Banking Finance Definition
The majority of banks works as profit-seeking enterprises, however, a few government banks work as non-profit organizations. Central banks function as government agencies and they regulate the interest rates and circulation of money in the total economy.
The activities of banks can usually be categorized into the following types :
- Receiving deposits from the customers and issue of current or checking accounts and savings accounts to businesses and individuals
- Providing financial consultation services to individuals and businesses
- Providing loans to businesses and individuals
- Encashment of checks
- Facilitation of monetary transactions, for example cashiers checks and wire transfers
- Issue of ATM cards, credit cards, and debit cards
- Offering safe deposit vaults for keeping valuables
- Encashment and distribution of bank rolls
- Retirement & pension planning
Banks can be widely categorized into two types:
Retail banks: These include
- Commercial banks
- Postal savings banks
- Private banks
- Community banks
- Community development banks
- Savings banks
- Building societies
- Offshore banks
Retail banking directly deals with small businesses and individuals, commercial banking, corporate banking services to important commercial organizations, and offering services to mid-market businesses.
Investment banks: The investment banks function as underwriters of stock and bond issues and also provide a number of related services. Examples of investment banks are merchant banks and venture capital firms. As a whole, investment banking deals with capital markets.
The financial transactions of a bank are carried out through a number of measures:
- Through branches
- Through ATMs (automated tellering machine)
- Telephone banking
- Online banking
- Through mail services
Finance deals with efficient allocation and distribution of resources by commercial entities, individuals, as well as other establishments over time taking into consideration the associated risks.
The term called finance can include any of the following areas:
- The process of managing money
- The study of money and other types of assets
- Managing and controlling those assets
- Identifying and handling project risks
If the term finance is used as a verb, it denotes provision of funds for individuals for buying cars or houses and businesses.
The function of finance is to apply a group of techniques which the corporate entities and individuals implement for managing their financial activities, specifically the margin of income and expenditure as well as investment risks.
Finance can be widely categorized into the following types:
- Personal finance
- Business finance
- Public finance
The major sources of financing include:
- Loan or credit