Q.Define Banking. Explain the functions of the Banking.

Banking is the business of accepting deposits from the public for lending or investment, repayable on demand or otherwise. A bank's functions are primary (accepting deposits and lending money) and secondary (agency services and general-utility services).

Definition of Banking

According to the Banking Regulation Act 1949, banking means 'accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise.' A bank thus acts as a link between those who have surplus money (depositors) and those who need money (borrowers).

Functions of Banking

A. Primary Functions

1. Accepting deposits - Banks accept deposits through:
   • Savings deposits (for small savers, moderate interest, limited withdrawals)
   • Current deposits (for businessmen, no/low interest, unlimited withdrawals)
   • Fixed/time deposits (for a fixed period at higher interest)
   • Recurring deposits (fixed amount deposited regularly)
2. Granting loans and advances - Banks lend the deposited money through:
   • Term loans, cash credit, overdraft, discounting of bills, and advances.

B. Secondary Functions

1. Agency functions (on behalf of customers) - collecting cheques and bills, paying bills, transferring funds, buying/selling securities, acting as trustee and executor. …