Types of Banks

1. Central Bank:
Central Bank is the bank of banks. Every civilized country now has its own central bank. The primary function of the central bank is to regulate the flow of money and credit in order to promote efficiency, stability and growth in the country. In Pakistan State Bank of Pakistan is the central bank.

Functions of central bank are;

Sole right of note issue Banker, agent and advisor to the government Banker to commercial banks Controller of credit Clearing agent Custodian of foreign exchange reserves Development Role Other Functions

2.Commercial Banks:

Commercial banks are those banks which are engaged in performing the routine duties of banking business. They collect surplus money and make loans and advances in the form of overdrafts, cash credit and discounting bills of exchange. They also provide special financial services and agency services. Commercial banks in short are considered the life blood of the economic society. In Pakistan United bank, Habib Bank etc are commercial Banks.

Functions of commercial banks are;

Receiving loans Advancing loans Increasing money supply Transfer of money Safe custody of valuables Agency functions Economic development

3. Exchange Banks:
Exchange banks are mainly deal with international trade. These banks takes the responsibility of settlement of foreign exchange and arrange the foreign businesses. They also finance Export and Import trade. American Express bank, Rupali bank, bank of Oman are some examples of exchange banks.
Currency exchange Providing information for international business Providing finance for international business Bank drafts and Bill of exchange

There functions are;

4. Saving Banks:
Saving banks are those banks which collect and keep the small savings of the public. They are called thrift promoting institutions. The Saving banks invest the funds in the safest government securities and offer reasonable rate of profit on saving accounts. Students, government employees and household women are usually opening such accounts. A prior notice to bank is necessary for withdrawal of huge amount. National Saving bank in England and Post office saving bank in Pakistan are examples of saving banks.

There Functions are;

Accepting deposits of people for saving Investing the money of people in safe means of investment

5. Agriculture Banks:
The bank is responsible for the development of agriculture sector of the country. Agriculture banks are set up to provide financial assistance to the agriculturists and agro-based industries. Agricultural Development bank of Pakistan, Agricultural Mortgage Corporation in England and Federal Land Bank of USA

There functions are;

Providing long term advances for buying tractors etc Short term loan for purchasing seeds and fertilizers Introducing modern techniques in farming Making awareness in farmers by seminars Medium term loans for construction of tube wells

6. Industrial Banks:
The Industrial banks provide medium and long term credit to the industries. The growth of industries depends on these banks. Industrial development bank of Pakistan and Industrial bank of Japan are working as industrial banks. Granting loans to set up new companies Long term loans for machinery and construction of building Loans for modernization and replacement of business units Short term loan for purchase of raw material and payment of daily expenses.

There functions are;

Role of Commercial Banks in the Economic Development of a Country

Commercial banks play an important and active role in the economic development of a country. If the banking system in a country is effective, efficient and disciplined it brings about a rapid growth in the various sectors of the economy. The following is the significance of commercial banks in the economic development of a country. 1. Banks promote capital formation 2. Investment in new enterprises 3. Promotion of trade and industry 4. Development of agriculture 5. Balanced development of different regions 6. Influencing economy activity 7. Implementation of Monetary policy 8. Monetization of the economy 9. Export promotion cells

 1. Banks promote capital formation:

Importance of Banks for the Development of a Country

Commercial banks accept deposits from individuals and businesses, these deposits are then made available to the businesses which make use of them for productive purposes in the country. The banks are, therefore, not only the store houses of the countrys wealth, but also provide financial resources necessary for economic development. Businessmen normally hesitate to invest their money in risky enterprises. The commercial banks generally provide short and medium term loans to entrepreneurs to invest in new enterprises and adopt new methods of production. The provision of timely credit increases the productive capacity of the economy. With the growth of commercial banking, there is vast expansion in trade and industry. The use of bank draft, check, bill of exchange, credit cards and letters of credit etc has revolutionized both national and international trade.

2. Investment in new enterprises:

3. Promotion of trade and industry:

 4. Development of agriculture:
The commercial banks particularly in developing countries are now providing credit for development of agriculture and small scale industries in rural areas. The provision of credit to agriculture sector has greatly helped in raising agriculture productivity and income of the farmers. The commercial banks play an important role in achieving balanced development in different regions of the country. They help in transferring surplus capital from developed regions to the less developed regions. The traders, industrialist etc of less developed regions are able to get adequate capital for meeting their business needs. This in turn increases investment, trade and production in the economy. The banks can also influence the economic activity of the country through its influence on a. Availability of credit b. The rate of interest If the commercial banks are able to increase the amount of money in circulation through credit creation or by lowering the rate of interest, it directly affects economic development. A low rate of interest can encourage investment. The credit creation activity can raise aggregate demand which leads to more production in the economy.

5. Balanced development of different regions:

6. Influencing economic activity:

 7. Implementation of Monetary policy:

The central bank of the country controls and regulates volume of credit through the active cooperation of the banking system in the country. It helps in bringing price stability and promotes economic growth with in the shortest possible period of time. The commercial banks by opening branches in the rural and backward areas are reducing the exchange of goods through barter. The use of money has greatly increased the volume of production of goods. The non monetized sector (barter economy) is now being converted into monetized sector with the help of commercial banks. In order to increase the exports of the country, the commercial banks have established export promotion cells. They provide information about general trade and economic conditions both inside and outside the country to its customers. The banks are therefore, making positive contribution in the process of economic development.

8. Monetization of the economy:

9. Export promotion cells:

Efficiency of good Banks

Efficiency of a bank is often used to describe its performance. Efficiency of bank can be measured in terms of minimization of inputs to produce outputs. Efficiency of bank under a specific objectives is an indicator of success by which the performance of bank can be compared with each other. It also indicates government policies impact on bank. Information about efficiency of bank is important for depositors, owners and governments.