Bank

A bank is a financial intermediary and appears in several related basic forms:

a central bank issues money on behalf of a government, and regulates the money supply
a commercial bank accepts deposits and channels those deposits into lending activities,
either directly or through capital markets. A bank connects customers with capital deficits
to customers with capital surpluses on the world's open financial markets.
a savings bank, also known as a building society in Britain is only allowed to borrow and
save from members of a financial cooperative

Banking is generally a highly regulated industry, and government restrictions on financial

activities by banks have varied over time and location. The current set of global bank capital
standards are called Basel II. In some countries such as Germany, banks have historically owned
major stakes in industrial corporations while in other countries such as the United States banks
are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a
cross-share holding entity known as the keiretsu. In Iceland banks followed international
standards of regulation prior to the 2008 collapse.
The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, and
has been operating continuously since 1472.[1]

History
in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the
rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi families
dominated banking in 14th century Florence, establishing branches in many other parts of
Europe.[2] Perhaps the most famous Italian bank was the Medici bank, set up by Giovanni Medici
in 1397.[3] The earliest known state deposit bank, Banco di San Giorgio (Bank of St. George),
was founded in 1407 at Genoa, Italy.[4]

Origin of the word

The word bank was borrowed in Middle English from Middle French banque, from Old Italian
banca, from Old High German banc, bank "bench, counter". Benches were used as desks or
exchange counters during the Renaissance by Florentine bankers, who used to make their
transactions atop desks covered by green tablecloths. [5]
The earliest evidence of money-changing activity is depicted on a silver Greek drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350325 BC, presented
in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a
pun on the name of the city. In fact, even today in Modern Greek the word Trapeza ()
means both a table and a bank.

Definition

The definition of a bank varies from country to country. See the relevant country page (below)
for more information.
Under English common law, a banker is defined as a person who carries on the business of
banking, which is specified as:[6]

conducting current accounts for his customers

paying cheques drawn on him, and
collecting cheques for his customers.

Banco de Venezuela in Coro.

In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in
relation to negotiable instruments, including cheques, and this Act contains a statutory definition
of the term banker: banker includes a body of persons, whether incorporated or not, who carry
on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it
is actually functional, because it ensures that the legal basis for bank transactions such as
cheques does not depend on how the bank is organised or regulated.
The business of banking is in many English common law countries not defined by statute but by
common law, the definition above. In other English common law jurisdictions there are statutory
definitions of the business of banking or banking business. When looking at these definitions it is
important to keep in mind that they are defining the business of banking for the purposes of the
legislation, and not necessarily in general. In particular, most of the definitions are from
legislation that has the purposes of entry regulating and supervising banks rather than regulating
the actual business of banking. However, in many cases the statutory definition closely mirrors
the common law one. Examples of statutory definitions:

"banking business" means the business of receiving money on current or deposit account,
paying and collecting cheques drawn by or paid in by customers, the making of advances
to customers, and includes such other business as the Authority may prescribe for the
purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).

"banking business" means the business of either or both of the following:

1. receiving from the general public money on current, deposit, savings or other similar
account repayable on demand or within less than [3 months] ... or with a period of call or
notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers[7]
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct
debit and internet banking, the cheque has lost its primacy in most banking systems as a payment
instrument. This has led legal theorists to suggest that the cheque based definition should be
broadened to include financial institutions that conduct current accounts for customers and
enable customers to pay and be paid by third parties, even if they do not pay and collect
cheques.[8]

Banking
Standard activities

Large door to an old bank vault.

Banks act as payment agents by conducting checking or current accounts for customers, paying
cheques drawn by customers on the bank, and collecting cheques deposited to customers' current
accounts. Banks also enable customer payments via other payment methods such as telegraphic
transfer, EFTPOS, and automated teller machine (ATM).
Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by
making advances to customers on current accounts, by making installment loans, and by
investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable by
most businesses, individuals and governments. Non-banks that provide payment services such as
remittance companies are not normally considered an adequate substitute for having a bank
account.
Banks borrow most funds from households and non-financial businesses, and lend most funds to
households and non-financial businesses, but non-bank lenders provide a significant and in many
cases adequate substitute for bank loans, and money market funds, cash management trusts and

other non-bank financial institutions in many cases provide an adequate substitute to banks for
lending savings too.[c

Bank account
A bank account is a financial account with a banking institution, recording the financial
transactions between the customer and the bank and the resulting financial position of the
customer with the bank

Nomenclature, classification and codification

Account types
Bank accounts may have a positive, or debit balance, where the bank owes money to the
customer; or a negative, or credit balance, where the customer owes the bank money.
Broadly, accounts opened with the purpose of holding debit balances are referred to as deposit
accounts; whilst accounts opened with the purpose of holding credit balances are referred to as
loan accounts.
Some accounts are defined by their function rather than nature of the balance they hold. Bank
accounts designed to process large numbers of transactions may offer credit and debit facilities
and therefore do not sit easily with a polarised definition.

Types
Demat account
NRE A/c
NRO A/C
FCNR A/c
Sb a/c -Savings bank account
CC a/c - Cash credit account
CA a/c - Current account
Salary Account
Recurring deposit account
Overdue account - OD a/c
Fixed deposit account
Propreitorship account
Partnership account
Firm account
Company account

Function of bank
According to Britannica.com, a bank is:
an institution that deals in money and its substitutes and provides other financial services.
Banks accept deposits and make loans and derive a profit from the difference in the
interest rates paid and charged, respectively.
Banks are critical to our economy. The primary function of banks is to put their account holders'
money to use by lending it out to others who can then use it to buy homes, businesses, send kids
to college...
When you deposit your money in the bank, your money goes into a big pool of money along
with everyone else's, and your account is credited with the amount of your deposit. When you
write checks or make withdrawals, that amount is deducted from your account balance. Interest
you earn on your balance is also added to your account.
Banks create money in the economy by making loans. The amount of money that banks can
lend is directly affected by the reserve requirement set by the Federal Reserve. The reserve
requirement is currently 3 percent to 10 percent of a bank's total deposits. This amount can be
held either in cash on hand or in the bank's reserve account with the Fed. To see how this affects
the economy, think about it like this. When a bank gets a deposit of $100, assuming a reserve
requirement of 10 percent, the bank can then lend out $90. That $90 goes back into the economy,
purchasing goods or services, and usually ends up deposited in another bank. That bank can then
lend out $81 of that $90 deposit, and that $81 goes into the economy to purchase goods or
services and ultimately is deposited into another bank that proceeds to lend out a percentage of it.

In this way, money grows and flows throughout the community in a much greater amount than
physically exists. That $100 makes a much larger ripple in the economy than you may realize!

Why does banking work?

Banking is all about trust. We trust that the bank will have our money for us when we go to get
it. We trust that it will honor the checks we write to pay our bills. The thing that's hard to grasp is
the fact that while people are putting money into the bank every day, the bank is lending that
same money and more to other people every day. Banks consistently extend more credit than
they have cash. That's a little scary; but if you go to the bank and demand your money, you'll get
it. However, if everyone goes to the bank at the same time and demands their money (a run on
the bank), there might be problem.
Even though the Federal Reserve Act requires that banks keep a certain percentage of their
money in reserve, if everyone came to withdraw their money at the same time, there wouldn't be
enough. In the event of a bank failure, your money is protected as long as the bank is insured by
the Federal Deposit Insurance Corporation (FDIC). The key to the success of banking, however,
still lies in the confidence that consumers have in the bank's ability to grow and protect their
money. Because banks rely so heavily on consumer trust, and trust depends on the perception of
integrity, the banking industry is highly regulated by the government.