The basic function of a bank is to collect funds from the public in the form of savings, such as deposits, savings accounts, and checking accounts, and then redistribute these funds in the form of loans or credit to individuals, businesses, and government entities that need them. This function ensures that banks are not only acting as money storage facilities but also as institutions that facilitate the flow of money within the economy.
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In addition, another key function of a bank is the provision of credit.
The funds collected from the public through savings are used by banks to offer loans to individuals, businesses, and the government. These loans can include personal loans, business loans, investment loans, or consumer loans. The distribution of credit is crucial because it helps meet the financial needs of those who require funds for various purposes such as business expansion, investment in productive assets, or fulfilling consumer needs.
Beyond collecting funds and providing credit, banks also offer various financial services that help facilitate transactions and financial management for their customers.
These services include payment services, money transfers, credit card facilities, and electronic banking services such as internet banking and mobile banking, along with other financial services. These services provide convenience and flexibility for customers in managing their finances and conducting daily transactions.