Everything with which we are much familiar, is difficult to be defined. The paradox applies to the bank also. We are much familiar with banks in our day-to-day life, but when it comes to definition, one is bound to keep silent. Different people have defined bank in different forms. In simple and direct words, we think of bank as an institution which accepts deposits from public and lends money. People either for the sake of safety, or for the sake of income in the form of interest or for both, like to deposit their money with the banks. Banks accept their deposits on interest and lend it to other people on a higher rate of interest, thereby earning profit for themselves.
The primary business of bank is to receive deposits and give loans, yet some banks are specialized in one task while are others are in other tasks. On the basis of the specialization, the banks are classified under the following heads:-
1. Central Banks
The Central Banks is the principal bank in a country. It is the head of the banking system. Besides the fact that this is the principal bank of a country, its other functions and status are still more important. It acts as the banker's bank. It is the banker of the government. The deposits of the government are maintained with it. it lends money to the government and has the responsibility of adjusting all the responsibilities in monetary and financial matters which the government bestows upon it. In addition, this Central Bank has the sole authority of controlling the credit and money supply of the country. It controls the volume of currency by its sole right of issuing notes. It controls credit by controlling the lending business of the commercial banks through the various techniques such as discount rate, manipulations, open market operations, changes in the reserve ratio and the selective credit control.
2. Commercial Banks
These types of banks are most numerous in number and are also popular. Their functions are manifold and this is the reason that they are found in the greatest number and have gained much currency. The main functions of such banks are accepting deposits, lending money through overdraft, loans discounting of bills etc. working as a agent of its customers in the takes assigned by their customers and financing of trade and industry. But it must be noted that these banks lend money on short-term basis, not on long-term basis. Besides doing the function of commercial banking, they also deal in foreign exchange and may do some other banking functions also.
3. Industrial Banks
Industrial banks arrange long-term loans for industry. These banks accept long-term fixed deposits.mainly deal in the financing of industry for long periods. Such loans are also given for specific purposes which are productive and expected to yield return after the allowed time. In industry advanced countries these banks have a great role to play in industrial development.
4. Agricultural Banks
Agriculture has its own problems and hence there are separate banks to finance it. They may be divided into two sections: one for meeting the long term and the other for other for meeting the short-term needs. Long-term needed for making permanent improvements in land, buying more lands and introducing better methods and costlier implements. Short-term credit is meant to supply funds for day-to-day operations of the agriculturists. These include buying of seeds and manures, personal and labor expenses and payment of water rates and taxes etc. The nature of the securities offered by the agriculturists and the length of time for which capital is required, make it impossible for commercial bank, exchange banks and industrial banks to take up this finance. Hence we have got land-mortgage banks and cooperative banks, which render this service to the community, the former by catering for long-term needs and the latter by catering for short-term needs.
5. Land Mortgage Banks
These banks provide loans to cultivators by mortgaging their land whenever the cultivator has to do some permanent reforms in his land, viz, making boundary around the field, purchase of machine, digging of well or for any other work. He can borrow money form land mortgage bank by mortgaging his land such banks arrange, short medium and long-term loans.
6. Exchange Banks
These banks mainly deal in foreign exchange. They purchase foreign currencies and sell them to those people who have to make payments abroad. Though commercial banks deal in foreign exchange as their specific function, yet these banks are specific in the task. Exchange banks besides financing foreign trade, also finance the internal trade.
7. Cooperative Banks
These types of banks are nothing else then commercial banks but their organization is carried on cooperative lines. The principles of cooperation are different from all other forms of the joint stock organizations, has they are treated on different stand due to some peculiarities in regard to their fund and character.
8. Saving Banks
Though all the commercial banks have savings accounts with them, there may be some specialized banks which deal in the small amounts of the savings of the people.
9. Private Banks
While different kinds of banks described above are banks run on modern lines, there are some private bankers who combine trading and carry on their business in the most antiquated from. We have already studied of such bankers in England. Their number now is sufficiently large even in this country their number is increasing day by day. Almost the whole of the agricultural industry and a considerable portion of the internal trade is financed by them. They require to be reformed, but as has been aptly remarked by one of the writers on this subject, "they constitute and indispensable element in the country's financial system, and not only Pakistan but the world would be poorer by their extinction. "In fact, there are some such bankers in every country in the modern says also.
10. Miscellaneous Banks
There are certain other kinds of banks which have arisen in due course to meet the specialized needs of the peoples. In England and America, we got investment banks whose object is to control the distribution of capital into several uses. American trade Unions have also got labor banks where the savings of the laborers are pooled together. Some of the colleges in the country have started students banks to receive their deposit of the specialized student community. The merchant bankers or Accepting Houses of London perhaps represent another highly specialized development of the financial structure. In modern times trade depends on credit. But when a merchant sells goods on credit to foreign merchants he takes immense risks and sell goods on credit to foreign merchants he takes immense risks and must therefore set up a machinery for watching them in every country to which he sells. These merchant's bankers have taken up this job and in view of their close relations with the important importing agencies all over the world, they undertake to accept exporter's bills on their behalf.
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