What is banking and why is it important?

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Banking is defined as the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to conduct economic activities such as making profit or simply covering operating expenses.

A bank is a financial institution licensed to receive deposits and make loans. Two of the most common types of banks are commercial/retail and investment banks. Depending on type, a bank may also provide various financial services ranging from providing safe deposit boxes and currency exchange to retirement and wealth management.

In the Bangladesh banks are regulated by the Bangladesh Bank the Central Bank of Bangladesh Above all, central banks are responsible for currency stability. They control inflation, dictate monetary policies, and oversee money demand and supply in the market.

Commercial or retail banks offer various services including, but not limited to, managing money deposits and withdrawals, providing basic checking and saving accounts, certificates of deposit, issuing debit and credit cards to qualified customers, supplying short-and long-term loans such as car loans, home mortgages or equity line of credits. Investment banks gear their services toward corporate clients. They provide services such as merger and acquisition activity and underwriting among other investment services.

But why is this important?
because those who are unbanked or underbanked are hindering their financial lives from enjoying services that lead to financial well-being. Many must resort to services outside the banking system to cash checks or borrow loans and incur higher transaction fees and interest unnecessarily. Here are some of the reasons why banking tops the list of pillars required in financial literacy.

❏ Safeguard your cash
❏ Manage your finances – record keeping and budgeting
❏ Receive your paycheck quickly using direct deposit
❏ Facilitate financial transactions
❏ Insure your liquid assets
❏ Use debit and credit card services
❏ Earn interest
❏ Borrow loans
❏ Invest your money.