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Concept of Banking — Banking refers to all the financial functions performed by banks. It includes deposit collection, loan disbursement, fund transfer, payment processing, financial advice, and other related services.
In simple terms, banking is the entire range of financial activities carried out by a bank.
Characteristics of Banking:
1. Financial Service Oriented:
Banking primarily focuses on providing financial services to the public.
2. Deposit and Loan Oriented:
Banks collect deposits from the public and convert them into loans.
3. Contribution to Economic Development:
Banking channels capital into business, industry, agriculture, and small enterprises, promoting economic growth.
4. Regulated by the Central Bank:
All banking activities are regulated by the central bank, such as Nepal Rastra Bank (NRB) in Nepal.
5. Public and Private Interaction:
Banking facilitates smooth economic interaction between the public, government, and private sectors.
Areas of Banking:
1. Retail Banking:
Deals directly with the general public — such as savings accounts and personal loans.
2. Commercial Banking:
Provides financial services to large companies, industries, and businesses.
3. Investment Banking:
Deals with investments in shares, bonds, and capital markets.
4. Digital Banking:
Provides banking services through the internet, mobile apps, and QR code systems.
Importance of Banking:
- Money Management: Ensures the safe management and circulation of money.
- Loans and Investments: Provides loans to industries, businesses, and agriculture sectors.
- Payment System: Facilitates trade and personal transactions smoothly.
- Economic Stability: Maintains monetary flow and balance in the economy.
- Financial Inclusion: Extends financial services to rural and underprivileged populations.
Conclusion:
Banking is the operational field of banks.
It is not merely about money transactions but a major driving force of economic activities in a nation. Efficient, safe, and accessible banking ensures the prosperity and stability of a country’s economy.