Daffodil International University

Faculties and Departments => Real Estate => Business & Entrepreneurship => Finance & Banking => Topic started by: Shekh Moniruzzaman on April 04, 2019, 10:54:02 AM

Title: Banking And Its Classifications
Post by: Shekh Moniruzzaman on April 04, 2019, 10:54:02 AM
It is not easy to define a bank because different experts have defined a bank highlighting its various functions. simple definition is "A bank is a financial institution whose main business is to accept money on deposit from some people and to advance loans on interest to some others."

Classification Of Banks:

Banks can be classified into various types on the basis of their functions, ownership, domicile, status, etc. The main types of banks in Pakistan are as under:

1.   Classification On The Basis Of Functions:

1.1 Central Bank: The most important bank in a country is the central bank. It stands at the top of all other banks. The main aim of a central bank is to maintain monetary and economic stability of a country. It enjoys the monopoly of note issue. Every country has a central bank of its own with different names.

1.2.   Commercial Bank: Commercial banks are the most common type of banks.They conduct their business purely on profit motive. The main function of a commercial bank is to accept deposits from those who have surplus funds and lend on interest to those who require funds.

1.3.   Industrial Bank: Industrial banks are those which meet the long-term credit needs of industries. The leading countries of the world have separate industrial banks to provide industrial finance. Bangladesh Development Bank Ltd(BDBL) is the leading industrial bank in Bangladesh. Industrial Development Bank of Pakistan was established in 1961 to provide long-term finance for the promotion of industries.

1.4.   Agricultural Bank: Agricultural banks provide long-term, medium-term and short-term finance to agriculture sector. Zarai Taraqiati Bank of Pakistan, the Federal Land Bank of America, the Agricultural Mortgage Corporation in England are some of the examples cf agricultural banks.

1.5 Exchange Bank: The exchange banks are those specialized banks which carry on foreign exchange business. Foreign trade transactions are settled through these banks. Exchange banks purchase, sell and collect foreign bills, issue letter of credit, facilitate foreign remittances through bank draft, telegraphic transfer, etc.

1.6. Saving Bank: The principal aim of saving banks is to collect and pool together the scattered savings of the community. Saving banks are usually departments of commercial banks. There may be separate saving-banks in some countries of the world. In Pakistan, there is-no saving bank. Commercial banks and post offices carry on saving banks functions. The saving banks invest funds in the safest government securities.

1.7. Investment Bank: Investment banks purchase and sell shares, bonds and securities. They assist joint stock companies and government bodies to raise money through the sale of shares and bonds. Investment banks also perform the usual banking functions of receiving deposits and advancing loans.

1.8. Mortgage Bank: Mortgage banks provide long-term loan against the mortgage of agricultural lands, houses and other such immovable property. House Building Finance Corporation is working as mortgage bank in Pakistan to provide funds for house building.

1.9. Micro-finance bank: The main objectives of micro-finance banks is to provide small loans to small traders, the loans are granted for short-term and medium terms. In Pakistan micro-finance banks and Khush-hali bank are the examples of this type of bank.

Title: Re: Banking And Its Classifications
Post by: drrana on February 20, 2020, 08:42:35 PM