Bank Types

A bank is a financial institution that is licensed to deal with money and its substitutes by accepting time and demand deposits, making loans, and investing in securities. The bank generates profits from the difference in the interest rates charged and paid. Types of Banks: • Central bank: A central bank is a specialized institution whose customers are commercial banks and government Generally speaking, the central bank is the bank of all banks. A bank that issues currency, a bank that handles government transactions. It monitors the financial sector as a whole and chalks out plans towards self-sufficiency and reducing foreign reliance and take measures to achieve full employment of country’s productive & creative resources. E.g. state bank of pak. • Commercial Bank: A commercial bank is an institution that accepts deposits and uses the proceeds to make loans. These are the ordinary banks that deal in money and credit. The main object of commercial banks is to make profits. They are also engaged in the performance of agency and general utility functions. • Industrial banks: such banks performs the functions of specialized credit providing institutions. Suck banks provide medium, short and long term loans to various industries. E.g. Industrial development bank of Pakistan (IBBP). • Co-operative bank: the banks that are setup by inhabitants of the particular areas. The purpose behind this is to provide credit facilities to the residents of that area or to a particular class of people. E.g. Punjab provincial co-operative bank. • Agriculture bank: these are the bank that engaged in the financing of agriculture and rural sector. Agriculture banks mainly satisfy the credit needs of farmers and villagers. They have the sole object pf promoting macro-economic growth in the rural areas. E.g. zarai taraqiati bank limited. • Savings bank: these banks are established for the purpose of promoting savings habits in the middle and working class of the economy. These banks help in the accumulation of the savings of the low income group. Ordinary commercial banks also provide the services like that of a saving bank. E.g. national saving centers. • Investment banks: the banks which provide finances for the sale and purchase of stocks and shares. Such banks assist business corporation & govt bodies to rise funds for long term capital requirements through the sale of shares, stocks and bonds. E.g. investment cooperation of pak and national investment trust. • Exchange bank: bank branches with their head offices abroad are called exchange banks. These banks having the primary functions of dealing in foreign exchange. Also these banks finance foreign trade. They also finance internal trade and thus play an imp role in the eco. • Mortgage bank: they provide finance against fixed assets like lands and buildings. The finances are usually medium and long term. house building finance corp. is doing the job similar to that of mortgage bank. E.g. mortgage bank of spain & anotria. • Islamic bank: those banks which are working under the injunctions of sharia. It is interest free banking system and Islamic banks are working under profit and loss sharing principles. These banks launched sharia compliant products and services only. It means banking product and services offered by banks to their clients duly approved by their sharia advisers / sharia supervisory committee.