Characteristics of a Bank

A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets.

1. Dealing in Money
Bank is a financial institution which deals with other people’s money i.e. money given by depositors.

2. Individual/ Firm/ Company
A bank may be a person, firm or a company. A banking company means a company which is in the business of banking.

3. Acceptance of Deposit
A bank accepts money from the people in the form of deposits which are usually repayable on demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It also acts as a custodian of funds of its customers.

4. Giving Advances
A bank lends out money in the form of loans to those who require it for different purposes.

5. Payment and Withdrawal
A bank provides easy payment and withdrawal facility to its customers in the form of cheques and drafts, It also brings bank money in circulation. This money is in the form of cheques, drafts, etc.

6. Agency and Utility Services
A bank provides various banking facilities to its customers. They include general utility services and agency services.

7. Profit and Service Orientation
A bank is a profit seeking institution having service oriented approach.

8. Ever increasing Functions
Banking is an evolutionary concept. There is continuous expansion and diversification as regards the functions, services and activities of a bank.

9. Connecting Link
A bank acts as a connecting link between borrowers and lenders of money. Banks collect money from those who have surplus money and give the same to those who are in need of money.

10. Banking Business
A bank’s main activity should be to do business of banking which should not be subsidiary to any other business.

11. Name Identity
A bank should always add the word “bank” to its name to enable people to know that it is a bank and that it is dealing in money.

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