Most of the Banking activities are derived from the above definition. Apart from the activity of accepting and lending money, banks are allowed to perform certain activities which are supplementary to this business of accepting deposits and lending, Banks are allowed to perform certain activities which are ancillary to this business of accepting deposits and lending. A bank's relationship with the public revolves around accepting deposits and lending money. Another activity which is assuming increasing importance is transfer of money - both domestic and foreign - from one place to another. This process is generally known as "remittance business" in banking phrase. Forex (foreign exchange) business is largely a part of remittance although it involves buying and selling of foreign currencies.

In short, a banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money, it is an institution where one can deposit and borrow money and take care of financial affairs.The first modern bank, named Bank of St. George was founded in Italy in Genoa in 1406.

Functioning of a Bank is among the more problematical of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather strictly. In India, the regulation traditionally has been very strict and at the same time NPAs are also of a very high order. The process of financial reforms, which started in 1991, has cleared the staleness but a lot remains to be done. The large number of policy and regulations that a Bank has to work with makes its operations even more complicated, sometimes bordering on illogical. Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheques, draft, order or otherwise."The law governing Banking Activities in India is called as "Negotiable Instruments Act 1881". Following are the major activities of banks:

  • Borrowing or raising of money

    Lending or advancing of money with or without security

    Drawing, accepting, discounting, buying, selling and collecting bills of exchange, hundis, promissory notes, drafts, and other instruments

    Granting and issuing of letters of credit, circulars notes and travelers’ cheques

    Buying and selling of foreign exchange

    Buying and selling of bullion

    Acquiring, holding, underwriting and dealing in stocks, funds, shares, debentures, bonds and investments of all kinds

    Purchasing and selling of bonds and other forms of securities on behalf of customers

    Receiving all kinds of bonds or valuables on deposit or for safe custody

    Collecting and transmitting of money and securities

    Carrying on and transacting all kind of guarantee and indemnity business

    Managing, selling and realizing any property which form the security or part of the security for any loans or advances.

    Acting as an agent for any government or local authority or for any other persons

    Contracting and issuing public or private loans

    Insuring, guaranteeing, underwriting, and participating in managing and carrying out of any issue (shares and Debentures) and lending of money for the purpose of any such issue

    Undertaking and execution of trusts

    Undertaking the administration of estates as executor, trustee etc.

    Establishing and supporting institutions funds, trusts etc.

    Acquiring, constructing and maintaining building for its own purpose

    Selling, exchanging, managing, developing, leasing, mortgaging or disposing its own property

    Performing all such activities that are incidental or favorable for the promotion or advancement of its business

    Performing all other business specified by the Central Government as the lawful business of a banking company (indianmoney)

Related Articles