Banks and Financial Institutions

In any economy, financial institutes play an important role because all the financial dealings and matters are handled and monitored by such institutes. The major components of financial institutes are banks, insurance companies, credit card agencies, investment companies, consumer finance companies, and other specialized financial institutes.

Banks and Financial InstitutionsThough all the components have a common role to play in the country’s economy, there is a significant difference between the banking and non-banking sectors. The banking sectors include commercial banks including private banks, public sector banks, and foreign banks that are mainly responsible for ensuring fiscal stability in the country. On the other hand, the non-banking sector includes all the other components like credit card agencies, investment companies, and insurance companies that are responsible to regulate and monitor lending as well as borrowing of funds.

The key difference between banks and other financial institutes is the facility of cash deposits. This unique facility is provided by the banking sector to all its customers through means of saving accounts and current accounts. This is an easy and effective way of handling all the personal as well as business finances. Apart from this, banks also serve as financial intermediaries offering a host of financial services to all customers.

Non-banking financial institutes do provide various types of financial services but are not entitled to offer a saving account. These institutes mainly serve as investment tools or to fulfill the financial needs of individuals and companies. However, in the present day, banks are gradually expanding their operations and are offering all financial services including investment, loan, credit, and bonds under one shelter.

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