Banking Basics: Standard Activities of a Bank

A bank is a financial intermediary that receives deposits and channels those deposits into lending activities. Banks are active players in financial systems and are also are financial system's fundamental component.

Banks act like payment agents by carrying on current or checking accounts for customers, paying cheques, which are drawn by customers, and obtain cheques which are deposited to customers' current accounts. Banks also allow the customer payments by the way of other payments like EFTPOS, telegraphic transfer, and ATM.

Banks accept the funds which are deposited on current accounts, it accepts the term deposits, and issues the debt securities like bank notes, and bonds. Money is lent by banks to customers through making advances on current account, and through investing in marketable debt securities, through making installment loans and other forms of money lending.

Almost all payment services are provided by banks, and most businesses, governments and individuals consider the bank account as indispensable.

Banks lend the most funds to non-financial businesses, households, etc. Banks borrow most funds from non-financial businesses, and households, but non bank lenders arrange many conditions enough substitute for bank loans, cash management trusts and money marker funds, and other non banking financial institutions.