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What is a Bank?

Most of us are familiar with the banks and banking systems in our daily life as we must have seen our parents either drawing out cash or making deposits into their bank accounts. Back in the day, some of us would have accompanied them waiting in the long queues of the bank branch, before the efficiency of internet and online banking completely changed the banking process.

Simply put, banks are basically intermediaries between a lender and a borrower, wherein they get to keep the commission in between. However, they also perform other functions such as remitting people’s salaries, transferring remittances from Foreign countries, helping businesses to settle their payments by providing guarantees, depositing school fees, paying utility payments etc. In summary any transaction which involves money can be performed through the bank. In India, there are a few renowned private banks such as HDFC, AXIS, Kotak Mahindra bank, but most of the banks that can be found on our city streets are public sector Banks owned primarily by the Govt. of India.

Why Banks are Important

Banks are important for the simple fact that everything we see today is connected to the banking system in one way or the other. The entire system of money flow between individuals, businesses and countries which are all ran through the banks. In the absence of it, our economies would collapse and there would probably be complete mayhem. On an individual basis we need banks for drawing our salaries making deposits, avail Home/Car loans, make payment for our utility services etc. That’s why having a well-managed active bank account is very important in our financial journey.

Origin and Evolution of Banking

The origin of banking evolved from the early civilization wherein before invention of currency, people used to barter their goods among themselves, suppose a farmer who grew Rice barter their 2 Kg Rice with 2 Kg Potatoes or 1 Pottery item etc. However, this system had a major flaw which was the function of divisibility and exchangeability, for example what if the potter needs only 1 Kg Rice he can’t offer half of his pottery item or what if he doesn’t need Rice but the Rice farmer needs his pottery item, so the need for invention of currency as a common medium of exchange was felt and with the invention of currency the banking system evolved to regulate its flow and usage which we witness in its current form.

Types of Bank Accounts

There are two types of bank accounts, saving and current account. Current account has usually been opened by businesses as there are no limits on transactions and are usually associated with the loans for business activities availed by these businesses.

Saving account on the other hand are more suitable for people like us who are working as a salaried employee in different companies.

There are host of benefits associated with the savings account such as facility of ATM card, cheque book, debit card, mobile banking, and net banking for money transactions etc.

Things to Consider Before Opening a Bank Account.

As we grow up and start our career the one of the first thing our companies ask is to open a salary account, in most of the cases companies provide the options of banks they have tie ups with. Moreover, salary accounts are usually zero balance accounts wherein there is no need to maintain minimum balance in your account, however sometimes companies give you an option of opening a saving account in which they will deposit your regular salaries, or you may open a saving account for your personal reasons and needs. Below are few points which needs to be kept in mind before choosing to open a saving account for your hard-earned money.

  • The bank should be a reputed scheduled bank, as nonscheduled banks are not required to adhere to RBI guidelines hence are prone to mismanagement by people who has vested interests.
  • The minimum balance required to operate the account should be on lower side, as there are many cases where people have been charged huge penalties for the simple fact of not being able to maintain the minimum balance requirement.
  • You should not get influenced by the high interest rates offered on your deposits by the bank, as there are many irregularities of banks regarding depositor’s money has been uncovered in recent times by RBI. These type of banks lures naïve customers by offering high interest rates on their deposits. Sometimes depositors are not able to even withdraw their savings.
  • Home branch of the Bank should be in your vicinity for any needs which can’t be done online.
  • Bank should offer facility of ATM card, check book, debit card, mobile banking, and net banking for money transactions etc. without any major additional cost.

You need to be vigilant about all the above-mentioned aspects before opening an account in any bank because it’s a matter of safety for your hard-earned money. Hence you should choose a bank account which gives the best possible rate of return with the highest degree of safety possible for your deposits and suits your requirements adequately.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. City Credit Management LLP is not liable for any decision arising out of the use of this information.

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