QS Study

Classification of Bank on the basis of Function

At present, the word “Bank” is considered as an economic term in all country. Banks are the financial institutions that are licensed to deal with money and its substitutes by accepting time and demand deposits, making loans, and investing in securities.

Here classifications of banks on the basis of function are described as follows:

Central Bank: the Central bank is such kind of bank that is owned and controlled by the government. This kind of bank works as the banker to the government and to the other bank.

Commercial Bank: Banks that take a deposit as a loan at minimum interest and form the surplus unit and provide it as the loan and advances to the deficit unit at maximum interest. Profit is the ultimate goal for these banks.

Cooperative Bank: According to Cooperative Act and cooperatively established & directed banks are known as a cooperative bank. These banks are basically established to help the member.

Agricultural Bank: To develop agriculture sector and to help the farmer’s agricultural banks are established. Modern agriculture instruments, fertilizer, seeds etc are sometimes not a affordable for the farmers. Agricultural bank helps them and gives a loan. This kind of bank has much of an agricultural based economy like ours.

Industrial Bank: To establish an industry, enough capital is needed. The banks which help in the industrial sector and preside long and the short-term loan is known as the Industrial Bank.

Investment link: This kind of bank is dedicated to financing the new and upcoming project. So, it needs to work as a medium between the investors and the business.

Merchant Bank: Merchant banking is one kind of intermediary baking which is issuing L/C, endorsement of bills, a collection of bills etc. are the main task of the merchant bank.

School Bank: Saving is the precondition of capital formation in the country. In this sense, to encourage the students of schools in banking and in savings, school bank is established.

Consumer Bank: In the USA some specialized banks are established to provide a loan to the consumers to buy their daily need. These banks issue a credit card, by which one can easily buy their needs.

Mixed Bank: The bank which is developed to do the multipurpose task is known as the mixed bank. This bank is commercial as well as specialized.

Regional Bank: the Regional bank is established to develop a special region. These banks finance its member country. Asian Development Bank (ADB), Islamic Development Bank (IDB) etc are such kind of regional bank.

International Bank: United Nations or any other regional organization sometimes established banks for the economic development. These kinds of the bank have a huge contribution to the developing countries. World Bank, International Monetary Fund is such kind of bank.

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