate consumer susceptibility to e-banking victimization through phishing attacks. Subsequently, the study will be designed to evaluate the effectiveness of phishing victimization training to E-banking consumers.
ICT: E-Banking and Firm Performance ICT is concerned with storage, retrieval, manipulation and transmission of digital data. ICT involves software, hardware and systems.
P&G & Royal Bank of Canada’s Securities Valuation The discussion in the paper focuses on the Two-Fund Separation theorem. The discussion also reveals that the asset allocation problem focuses on the allocation of resources between two risky assets.
Governance Failures in Australian Banking Sector Firstly, executive compensation in the Australian banks was not tied to performance outcomes, and, secondly, the major problem in the CEOs’ conduct was related to the field of ethics.
Hongkong and Shanghai Banking Corp and Wells Fargo Speaking of the Income Statement, Wells Fargo wisely divides it into interest income and expense and non-interest income and expense, and this aspect eases the overall calculations of financial ratios.
Noor Bank’s Balance Sheet and Income Statement The bank’s operating income from Islamic banking and sukuk amounted to more than 895 million AED compared to 678 million AED in the previous year.
Banking Institution and Transaction Regulations In the case of Brittany, it is the duty of the bank to authenticate all transactions on her account. In the process of negotiation, most parties often focus on the substance of the deal and […]
Bank of America’s Strengths and Weaknesses Interestingly, even non-banking institutions such as Quicken Loans and Leader Bank have started to claim a share of the market held by Bank of America. The root cause of the Bank’s mortgage troubles emanated from […]
Bank of America’s External Analysis in 2013 Among the major lenders in Massachusetts, for instance, Bank of America was the only bank that recorded a notable decline in the volumes of purchase and refinancing loans relative to other years. Apparently, competition has […]
Sales Portfolio: A Bank Mortgage and Marketers Although a mortgage has several advantages to both the commercial institution and the customer, it has its share of disadvantages. Many clients are reluctant to take up a mortgage because of the high interest rates.
Banking With WikiLeaks If Wiki Leaks has the right to be served by a financial institution, the company must ensure that it does not harm the operations of the institution.
The Essence of the Islamic Banking System Riba of the Quran is called Riba An-Nasiyah and riba of the of Sunnah is called Riba Al Fadl. In the context of Islamic banking system, gharar is excessive uncertainty.
The Pros and Cons of Investment Banking The investment banks are also referred to as proprietors since they are involved in trading of marketable instruments using their own money as opposed to that of investors.
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Bank of China Limited: Overview That said the objective of my effort is to present a report on the Bank of China’s IPO of 2006. This listing was exceptional since it was the only bank of China that had managed […]
Banking Industry: Successes and Failures These banks are regulated by the federal government and are required to be members of the Federal Reserve. However, these banks are not compelled to be members of the Federal Reserve.
Commercial Bank of Australia Ltd vs. Amadio The decision by the court held that the bank manager and the commercial bank were aware of the special disadvantage of the Amadios and made no substantive efforts to ensure that Amadio clearly understood the […]
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Banking and Financial Markets: Asset-Backed-Securities Thus, there are four notable main stages in the process of creating the asset-backed securities and these include: Segregation of assets from originator or seller Creation of a specialized functional vehicle to seize the asset […]
Analyzing and Managing Systematic Risks in Banking Risk assessment is done to ascertain the nature of task before deciding the strategy of responding to it. Analysis and management of risks requires one to identify the nature of the risk involved.
Islamic Banking in Dubai and the UAE In an Islamic environment, the approach to financial operations such as the law of contracts, nature of property, interest rates and business transactions is quite different from the rest of the world.
Deutsch Bank Analysis and Performance Forecast The big bonus for banks came in the form of the Securitization Bill, which gave banks and institutions opportunity to recover from bad debts.
International Banking: New Basel The combination of the four changes in 2004 intended to speed up off-balance sheet mortgage securitization as the main avenue to drive the revenue together with the share price of banks.
Barclays Bank: Management Accounting Report This team assists the management in the gathering of information that is unilaterally used in management accounting to address specific challenges in the bank.
BNP Paribas International Banking Networks In the United States, the bank has a strong presence in the western part of the country, whereas, in Asia, it has fixed a secure and fast-growing business.
Riyadh Bank: The Historical Financial Analysis By the end of the third quarter of the year 2011, the organization has recorded a 15% increase in its net profit.
Budgeting of HSBC Bank UAE Branch Looking at their financial statements one will note that they are quite detailed with lots of financial items, which are specific to the bank, and understanding them requires referral to the notes accompanying the financial […]
Westpac Banking Corporation Analysis and Forecast The entry of foreign banks as well as the building societies which were speedily developing into banks and the emergence of other financial institutions increased competition in the Australian financial market.
The Analysis of Banorte Bank in Mexico The scrutiny of the bank’s fundamentals and variables of the bank form part of the report. Financial analysis and forecast of the bank’s financial performance is the major objective of the report.
Case on Private Equity in Saudi American Bank The problem was that the firm’s investment manager was investing for the first time and therefore, he had many questions to ask before he finally made the decision to invest in the company.
Commercial Banks and the Northern Rock Crisis Bank Roles Prior to the actual analysis of the case of the Northern Rock bank is a brief background that elaborates the scenario of the Northern Rock Bank Crisis.
Bank (HSBC) and Life Insurance Company (Protective) The report also investigates the profitability of the two companies, the metrics used to measure profitability, variation in the last five years and the reasons for these variations.
Investment Banking and Operations Management In a steady market, the bank uses the information conveyed in prices of assets to significantly allocate capital resource to the most profitable and ultimate use.
Investment Banking and Global Operations Management Essentially, banks engage in securitization process to increase their uncertain profit opportunities and also to adjust their asset portfolio Entering into the security markets through the perspective of the original financial institution is of great […]
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Cost Accounting Essay Topics
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Chicago (A-D)
Chicago (N-B)

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Banks: Compilation of Essays on Banks | India | Banking

Here is a compilation of essays on ‘Banks’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Banks’ especially written for college and banking students.

Essay on Banks

Essay Contents:

Essay on the Credit Instruments Used by Banks

Essay # 1. Meaning of Banks:

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Bank is a financial institution that provides banking and other financial services to their customers. It is generally understood as an institution which provides fundamental banking services such as accepting deposits and providing loans. A banking system referred as a system provided by the bank which offers cash management services for customers, reporting the transactions of their accounts and portfolios, throughout the day.

The banking system in India should not only be hassle free but it should be able to meet the new challenges posed by the technology and any other external and internal factors. Before the establishment of banks, the financial activities were handled by money lenders and individuals. At that time the interest rates were very high. Again there were no security of public savings and no uniformity regarding loans.

The bulk of all money transactions today involve the transfer of bank deposits. When a depositor writes a check against his account, his bank must surrender that amount in reserves to the payee’s bank for the check to clear.

Reserves are constantly moving from one bank to another as checks are written and cleared. At the end of the day, some banks will be short of reserves and others long. The supply of reserves changes whenever base money enters or leaves the banking system.

Those who are new to banking or who have lived in other countries where the banking system can’t be trusted might be wondering why they would want to use a bank at all.

It’s certainly possible to operate on a cash-only system, but that isn’t the best idea for several reasons:

(a) Security;

(b) Convenience; and

Essay # 2. History of Bank :

The first regular institution resembling what we call a Bank was established at Venice, nearly seven hundred years ago. The Republic being engaged in war, and falling short of funds, had recourse to a forced loan. The contributors to that loan were allowed an annual interest of four per cent on the sums they had been obliged to lend; certain branches of the public revenue were assigned for the payment of that interest.

The Bank of Venice long remained without a rival; but about the beginning of the fifteenth century, similar institutions were established at Genoa and Barcelona, cities, at that time the pride of Europe, and second only to Venice in extent of trade.

The Bank of England, first chartered in 1694, is the prototype and grand exemplar of all our modern banks; its history, will deserve the more particular attention. The original capital of bank was 1,200-0001 sterling. The original capital of this bank was 1,200,000 sterling. This capital did not consist in money, but in government stock.

The subscribers to the bank had lent the government, the above sum of 1,200,000 at an interest of eight per cent, besides an additional annuity of 4,000 and the privilege of acting as a banking company for the term of twelve years. These hard terms are a pretty clear proof how low was the credit of King William s government in the first years of its establishment.

With the increase of wealth and commerce in Europe, private bankers established themselves in all the principal cities and towns. They received money on deposit; they managed the money affairs of states and individuals; they lent money to such borrowers as could give the necessary security; and they bought and sold bills of exchange, bullion, and coin.

Two banks were established in Scotland by charter from the king; one the Bank of Scotland, in 1695; the other, the Royal Bank of Scotland, in 1727. These two banks have branches in most of the principal towns of Scotland; but as they never obtained any exclusive privileges, a multitude of private banks sprung up to dispute the business with them, and to divide its profits.

ADVERTISEMENTS: (adsbygoogle = window.adsbygoogle || []).push({}); Essay # 3. Types of Banks :

Bank can be classified in various ways on the basis of their functions, ownerships etc.

Some of them are:

i. Central Bank:

Central bank is the apex institution that controls, regulates and supervises the monetary and credit system of the nation. In India Reserve Bank of Indi is the central bank. Guiding principles of the RBI are to operate its most instruments in a way that serves the objectives of economic policy laid down by the Government and Planning Commission. The central bank has the monopoly of issuing notes or paper currency to the public.

Another important function is to act as the banker to the government. The central bank is the lender of the last resort for other banks in difficult times because there is no hope of getting help from any competing institution. The chief function of central bank is to maintain price and economic stability. Another important function is to maintain the exchange rate of the national currency.

ii. Commercial Bank:

It is such bank that performs all types of banking activities and finance for industry and business. They collect savings from people and give loans when needs. They give loans for short term, medium term and long term. Majority of commercial banks in India are in the bank of the public.

Commercial banks are the single most important source of institutional credit in India. Modern commercial banking begins with the setting up of the first Presidency bank, The Bank of Bengal in 1806 in Calcutta. Two other Presidency banks were set up in Bombay and Madras in 1840 and 1894 respectively. They were amalgamated in Imperial bank in 1921.

iii. Exchange Bank:

Such bank deals with the foreign exchange and international trade. They involve international payments through the sale and purchase of bills of exchange and helps for promoting the foreign trade.

iv. Saving Bank:

Such bank plays vital role for improving the savings habits among people. People can easily save money and also get interest and other benefits.

v. Agricultural Bank:

Agricultural bank specially set-up for agriculture development. In India, co-operative institutions and land development banks are more important among those. Farmers needs more credit from scheduled banks so that they not depends on moneylender and others people who exposits them by higher rate of interest.

Essay # 4. Electronic Modes of Payment Used by Banks:

SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. This is a cooperative society, owned by member banks and financial institutions, providing secured telecommunication and one point contact with 8,300 member financial institutions, spread over 209 countries.

The system has built in security system with an automatic authentication of financial messages, through bilateral key exchange (BKE), and is available 24 hours a day and 365 days in a year. The system is cost effective with cost of an average message grossly lower by almost one-fourth than the conventional telex systems.

SWIFT has since introduced new system of authentication of messages between banks, whereby banks are required to have a authentication key exchanged between themselves, through a set format by use of Relationship Management Application (RMA), (also called Swift BIC, i.e. Bank Identifier Code).

ii . Chips :

CHIPS (Clearing House Interbank Payment System), is a major payment system in the USA, operating since 1970. It is a fully automated; computer based messaging and net settlement payment system used by major banks for settlement of a large part of US dollar payments in the USA. CHIPS were established by New York Clearing House, as a substitute to paper checks. Over the period, CHIPS has grown both in volumes, with a membership of 48 currently.

The participating banks use the system throughout the day for sending and receiving electronic payment instructions, which at the end of the day are netted and net payment received/paid by each bank to the clearing house. The net position is then debited or credited to each bank’s account with Federal Reserve.

The system uses CHIP participant codes to identity the participants and UID numbers to identify the beneficiary account. The banks maintaining US dollar Nostro accounts with any of the US based banks are given a specific UID number, which facilitates Straight through Processing (STP) of most of the interbank payments and receipts, through the system.

CHIPS are operative only in New York, and as such, are mainly used for foreign exchange interbank settlements and Euro Dollar settlements.

iii . Fedwire :

This is another US payment system operated by Federal Reserve Bank, operated all over the US states since 1918, and handles majority of domestic payments. It is an automated computer-based messaging and payment system, working on gross settlement basis. All US banks maintain accounts with Federal Reserve Bank, and are allotted an ‘ABA numbers’ to identify the senders and receivers of payments.

As compared to CHIPS, this is a large system, with over 8,000 participants, and handles a large number of payments across USA, covering Interbank transfers out of New York, local borrowings and lending, commercial payments, and also some securities transaction related payments for domestic banks.

iv . Chaps :

Clearing House Automated Payments System (CHAPS), is a British equivalent to CHIPS, handling receipts and payments in LONDON. This system works on the same principles as CHIPS, working on the net payment settlement system. CHAPS is used by a large number of banks in UK, with about 16 member banks and over 400 indirect members, using the system through some large bank.

v . Target :

Trans-European Automated Real-Time Gross Settlement Express Transfer system is a EURO payment system comprising 15 national RTGS systems working in EUROPE. These are interconnected by common procedures and uniform platform for processing high value payments by over 30,000 participating institutions across EUROPE. This facilitates receipts and payments of funds across the Euro zone (all member countries).

vi . RTGS-Plus and EBA :

These are other Euro clearing systems, with RTGS plus, being a German hybrid clearing system and operating as an European-oriented real time gross settlement and payment system. RTGS plus has over 60 participants.

The EBA-EURO 1, with a membership of over 66 banks, in all EU member countries, works as a netting system with focus on cross border Euro payments. For retail payments, EBA has another system, called STEP 1, with around 200 members across EU zone.

STEP 2 is also in use in EU zone, which facilitates straight through processing (STP) to member banks, using industry standards.

vii . RTGS/NEFT in India :

Reserve Bank of India has implemented Real Time Gross Settlement (RTGS) system for the banks in India, where banks can remit funds to other banks through this mechanism. The RTGS system is managed by IDBRT, Hyderabad, which connects all banks to a central server maintained at RBI.

Each bank maintains a pool account with the RBI for inflow and outflow of funds received/paid through RTGS. The bank has to monitor the balances in the account throughout the day, so as to keep it sufficiently funded, to take care of outward remittances. For customer remittances, the minimum amount for RTGS transfers is Rs. 1.00 lac.

This is another funds transfer facility for banks in India, which runs on a batch process method. This is used for small remittances by customers from an account with one bank to another account in another bank. The funds adjustment for NEFT is also done through the pool accounts maintained by individual banks.

Both RTGS and NEFT have facilitated faster funds transfer for bank customers, across the country, leading to a great reduction remittances/payments sent earlier through cheques/drafts.

Essay # 5. Process of Credit Creation by Banks:

We know that it is a primary function of the banks to accept deposits from public keep a certain part of this deposit with them and distribute the rest as loans and advances. If banks don’t distribute the money received as deposits in the form of loans, there will be no credit formation. So Prof. Sayers has said, “Banks are not merely purveyors of money, but also, in an important sense, manufacturers of money.”

Thus it is clear that banks create credit through deposit. The money created by banks is called ‘bank money.’ Now there is a need to highlight how banks create credit.

Credit is created by banks in the following ways:

(1) By Issuing Paper Money:

These days in almost every country, the Central Bank retains the authority of issuing paper notes. In India, too, the Reserve bank of India monopolises the process of issuing paper notes. Banks create credit by issuing bank notes also because, there is no need of maintaining a cent percent metallic reserve for issuing paper notes.

After a certain metallic reserve, the remaining parts of paper notes are issued on the credit and bonds of the central bank. It is worth mentioning here that only the central bank can create credit in this way.

(2) By Primary and Derivative Deposits:

Banks create credit by increasing deposits.

Bank deposits are of two types:

(a) Primary Deposits:

Primary deposits refer to those deposits which are made by the people directly in banks in the forms of cash. There is no role of banks in such deposit. It totally depends on the will of the customers. That is why Lord Keynes has called it Idle or Passive Deposits.

(b) Derivative Deposits:

When somebody applies to the bank for loans and the bank accepts it the whole amount of loan is not issued as cash in one go, but the bank opens a loan account and deposits money in that. Then the borrower is authorised to withdraw it in installments through cheque according to his needs.

This way every loan granted by banks creates deposits, but this deposit is not a cash deposit but a credit deposit. Thus loans create deposits. On the other hand loans given by the banks are on the basis of initial deposits. If banks don’t have initial deposits, they can’t give loans. Thus deposits create loans.

So, Prof. Keynes has said, “Loans are the Children of deposits and deposits are the children of loans.”

The Credit of Derivative Deposits created by banks can be, presented with the help of an example. Suppose a customer named Satyam deposits Rs. 1,000 with bank X. This will be called the initial deposit of bank X. Now suppose bank X keeps 20 percent of this deposit as liquid money and gives Rs. 800 as loans to another customer named Pragati.

In this amount Rs. 800 will be deposited in the account of the customer to whom the loan is being granted and she will have the right of withdrawing money using Cheque. This way this Rs. 800 is the derivative deposit of the bank. Now if Pragati wants to pay some money to somebody, she would issue a cheque in his name.

Suppose, Pragati gives a cheque for Rs. 800 to Aman, Aman deposits that cheque in bank Y. Bank Y also keeps 20 percent as liquid money and the remaining 80 percent i.e. Rs. 640 will be distributed as loans. Similarly Rs. 640 will the initial deposit of any other bank let it be bank Z. This way the sequence would keep going on.

This system of credit creation can be clarified with the help of following table:

(3) Promissory Note:

According to the Section 4 of Indian Negotiable Instrument Act, 1881, “A Promissory Note is an instrument in writing (not being a bank note or a currency note) containing an unconditioned undertaking signed by the marker to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.

In this way it is also a condition free written document like a bill of exchange. The only difference is that the bill of exchange is written by the drawer/creditor and accepted by debtor/drawee which the promissory note is written as well as accepted/promised to pay by the debtor only.

A promissory note has two parties:

(i) Maker/drawer/promisor, and

(ii) Drawee/payee/promisee.

Hundi is such a condition-free document written in one of the vernacular languages in which one person instructs the other to pay a specific amount after the completion of a certain period or on demand. It can be written in different languages, so there is not any definite format. There are various kinds of Hundis.

Some examples are as follows:

(i) Darshani Hundi:

Darshani hundis are like sight bills. They are paid immediately on presentation, sight or demand.

(ii) Muddati Hundi:

The muddati hundi is like a time bill. It becomes payable after a stipulated period from the date of the hundi.

(iii) Dhekhanhar Hundi:

The payment of dhekhanhar hundi can be made to any person who presents the hundi.

(iv) Shahjog Hundi:

Shahjog hundi is that hundi whose payment is made to a reputed person.

(v) Farmanjog Hundi:

The payment of this hundi is made to a person whose name is mentioned in the Hundi.

(vi) Dhanijog Hundi:

The payment of this hundi is made to the person mentioned in the hundi or to somebody else according to his instruction.

(5) Bank Draft:

It is a bill of exchange drawn by a bank on another bank or by itself on its other branch. It is very nearly allied to a cheque but it cannot be easily countermanded like a cheque and it cannot be made payable to bearer. In other words, it is a credit instrument in which the branch of a bank instructs the other branch to pay the specified amount to the person, organisation or institution mentioned in it.

When somebody wishes to send money to other places, he deposits the amount with a branch of a bank and gets a bank draft issued in favour of paying party. Then he sends the draft to the concerned person or place by post. The draft is then carried to the concerned bank and en-cashed there.

(6) Letter of Credit:

Letter of Credit refers to such a document through which a person, institution or bank requests the other person, institution or bank that the person specified in the document should be granted credit up to a certain limit or shares. A certain date is also mentioned in the letter of credit which is the period for which the credit is requested.

(7) Treasury Bills:

Treasury bills are promissory notes issued by the Central Government for a fixed period for raising short term funds. It is issued at a discount. Site period is 3 to 6 months. The Payment is made just after the completion of the period.

Banks: Meaning, Functions and Types | India |Banking
Classification of Banks in India: 2 Types
Credit Instruments of a Bank: 6 Forms | Banking
Deposit Accounts Provided by a Bank: 3 Types | Services | Banking

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Bank: short essay on bank.

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A bank is an institution that accepts deposits of money from the public withdraw-able by cheque and used for lending.

Thus, there are two essential functions which make a financial institution a bank:

(1) Acceptance of chequable deposits (of money) from the public and

(2) Lending.

The former is its unique or most distinctive function.

Three things about deposits are noteworthy:

(i) They are deposits of money and not of goods or non-money financial assets;

(ii) Deposits are accepted from the public at large and not merely from its shareholders or members;

(iii) The deposits are repayable on demand and withdraw-able by cheque, i .e., the deposits are demand deposits.

The second essential function relates to the use of deposits. They are used for lending to others, and not for financing its own business of any kind (say manufacturing or trade).

In fact, as bank (under the Banking Regulation Act, 1949) is not allowed to carry on any such business (other than that of banking). The word lending is used here broadly to include both direct lending to borrowers and indirect lending through investment in open-market securities.

The above discussion implies that neither of the functions alone is sufficient to earn an institution the status of a bank (in the modem sense of the term). Thus, acceptance, of chequable deposits from the public is only a necessary, but not a -sufficient, function of a bank. It must also lend to others. For this reason, Post Office savings banks are not banks in the accepted sense of a bank, even though some of them accept chequable deposits.

The reason they are not banks in the ordinary sense of the term (and are called savings banks) is that they do not perform the other essential function of a bank—that of lending to others. The Post Office savings banks are run as departmental agencies of the Central Government, and all the funds deposited with them are in fact lent to the Government, their owner.

Similarly, lending alone does not make a financial institution a bank. In fact, leaving out Post Office savings banks, all other financial institutions do the work of lending to others. But only those of them are banks that also accept chequable deposits them. All others are non-bank financial institutions. The examples are the LIC, UTI, the IDBI etc.

Banks are said to be department stores of financial services as they render a wide variety of such services to their customers. The range of these services differs from bank to bank, depending mainly on the size and type of banks.

So far we have highlighted only two of them, because, in combination, they are the necessary services which a bank as a bank must perform. They are also the two most important functions of a bank. We sum up briefly below the main services which banks in India generally perform. This should help appreciate the role which banks play in the economic life of the country.

Bank: Meaning and Types of Banks
11 Ways in which a Central Bank is differentiated from a Commercial Bank

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Banking In India Essay | Essay on Banking In India for Students and Children in English

February 14, 2024 by Prasanna

Banking In India Essay: A bank is a financial body that accepts deposits and channels them into lending through loans or capital markets. Banks thus, connect customers with lack of funds 1 and those with extra capital.

“Money plays the largest part in determining the course of history.” -Karl Marx

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Long and Short Essays on Banking In India for Kids and Students in English

Given below are two essays in English for students and children about the topic of ‘Banking In India’ in both long and short form. The first essay is a long essay on Banking In India of 400-500 words. This long essay about Banking In India is suitable for students of class 7, 8, 9 and 10, and also for competitive exam aspirants. The second essay is a short essay on Banking In India of 150-200 words. These are suitable for students and children in class 6 and below.

Long Essay on Banking In India 500 Words in English

Below we have given a long essay on Banking In India of 500 words is helpful for classes 7, 8, 9 and 10 and Competitive Exam Aspirants. This long essay on the topic is suitable for students of class 7 to class 10, and also for competitive exam aspirants.

The word ‘bank’ was borrowed from European languages, literally meaning ‘bench’ or ‘counter’. Banking system evolved in the 14 th century in Italy. By the 18 th century, merchants of London had started storing their gold with goldsmiths who charged a fee and issued receipts. A banker is a person who discharges his duties in the form of operating customer accounts and, paying and collecting cheques.

Banks borrow money by accepting the l money deposited in current accounts, by accepting term deposits and issuing securities on banknotes and bonds. They also create pew capital by giving loans. Banking activities can be for retail, in which the customers and small businesses are involved directly with the bank; for businesses for large corporate houses and for investments.

There are various types of banks such as commercial banks (which are engaged solely in banking activities), investment banks (for capital market activities), cooperative banks (non-profit banks), postal savings banks (associated with postal systems) and private banks (managing the assets of high net worth people).

In India, banking has its origin in the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu Jurist, who laid down rules relating to rates of interest. During the Mughal period, the indigenous bankers played a very important role in lending money and. financing foreign trade and commerce.

The first bank in India, though elemental, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are Early Phase from 1786 to 1969 of commercial banks; Nationalisation of Commercial Banks upto 1991, prior to Indian banking sector reforms and New Phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

The General Bank of India was set-up in the year 1786. The East India Company established the Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, for mostly European shareholders. For the first time exclusively by Indians, Punjab National Bank Ltd was set-up in 1894 with Headquarters at Lahore. During the first phase, the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small.

To streamline the functioning and activities of commercial banks, the Government of India came up with the Banking Companies Act, 1949 which was later changed to Banking Regulation Act, 1949 as per amendment Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. RBI is the Central Bank of the country since 1935. It regulates and controls credit, issues licenses and functions as the banker of all banks and the government.

During those days, public had lesser confidence in banks. As an aftermath, the deposit mobilisation was slow. Instead of banks, the savings bank facility provided by the Postal department was considered comparatively safer. Moreover, funds were largely given to traders. Government took major steps in the Indian Banking Sector Reforms after Independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale, especially in rural and semi-urban areas. It formed the State Bank of India, to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country.

It was on the efforts of the then Prime Minister of India, Mrs Indira Gandhi that 14 major commercial banks in the country were nationalised in 1960’s. The second phase of nationalisation, with Indian Banking Sector Reforms, was carried out in 1980 with the nationalisation of seven more banks. This step brought 80% of the banking segment in India under government ownership. After the nationalisation of banks, the branches of the public sector banks in India rose to approximately 800% in deposits and advances took a huge jump by 11000%.

Banking in the support of government ownership, gave the public implicit faith and immense confidence about the sustainability of these institutions. The third phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set-up to suggest measures for banking sector reforms. Today, the country is flooded with foreign banks and their ATM stations. Efforts are being put in to give a satisfactory service to customers. Phone banking and net banking have been introduced. The entire system has become more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by external macroeconomics shock, unlike other East Asian Countries that had to suffer. This is largely due to flexible exchange rate regime, high foreign exchange reserves and reforms in the capital markets and banks. Presently, in India, the banking sector is segregated as public or private sector banks, cooperative banks and regional rural banks. Bouquet of services are available at the customer’s demand in today’s banking system. Different types of accounts and loans, have been facilitated with the advent of plastic money and money transfer across the globe. The last decade experienced a complete change in the financial and banking sector. The capital and financial markets, banking and non-banking institutions and financial instruments were redressed towards development.

Short Essay on Banking In India 350 Words in English

Below we have given a short essay on Banking In India is for Classes 1, 2, 3, 4, 5, and 6. This short essay on the topic is suitable for students of class 6 and below.

Industrial Development Bank of India (IDBI) is the tenth largest bank in the world in terms of development. With the advancement of technology, banking sector has become easier, faster, accurate and also timesaving. ATMs, Mobile Banking, SMS Banking and Net Banking are only the tips of an iceberg.

The enhanced role of the banking sector in the Indian economy, the increasing levels of deregulation along with the ascending levels of competition have facilitated globalisation of the Indian banking system and placed numerous demands on banks. Operating in this demanding environment has exposed them to various challenges. The last decade has witnessed major changes in the financial sector new banks, new financial institutions, new instruments, new windows, and new opportunities and along with all this, new challenges.

While deregulation has opened up new vistas for banks to augment revenues, it has entailed greater competition and consequently greater risks. Demand for new products, particularly derivatives, requires banks to diversify their product mix and also affect rapid changes in their processes and operations in order to remain competitive in the globalised environment.

Developing countries like India have a huge population. Banking must reach out to people even in the remote fragmented locations. Banks are also suffering from diminishing employee satisfaction. Losing out on potential and valuable customer base would be one of the consequences. Top level executives and human resource departments of various banks need to spend time and effort towards retention of their key employees. Banks have also come under the scanner recently, due to various scams and malpractices. The arrest of the Chairman of Syndicate Bank is the latest case in sight.

The banking sector also introduced the All-Women’s Bank, known as Bhartiya Mahila Bank, in New Delhi. It was inaugurated by the then PM Manmohan Singh on 19 th November, 2013, to commemorate the 94 th birthday of Indira Gandhi. India will be the third nation after Pakistan and Tanzaniya, to have a bank dedicated to women. The bank will offer concession on loan rates to women. It would also motivate people interested in entrepreneurship to locally train women in vocational skills. The other goal is to promote ownership of assets among women customers, as assets serve as a back-up in cases of domestic violence.

However, the present governor of RBI, Raghuram Rajan has assured that this case shouldn’t be extrapolated to the entire system. Banks shouldn’t be just money-lending institutions, they should be ‘banks with a conscience’.

Banking In India Essay Word Meanings for Simple Understanding

channel – a course into which something may be directed
Retail – the sale of goods to ultimate consumers, usually in small quantities
Indigenous – originating in and characteristic of a particular region or country
Segregated – to separate or set apart from others or from the main body or group
Distinct – different in nature or quality, dissimilar
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Synctech Learn: Helping Students in, Nibandh,10 lines essays

10 lines on Bank in English - Short essay on Bank - Few lines about Bank

Today, we are sharing Ten Lines on Bank in English . This article is generally useful for students of class 1, class 2, and class 3 .

10 Lines On Bank In English

The bank is an institution where the money is transacted.
We deposit money in the bank.
And when needed it can be withdrawn.
Some banks are governmental and some are private.
There should be an account in the bank to make money transactions.
After opening an account in the bank, we get an account number.
With the help of the same account number, we can manage the money in the bank.
With the help of the bank, we can send money to anyone.
ATM Card is given to us by the bank.
Through this card, we can withdraw money from the ATM machine at any time.

10 Lines On Environment in English - Short Essay on Environment

5 Lines On Bank In English for kids

Banks are establishments that safeguard our finances.
They provide services like savings accounts, loans, and credit cards.
Banks help in the growth of a nation’s economy by providing loans for businesses.
They also offer services for money transfer, both domestically and internationally.
Banks are pivotal in upholding the financial equilibrium of a nation.

FAQ - Bank ( English )

Q. what is a bank.

Ans: A bank is a financial institution that keeps our money safe and provides various financial services.

Q. What services do banks provide?

Ans: Banks provide services like savings accounts, loans, credit cards, and money transfer services.

Q. How do banks help businesses?

Ans: Banks support businesses by providing them with loans for their growth and expansion.

Q. What is a bank loan?

Ans: A bank loan is a sum of money lent by the bank to individuals or businesses, which needs to be repaid with interest over a specified period.

Q. Why are banks important for a country?

Ans: Banks play a crucial role in a country as they help maintain financial stability and contribute to the growth of the nation’s economy.

We hope you liked this article about "10 Lines on Bank in English". Please share it with your friends.

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Essay on Bank | Bank Essay for Students and Children in English

Essay on Bank: Banks are financial institutions that provide a loan or save customer’s money. The term ‘Bank’ is derived from the word ‘Banc’ or ‘Banque,’ which means a bench upon which the ancient day financiers would display their coins or transact their business in the market space.

Banks are an elemental part of society. Banks are located in different parts of the country and deal directly with the general public. They provide multiple services on customer-based requirements and provide lockers, ATM Services, money transfer, loans for houses and businesses, and several other monetary services.

Thus, Bank (s)provides primary monetary services that boost the economic development of the country.

You can read more Essay Writing about articles, events, people, sports, technology many more.

Long and Short Essay on Bank for Students and Kids in English

We have mentioned two essays- a 500 words Long Essay and a 200 words Short Essay. The extended essay on Bank consists of 400-500 words. The Long essay provides a framework that helps students with their competitive exams and assignments. The short essay on Bank is written for 200 words and is suitable for children and kids with their classwork.

Long Essay On Bank 500 Words in English

Given below is an extended essay on Bank for aspirants of competitive exam and students belonging to classes 6,7,8,9, and 10. The Bank essay helps students with their class assignments, comprehension tasks, and even for competitive examinations.

A bank is a licensed monetary institution to make loans and receive or deposit money. It provides financial services such as safe deposit boxes, wealth management, and currency exchange.

The inception of a Bank/Banking system in India goes back to the Vedic civilization. Loans were given to those in need and were then known to be the name ‘rnalekhya or rnapatra.’ As time evolved, Big merchants and business people started bidding interests on loans to farmers and small traders and the unpayable assets were confiscated.

The first Bank established in India was the Bank of Hindustan at Calcutta in the year 1770. This was followed the start of other banks such as Bank of Calcutta, Bank of Madras, and Bank of Bombay in the early 19th century.

Classifications of a Bank

Commercial Bank: Theses may be government-owned or a private bank. There are 20 major commercial banks
Industrial or Investment Banks: These banks provide long-term loans or other features to any industrial concerns.
Exchange Banks: These banks deal with the foreign exchange of currencies. A few Indian commercial banks also handle foreign currency exchange deals.
Co-operative Banks: These are set-up regarding small-scale industries and farmer’s concern. Co-operative banks are subcategorized as Central Co-operative Banks and State Co-operative Banks.
Land Mortage Banks: These banks provide loan-term debentures to agriculturalists and farmers.
Central banks: This Bank occupies the central position in the country and is the financial market’s statutory body.
Saving Banks : these banks promote savings scheme among the middle-class families. However, the savings accounts are monitored by the commercial banks in India.
Indigenous banks: These lend money and finance the country’s internal trade.
Regional Rural Banks: Theses banks are set-up by the central government for the economic development of rural regions. The commercial banks sponsor these banks.

Functions of a Bank

The essential function of a bank is to receive deposits. Theses deposits are received as fixed deposits- which have a limited time frame, current deposits- require no interests and are framed mainly for business people and savings bank deposits to encourage savings with a 5 percent interest rate.

Another primary function of a bank is to lend money through cash credits or loans, overdrafts, or discounting bills. The banks usually charge a higher interest rate while giving money.

The banks also perform various agency functions that provide services such as remitting funds, sell and purchase shares and bonds, collect and paycheck bills, subscriptions, rents, etc.

Importance of a Bank

A bank helps people cultivate the habit of saving and provides safe custody. It collects bills, drafts, cheques, and grants credit facilities and loans to people. It facilitates making payments and secures the overdrafts and loans.

A bank also provides safe custody of valuables such as deeds, ornaments, documents, jewels, etc. It also sells and purchases stocks, shares, etc. A bank is essential as it provides Credit information and a Letter of Credit and acts as representatives and makes correspondence.

Top 10 Indian Banks

Bank of Baroda
Punjab National Bank
Canara Bank
Bank of India

Thus, a bank forms an integral part of society and is a critical factor that boosts economic development in the country.

Short Essay on Bank 200 Words in English

The 200 words short essay mentioned below is suitable for kids and children up to 6th standard. The essay is written to guide the children with their school works-assignments and comprehension exercises.

A bank is a financial institution that provides funds based on credits to firms or individuals and accepts money deposits from the general public. A bank offers various functions such as transfer of funds, issuance of drafts, locker facility, portfolio management, etc. The first established Indian Bank is the Bank of Hindustan, located at Calcutta in 1770.

There are different types of functioning banks, such as Retail banks, national banks, investment banks, savings banks, co-operative banks, commercial banks, land mortgage banks, exchange banks, industrial banks, and consumer banks.

A bank provides multiple functions such as eases trade and commerce, promote agricultural sectors, ensure safe deposits, aids industrial developments, provides employment, and encourages saving habits.

A bank plays a vital role in the economic development of a country as it removes the deficiency of capital and encourages investment and savings. It resembles all the savings of society and makes it available for investment.

There are a total of 34 functioning banks in India; out of 12 banks are public sector banks, and the remaining 22 banks are private sector banks. The Top ten banks include

In short, Indian banks play an essential role in boosting the economic development of a country. It mobilizes the financial resources and flow of money in a society.

10 Lines on Bank Essay

Banks are government-certified financial institutions that lend or receive money deposits.
The Bank of Hindustan was the first Bank to be established in 1770 at Calcutta, while the State Bank of India, established in 1906, is the oldest functioning Bank.
Banks provide long and short-term loans to individuals and corporate firms.
The Reserve Bank of India is a central monetary that controls and regulates the entire banking system- circulation of currency and credit.
India comprises 34 functioning banks, out of which 12 are public sector banks, and the remaining 22 are private sector banks.
There are multiple divisions in banks. However, the two primary classifications of a bank are Investment Banks and Commercial/Retail Banks.
The primary purpose of a bank is to provide consumers with ease of financial issues.
A bank plays a significant role in the economic development of a country. It aids in the removal of the deficiency of capital and encourages investment and savings.
A bank also performs other services such as remitting funds, sell and purchase shares and bonds, collect and paycheck bills, subscriptions, rents, etc.
The Bank acts as the lifeline of any economy and is significant for the development of a country.

FAQ’ On Bank Essay

Question 1. State the significant functions of a bank?

Answer: A bank’s primary function includes cash credits, overdrafts, discounting bills, granting loans, and accepting deposits. While their secondary duties include providing consumer finance, safe deposit for valuables, issues letter of credit, educational loans, etc.

Question 2. Which is the first Indian Bank?

Answer: The first Bank to be established in India was the Bank of Hindustan in 1770 at Calcutta.

Question 3. State the various types of banks?

Answer: A bank is classified as national banks, investment banks, retail banks, savings banks, industrial banks, co-operative banks, commercial banks, exchange banks, consumer banks, and land mortgage banks.

Question 4. Name the top ten Indian banks?

Answer: HDFC Bank, Axis Bank, IDFC Bank, SBI, Bank of Baroda, Punjab National Bank, ICICI Bank, Canara Bank, IDBI Bank, and Bank of India.

The changing landscape for banks

The past year and a half has been profitable for the global banking industry. But even though the industry has had its best period since 2007, banks still need to acknowledge recent structural and macroeconomic shifts and look for ways to evolve with markets. On this episode of The McKinsey Podcast , McKinsey senior partner Alex Edlich and partner Reinhard Höll join editorial director Roberta Fusaro to discuss the findings of McKinsey’s Global Banking Annual Review . They outline the new challenges banks are facing and suggest how leaders can address those challenges.

This transcript has been edited for clarity and length.

The McKinsey Podcast is hosted by Roberta Fusaro and Lucia Rahilly.

A time of reckoning

Roberta Fusaro: Take a look at the balance sheet in any global bank today, and it will probably look different—lighter—than it did ten years ago. Here’s McKinsey senior partner Alex Edlich on one of the biggest takeaways from McKinsey’s annual banking report, The Great Banking Transition .

Alex Edlich: There are $402 trillion in assets that exist in the global financial system. More than half of that is not on bank balance sheets. Over the past decade, 75 percent of the net increases have gone into mutual funds, insurance balance sheets, pension funds, sovereign wealth funds, and private capital.

Roberta Fusaro: Partner Reinhard Höll agrees and says that while the balance sheet has eroded, interest rates have risen over the past 15 years. Those rising interest rates boosted net interest margins, which in turn boosted the sector’s profits by about $280 billion in 2022. Another big change? Technology.

Reinhard Höll: In the past, whenever we talked about technological change, it was always about big programs, about cloud, about core banking migration systems. Now we’re talking about gen AI [generative AI] and stuff you can implement pretty quickly.

Roberta Fusaro: What’s clear is that financial institutions are in a reckoning. They are having to reinvent themselves in the face of some major structural and macroeconomic shifts.

This is The McKinsey Podcast , where we help you make sense of the world’s toughest business challenges. I’m your host for today, Roberta Fusaro.

Banks in transition

Roberta Fusaro: If I’m a leader in a traditional bank right now, what are some of the challenges I’m facing?

Alex Edlich: Here are a couple of examples. Consumer digital-payments processing conducted by payment specialists grew more than 50 percent in the past few years. In payments, the shift to contactless digital payments is accelerating.

In addition, the demand for embedded finance, offered through checkouts on websites or apps, is also growing. Capital markets, investment banks, and broker-dealers are gaining market share from traditional banks in various products, whether that’s in equity or capital markets.

Distribution is also increasingly moving from omnichannel to fully mobile channels. Banks need to operate differently in those environments. Their clients want different services. Their lenders want different loan durations, and sometimes insurance companies are better able to match the durations.

It is critical to think about, “How are we selling directly to customers or indirectly to customers? What are the technology platforms that we need to have to make our products and services more seamless?” In many countries, apps, mobile phones, and the web have fundamentally changed how consumers interact with their financial institutions.

They are searching, shopping, and sometimes even transacting on their apps. This creates a different role for a financial-services institution. How do banks respond to that? How do they move further upstream? How do they meet the clients where they need to be met?

Roberta Fusaro: Reinhard, can you build on that? What kinds of changes are we seeing in banking distribution?

Reinhard Höll: We’ve seen two things. The first is that a lot of the distribution is not advisory driven, but it can be digitized quickly and done at scale. This means banks should always try to get the advisory angle in there or be really, really good in nonadvisory-driven distribution.

Second, some of our estimates indicate that we will see up to 30 percent of distribution in retail banking going via third parties. This could be an online comparison platform. This could be embedded finance. This could be all kinds of things. This can happen with the banks, or against the banks where you still only provide the service, but someone else effectively has customer access. Banks need to think very clearly about how they want to position themselves. For that, some of the answer may be, “Well, we provide the service at scale, and we’re still going to have a healthy economic return.”

The risk factors

Roberta Fusaro: What kinds of risks are banks facing now in the midst of this “great transition”?

Alex Edlich: The changes in interest rates and in the wide dispersion of economic outcomes and forecasts are extremely large. Financial institutions and banks need to up their game to the next level in order to meet these changing risks, such as new regulatory requirements, the macro context, and risks associated with technology and cyber.

Reinhard Höll: It’s probably one of the toughest questions we’re asking in the report. If we look forward, you have the traditional banking risk, like credit risk, market risk, and liquidity risk. And it’s still at the forefront of everyone’s mind, given the macroeconomic outlook, given geopolitical instability.

But you actually have to go further. On the one hand, you see under the great header of technology risk, cyber risk and fraud risk. We are seeing broader APIs, and APIs in a sense that we have broader connectivity to other players, your customers, which introduced potential additional risks. Sometimes the risk may not actually come out of your organization, but it may actually be coming from partners.

Look at retail distribution, for instance, which is done with partners and through partners. The financial institution only provides the underlying service, but you need to make sure the partners still comply with regulations, so they won’t shine a bad light on you as a banking institution.

Roberta Fusaro: What can banks do differently to mitigate the risk?

Reinhard Höll: Three things spring to mind. The first is technology—for example, instant payments. Any payment can happen within a couple of seconds. If you want to look out for fraud risk, you’ll want to look out for KYC [know your customer] risk.

The second is making sure that risk is not thought about in silos but rather across the different environments. Also, making sure we think not just about compliance but how it fits together with the underlying factors that drive fraud. This can make a huge difference. Last but not least is making sure that you have the proper risk culture and risk compliance culture in the background. We have consistently seen that risk culture is one of the strongest determinants of how well an institution—whether it’s a traditional bank, a payment company, or a stock exchange—can steer through all the difficulties. The reality is that banking institutions are ultimately in the business of taking risks. That will hopefully never change. To manage them correctly, it’s a combination of technology, culture, and everything in between.

Roberta Fusaro: Reinhard, what do you mean by risk culture?

Reinhard Höll: Risk culture is really a combination of the underlying mindset and the risk practices. We often think about it as something that cuts across a number of dimensions: How well do you understand risk? What’s your transparency on risk? How much do you acknowledge those risks? And there’s a third element, which is responsiveness: What level of care and what speed should I apply, particularly to some of the faster-moving kinds of risk?

Banking across geographies

Roberta Fusaro: This was a global study. Alex, what differences did you see across geographies?

Alex Edlich: Between 2015 and 2022, the changes in total assets that went off the banking balance sheet in North America was 79 percent. It was 77 percent in Europe. But for China, it was only 34 percent. In the rest of Asia–Pacific, except for China, it was 51 percent. In Latin America, it was 40 percent.

This is a global phenomenon: in every geography, except for Latin America and China, the share that’s going off the banking balance sheet is more than 50 percent. One of the really important things is what we see in the Indo-Crescent region.

Reinhard Höll: This region, which starts in East Africa and stretches to the Middle East, India, ASEAN [Association of Southeast Asian Nations] countries, and Australia, had the majority of the best-performing banks on the planet. This is the first time in history we’re seeing this for this region.

If we cut up the top financial institutions by market cap, 28 percent of those institutions are in the Indo-Crescent region. There is a huge middle class rising in India, and the country is opening up to cross-border payments. You have ASEAN, where we see a big, broad-based SME [small and medium-size enterprise] industry base accessing more finance. You see wealth management taking off in the Middle East, and you’re seeing an increasingly interconnected East Africa. So a lot is happening.

Embracing technology

Roberta Fusaro: Lots of opportunities are emerging in ASEAN countries and elsewhere in the world. But you know technology is another big opportunity—it’s actually a key area of focus in the report. Alex, what should banks be doing with their technology?

Alex Edlich: From a technology and AI standpoint, it is so critical to continue to boost productivity. We’ve seen the improvements that financial institutions have made over the past decade, particularly banks, in improving their cost-income ratios, improving their cost per asset to serve.

Financial institutions should ask themselves, “How can we continue to exploit technology, advanced analytics, and AI to leverage our talent better, to improve the quality and delivery of our products and services, to better meet clients where they want to be met and how they want to be serviced?”

We believe it’s not only an opportunity to improve client service and customer experience, but it’s also a way for them to continue to innovate the products and services that lenders and other banks and financial-services customers can get from them.

Roberta Fusaro: What do banks have to do to compete on technology? What’s changed there?

Reinhard Höll: A couple of things have changed. We should not forget that banks were one of the earliest adopters of technology back in the 1980s. That said, a lot of them are still stuck in the 80s.

The report highlights that of the best-performing banks in Europe, the top ten invest, on average, two and a half times more into technology than the bottom ten. So there’s a big difference in terms of investment. At the moment, profits are up, meaning investment possibilities are up.

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There has also been a step change in technology. It’s not just about your core banking system but generative AI in particular. Gen AI allows better and simpler customer interactions. It allows banks to use all the soft information/data they have, be it in operations, be it because of customer interviews, or be it in terms of monitoring software. They can leverage that data, which at the moment requires lots and lots of manual intervention, and use it to their advantage.

The third element is really about how the barriers to entry have gone down, especially with gen AI. For instance, digitally interacting with your customers and not having just a chatbot, which can drive you insane when you interact with it. It’s really more about providing the right tonality, providing services, and helping your call-center agents. Often, the banks that implement technological improvements have a quick turnaround. By exploiting new technology, banks will boost productivity within six, eight, 12 weeks. This is a massive change from what we have seen in the past.

Roberta Fusaro: For the banks that are further along on this technology journey, what are they doing differently? How are they making decisions differently?

Reinhard Höll: A multitude of answers springs to mind, but I would probably highlight three things. One is having a very clear strategy about where technology is a distinctive advantage for banks and where it’s maybe more of a hygiene factor. They need to tack along and have a clear idea of where to invest.

Second is making sure to take the organization along. An example of this, which we have seen when we implemented gen AI at one particular client of ours, is an increase in coders’ productivity. For the top 25 percent of banks, the increase was massive. For the bottom 25 percent of banks, we actually saw an initial decrease because they didn’t take the people along.

Third is aligning the technology with the local regulatory regime, with what their customers actually need, and making sure that it’s a fitting end-to-end package. It’s not just about fixing something for the short-term results. It’s about taking a little bit of a longer view on technology and implementing all the necessary things. Be it agile, be it cloud, be it gen AI, or be it the analytics behind it.

Why it isn’t business as usual

Roberta Fusaro: In the report, we talk about the need for banks to scale or exit existing businesses as part of this transition. Does this present new challenges for banks? Because it feels like banks typically do acquire and divest assets fairly normally. What’s different here?

Reinhard Höll: So we highlight this particularly for transactions because that tends to be the most cross-border and international part of it. When we talk about scaling or exiting, it means a few things. One, it means thinking clearly about where you are and if you are big enough to provide transactions locally. If you are you too small to provide those transactions at scale and find a partner, then exiting might be the answer.

Or is it a mixture that is in-between, which then means partnering? So the answer to a given illustration could be if you’re a medium-size institution in the US and you still do everything about security services and capital markets yourself. If this is a scale-driven business, we would have to ask the question, “Is this something someone else could do better for you?”

If you ask that same question to a bank in Slovenia, the answer might be that that bank is the only one that’s offering transactions locally. So the question of scale affects this bank differently, and the bank may need to invest and scale up further to get the best products and services for its customers.

Also, there’s another interesting element. Banks do acquire and divest assets. Historically, they have done so. But in the past 15 years after the financial crisis, we’ve seen much less of that. And what we suspect in many respects is that we’re going to see somewhat of a pickup in activity.

The record profits also need to go somewhere. You can invest them into your franchise. You can give them back to shareholders or other stakeholders. Or you can think more about M&A. And sometimes the answer is, particularly in the richer ecosystem of fintechs, that you may acquire smaller stakes in quite a few of the fintechs and build a partnership network around you without necessarily owning all of them.

A new approach to the balance sheet

Roberta Fusaro: This talk about acquisitions is making me think about the balance sheet, Alex. How should traditional players think about these recent changes to the balance sheet?

Alex Edlich: From a balance sheet standpoint, we do think that there is an ability to flex and to sometimes even unbundle their balance sheet. Whether that means figuring out which are the assets that need to remain on their bank balance sheet, or actually better syndicated to others, or originate to distribute to other institutions that are better able to hold, who have better cost to funding, or better duration, or better liabilities to match those assets—that would be one thing that they could do.

They should think exceptionally hard about which are the products, clients, geographies, services that do require a balance sheet and that the banks are best off serving. Not everybody can be served by a bank when you have a constrained balance sheet. But in this environment, which does have great tailwinds for banks with higher interest rates and greater spreads, there’s a question of what do you do with your balance sheet now that it’s earning more money than it was in a very low interest rate environment?

Roberta Fusaro: Reinhard, anything to add here?

Reinhard Höll: So the background to this is that 70 percent of the net increase of financial stock happens off balance sheet. What does it mean? Overall, we see that the global source of financial funds in 2022 was $326 trillion—a huge number.

Of that, about 37 percent or $120 trillion were funded off the bank’s balance sheet, meaning there were deposits in the background of banks’ liability. Everything else ultimately got funded either by retail investors, for instance, through the stock market, through institutional investors, pension funds, private equity, private debt, or sovereign wealth funds.

If you look at the relative change from 2015 and 2022, the numbers are even starker. Seventy-three percent got funded off balance sheet. For banks, this has three opportunities. It means you can do business that you ordinarily couldn’t do. My normal example is, if you were to build an offshore wind farm and finance it, be it in the North Sea on the Eastern seaboard or somewhere off Japan, it’s very difficult to finance via the bank’s balance sheet. You could find a third-party provider, let’s say a pension fund, and the bank could help syndicate it and actually set it up. Many institutions at the moment don’t do it as much as they probably would want to do, and they can do even more of it.

The second thing is that, in terms of managing your own balance sheet, it allows you to back out some stuff and say, “Well, we can actually do additional business and get some risk diversification into the whole thing.” That means a bank, which may be heavily focused on mortgages, finds a partner institution or fund or whatever to take on some of the risk, which allows the institution to take on additional risk, maybe even of the same kind.

There is a third element for traditional banks, and everyone else as well, which is they could go to other institutions and actually onboard some of someone else’s credit exposure. They would generate returns.

Last, what do we mean by a traditional bank? A traditional bank for us is a bank that holds deposits and actually gives out credit facilities. But in theory, it’s always worth remembering that many people can directly hold assets themselves, and any of us who invest in stocks or ETFs [exchange-traded funds] are ultimately doing exactly that.

Making change happen

Roberta Fusaro: For any bank, whether it’s a traditional bank or not so traditional, how hard or how easy is it to change course, and what kinds of conversations do you need to have inside the organization to make things happen?

Reinhard Höll: It’s a very complex issue for some of the institutions. It often starts with the way you think about risk. Just because you may be able to use other partners for handling risk doesn’t mean you’d lose all the responsibility for it. The traditional example is the financial crisis. Part of the reason for the financial crisis was that we just offloaded risks to someone else and then it was kind of forgotten and we ran into trouble later on.

Also, the way you interact with partners, particularly the financing partners, needs to be much more up to scale.

We have always seen syndications within the industry. So for very large loans, a bank would syndicate something to do to bigger institutional investors, which is a relatively manual process. The process has become more digital over the past couple of years. But as we move to a more broad basis, in order to become effective, banks need to become more automated and digital.

The most extreme example is when we say there’s a supply chain financing where you have lots of letters of credit going through with a very short duration, and that it just needs to run automatically. So your risk assessment tools need to be up to scratch. Your APIs to communicate with partners need to be up to scratch. But you also need to have very strong SLAs with your partners to do that.

The third thing is to really make sure you approach both your partners and your risk protocols not just from a culture angle but also from a commercial go-to-market strategy. That you recognize that it’s a very different thing if you go out with the mindset of, “I’m doing mortgages, I’m doing corporate loans from my own balance sheet” versus “I’m doing something where I can actually also pass it on to partners.”

The final point is for the investors to make sure they have risk capabilities up to scratch. They are often differently regulated, and they have a fiduciary duty, be it a private equity fund or a pension fund. Make sure that this aligns with what they are looking after.

Next, first steps

Roberta Fusaro: So as we wrap up, what’s the first thing financial executives should prioritize?

Reinhard Höll: First and foremost, everyone should recognize that we’re entering a new era. The next five or maybe 15 years are going to look very different than the last 15 years of very low interest rates. And that means that your strategy, your operation, your culture, and everything around them need to acknowledge that and everyone needs to think differently about how to deal with this future.

Roberta Fusaro: OK, first step: acknowledge a new era. How about you, Alex?

Alex Edlich: Institutions are not doomed by their own business model. They’re not doomed from birth. For some, their reactions will be defensive; for some, it’s about going on the offense; for some, it’s about changing the business model a little bit.

If you can’t take these assets onto your balance sheet, then ask, who is the natural owner of them? And can you originate to distribute? So those are the types of changes that we see by different subsectors in this vast and growing global ecosystem.

Despite all the uncertainty that exists—macroeconomic, geopolitical, technological—and despite all of the turmoil that happened last year and this year, banking saw its highest profits in more than a decade. They earned, in 2022, a 12 percent return on equity and so far in 2023, 13 percent. And that compares with a 9 percent average since 2010. So despite all of the turmoil, despite all that’s happened, they’ve actually done very well.

Roberta Fusaro: Alex and Reinhard, thank you so much for taking the time today and talking through the findings.

Alex Edlich: Great to see you.

Reinhard Höll: It’s a pleasure to be here. Thank you.

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