Banking Simplified!!

 Banks!

What are banks?

Banking has been an old art of making money by giving money.

Let me simplify!!

Well, banking is taking deposits (money), to provide loans (money) for a fixed rate of interest (money) which is given to the bank by the person or an organization that takes the loan (money) and the bank gives the interest (money) to the person whose deposits (money) were taken by the bank. 

For banks to make a profit (money), the interest rate that is charged on the persons that take the loans (money) should be higher than the interest rate that is given to the persons that provide deposits to the bank.

Thus, banking is a business about money. Some banks such as Islamic banks, don't charge interest and thus, only have to rely on other sources of income such as investment in shares and commission for selling insurance or other products. 

Banks in many countries tend to be owned by the government but there are many banks which are private. Especially the case with developing countries such as India. The monetary policy is decided by the top banks such as the Reserve Bank of India (R.B.I.) in India and Federal Bank in the USA.

What is the monetary policy? It is the policy that decides the interest rates indirectly as the smaller banks are forced to reserve some percentage of money with the top banks. Such rates are the Cash Reserve Ratio (CRR) and the Statutory Liquidity Ratio (SLR). Cash Reserve Ratio requires banks to deposit money in the Cash form while Statutory Liquidity Ratio requires banks to deposit in liquid assets. Such ratios are usually decided by the government during the annual budgets. 

Banking provides a lucrative career option. From finance to marketing and HR to ATM technicians, everyone can get a job at bank. As for entrepreneurs, setting up a bank requires a lot of capital and abiding by the rules set by the government and the top bank. 

Thus, banks are unique institutions worth your attention and banking is an art as well as a science of securely managing money and providing the money to those that need it the most.