bank is a financial institution that plays an important role in facilitating the economic activities of society by providing various banking services such as lending money, fund storage, investment, and various financial transactions. According to experts, the definition of a bank is:
Definition of a Bank According to Experts
List of contents
Richard Scott Carnell
A bank is a financial institution that takes deposits, provides loans, and offers financial services.
Charles Goodhart
A bank is an institution that collects funds from the public who have excess funds and provides funds to the public who need them.
Dick B. Henneman
A bank is a business entity that has an official license to conduct banking business, such as accepting deposits, providing loans, and offering other financial services.
Prof. S. A. Dave
A bank is a financial institution that takes money as deposits from the public and gives credit for productive purposes.
Banks have an important role in maintaining the economic stability of a country by controlling the amount of money in circulation, providing credit to advance the economy, as well as being the guardian of security and public confidence in the financial system.
Bank Functions
The functions of a bank can be divided into two main categories, namely, general functions and special functions. Each has its unique role in meeting the economic needs of society. Let's explore further!
General Functions of a bank
Fund Acceptance (Deposits)
Banks act as a place for the public to store their funds. Through savings and deposits, banks are able to collect funds from various individuals and entities, provide security, and help in managing those funds.
Credit Provision
Banks provide loans to individuals, companies, and other institutions to support economic activities. These loans help finance new projects, investments, education, and other urgent needs.
Payment Services
Banks offer various payment tools such as checks, credit cards, and interbank transfers, facilitating everyday and business transactions.
Security and Investment Services
Banks provide various investment instruments such as bonds, stocks, and mutual funds, offering options for people to grow their funds.
Special Functions bank
Agent of Trust (Agent of Trust)
Banks build trust between the public and banking institutions, enabling transactions and loans with a sense of security.
Agent of Development (Agent of Development)
Banks promote economic growth by encouraging investment, consumption, fund distribution, and money usage.
Agent of Services (Agent of Services)
Banks provide financial services such as fund storage, loans, and fund transfers according to the needs of the public.
By understanding the functions of banks, we can more effectively utilize banking services to support our financial lives.
Bank Products
Before we delve further into the world of banking, let’s review some of the products offered by banking institutions. Here is a brief summary of banking products:
Savings Account
Safe and liquid for storing and accumulating funds.
Credit
Loans for various purposes such as homes, cars, or education.
Deposit
Funds stored with a fixed interest rate for a specified period.
Checking Account
Electronic financial transactions for flexible fund usage.
Service Access
Electronic access and management of accounts through the internet or text messaging.
Safe Deposit Box
Storage of valuable items in a bank's security box.
Bank Card
Debit and credit cards for financial transactions.
Letter of Credit (L/C)
Payment guarantee for international trade.
Clearing
Safe and efficient settlement of interbank financial transactions.
Collection
The process of collecting payment for instruments such as checks or drafts.
Read Also: The most complete list of bank codes for financial transactions
Types of Banks
In the world of banking, there are various types of banks that can be categorized based on their functions, ownership, operational activities, and business forms. Read on for further explanations!
Based on Their Functions:
- Central Bank : Responsible for regulating monetary policy and maintaining the economic stability of the country.
- Commercial Bank : The definition of a commercial bank according to Article 1, Paragraph (3) of Law No. 10 of 1998 is: "A commercial bank is a bank that conducts business activities either conventionally or based on sharia principles, which provides services in payment transactions."Â
- Rural Bank : Rural banks are described in the following paragraph: "A Rural Bank is a bank that conducts business activities either conventionally or based on sharia principles, which does not provide services in payment transactions."
Ownership
- Joint Bank: Owned by both private parties and the government.
- Foreign Bank : Owned and operated by foreign entities.
- National Private Bank : Owned and operated by local private parties
- Government Bank : Owned and operated by the government.
- Cooperative Bank : Owned by cooperative members.
Operational Activities
- Conventional Bank : Conducts business activities according to conventional banking principles.
- Islamic Bank : Operates based on sharia principles.
Business Forms
- Cooperative Form : A business entity owned and operated collectively by its members.
- Partnership Form : A business entity with joint ownership and management.
- Sole Proprietorship Form : A business entity owned and operated by an individual.
With these various types of banks, the banking system can provide services that meet the needs of the public and support overall economic growth.
Tips for Choosing a Bank
Are you confused about choosing the right bank for you? Here are some tips you must try to choose the right bank.Â
First, understand your financial needs, whether you want to open a savings account, get a loan, or invest. Next, check for suitable services such as savings accounts with attractive interest rates and beneficial credit cards.Â
Then, observe the fees and rates, ensuring they are transparent and reasonable. We also need to pay attention to the security and reputation of the bank, as well as check the availability of ATMs and branches. Look for customer reviews and check if their digital platform is user-friendly. Finally, you can also consult a financial advisor.Â
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