Chapter 1 Class 8 Economics - Introduction to Banks

Functions of banks 

Some of the main functions of banks are: 

  • Acceptance of deposits : Banks accept deposits from the public in various forms, such as savings accounts, current accounts, fixed deposits, recurring deposits, etc. Banks pay interest on deposits according to the rates decided by the Reserve Bank of India (RBI), which is the central bank of the country.

  • Lending of funds : Banks lend money to individuals and businesses for various purposes, such as personal loans, home loans, car loans, education loans, business loans, etc. Banks charge interest on loans as their main source of income.

  • Cheque facilities : Banks provide cheque facilities to the owners of savings and current accounts to withdraw their money or make payments. A cheque is a written order to a bank to pay a certain amount of money to a person or an organisation. There are two types of cheques: bearer cheques and crossed cheques.

  • Remittance of funds : Banks also provide the function of money transfer from one place to another or from one person to another. They use different methods such as drafts, pay orders, net banking, NEFT/RTGS, etc. Banks charge a nominal commission for this service.

  • E-banking : E-banking is the method by which customers can conduct transactions electronically via the internet. Some examples of e-banking are managing deposit accounts, online fund transfer, ATM, electronic data interchange, etc.
Go Ad-free
Davneet Singh's photo - Co-founder, Teachoo

Made by

Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 14 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.