LIAQUAT COLLEGE OF MANAGEMENT & SCIENCESMONEY & BANKING

ASSIGNMENT GROUP - 2 BS – III

ASSIGNMENT

Submitted to :

Sir Imran Hussain Palwa

•Definition Of Bank:

Institution that deals in money and its substitutes and provides other financial services. Banks accept deposits and make loans and derive a profit from the difference in the interest paid to lenders (depositors) and charged to borrowers, respectively. They also profit from fees charged for services.

The word “BANK” derived from an Italian word ‘BANQUE’ which

means a ‘BENCH’. It has originated from the German word ‘BANC’

which means a “joint stock firm.”

• Meaning Of the Word ‘BANK’:

•EVOLUTION OF BANK IN ENGLAND:

oThe Bank of England was formed in 1694 to financially help King Charles III (1689_1702). o Central bank of England was nationalized in1946. In mid-twenties many great banks were formed in the U.K. which were merged into four big banks. 1. Lloyd bank 2. Barclays bank 3. Midland bank 4. National bank

oThe First Bank of the United States, was established by the U.S. Congress in 1791. o The bank was revived in 1816 only for 20 years

•EVOLUTION OF BANK IN U.S.A:

oThe first bank in Indo-Pak subcontinent came into existence in 1809. oIts name was Bank of Bengal.oIn 1935 Reserve bank of India was established as a Central bank.

•Evolution Of Bank IN INDIA:

oThe banking sector was created with the setting up of the Habib bank in 1947 which was shifted to Karachi from Bombay. o Muslim commercial bank in 1948 from Calcutta to Chittagong. o In July, 1974 all commercial banks were nationalized.

•EVOLUTION OF BANK IN PAKISTAN:

•Central Bank:The central bank is the bank which regulates the banking system in the country. In every country, there is a principal bank which responsible for regulation and guidance of a financial system in the country. Central bank does not deal with general public. Pakistan’s central bank is the

“STATE BANK OF PAKISTAN”. Established on 1ST July,1948.

•Functions of Central Bank:

•The primary objective of the bank is to achieve and maintain price stability. • Determines the monetary policy and the monetary policy instruments to achieve and maintain price stability.• Supports the growth and employment policies of the government.

•Responsibilities of Central Bank:oConducting monetary policy.o Supervising and regulating depository institutions. o Maintaining the stability of the financial system.o Providing payment and other financial services to the government, the public and foreign officials institutions.

•Commercial Bank:Commercial bank are ones that receive deposits and advance loans and play an important role in the creation of credit money. They help businessmen to promote their businesses. They work for traders, manufacturers, wholesalers, retailers, exporter and importers.

•ROLE OF Commercial BANK IN THE ECONOMIC DEVELOPMENT OF A COUNTRY:•Banks promote capital formation• Investment in new enterprises • Promotion of trade and industry• Development of agriculture• Balanced development of different regions• Influencing economy activity• Implementation of monetary policy • Monetization of the economy• Export promotion cells.

•INDUSTRIAL Bank:Industrial bank offer valuable services for the development of industries in a country. They offer long-term loans, both in local or foreign currencies, to the industrialist.

•Agricultural Bank:The agricultural bank plays a vital role in the agriculture field. They provides loans to farmers and landlords to enable them to buy fertilizers, seeds, tractors etc. the loans are offered against the mortgage of the land.

•Mortgage Bank:

•Exchange Bank:Its deals in foreign exchange and is involved in foreign trade. It provides foreign exchange to importers. It buys and sells foreign exchange at open market rates which are generally different from the rates determined by the central bank .

It is the bank that commands its capital through deposits and dealing in shares and bonds. Mortgage banks lend for purchasing and reclaiming land, and discharging old debts. They mortgage 50% of the land. The period of loan ranges between 15 and 30 years.

•SAVING BANK:Saving bank is to encourage savings of the common man. These small savings, if deposited with the bank, turn into a large amount which channeled in the development of commerce and trade. Savings bank offer interest or profit to the accountholders.

•CONSUMER BANK:Consumer bank is a new addition to the existing types of banks. Such banks are usually found only in advanced countries like U.S.A and Germany. The main objective of this bank is to give loans to consumer for purchase of the durables like cars, television, washing machine, air conditions and etc.

•Bank account:

A bank account can be defined as a facility provided to the accountholder to deposit his money with the bank and withdraw it whenever he needs it. He may use the account to borrow and or settle his debts through cheques.

•Saving Account:

This account is very common in Pakistan.It was introduce by the bank for those who have low income and small savings. This account enable small severs to save and earn income on it.This account is also opened with the post office in Pakistan.

•Profit And Loss Sharing Saving Account (PLS):

PLS saving account was introduce in Pakistan on july1,1985The aim of this account is to mobilize saving of the people who do not want to earn interest but desire to be sharer in profit and loss:The bank invest these savings in non-interest areas of business.

Rules for PLS:•Account can b opened with a sum of RS:100/-•Withdrawal can only be made through cheques.•Withdrwal is allowed 8 times in a month.•Allowed withdrawl of rs:15000/- •For large amount a 7 days notice is required.

•HOME SAVING ACCOUNT:

In this type of account, the bank supplies saving box to the costumer,to enable him to drop his small saving into it from time to time.The box is taken to the bank periodically where the amount is taken out from the box and credited to the customer’s account This account is basically introduce to inculcate the habit of saving.

•CURRENT ACCOUNT:In current account,the banker incurs an obligation to honour all cheques drawn by the customer so long as there is enough money to the credit of the customer.The obligation may be extended by an agreement to the amount of overdraft agreed upon between the banker and the customer.The bank do not usually pay any interest on these deposits as they can be withdrawn without notice.The bank here acts only as the custodian of the money.

•Facilities For Current Account Holder:

•The bank collects properly endorsed cheques,bills etc.•The bank may allow the facility of overdraft on prior arrangements.•Loans and advances may be sanctioned to the credit worthy current account holders.•Withdrawal can b made through cheques and ATM cards provided by the bank.

•FIXED DEPOSIT ACCOUNT:

Fixed or Term deposit account is the major source of fund of a commercial bank.As the name implies is deposit which kept with is the bank for a fixed period specified in advance.The rate of interest is higher than that of saving deposits.The longer the duration for which the amount is kept with the bank,the higher is the rate of interest.The interest is paid to the depositer at the expiry of period for which the deposit has been made.The bank does not issue cheque book against fixed deposit.

•FOREIGN CURRENCY ACCOUNT:THE STATE BANK of PAKISTAN has introduce

a number of reforms in the foreign exchange control in the country.The main purpose of introducing the various reforms is to strengthen the foreign exchange reserves which hover around 13billiondollars and are only sufficient to cover the import bills of the country for few weeks only.The reason of opening this type of account is to Boosting Remittances and Mobilizing Foreign Exchange Resources.

•JOINT ACCOUNT:A joint account is a special bank account which is a opened in the name of two or more persons.For drawing the signature of all the account holders are required.But through an agreement they can allow any 1 of them to draw the amount.On the death of the either party, the bank allows the survivor to draw any balance standing to credit of the account.

•RESERVE ACCOUNT:

A valuation account that shows the estimated or actual decline in value of an asset and is always subtracted on a balance sheet from the related asset account to show net value ( for depreciation, bad debts, to reduce investments to market value) and also called  allowance account, provision account, valuation account.

An account representing ownership in a business as a proprietor's account and a partner's account. OR Any corporation account classified as part of net worth as a capital stock account and a surplus account.

•CAPITAL ACCOUNT: