Importance Of Banks

Capital is the most essential factor for the development of any country. Bank is vital to develop and spread industries to boost the trade and commerce activities and for international trade. Banks are among the most important financial institution and essential business in different parts to the town and cities. Bank is financial organization with an aim to accumulate the idle money of the general public and advancing to their profit sector. In order to collect money from general public, banks offer attractive rate of return for saving. Bank then mobilizes their deposit in providing loan facility to the general public, business houses, industries agriculture and other needy sectors on attractive interest rate. In this way, the main objective of the bank is to mobilize idle resources in a productive area after collecting from different scattered sources.                                              

A bank through its operation acts as a mediator between the savers and investors and generates profits for self-existence. The bank will generate their income from different ways. They acquire funds from one group of surplus spending unit and make these funds available to other deficit unit.

They make profit by paying low rate to the savers and charging high rate to the borrowers. Bank also generates income by providing other services for which they charge fees and commission, such services includes  trust administration, safety deposits, LC(letter of credit), credit cards etc. meanwhile bank have also entered into a financial advisory services, foreign trading, processing and investment.

There is no unanimity about the origin of the world banking. Different people have different views about its origin. The term bank was originated from Italian word “Banco” which means bench in which the banks will deeps its money and its records. Some of the opinions trace that it was originated from the French word “Banque”.