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The function of a bank is deficit financing and deposit mobilization. They collect deposits from customers and grant loans to people and businesses that need financing.
They collect an interest from the loan customers and in turn grant interest to the deposit holders.
A Bank is a financial institution that serves as the intermediary in the economy. They are responsible for cash flow within the nation's economy. They accept deposits from customers who have surplus money and use that cash to grant loans to those customers who need money. Their main functions include:
1. Accepting Deposits
2. Lending Loans
3. Providing Bank Accounts
4. Providing Credit Cards
5. etc.
The main purpose or function of banks is to keep the flow of money in the economy. That is, to transfer money from the ones that have surplus to the ones that need it.
Let me explain:
The banks would accept deposits from customers and using this money they would grant loans to people who need money. The customers who got the loan pay an interest and the ones that deposited the money in turn get a significant portion of this interest.
This way, they promote businesses and keep the economy running.
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