Basic concept of the banking system:

The basic concept of the banking system:

In ancient times, people used to deposit their surplus money in temples, merchants, goldsmiths, moneylenders, etc. for security. Again, if necessary, he would lift from there. Once the depositors saw that they had a lot of money in their hands. So he thought of depositing a portion of the deposit and investing the rest as a loan. Later, he introduced the system of handwritten receipts for smooth operation of deposit taking, lending and lending. Since then, the banking system has taken an institutional form, not at the individual level. Initially the banking system was based on sole proprietorship but later it was established as a partnership, joint venture business. 

At one time the state came forward to establish a central bank to control the money market, issue notes and currency under its own control. At one stage, branch banking system was introduced to provide massive banking facilities to the people. At present, the banking system based on computer technology, specialized banking, e-banking, the bank has been able to make its own development through the provision of these technological services, as well as accelerating the economic development of the country.  

 

Classification of Bank: basic concept of the banking system

The origin of the bank is due to the economic needs and security of the people. However, it is not possible for a bank to meet the needs of different classes of people. Different types of banks have been created for this purpose. E.g.- 

A. Banks on the basis of ownership

B. Functional class division

C. Class division on the basis of organizational structure

D. Class division on the basis of enrollment 

A.    Banks on the basis of ownership

1. Government Banks: Banks which are formed, operated and regulated by the Government are called Government Banks. Privately owned banks can also be brought under government ownership through nationalization. For example, there are four government banks in Bangladesh including Sonali Bank and Janata Bank. 

2. Private Banks: Banks which are formed, operated and regulated by private enterprises are called private banks. Private banks are operated under the indirect control of the central bank for the purpose of listing. 

3. Public and Private Jointly Owned Banks: Banks formed and operated by government and private individuals are called public and private jointly owned banks. These banks are 51% government owned and 49% privately owned. For example, Rupali Bank of Bangladesh. 

4. Autonomous Banks: Autonomous banks are the banks that are formed by special laws of the government and special ordinances of the constitution. These banks operate under their own management and independently. Bangladesh Bank, Bangladesh Development Bank is an autonomous bank. 

 B. Functional class division

1. Central Banks: Central banks are those banks which are under the ownership and control of the government and are responsible for the circulation of notes and currency, guardians of the money market, bankers of other banks and formulation and implementation of monetary policy as well as overall economic functions. The central bank of Bangladesh is 'Bangladesh Bank'. 

2. Commercial Banks: Banks which deposit people's money at low interest rates and lend at high interest rates for the purpose of making profit are called commercial banks.

3. Cooperative Bank: A bank formed, operated and regulated in accordance with the prevailing cooperative laws of the country is called a cooperative bank. The bank provides low interest loans to its members for their economic welfare. The main objective of this bank is to make profit but also for the financial welfare of the members. 'Bangladesh Cooperative Bank' is the cooperative bank of Bangladesh. 

4. Krishi Bank: The Krishi Bank is a bank established to ensure the development of the agricultural sector of a country by providing money to farmers, providing loans, ensuring supply of fertilizers and seeds and providing various assistance. Krishi Bank in Bangladesh is Rajshahi Krishi Unnayan Bank, Bangladesh Krishi Bank. 

5. Shilpa Bank: Shilpa Bank is a bank which is formed to provide adequate capital to the industrial sector of a country and to provide necessary advice, assistance and cooperation. For example, Bangladesh Development Bank. 

6. Exchange Banks: Banks which are formed for the purpose of determining foreign exchange, settling transactions, ensuring supply of foreign exchange, etc. in the field of foreign trade are called exchange banks. There is no such bank in Bangladesh. 

7. Investment Banks: Banks that are established to provide long term capital to a business organization are called investment banks. Apart from providing loans, these banks also buy and sell shares, debentures and securities of government and non-government organizations. 

8. Merchant Bank: A bank formed by a combination of exchange banking and investment banking is called a merchant bank. The bank issues credentials on behalf of the customer, recognizes the bill of exchange and pays the bill and also provides advice if required.

9. Savings Bank: It is called a savings bank by helping the people in different parts of the country to form capital by collecting the money lying around.

10. Regional Bank: A bank established for the economic development of a particular region is called a regional bank. Such as- Asian Development Bank (ADB), Islamic Development Bank (IDB) etc. 

 

C. Class division on the basis of organizational structure

1. Single Bank: A bank that conducts its banking activities through a single office is called a single bank. This bank is more common in the United States. 

2. Branch Bank: A bank system in which multiple branches are formed and operated simultaneously in different parts of the country and abroad through a central office is called a branch bank. The United Kingdom is also known as the British banking system due to the origin of such banks.

3. Chain Bank: A chain bank is a bank which conducts its banking activities on the basis of mutual cooperation and agreement while maintaining its independent entity and own capital. There is no such bank in Bangladesh.

4. Group Bank: A group of banks in which small, weak, homogeneous banks conduct their banking operations under a strong bank. The controlling bank is called the holding company and the one whose control is assumed is called the subsidiary company. Such a bank originated in the United States in 1930.

D. Class division on the basis of enrollment

1. Listed Bank: Listed bank refers to the banks included in the list of Central Banks. That is, the banks included in the list of central banks are called listed banks. A bank must have a minimum paid-up capital of Rs 400 crore to be listed by the central bank.

2. Unlisted Banks: Banks which perform banking functions without being listed by the Central Bank even though they are constituted under the Banking Act are called Unlisted Banks.

 

These are basic concept of the banking system.