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One of the basic functions of banks is to extend loans to individuals and business entities. There are different types of loans that banks grant to borrowers.

One type of loan the banks grant is referred to as money at call. This type of loan is extended to other banks and financial institutions. The bank who has granted this type of loan has the option to call back the loan on a short notice by1 to 14 days.

Another type of loan is cash credit. This type of loan is extended to borrowers based on the value of their current assets. An account is opened under the borrower’s name that lets him withdraw from the accountevery now and then. The amount granted to him is never bigger than his current assets’ value. Interest is charged on the actual amount withdrawn from said account.

An overdraft is another accommodation or loan a bank extends or grants to its depositor. It allows the depositor to withdraw more than the amount in his account. Interest is computed based on the amount overdrawn.

The banks also discount bills of exchange as a form of a loan. The amount granted by the bank is based on the maturity value of the bill of exchange after charges are deducted. When the bill of exchange matures the bank collects payment for the accommodation it has given the holder of the bill of exchange.

There are still other types of loans banks grant like credit cards, long term loans and personal loans. The personal loans individual get from banks are based on their salaries and paying capacity. Often these loans are used to purchase some personal things like gadgets, appliances, vehicles, houses or even to finance education. He borrowers pay the bank on an instalment basis wherein their amortizations are being deducted from their salaries.

You might wonder what banks do for us in general. Banks like all other financial institutions are established to perform functions that meet the financial and monetary requirements of businesses and individuals. These functions cater to the desire of individuals to save their money and utilize it profitably. These banks also cater to the needs of individuals and business entities in keeping up with needs involving monetary considerations.

The first basic function of banks is to accept deposits from individuals and businesses and invest or keep them for safekeeping. There are different types of accounts that one can avail of depending on the amount one would like to save and invest. Each account type meets the specifications and requirements of every depositor.

The next basic function of a bank is extending loans to the public from the deposits and funds of depositors and investors. Business entities and individuals turn to banks for financial assistance in the form of loans. These loans are being used for other financial transactions that are necessary to acquire properties, assets or even to answer for payables that the business may incur.

Another basic function of the banks is to act as a paying and collecting agent for individuals and businesses. When one deposits a cheque, it is the function of the bank to have it cleared and credited to the corresponding account. The same thing is done when a payment is made; the bank makes sure that the particular account is being debited accurately and correctly. They monitor the coming in and going out of funds from accounts they maintain.

We know that most of our monetary and financial activities involve transactions made with banks. These banks are governed by government regulations and operate under strict supervision of the central bank.

The central bank acts as the core of all banks and financial institutions. It has a wide range of functions and responsibilities in the monetary system of a country.

Among the functions of the central bank is overseeing the policies in the banking system and making it sure that these policies are being followed. The central bank is also responsible for the issuance of currencies, and management of exchange reserves. It also serves as the main bank of the government. It also monitors the activities of commercial banks and assists in extending loans whenever the need arises.

The central bank mainly acts as the administrator of Federal monetary reserves. It also determines and regulates interest rates that greatly affect the economy. Policies involving the buying and selling of treasury bonds and bills are implemented by the central bank. The central bank also takes care of gold reserves of the country. It also performs a behind the scene role in the negotiations of international monetary transactions.

The central bank as a whole performs the same functions as the other types of banks. It only has other functions that it performs in connection with transactions involving the international monetary system and other financial transactions of the government. In the structure of the monetary system, you could consider the central bank as its core overlooking financial activities of banks and other financial institutions.

There are different types of banks for different lines of business. They are called or referred to with different names. Some of these banks sometimes can function as several types of banks.

Let us go over the different type of banks to understand better how each one function:

• Retail bank.It provides basic banking services like checking and savings accounts, cash deposits, safe deposit boxes, mortgages, car loans, and credit cards to the general public. Often this type of bank also functions as a commercial bank.

• Commercial bank. It handles the banking needs of businesses. Some of the services rendered by commercial banks are basic accounts, loans for capital purchases, credit lines, payment and transaction processing and foreign exchange.

• Central bank.It handles the banking activities of all banks. The major function of a central bank is to conduct monetary policy, supervise and regulate financial institutions and companies and provide services that other banks render.
• Online bank. This is newest type of bank. Transactions like opening accounts, fund transfers, online bill payments, payment for online purchases, applying for loans, do purchases using debit cards and checking balances and credit balances of credit cards are done through the Internet.
• Savings and loans bank. This type of bank makes it possible for depositors to acquire homeownership and focuses on home mortgage. It encourages people to save money.

With the different types of bank, there is one that can serve the depositor’s requirements. These banks cater to the financial needs and requirements of businesses and individuals.

In the business world, a financial institution known as a bank plays an important role. This financial institution has many economic functions. It is responsible for the issuance and creation of money. It also acts as a collecting and paying agent to customers.  When one decides to put up a business, it is through the bank one gets some of his funds to be able to run his business. Most financial transactions of a business involve transactions with the bank, like making deposits, investing and making payments. Businesses work back to back with financial institutions.

The bank accepts deposits which are money clients put in for safe keeping. These deposits are in return offered to creditors as loans. The money that is deposited earns through the loans others get. The bank acts as a mediator between the depositor and the borrower.  This flow of the money is the very essence of banking.

Banking is a system where money put in is invested or offered to others as loan. The banking system is a network of banks that provide financial services that includes accepting deposits, providing loans and credit assistance, transmission of money and other investment services. The network of banks includes commercial, savings, and specialized banks and a central bank. It is through these business transactions that the bank profits. With their earnings and profit they give interest to their depositors and investors and impose interest on borrowers and creditors. The banking system is regulated by government laws putting restrictions on financial activities. These restrictions are for the protection of the depositors and investors.