Q.Define Banking and explain the functions of Banking.

Banking is the business of accepting deposits from the public for lending or investment, repayable on demand or otherwise and withdrawable by cheque. Its functions are of two kinds: primary functions (accepting various deposits and granting loans and advances) and secondary functions (agency services such as collecting cheques and paying bills, and general utility services such as lockers and foreign exchange). ## Meaning / Definition of Banking A bank is a financial institution that deals in money and credit. As per the Banking Regulation Act, 1949, banking means accepting, for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise. In the AP Intermediate (2nd year) Commerce course, a commercial bank is studied as an institution that links savers and borrowers. ## A. Primary Functions 1. Accepting Deposits — The bank mobilises the savings of the public through different deposit accounts: - Savings deposit — for small savers; limited withdrawals; modest interest. - Current deposit — mainly for businesspeople; no restriction on withdrawals; usually no interest. - Fixed (term) deposit — a lump sum kept for a fixed period at a higher rate of interest. - Recurring deposit — a fixed amount deposited regularly every month for a set period. 2. Advancing Loans — The deposits collected are lent out to earn interest. Forms include: - Term loans — a fixed sum repaid in instalments. - Cash credit — borrowing up to a sanctioned limit against security. - Overdraft — a current-account holder is allowed to overdraw up to a limit. - Discounting of bills of exchange — the bank pays the holder of a bill its value after deducting a discount, before the bill matures. ## B. Secondary Functions 1. Agency Functions (performed on behalf of customers): collecting and paying cheques, bills and promissory notes; collecting dividends and interest; paying rent, insurance premiums and other bills on standing instructions; buying and selling securities; acting as trustee or executor; transfer of funds. 2. General Utility Functions: issuing letters of credit and traveller's cheques; providing safe-deposit lockers; dealing in foreign exchange; underwriting shares and debentures; collecting statistical and credit information. Together these functions let banks mobilise idle savings and channel them into productive investment, which is why the chapter treats …