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Discuss the Different Types of Bank

Different Types of Bank


History of Bank


Money is very important and necessary to satisfy human wants. Man has been needy in every era due to which the collection and supply (receipts and payments) of money has been an essential part of human life. Different commodities have been used as money in different ages, like, stones, metals, animals, different eatables and minerals. The concept of money, its sources and uses have been passing through from the revolutionary stages along with the evolution of human culture. Even a good number of people directly started dealing in money e.g. merchants, gold smiths, and money lenders etc. the concept of loan, interest, written documents i.e. cheque a bill of exchange came into time light only because of them Origin of the word “BANK”


Opinion differs regarding the origin of the word “BANK”. According to some authorities, the word “BANK’ is derived from the Italian word “BANCO”, “BANCUS”. Which mean that “a bench upon which Italian money changers used to sit with their cons to transact business”,

The German experts says about the word “BANK” is originally derived form the word “BACK” which means a join stock firm or fund. This word was Italianized into “Banco” when Germans were masters of great part of Italy.


Generally it is said that “A financial institution which deals in money and credit. It borrows and lends money and credit. It borrows money and lends money and in this way acts as financial intermediary between the lender and borrower” We can simply say that


“The banker is a man who lends you an umbrella

when it rains, and takes it away when the weather is fair”.



Simple definition:

“Banks are Financial Departmental stores”

Experts Views:


Prof Kinley views:

“A bank is an institution which receives deposits and advanc s loans”


According to H.L.Hart


“A banker is one who, in, the ordinary course of his business, honours cheques drawn upon him by persons from or for whom he receives money or current account”.


According to Prof. Crowther


“A bank collects money form those who have it spare or ho are saving it out of their incomes. It lends money to those ho require it.”

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Comprehensive Definition


According to Banking companies’ ordinance 19

Banker means a person transacting the business of accepting for purpose of lending or investing of money from the  public, repayable on demand or otherwise with draw able by cheque, draft, and order or otherwise.


Kinds of Banks:-


(a)                  On the basis of Functions


(b)                  On the basis of Ownership


(c)                  On the basis of Registration


(d)                  On the basis of Domicile


Functional Classification:-


(i)        Commercial Banks:-


The most popular kind of banks is the commercial bank r c ives surplus money from the public and lends to othe s who needs funds. The bank collects chequ s, Bill of exchange etc for customers .Its transfers money from one place to another. The purpose of a commercial bank is to earn profit. The main commercial banks of Pakistan are National Bank, Habib Bank, Allied Bank, United Bank, MCB etc. These banks play a vital role in economic development.


Central Bank:-


Central bank is the most important bank of any country. Almost all countries of the world now have central bank. The central bank is the leader of all other banks. It does not compete for profit. It has a right to note issue. It controls the operations of other banks for monetary and economic stability in country. The central bank represents the Govt in International conferences.



Industrial Banks:-

The industrial bank is very important for the development of any country. To provide medium and long-term finance to industry is the distinguishing Features of these banks. Industrial banks generally provide finance for fixed capital requirement. They provide finance for expansion, modernization and establishment Bank (IDBP) was set up in 1961. The other institution engaged in providing financial assistance to industries are PICIC, NDFC, SME, etc.




Agricultural Banks:-


Pakistan is an ag icultural country and most of our exports consist of Agro-based products. So well organized agriculture sector is necessary for the development of a country. Agricultural banks prov de loan for this purpose. ADBP, Agriculture credit advisory committee and rural credit banks are the few examples of “Agriculture Banks in Pakistan”.

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Saving Bank:-


The banks are established for encouraging and collecting savings of people. Saving banks are not banks in the real sense of term. They only provide saving facility. These banks usually invest their funds in Govt securities. The well-Known Post Office savings Banks is an institution of this type. Commercial banks are also providing the service of saving banks in Pakistan.



Investment Banks:-


The bank is opened to buy and sell shares and other securities. It also provides loans for purchase of shares and debenture etc. It keeps new companies by under writing the share, bonds & other securities. At the end of June, 1992 Seventeen investment Banks, both Pakistani and foreign were functioning in Pakistan.


Merchant Bank:-


The bank provides services like acceptance of bills of exchange, corporate finance, Leasing, hire-purchase and insurance broking. It is a whole sale bank and accepts large sums for fixed term from individual, companies and financial institutions.


Baring, lazards are examples of Merchant Bank.


Consortium Banks:-


A Consortium bank is owned by other banks. The bank is formed to meet the financial requirements of large companies for long period of time. The bank receives the funds from the parent Bank. It can also arrange syndicate loans.


International energy Bank, Br t sh Middle East Bank, Orion Bank are the examples of consortium Banks.


Labour Bank:-


The Bank is opened by trade union of labourers. The purpose of this bank is to manage worker funds like pension funds, Provident fund etc in a better way. The Labourers also keep their saving in it. The bank provides loans to the concerns which are under the control of trade union. E.g. Union Bank, Saving Bank of Chicago, State Bank of Kansas city.


School Bank:-


The banks provide banking facilities to the students in schools. The boxes or bags are supplied to the students who keep their saving in boxes. Accounts are opened in the name of students. The bank officers go to the school after regular interval and collect the amount of their saving. In U.S.A Beloit saving Bank started working school bank in 1882.

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Mortage Bank :-


These banks provide loans to people against moveable and immovable property. HBFC is doing the working of Mortage Bank.



Cooperative Bank:-


These banks are set up to pr vide credit facilities to farmers and small producers. The bank is opened by persons of similar occupations living in same areas for providing banking facilities. In Pakistan the Co-Op rative bank registered under the Co-Operative societies Act 1925 and can be registered with registrar of Co-Operative societies at provincial headquarters.




On the Basis Of Ownership:-


Public sector Bank:-

Such banks are owned by government and works under the direct control of the government. The chief executive of such banks is

appointed by federal government. NBP are examples of public sector banks, First woman Bank.


Private Sector Bank:-


These banks are under the direct ownership of the private organization of Co- Operative Societies. The banks are controlled by the individuals or Pvt Organization, MCB, ABL and KASB Bank is the examples.



On The Basis Of Registration:-


Scheduled Bank:-


These are the banks which are registered in the list of central bank. They are bound to follow the instruction and policies of central bank.



Non Scheduled Banks:-


The banks which are registered and incorporated with in the country are called domestic banks.


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