Explain the importance of Bank in business.
Or, Describe the importance of Bank in business.
The importance of banks in the economic development of the country is immense. The importance of the bank in business transactions is discussed below:
1. Accepting deposits:
The main function of the bank is to accept the savings of the public, business entities, and other institutions as deposits and to keep that money safe in the bank.
2. Providing loans:
It is a major function of the bank to invest or lend the money received as the bank’s own capital and deposit. Banks usually deal with various types of loan transactions such as Cash Credit, Bank Loans, and Overdraft.
3. Discounting bills:
If the transaction requires money before the expiry of the specified period, the bank discounts the bill for a small amount discount. Upon maturity, the bank collects the full amount of the bill from the bill receiver. As a result, the traders can get such money as they need, on the other hand, the income of the bank is earned through discounts.
4. Money transfer:
Banks help to send money from one place to another. Money can be easily transferred from one place to another through cheques, bank drafts, pay orders, etc. As a result, traders do not have to take the risk of carrying cash.
5. Reduction in the use of cash:
Banks usually do not require cash transactions as they are usually transacted by cheque. As a result, cheque transactions are safe enough for traders.
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