BANK: Bank is a financial institution or corporation which deals with money and its substitutes; it also provides other financial services. Banks accept deposits and make loans and obtain a profit from the difference in the interest paid to lenders (depositors) and charged to borrowers, respectively.
It is formed for the purposes of maintaining current accounts, savings accounts and checking accounts, issuing loans or advances or investment (Islamic mode) and credit, and dealing in negotiable securities issued by governmental entities and corporations.
It makes a link with depositors and customers directly or indirectly.
“A bank is a dealer in debts- his own and other peoples”- G. Crowther.
“Bank is an economic institution whose main aim is to earn profit through exchange of money and credit instrument” – Jhon Harry.
“A bank is an institution,the principal function of which is collect the unutilized money of the people and to lend it to others.” –R.P. Kent.
“Banks are institutions whose debts are commonly accepted in settlement of other people’s debts.” –R.S. Sayers.
“A bank is a financial intermediary- a dealer in loans and debts” -Cairncross.
“A bank is an establishment which trades in money, an establishment for deposit, custody and issue of money and also for granting loans and discounting bills and facilitating transmission of remittances from one place to another.”-Imperial Dictionary
English Version of Dictionary Definitions
1) “ A bank is an organization chartered by the state or federal govt. principal functions of which are :
- i) To receive demand deposits and pay customers cheques drawn against them.
- ii) To pay time deposits and pay interest thereon.
iii) To discount notes, make loans and invest in govt. or other securities.
- iv) To collect cheques, drafts, notes etc.
- v) To issue drafts and cashier’s cheques.
- vi) To certify depositors cheques.
vii) When authorized by the chartering govt. it may act in a fiduciary capacity.
-Dictionary of Banking and Finance.
2) “ Bank is an institution where money is received for custody and returned on demand.” – A.T. Deb.
3) “A bank is an institution for the custody and investment of money.
– Samsad Dictionary.
4) “A bank is an establishment which trades in money, an establishment for deposit, custody and issue of money and also for granting loans and discounting bills and facilitating transmission of remittances from one place to another.”-Imperial Dictionary
Some Definitions of Banks as provided by Famous Encyclopedias
1) “ A commercial banker is a dealer in money in substitutes for money, such as cheques or bill of exchange.”- New Encyclopedia Britanica.
2) “ Establishment for custody of money, which it pays out on customers order” – The New Oxford Encyclopedic Dictionary.
3) “ Commercial banks usually just called banks, can be defined as institutions that provide checking accounts to the public and have substantial proportion of their assets invested in loans and general business firms.”
– The Macmillan Family Encyclopedia
– Lexicon Universal Encyclopedia.
4) “Primarily business of dealing in money and instrument of credit.”
– New Illustrated Columbia Encyclopedia.
5) “ An establishment receiving money for the purpose of being lent out on interest or returned by exchange or disposed of the profit of to be drawn out again as the owner require it” – The new Caxton Encyclopedia.
Some Definitions of Banks as provided by Acts and Ordinances
1) “ Banker includes a body of person, whether incorporated or not, who carry on the business of banking”-English Bills of Exchange Act-1982
2) “ A bank , it implied, is an instrument of society having functions what make it, in effect, a financial reserviour receiving streams of currency from any direction and from which their issue out following streams where and as required to sustain and fructify or assist commercial, industrial or other enterprises or ventures.”- High court of Australia.
3) “ A bank is a person or corporation carrying on bonafide banking business.” – English Finance Act, 1915
4) “ Banker includes a person, or corporation, or a company acting as banker” – Negotiable Instrument Act, 1881
Some Definitions of Banks as provided by Banking Institutes
1) “ A bank performs an essentially distributive task, service or acts as an intermediary between borrowers and lender sense, however, a bank can be considered the heart of a complex financial structure.” – American Institute of Banking.
2) “ Stated very simple, banks deals in money and in that connection offer certain related financial services.” – Harold Wallgren for American Bankers Association.
General Function of Bank
General Function of Bank of General Banking Department
1. Account Opening Sections: Opening of A/C, Mudaraba Savings A/Cs, Mudaraba Term Deposit A/c, Al-Wadiah A/cs, Mudaraba Haj Savings A/C, To keep record of Account opening at A/C Opening Registers and Cheque Book.
2. Maintenance Sections:
Maintenance of Current A/C Ledgers, Deposit Ledger, MTDR/FDR Ledger and Operation of Computer. Maintenance of Charges, Suspense and Sundry Deposit A/c, Maintenance of Dead Stock and Stationary Registers.
3. Transfer Sections: To maintain Transfer Scroll, Statement of Current A/Cs, Deposit A/C and Hajj Deposit A/c
4. Bills Sections: To keep record of Outward & Inward Bills (OBC & IBC) and Clearing.
5. Remittance Sections: Issuance and Payment of DD, TT, P0., TT., MT etc.
6. Cash Sections: To maintain of Clean Cash Book and Posting to computer General Ledger and Checking of Computer final Sheets with General Ledger.
7. Payment Order: To issue payment order (PO) and keep record accordingly and check with computer sheet after daily transactions.
8. Online Banking: To make online transaction meticulously and keep proper record
09. Establishment Department:
1) To check Salary Sheet, LPC, Maintenance Leave Register, Personal Files, and Payment of Income Tax. Issuance of Office Order, Release & Transfer, Posting of the Employees, Maintenance of Office Premises/Decoration etc.
2) Papers, Books, Files, Registers etc. which are not currently used may be kept in steel boxes locked and stored in godowns. Such old records should not be destroyed without the permission of Head Office.
3) Instruction circulars are permanent records of the Bank and hence should never be destroyed. Circular letters should be maintained for five years as current records and then kept as old records.
4) All old records should be entered in the old records register before being sent to godown. Wherever any record is destroyed with due permission, note is to be kept in the old record register against the item destroyed under the signature of authorised officer(s) in whose presence it has been destroyed.
5) Managers are responsible for proper maintenance of Branch premises. Cash counter should be away from the main gate and unauthorized person must not be permitted to enter into the Cash counter.
6) Cleaning premises must be complete before business hours. Door of premises will be opened at the start of business hours and closed just after counter hours. After counter hours doors should be locked till cash is safed in.
7) Fire extinguisher should be refilled before due date. On the Fire Extinguisher a paper should be pasted and date of filling and. next due date should be mentioned thereon. The guard must know how to handle fire extinguisher
8) Proper servicing arrangement must be made for ensuring long life of office equipments like type writing machine, ledger keeping machine, adding machine, franking machine etc. These should be kept oversight in the strong room.
9) Gun, Pistol etc. should be cleaned by the guard. Occasionally test fire should be made in presence of the Manager to ensure that the gun works. Overnight, gun should remain in the strong room.
10) Manager is responsible for proper use and maintenance of motor vehicles used by their officer. Servicing and minor repairing should be done in time to ensure long life of the vehicle. Log book must be maintained.
11) All furniture and fixtures shall be serially numbered and entered in the Furniture & Fixture register.
12. Auditors will check all furniture, fixture, vehicle, office equipment etc. in the register as well as count them physically during their inspection. Auditors will also check calculation of depreciation of all items.
13. Rubber Stamp and seal should be uniform of all branches.
14. ‘Cash Received” Stamp & the brass seal must be kept in the cash safe. Other stamps shall remain locked in the strong room after office hours.
15. Every branch /office shall maintain a ‘Rubber stamp register’ where in impress of all stamps maintained by the branch should be recorded. The register shall remain with the Manager. Whenever any stamp is discontinued, and it is to be destroyed, such destruction is to be noted in the register under signature of authorized official in whose presence it has been destroyed.
16. Every branch will maintain a notice board at a convenient place of the premises. Banks publicity materials, important information like exchange rate should be displayed on the Notice Board.
17. Head Office is responsible for standardizing, numbering and printing of forms used by the Bank. Head Office will review these forms from time to time.
18. All cheque books, DD, MT, P.O., LCA Forms & L/C forms shall be treated as security stationery. These will be entered in the security stationery register. Stock of security stationery should be kept under joint custody. For day to day use, security stationery will be supplied to authorized official who will be responsible for its use and Custody.
19. Stationery articles other than security stationery shall be entered in a separate stationery register. Unused stationery should be stored in the strong room.
20. Table stationery like pin, clip, pencil, pen, papers & ink etc. are required for officers. These stationery shall be entered in the Stock Register and should be stored in the Al-mirth.
Bank may be classified are as follows:
a] Based on organizational Characteristic
b] Based on Technique
a] Based on organizational Characteristic:
1. Branch Banking:
A banking system where operation of branches that situated in different parts of the country or even in abroad executed under control of the corporate office. Branch office has no different identity. Branch office works as a representative and follow all instructions/circulars of corporate office for performing banking activities. It has many branches in local and abroad.
2. Chain Banking:
When two or more banks are operated and controlled jointly by keeping separate identity in order to avoid risk and competition among themselves termed as chain banking. It’s objectives are to improve jointly. This types of banking systems were available before 1920 in USA.
3. Holding Company Banking or Group Banking:
Holding company banking/ group banking system actually refers two or more banks, which are held as subsidiaries by holding company. It is also called holding company bank. The largest company purchases other weak bank’s maximum shares. As a result, Strong bank represent weak bank as a subsidiary bank.In 1930 in USA, this types of banking started.
4. Unit Banking:
Operations of banking system are conducted by a single office/unit. It has no branches. It generally collects deposit from the small communities in that particular arena and places those deposits with bigger bank. Since the unit banks are small in size, they cannot provide remittance facilities to their customer. They have own capital, Board of directors and share holders.In Bangladesh there is no unit Bank.
b] Based on Technique:
1. Deposit Banking:
Deposit banking is collecting of different types deposits from the public and invest the same to their existing investment clients.
2. Investment Banking:
Investment banks are the specialized institutions engaged in providing assistance to the commercial companies in raising their long-term capital through sale of shares, stocks, and bonds in the open market. The activities of investment banking may be classified as (a) Originating, (b) underwriting and (c) retailing on behalf of individual and institutional investors.
3. Merchant Banking:
Merchant bank is a financial institution where mainly engaged in offering financial services and counsel to corporations and to rich individuals. The term can also be used to describe the private equity activities of banking. The main difference between an investment bank and a merchant bank is that a merchant bank invests its own capital in a client company whereas an investment bank entirely distributes (and trades) the securities of that company in its capital raising role.
4. Mixed Banking:
Mixed banking usually refers to combination of commercial banking and investment banking.
Objectives of Bank
Bank has various objectives as per other financial organizations. But banking organization view point is exceptional than others. The objectives of bank can be viewed from three different perspectives:
1) Objective from the view point of Bank owners,
2) Objective from the view point of the government and
3) Objective from the view point of Bank customers.
1. Objective from the view point of Bank owners:
i) Earning profit: Profit motive of the owners of the Bank acts as a driving force in engaging themselves in the business of banking like all other business.
ii) Rendering Services: Bank renders various services to the society as a part of their social commitment and this is a prime objective for engaging in banking business. Bankers are not only to make profit but also to do some good to the society.
iii) Investment of fund: The owners of the bank treat the bank as a suitable sector to invest their accumulated saved money.
iv) Earning good will: The owners of bank take bank as a way of earning good will by enhancing the periphery of their banking business.
v) Raising efficiency: The owners sharpen their managerial skill and efficiency by ensuring smooth operation of their banking business.
2. Objective from the view point of the government:
i) Issuance of Note and currency notes: Government issues notes and currency as a medium of exchange through banks.
ii) Formation of capital: Government always encourages formation of capital in society through households and bank act as a catalyzing force in formation of capital in different sectors of the society.
iii) Investment of capital and industrialization: Bank helps investment of ideal money through its various asset products and expedites industrialization. Eventually this helps the growth of GDP, alleviating poverty and ensures equal distribution of wealth.
iv) Control of money market: Bank by its various products help in controlling money market (supply of money in the market) and guards against the economy to be inflated.
v) Creation of employment : Bank to fulfill its human resource requirements and create a large employment opportunities.
vi) Counseling in financial matters: Banks sometimes put up effective suggestions to Govt in financial matters from their part
3. Objective from the view point of bank customers:
i) Safe custodian of public money: Bank acts as a safe custodian of public money. By depositing own money into a Bank account people get rid of worries like theft, burglary and snatching.
ii) custodian of public money: Sometimes bank acts as a financial advisers and counselor to its customers in various aspects.
iii) Representative or trustee: Bank sometimes performs the role of a representative or trustee on behalf of its customers.
iv) Providing credit facility: Bank provides credit facility to its customers and make opportunities to invest in profitable sector and by the process create income opportunities for customers.
Origin of the word bank
Most of the authors opinion that word bank has been taken from Italian word banco or bancaor French word benque, meaning a bench, other writers opine that the origin of the word bank is the German word bank, which means a bundle of anything or shared stock fund.
Origin of the word bank lies in the city of Italy, where the Lombard Jews were used to keep benches in the market place to transact the business. Italian word for the bench is banco. Such banco arrangements were used to be made for smooth exchange of money and other bills of the business. From those banco arrangements, people used to call them as the banco personnel or the banco area or some specific banco. Gradually, with the mix up of the population and spreading the banco styled business, same banco word started giving rise to the bank. Later on, when the financial organizations in steps forward to function with the similar objectives, people gave them the name banco and then the bank. Majority of the bankers believe the above theory of development for the bank word. But little also says that the bank word has its origin in the French word beque; incidentally, it also means a bench. This is not the end of the solution of the word. Another group is there who advocates German word bank as the antecedent of today’s English word bank. In German, bank means a bundle of anything or shared stock fund.
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