Banking and its origin.

  

Date Posted: 12/6/2011 3:51:48 AM

Posted By: SimonMburu  Membership Level: Silver  Total Points: 838

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Banking can be defined as the act of accepting money from those who have have it in access of their immediate needs, safeguarding it and making it available to the owners and borrowers when needed. A bank is a financial institution which offers various banking services with the aim of making a profit.
DEVELOPMENT OF BANKING
During barter trade the use of gold as a medium of exchange posed a big problem as it had a very high unit price. The goldsmiths were later replaced by gold bankers who were more reachable.
FUNCTION OF COMMERCIAL BANKS
• Transfer of money-Channels of keeping and transferring money from one person to another.
• Safe keeping of money-Money deposited by customers is kept safely and made available when needed.
• Lending money-commercial banks offer loans to other customers who can provide security and who will repay with interest.
• Assisting traders in international trade-Doing business with people in other countries can be complicated. Banks offer useful services .e.g. guaranteeing payments to foreign suppliers (exports) to enable imports.
• Foreign exchange services-They have authority form C.B.K to buy and sell foreign currencies to the public on its behalf.
• Investment services-Providing advice to customers on issues like exchange rates, financing, business, financial management and business expansion.
• Advice on taxation taxation – When preparing returns they advice their customers and assist them.
• Acting as referees for their clients-The bank if requested will give financial reference about their customers.
• Acting a trustees-They can mange estate of a dead person n behalf of the beneficiaries.
• Safe custody-Valuable items which require safe custody can be safely kept in the banks at a small fee.
• Agents of stock exchange market-Banks can be instructed by individuals and organizations to buy and sell shares on their behalf.
• Publishing pamphlets-Banks can publish pamphlets, journals and articles on various financial issues.
TYPES OF ACCOUNTS OFFERED
• Saving accounts
• Currents accounts
• Fixed deposit.

CURRENT ACCOUNT
A current account holds short

term demand deposits. This mean s that the amount deposited can be withdrawn on demand at any time.

DISTINGUISH FEATURES OF A CURRENT ACCOUNT
1. Deposits of any amount can be made at any time
2. Deposits do not earn interest.
3. No minimum balance required.
4. Withdrawals of any amount without any notice
5. Cheque books issued to account holders to use as a means of payment.
6. Monthly bank statements are issued to account holders listing all transactions for the month.
7. Overdraft facilities are allowed to the account holder. This allows the account holder to withdraw more money that available in the account.
SAVINGS ACCOUNT
This is maintained by persons who have some money balances they wish to save. They are also known as deposit accounts.
DISTINGUISHED FEATURES
1. A deposit is required to open a savings account. This amount is referred to as the minimum initial deposit and varies from bank to bank.
2. Minimum balance maintained.
3. Money deposited earns some interest.
4. Withdrawals limited to certain amounts.
5. Account holders don’t have cheque books.
FIXED DEPOSIT ACCOUNT
This is normally operated by people with money not meant for immediate use. The money is deposited in the account for a fixed duration of time. They attract relatively higher interest rates. Once the money is deposited, no further deposits or withdrawals can be made into or from the account until expiry of the time period. If withdrawal is made before time no interest is paid.
ADVANTAGES OF FIXED DEPOSIT ACCOUNTS.
1. Interest rates are relatively.
2. No bank charges to account holders.
3. Money kept can be used as a security for getting a loan.

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