We all have bank account and we all deposit our money in bank and withdraw when we need it . so that’s is from our hand but what about bank ? how bank really manage all this money and how they earn money and who regulate bank ? why people trust on bank ? there is alot of questions in our mind .
In this blog post you get answers of all your questions and understand all about bank .
What is bank ?
Bank is one organization who accept deposit and give loan to their clients .
This is the basic definition of bank . simply we describe work of bank in word’s . so generally we can say that bank is one oregenization who accept deposit and withdraw and when any person need money they give money as loan .
Why bank give interest on deposit ?
When we say bank accept deposit then we also need to understand that bank give some amount of intrest on money to that person who deposited . so why they give interest? simply because bank use this money for loan . if bank want to give more loans than they need more amount money and money come from deposits .
For attract customers they give some amount of interest on deposit . and use this deposits for loans .
How bank really earn money ?
Here are some main income source of banks
- Interest on loan
- Fees and charges
- Investment income
- Credit card business
- Wealth management
This is the main income sources of banks . it’s very complicated but let’s figure out .
1 intrest on loan
When one bank give loan to their customers then they charge some fix amount intrest on it . so basically diffrence between intrest on deposit and internet on loan is the main income source of banks .
2 fees and charges
Bank charge some amount of fees for their services like debit card , account maintanence .
3 Investment income
Bank also invest their money in different goverment bonds , stocks, securities and foreign exchange . bank earn money from this . the difference between buy and sell is the earning of bank.
4 credit card business
Bank charge merchants on transaction done by credit card and also charge intrest on customer who have balance in credit card . simply because we know bank provide some services to their users or we can say customer so for that service they charge some amount of money .
5 wealth management
Banks offer financial planning, investment management, and insurance services for high-net-worth individuals and businesses.
Who regulate banks ?
In one country their is two type of bank central bank and other banks . every country have one one central bank and that bank is called bankers bank . because this bank make all kind of rule and regulations for other banks and monetring them .
Conclusion
We know bank is oregenization who accept deposit and give loan to their customers . but in detail we can say that bank is not only work this bank is oregenization who provide liquidity to economy. if any economy want to grow then they need flow of money from those who save to those who need it for investment . bank is medium of this process.
The role of bank in any country economy is more wider than we think . so next time you visit any bank jut remember this is not only accept deposit but do more than that .