Financial Institutions help in easy access of money. Many of them allow people in need to deposit their valuable items like gold jewelries to meet the immediate economic crisis. Every country has a system of regulating the flow of money within the financial set up of a country. The overall contribution of financial institutions in strengthening the financial condition of the nation consists of a systematic process.
Bank as a Financial Institution
Savings Accounts It accepts money from individuals and helps them to save the money for important situations of life. Thus, this deposited money acts as savings to be utilized at crucial moments. The money deposited in bank by people with a purpose of saving the surplus cash is kept in their individual savings account. The money deposited in the savings account is kept for a fixed tenure of time and extra dividend via the varied interest rates is added to the client’s savings account.
The larger the duration of the fixed tenure more will be the rate of interest applied, thus increasing the amount of the dividend.
Bank Helps to Secure Surplus Amount of Money Transaction
Accounts Generally people come to deposit money in the banks to save it from getting stolen or lost. Apart from the people who deposit money for saving it for future purposes, many individuals deposit money in transaction accounts of a bank. Unlike savings account here the money is deposited without any intention of saving it. Instead the individuals can withdraw any amount of money as required according to their desire. Thus, here the people who deposit money in the transaction accounts do not receive any extra dividend in the form of interest.
Unlike the people who have surplus money to deposit there are individuals who face money deficit problems and come to banks to borrow the required cash. The purpose of borrowing money can be many like to start business, make a new home, buy a car etc. These money borrowing people are given money in the form of loan with certain rate of interest. Here the interest applies in the form of excess money to be paid along with the money borrowed as per the amount and the tenure. Other Factors the money which the banks give away to the borrowers is actually the money deposited by their clients. Thus when a borrower returns the money back to the bank along with the extra amount, it distributes a part of this excess quantity to the savings account of the clients as dividends. Before giving money a bank inspects the possessions of an individual. This is done with a purpose that in case the borrower is unable to return back the money in the scheduled time with the rate of interest the bank will take away the possessions of the borrower in lieu of the cash. The bank also has provisions of ATM card and Credit Cards. In case of the ATM card a client of a particular bank can withdraw money in cash form from any retail outlet of the bank. With the help of credit card a client can shop, with a promise of giving back the amount. And with the emergence of internet, transaction of money can be done without any hassle online.