Question

What is a Bank?

Hint:

The defining characteristic of a bank is its dual function of both accepting deposits and making loans. An institution that does only one of these is a non-bank financial company (NBFC), not a bank.

Answer 1

Step 1: Understanding the Concept:
The question asks for the definition of a bank, which is a key financial intermediary in any modern economy.

Step 2: Detailed Explanation:
A Bank is a licensed financial institution that performs two primary functions: \begin{enumerate} \item It accepts deposits from the public (individuals and businesses) who have surplus funds. \item It provides loans and advances to those who are in need of funds for consumption or investment purposes. \end{enumerate} By performing these two functions, a bank acts as an intermediary, channeling funds from savers to borrowers. Besides these core functions, banks also provide a range of other services like fund transfers, cheque collection, foreign exchange services, and locker facilities. They play a crucial role in the creation of credit and the functioning of the payment system in an economy.

Step 3: Final Answer:
A bank is a financial institution that accepts deposits from the public and uses that money to grant loans, thereby facilitating the flow of money in the economy.