In this article, you will learn the things you must know before making a bank account.
Definition
A bank is a financial institution that acknowledges deposits from the general public and provides loans. Additionally, they provide many services that the public finds convenient for storing their cash, property, business, and so on. The main roles of banks are to provide quality services to their customers and generate profit. It can also be called an intermediator, taking cash or deposits from customers with a certain interest and providing it to needy populations with a higher interest.
It totally depends on consumers or customers how they want to use the several features of the bank, like depositing money for a certain period of time, earning interest, taking a loan, etc, for many purposes, like purchasing automobiles, building, business, organization, education, etc. You must know your objectives or need to find out which category you are looking for.
In this digital world, no one has hands-on money. Even in most places in Nepal, it’s been digitalized day by day. For instance, the majority of people deposit cash in a bank and enable different services like mobile banking and ATMs. So, by having such features, people can buy anything anywhere without taking money with them with the help of these features. It’s so easy to pay by mobile banking, scanning, esewa, and all.
Types of Banks
- Commercial Banks.
- Development Banks.
- Finance Banks.
- Financial Institution for Microfinance.
All types are categorized into various classes, from “A” to “D”. Commercial banks are classified as class “A,” development banks as a class “B,” finance banks as a class “C,” and microfinance financial institutions as a class “D.”. Whereas every bank is monitored or regulated by the central bank, i.e., Nepal Rastra Bank, which was established in 2014 B.S. Baisakh 14.
Role of Banks
Their main role is to accept deposits from depositors by giving a certain percentage of interest, and as an intermediator, lend that money to borrowers with a higher percentage than depositors and also receive repayment of loans.
Advantages of using Banking System
- Security of Wealth:
There is no safer place than a bank to deposit or keep your money or wealth in a safe place. There may be a chance of theft, robbery, invasion, and many more. In fact, the bank will take all the responsibility for your property.
- Affordable Loans:
Still, many people take loans from the general public with higher interest rates; sometimes they aren’t able to pay on time due to high interest. The bank provides loans with lower or affordable interest rates, where the majority of people find it easy to repay the loans systematically.
- Fuel for Economy:
Banks usually provide the money as a loan to borrowers with certain interest to many, small businesses, industries, education, and agriculture, however, it will assist to increase the economy as well as help to grow employment rates.
Disadvantages of Using a Banking system
- Possibility of bankrupt:
The majority of people withdraw huge amounts of money at a time, and the system of banks operates through deposit and loan processes. However, if the depositor is less or deposits a lesser amount of money, then the bank will be unable to assist them. In fact, we wouldn’t be able to withdraw the amount of money we needed to.
- Risk of Cybercrime:
In today’s technological world, there are several hackers who have been threatening the banks about stealing money, public ATM authorization, and so on. So they have to make the system more systematic, shield security, and hire ethical hackers. And doing so may end up costing customers more.
Core Banking System
A CBS (Core Banking System) is system software that enables clients to run a business independently of the bank’s branch. It is known as a central server that cooperates with the entire element or overview of CBS, for instance, ATM, Internet banking, etc.
Elements of CBS
- Bank Offices.
- ATM Switch.
- Internet Banking.
- Phone Banking
- credit/card system.
- Data Warehousing.
- Branch.
- Central Server
SWOT Analysis of Banks’
The SWOT Analysis consists of the analysis of the strengths, weaknesses, opportunities, and threats of banks. Where strength and weakness are known to be internal factors, opportunities and threats are external factors. In today’s world, you cannot imagine a world without a banking system that makes your life easier to live. In fact, you need to know each and every piece of information before using it.
