1. the Functions Of Banking
The most important functions of banking may be classified as follows: (1) to assemble capital and make it
effective; (2) to receivedepositsandmakecollections; (3) to check out andtransferfunds; (4) todiscountor
lend; (5) to exercise fiduciary or trust powers; (6) to issue circulating notes. Everybankwhich expects to
succeed must first of all prove its value to the community. The services which a bank performs are so
generally taken for granted that the public is unaware of the real extent of the facilities offered. Banks are
equipped to utilize funds, for either ashortor long period of time, safely, and with
someprofit.Depositorsindividually do not enjoy the same ability. An individual's unused funds are perhaps
small in amount, cannot be loaned toadvantagewith the assurance of immediate return when desired, and
the care of themoneyinvolves worry and risk. The bank, on the other hand, possesses the necessary
men, machinery and experience. By obtaining deposits, each perhaps small in itself, from many people, it
acquires a large reservoir of funds. From this supply, which is constantly being increased by
additionaldepositsand decreased by withdrawals according to the needs and circumstances of the
depositors, the bank can now makeloansandotherinvestmentsfrom time to time. It is known as a place
where loans may be sought, and it is protected in making theseloansof funds which it has had left with it
on deposit by the law of averages which usually operates in such a way that withdrawals and deposits
about balance each other, the normal tendency being in favor of a net increase. By receiving deposits
and making collections the bank saves the depositor much personal effort. To receive or deposit in one
city a check made payable in another, hundreds or thousands of miles away, to convert that check in a
relatively short time intocashavailable for the depositor's use, and all this with no direct assistance from
the customer and at a very slightexpenseto him or none at all, is indeed service. So also is the willingness
of the bank to collect promissory notes,draftsand other negotiable paper in a similar way. In addition to
taking care of funds without charge and making collections, the bank provides the means of withdrawing
and transferring funds readily by giving its customer a book of blank checks. If a depositor owes another
man one hundred dollars, the depositor need not go to the bank, withdraw the cash and pay his debt. He
can give his creditor an order on the bank, which can be presented at the bank in person and the cash
obtained, or it can be deposited in this or another bank. By lending money the bank benefits the
community to the extent that itsuppliesfunds to assist worthy business. Temporary working capital to
assist in the commercial, agricultural or industrial life of a community is very important. Borrowers logically
look to a bank for such assistance and are thereby saved the necessity of either going without the funds
they need or spending an endless amount of time and effort in negotiating many small loans from
individuals. Note issue, originally a common right of a bank, is now restricted by law to National
banks,Federal Reserve banksand the Government, and is chiefly valuable as a means of putting
additional currency in circulation according to the needs of trade. There has been such an enormous
growth in the business done by trust companies and by trust departments of banks in the last few years
by acting in various fiduciary capacities that it seems necessary to include this as one of the important
banking functions, which will be more fully discussed a little later.
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2. Introduction To Banks
Banks have developed around 200 years ago. The natures of banks have changed as the time has
changed. The term bank is related to financial transactions. It is a financial establishment which uses,
money deposited by customers for investment, pays it out when required, makes loans at interest
exchanges currency etc. however to understand the concept in detail we need to see some of its
definitions. Many economists have tried to give different meanings of the term bank.
Nature of Commercial Banks
Commercial banks are an organisation which normally performs certain financial transactions. It
performs the twin task of accepting deposits from members of public and make advances to needy and
worthy people form the society. When banks accept deposits its liabilities increase and it becomes a
debtor, but when it makes advances its assets increases and it becomes a creditor. Banking transactions
are socially and legally approved. It is responsible in maintaining the deposits of its account holders.
Definitions of Commercial Banks
While defining the term banks it is taken into account that what type of task is performed by the banks.
Some of the famous definitions are given below:
According to Prof. Sayers, "A bank is an institution whose debts are widely accepted in settlement of
other people's debts to each other." In this definition Sayers has emphasized the transactions from
debts which are raised by a financial institution.
According to the Indian Banking Company Act 1949, "A banking company means any company which
transacts the business of banking . Banking means accepting for the purpose of lending of investment of
deposits of money from the public, payable on demand or other wise and withdraw able by cheque,
draft or otherwise."

3. Functions of Commercial Banks
Commercial bank being the financial institution performs diverse types of functions. It satisfies the
financial needs of the sectors such as agriculture, industry, trade, communication, etc. That means they
play very significant role in a process of economic social needs. The functions performed by banks are
changing according to change in time and recently they are becoming customer centric and widening
their functions. Generally the functions of commercial banks are divided into two categories viz. primary
functions and the secondary functions. The following chart simplifies the functions of banks.
Primary Functions of Commercial Banks
Commercial Banks performs various primary functions some of them are given below
Accepting Deposits : Commercial bank accepts various types of deposits from public especially from its
clients. It includes saving account deposits, recurring account deposits, fixed deposits, etc. These
deposits are payable after a certain time period.
Making Advances : The commercial banks provide loans and advances of various forms. It includes an
over draft facility, cash credit, bill discounting, etc. They also give demand and demand and term loans
to all types of clients against proper security.
Credit creation : It is most significant function of the commercial banks. While sanctioning a loan to a
customer, a bank does not provide cash to the borrower Instead it opens a deposit account from where
the borrower can withdraw. In other words while sanctioning a loan a bank automatically creates
deposits. This is known as a credit creation from commercial bank.
Secondary Functions of Commercial Banks

4. Along with the primary functions each commercial bank has to perform several secondary functions too.
It includes many agency functions or general utility functions. The secondary functions of commercial
banks can be divided into agency functions and utility functions.
Agency Functions : Various agency functions of commercial banks are
To collect and clear cheque, dividends and interest warrant.
To make payment of rent, insurance premium, etc.
To deal in foreign exchange transactions.
To purchase and sell securities.
To act as trusty, attorney, correspondent and executor.
To accept tax proceeds and tax returns.
General Utility Functions : The general utility functions of the commercial banks include
To provide safety locker facility to customers.
To provide money transfer facility.
To issue traveller'scheque.
To act as referees.
To accept various bills for payment e.g phone bills, gas bills, water bills, etc.
To provide merchant banking facility.
To provide various cards such as credit cards, debit cards, Smart cards, etc.
Regional bank
In the US, the term regional bank is used to describe a midsized
depository institution that is larger than a community bank, but
smaller than one of the large money center banks. The term
regional bank does not have an exact definition, but a regional bank
has certain characteristics. First, in a list ranked by assets a regional
bank would not make the top 5, but the largest of these would be in
the top 25. Second, a regional bank has a presence in a single
geographic region, perhaps spanning more than one state. Third,
the regional bank probably does not have any international

5. presence. Fourth, the regional bank probably has more than a
handful of retail branches. Ongoing consolidation in the banking
industry periodically results in the merger or acquisition of a well-
known regional bank. Examples of major regional bank in 2005
include Fifth Third Bancorp, PNC Financial, and North Fork Bank. An
alternative classification scheme used by the FDIC that does not
include the term regional bank groups banks as either top 25, mid-
sized, or community.
A bank that only operates in one state or province, or in only a few neighboring states or provinces. A
regional bank differs from a money center bank, which has a national and/or global presence. Regional
banks usually specialize in retail banking, making loans and taking deposits. See also: Thrift, Regional
exchange.
A bank that operates in one region of a country, as opposed to a money center bank, which operates nationally and
globally.
A bank with deposit gathering and lending concentrated in a particular
geographic area of the country. For example, a regional bank may serve four
southeastern states.
Community Bank
Unlike huge multi-state and multi-national banks, community banks are locally owned and operated banking
institutions. These community banks offer all of the standard banking services including checking, savings, loans and
mortgages, safe deposit boxes, etc., for both consumers and business customers. Most community banks do not
offer some of the services that larger banks offer such as brokerage services and multi-million dollar financing.
The advantage of banking with a community bank over larger banks is that community banks are locally owned and
operated. This means that all lending decisions are made locally by people who understand the unique challenges
and financial needs of the business people and residents who live and work in the community that the bank serves.
This fact often makes it easier to obtain a loan that might not be written by a bigger bank for any number of reasons.
But don't assume that your money is not safe in a community bank just because it is small. Community banks are
governed by the same laws that govern the big banks and your money is insured by theFDIC just like it would be if
you banked with one of the giants.
Money centre bank.
A large bank in a major financial center which borrows from and lends to governments, corporations, and other banks,
rather than consumers.
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6. Diversified financial
Definition
The diversified financial services segment includes a range of consumer and commercially-oriented
companies offering a wide variety of products and services, including various lending products (such
as home equity loans andcredit cards), insurance, and securities and investment products. Some of these
firms were created during the wave of consolidation that has taken place in the financial industry over the
past decade.
Specialized finance
The development of financial systems in emerging markets requires a reasonable degree of diversity and
efficiency, which usually involves creating specialized financial intermediaries. Research has shown that
income level and the degree of financial intermediation and diversity are closely associated.
The Bank Group works with client countries to increase diversity and efficiency in their financial systems
by developing specialized nonbank financial intermediaries (e.g., leasing companies, private equity funds)
for SME finance and by creating efficient, market-based housing finance, which also improve urbanization
patterns.
Specializedfinance system
Overview of the specialized finance system
Our main product, the Specialized Finance System, or SFS, is a credit risk management system designed to handle
large, complex deals with multiple tranches and currencies. It is an integrated, completely customizable solution for
measuring, managing and reporting on the risk and performance of specialized finance assets including commercial
real estate and project finance from both a debt and equity perspective.
Main benefits of the SFS
Consolidation of loan information
The SFS credit risk management system allows a bank to properly consolidate all loan data into an integrated
system, beginning with initial structuring, through pricing, and continuing on to maturity. After initial data entry, either
manually or electronically, the bank will be able to put to good use everything known about the collateral, borrower, or
changes in valuation. Information from multiple banking systems at an institution are customarily fed into the SFS.
Structuring and Pricing
As the most flexible and effective credit risk management system available for loan origination, the SFS collects and
makes use of the rich data to price and structure deals in complex asset classes.
Risk Analysis
The SFS provides a complete structure for consolidating all known loan information, thereby streamlining the risk
management process. It is capable of slicing the portfolio to separate the assets by credit exposure in a geographic
area, LTV, size, margin, maturities and other variables.

7. For each loan in your portfolio, the SFS models the cash flow—allowing any amortization structure—and uses cash
flow simulation to generate all necessary risk metrics for a single investment or portfolio as a whole. Risk metrics
include probability of default (PD) and loss given default (LGD) at the loan and portfolio-level. The SFS is also widely
used for grading, structuring and pricing loans still in the pipeline.
Reporting
The SFS easily generates risk reporting and graphical representation of the analytics for both internal and regulatory
reporting, including those required for Advanced Basel II compliance. It is also used to calculate economic capital.
Stress testing
The SFS is an intuitive system that is completely configurable to your bank’s macroeconomic outlook. Future
assumptions used in cash flow models can be easily updated in the system, making stress testing a matter of
selecting parameters, such as interest rate movement, and then running the whole portfolio again. Of course, the
challenge of stress testing is determining which factors to stress, which ones should be done together and how many
factors should be stressed.
Implementation & customization
For more than 10 years, Risk Integrated has refined and enhanced the SFS to meet the evolving needs of large
banks and asset managers. During each implementation, we apply our knowledge and experience to accurately
assess your bank’s exact requirements and customize the SFS, sometimes markedly, to meet those needs.
Three Delivery options for implementation
Fully outsoursed portfolio analytics
The client sends the loan-level data to Risk Integrated and receives back a set of detailed portfolio projections for
grades, losses and cash flows. The analytics are by far the most detailed available in the market for commercial real
estate lending. The requirements for the input data per loan are extremely flexible and range from half a dozen to a
thousand unique fields depending on the deal's complexity and the institution's current state of data availability. This
service is provided on a one-time or quarterly basis
Hands-on analytics with outsoursed.It infrastructure
This approach is applicable both for portfolio analyses such as stress testing and deal-level analyses such as
grading, structuring and pricing. In this approach the client has full access to all the risk models and documentation.
After training, if desired, the client can define their own stresses, parameters and even alter the model structure to
suit their institution’s business and view of the market. For rapid and flexible implementation, the software is
accessed securely across the web and run on dedicated servers in Risk Integrated's data centers. This means that
there is no requirement for an initial in-house IT implementation.
Hands-on analytics with in house it infrastructure
This approach is applicable for portfolio and deal-level analysis and, again, the client has full access to all the models.
After the initial trial on Risk Integrated's servers, the software in installed in-house and fully embedded in the client’s
IT infrastructure and data flow.
Consumer finance perspectives: Consumer finance can be studied from 3 principal perspectives:
Individuals and households
Financial companies and the financial industry
The broad political economy

8. Applicability of consumer finance: Apart from its immediate utility to the student, the study of consumer finance also is
highly appropriate for anyone who expects to be a financial services professional who will be advising clients on
personal finance issues. These career paths include, but are not limited to:
Consumer finance
Definition
The division of retail banking that deals with lending money to consumers. This includes
a wide variety of loans, including credit cards, mortgage loans, and auto loans, and can
also be used to refer to loans taken out at either the prime rate or the subprime rate.
Consumer finance has to do with the lending process that occurs between the consumer and
alender. In some instances, the lender may be a bank or financial institution. At other times, the
lender may be a business that offers in house credit in exchange for the business of the consumer.
Consumer finance can include just about any type of lending activity that results in the extension of
credit to a consumer.
Most people have received financial assistance in obtaining desirable products through the use of
consumer finance methods. In retail banking, the lender extends secured and unsecured loans to
consumers who wish to purchase automobiles, homes, or engage in other activities that require
substantial financing, such as remodeling a home. Generally, consumer lending of this type caries
some degree of competition, since the consumer with a solid credit rating can often shop around and
secure superior interest rates and terms for the loan agreement.
At the same time, not all forms of consumer finance are in the best interests of the consumer. In
many parts of the world, institutions are in the business of lending money even to consumers with
poor credit ratings, or who lack a reasonable ability to repay the borrowed funds. This can take the
form of credit card offers, loans with extremely high rates of interest included in the finance structure
of the loan, and other terms that will be difficult if not impossible for the consumer to meet.
As with any type of financial arrangement, it is important for the consumer to understand the exact
nature of the commitment that is made as part of any consumer finance strategy. By understanding
and accepting the terms and conditions associated with any lending situation, the consumer is
pledging that the ability to repay within terms is present, and that the consumer has every intention
of complying with each component or section of the loan agreement. To this end, it is in the best
interests of the individual consumer to seek out the most desirable arrangements for any type of
consumer finance, taking care to avoid any situation that will place an undue amount of stress on the
resources in the possession of the consumer.