Bank- A Crucial Regulator of Money in the Economy

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The finance of any nation is regulated by its financial institutions. Bank is a financial institution which controls money transfer in the market effectively, to earn profit itself and as well as meet the requirements of its consumers.

Bank and its Basic Features

  • A bank being a vital part of the economy handles the cash in many ways to regulate the financial system effectively.
  • It accepts money as deposits from depositors, and then regulates the money efficiently to yield satisfactory results.
  • The bank then invests this money in order to earn profit. This is done via the money lending process to individuals and even to big organizations.
  • People do not invest or deposit money in the banks for free, but with the sole purpose of earning profit. A part of this profit earned is also provided to the depositors for keeping the money for tenure of certain specific number of years.
  • While the money stays in the accounts of the account holders or simply in the accounts of the people who have deposited money, the banks lends this money to the borrowers with interest.
  • The extra money that forms the profit amount, is earned in the form of interest applied upon the money lend to the borrowers. A part of this earned profit is in turn provided as earned interest to the accounts of the depositors.

The Ways in which The Functions are regulated

    • Bank receives dividend or financial revenue in the form of money deposited by its account holders for some specified tenure. Moreover it takes money from other financial institution if required.
    • Certain individuals also open checking accounts, but they are not meant for earning interest or savings. It is just a service provided by any financial institution by allowing an easy access to the individuals to transact money.
    • The transaction of money doesn’t always have to be easy withdrawal of money but often further deposit of money via monetary checks in an account holder’s account, adding to the banks financial strong side.
    • The transactions are generally done via automated Clearing House, wire transfer and automated teller machine etc.

    Some of the Ways in which Transactions are Made

    Automated Clearing House

    It is a system of electronic network, which participates in money transaction process. The AHC can handle bulk of credit and debit transactions. Utilizing The AHC an employer can make payments to the vendors, raw material suppliers etc.

    Wire Transfer

    Here money transfer takes from one account to the other. So it can be said that compared to AHC, wire transfer is a more personalized approach. A message is transferred via wire from the sending bank to the receiving bank.

    Automated Teller Machine

    It is an electronic computerized device that allows the clients of a bank to withdraw money from their personal accounts. The users here utilize a ATM card which is also known as bank card, client card or the debit card.

    Many financial institutions have open ATM centers from place to place to enable its clients for the easy transaction of money. The transaction takes place in the form of withdrawal of money from the user’s personal account.

    Mobile

    With technological advancements transaction of money has even become possible with the mobile phone. But here money transactions are made and not mere payments for shopping.

    Apart from this there many other money transaction systems like online platform, telephone and remote oriented audio and video consultation. All these processes only make it possible for the people to get benefited by the bank and its services.

    Description- Bank is that type of financial institution which helps in keeping the economy stable. They are innovating the ways in which they can provide services to their clients to attract more and more depositors and money lenders. With cash flowing in for further investment and cash flowing out, bringing profit banks are gaining stable position in the economy.

    Author’s bio – Simon Hopes has written several quality articles on Logbook Loans. He suggests his readers to visit Logbookmoney.com to avail more information on the same.

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