Definition of Bank

Commercial banks are an important institution of the economy for providing institutional credit to its customers.

“A banking company is the one which transacts the business of banking which means accepting, for the purpose of lending and investment of deposits of money from the public, repayable on demand or otherwise and withdrawals by cheques, draft, order or otherwise.“

The definition of a bank varies from country to country. Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as: conducting current accounts for his customers, paying cheques drawn on him, and collecting cheques for his customers. In India the banking company is defined as the one which transacts the business of banking which means accepting, for the purpose of lending and investment of deposits of money from the public, repayable on demand or otherwise and withdrawals by cheques, draft, order or otherwise.

In simple terms, a bank accepts money on deposits, repayable on demand and also earns a margin of profit by lending money. A bank stimulates economic activity in the market by dealing in money. It mobilizes the savings of people and makes funds available to business financing their capital and revenue expenditure. It also deals in financial instruments and provides financial services for a price i.e., interest, discount, commission, etc.

Bank is an institution that accepts deposits, makes loans, pays checks, and provides financial services. A primary role of banks is connecting those with funds, such as investors and depositors, to those seeking funds, such as individuals or businesses needing loans.