Banking

Banks are part of banking system and, for better or for worse, are interconnected. They are also moderated by central banking authority, which in the India is the Reserve Bank of India.

For the most part, when you think of “bank”, you think of a commercial bank. A commercial bank serves the public, ordinary consumers and “main street” businesses, with an assortment of accounts and loan services. Commercial Bank

What you should know A commercial bank gets funds from customer deposits, including chequing and saving accounts, certificate of deposits (CDs) and other time deposits. It may also gets funds by selling securities, especially government bonds, back to the government. In turn, it earns income by lending those funds to businesses needing operating capital and to consumers for a variety of purposes. Most do not offer the complete array of services that commercial banks do, which now offer investments, business lending and advise, and general financial advice. Commercial Bank

Investment banks are primarily in the securities business, not the general banking business. What you should know These banks are in business primarily to raise capital on behalf of clients, to advise them on mergers and other corporate restructuring, and to make markets for securities. In fact, they not only buy and sell securities on behalf of clients, but also they try to make money by dealing in the markets on their own behalf, in an activity known as proprietary trading. Investment Bank

A mortgage bank specializes in the mortgage business, originating and servicing mortgage loans. If you own a home with a mortgage, chances are good that you got the loan through a mortgage bank or a mortgage banking subsidiary of a larger bank. Mortgage Bank

What you should know Mortgage banks make money by acquiring funds at whole-sale cost (from investors or government-sponsored enterprises) and lending them at retail to homebuyers. They make a slight margin on the transaction but also make money through origination and other fees. They also earning income by serving loans; that is, by collecting and monitoring payments from other lending institutions. You can not deposit money in a mortgage bank, although some set up commercial banking subsidiaries to accept customer deposits. Mortgage Bank

Why you should care Aside from credit unions, mortgage banks are competitive and typically provide the best deals and the greatest number of options on the first mortgages and on various second-mortgage products, like home equity loans. As a result of public backlash and the shrinking lending market, the industry and number of players has been on the decline, and it may be more difficult than in the past to get a mortgage from one of these companies. That said, mortgage banks remain critical players in the today’s housing market. Mortgage Bank

As the name implies, “central bank” is central to the banking and monetary system of a nation. The central bank plays several key roles in the economy, including setting and carrying out monetary policy, maintaining the stability of the nation’s currency, and supporting and regulating individual banks and the banking system. The Reserve Bank of India (RBI) functions as the central bank in India. Central Bank

What you should know Central banks control money supply and currency stability through monetary policy. That is done by setting target interest rates and more directly through open market operations where they buy and sell government bonds to inject cash into or remove it from the economy. Central banks also control the amount of currency – paper and coin – in the economy. Central Bank

Central banks lend money to other banks when needed, and act as a “ lender of last resort” during financial crises. They set and enforce important banking and finance ground rules. These rules and requirements include governing how much capital bank must keep in reserve. Central Bank

Why you should care The health and welfare of any economy is carefully monitored and controlled by a country’s central bank. Observing the central bank’s actions will give you a forward look into what’s ahead for the economy. If the central bank is raising interest rates, for instance, a slowdown is intended and likely on the horizon. If the central bank is lowering interest rates and injecting money into the system, that signals that slowdown is at hand and the central bank is acting to reserve as slumping economy. Central Bank

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