Money and banking go together. They are complementary to each other. A bank is an institution which accepts money from public as deposits and gives loans to them. Banking refers to accepting for the purpose of lending or investment of deposits of money from the public, payable on demand or otherwise and withdrawal by cheque, draft, order or otherwise.

The primary functions of a bank are:

  1. Accepting deposits from public
  2. Giving loans

1. Accepting Deposits from Public

A bank accepts monetary deposits from public which include individuals, groups, and business firms. When some body wants to deposit money in the bank, the bank accepts the money by opening an account in the name of the depositor. If the depositor withdraws money from his or her account then the bank deducts that money from the depositor’s account.

On the other hand, bank gives interest on certain types of deposits of the public. The bank also issues cheque books to its depositors. Cheques are used by the depositors to withdraw money from the bank and making payments to any party through the bank.

2. Giving Loans

The bank gives loans to public who want to borrow and who has the capability to repay that loan amount in future.

People borrow money because they want to buy some thing today or do some business for which there is not enough money with them at present. But they have the ability to repay that money in future. Goods, such as, television, refrigerator, washing machine, and car are expensive items. Similarly, purchase or construction of house requires lots of money. For all these things, bank provides a loan. Bank also gives loan to start business.

3. Keeping Valuable Materials

The bank also keeps valuable things of people such as jewellery, property documents, etc. Normally, people want to keep valuables in safe custody which is provided by the bank in the form of locker facility.