Finance describes the management, creation and study of money, banking, credit, investments, assets and

liabilities that make up financial systems, as well as the study of those financial instruments. Some people prefer
to divide finance into three distinct categories: public finance, corporate finance and personal finance. There is
also the recently emerging area of social finance. Additionally, the study of behavioral finance aims to learn about
the more "human" side of a science considered by most to be highly mathematical.

A financial system is the system that covers financial transactions and the exchange of money between
investors, lender and borrowers. A financial system can be defined at the global, regional or firm specific level.
Financial systems are made of intricate and complex models that portray financial services, institutions and
markets that link depositors with investors.

A central bank, or monetary authority, is a monopolized and often nationalized institution given privileged
control over the production and distribution of money and credit. In modern economies, the central bank is
responsible for the formulation of monetary policy and the regulation of member banks.
The central bank of the United States is the Federal Reserve System, or the Fed, which Congress established
with the 1913 Federal Reserve Act.
A commercial bank is a financial institution that provides various financial service, such as accepting
deposits and issuing loans. Commercial bank customers can take advantage of a range of investment products that
commercial banks offer like savings accounts and certificates of deposit. The loans a commercial bank issues can
vary from business loans and auto loans to mortgages.

Thrift banks are financial institutions that have a primary focus on taking deposits and originating home
mortgages. One major factor that differentiates thrift banks from larger commercial banks such as Wells Fargo &
Company or Bank of America Corporation is that thrifts generally have access to low-cost funding from Federal
Home Loan Banks, which enables them to offer customers higher savings account yields. Thrifts also have greater
liquidity for making home mortgage loans.

A savings bank is a financial institution whose primary purpose is accepting savings deposits and paying interest
on those deposits.
They originated in Europe during the 18th century with the aim of providing access to savings products to all
levels in the population. Often associated with social good these early banks were often designed to encourage
low income people to save money and have access to banking services. They were set up by governments or by
socially committed groups or organisations such as with credit unions. The structure and legislation took many
different forms in different countries over the 20th century.
The advent of internet banking at the end of the 20th century saw a new phase in savings banks with the online
savings bank that paid higher levels of interest in return for clients only having access over the web.
Universal banking is a banking system in which banks provide a wide variety of financial services, including
commercial and investment services. Universal banking is common in some European countries, including
Switzerland. In the United States, however, banks are required to separate their commercial and investment
banking services. Proponents of universal banking argue that it helps banks better diversify risk. Detractors think
dividing up banks' operations is a less risky strategy.

trust bank that combines the functions of a commercial bank, depository institution, and a trust company.

An investment bank (IB) is a financial intermediary that performs a variety of services. Investment banks
specialize in large and complex financial transactions such as underwriting, acting as an intermediary between a
securities issuer and the investing public, facilitating mergers and other corporate reorganizations, and acting as
a broker and/or financial adviser for institutional clients. Major investment banks include Barclays, BofA Merrill
Lynch, Warburgs, Goldman Sachs, Deutsche Bank, JP Morgan, Morgan Stanley, Salomon Brothers, UBS, Credit
Suisse, Citibank and Lazard. Some investment banks specialize in particular industry sectors. Many investment
banks also have retail operations that serve small, individual customers.
Rural Bank can be defined as rural financial institution/ cooperative/ communitybank or deposit taking MFI that
provides customised financial services to ruralcommunities. BUDGET. Budget is a projection of the income and
expenditure from business activities of an institution in for a set time period.

Banking Institution
A banking institution (also referred to as a universal or commercial bank) can range from a large financial
institution with a highly visible brand name and an international presence to a small organization with a local
presence.
A banking institutions financing activities generally involve various types of lending, such as corporate
finance, housing, project finance, retail, short-term finance, small-medium enterprises, trade, and others.
Alternatively, the focus of a banking institution may be only on specific transactions with clients that meet certain
requirements and within certain industry sectors. Banking institutions may also provide financial products with a
focus on environmental business opportunities.
A banking institutions exposure to environmental and social risks varies greatly as a function of the clients within
its portfolio. Some banking institutions usually have highly visible brands in their markets or globally, and are
particularly susceptible to reputational risk. Banking institutions are also driven to improve their environmental
and social risk management capacity to reduce credit and liability risks arising from environmental and social
issues. A number of banking institutions have publicly committed themselves to sustainable banking, and many
have voluntarily adopted the principles established under various sustainability initiatives.

A n-bank financial institution (NBFI) is a financial institution that does not have a full banking license or is not
supervised by a national or international banking regulatory agency. NBFIs facilitate bank-related financial
services, such as investment, risk pooling, contractual savings, and market brokering.[1] Examples of these
include insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency
exchanges, and microloan organizations.[2][3][4] Alan Greenspan has identified the role of NBFIs in strengthening
an economy, as they provide "multiple alternatives to transform an economy's savings into capital investment
[which] act as backup facilities should the primary form of intermediation fail."[5]
Operations of non-bank financial institutions are often still covered under a country's banking regulations.[6]
What is 'Business Banking'

Business banking is a company's financial dealings with an institution that provides business loans, credit, savings
and checking accounts specifically for companies and not for individuals. Business banking is also known as
commercial banking and occurs when a bank, or division of a bank, only deals with businesses. A bank that deals
mainly with individuals is generally called a retail bank, while a bank that deals with capital markets is known as
an investment bank.

BREAKING DOWN 'Business Banking'

In the past, investment banks and retail/commercial banks had to be separate entities under the Glass-Steagall
Act, but changes to the law made it so a single bank can deal with business banking, retail banking and investment
banking. The Glass-Steagall Act is also known as the Banking Act of 1933, and was introduced to manage
speculation. Parts of the act were repealed in 1999, making it no longer illegal for an investment bank to also
engage in business/commercial and retail banking.
Services Offered by Business Banks

Business banks provide a wide range of services to companies of all sizes. In addition to business checking and
savings accounts, business banks offer a range of financing options and cash management solutions.

Bank Financing: Bank financing is a primary source of capital for business expansion, acquisitions and equipment
purchases, or simply to meet growing operating expenses. Depending on a business needs, business banks can
offer fixed term loans, short and long term, as well as lines of credit and asset-based loans. Banks are also a main
source of equipment financing, either through fixed loans or equipment leasing. Some banks specialize in lending
in certain industries, such as agriculture, construction and commercial real estate.

Cash Management: Also referred to as treasury management, cash management services help businesses achieve
greater efficiency in managing the cash coming into the business, or receivables; cash going out of the business,
or payables; and cash on hand, or liquidity. Utilizing the latest digital technology, business banks set up specific
processes for businesses that help them streamline their cash management, resulting in lower costs and more cash
on hand.

Banks provide businesses with access to Automated Clearing House (ACH) and electronic payment processing
for accelerating the transfer of money in and out of the business. They also allow for the automatic movement of
money from idle checking accounts into interest-bearing savings accounts, so surplus cash is put to work while
the business checking account has just what it needs for the days payments. Businesses have access to a
customized online platform that links their cash management processes to their checking and savings account for
a real-time view of their cash in action.

Investment banking and commercial banking are two primary segments of the banking industry. Investment banks
facilitate the buying and selling of investments, while commercial banks manage deposit accounts.

Investment Banking

Investment banks are institutions that function mainly to serve businesses. They aid companies in the process of
purchasing and selling bonds, stocks and a variety of other investments. Investment banks also aid companies in
going public by facilitating their initial public offerings, or IPOs.
These banks are allotted higher risk tolerances, in part because of their general business model and because they
are somewhat more loosely regulated by the Securities and Exchange Commission, or SEC, granting them
substantial freedom in strategic decision making.

Commercial Banks

Commercial banks are responsible for managing deposit accounts, such as checking and savings accounts, for
both businesses and individuals. Using money held on deposit enables them to make loans available to the public
and to companies.

There is a significantly higher level of government regulation with these institutions. Commercial banks are
federally insured to protect customers and are governed more stringently than investment banks by federal
authorities such as the Federal Reserve and the Federal Deposit Insurance Corporation, or FDIC. Commercial
banks are much more sensitive to risk due to the fact they deal directly with the public.

Combination Institutions

In 1933, the Glass-Steagall Act mandated a separation of all investment and commercial banking. It was repealed
over six decades later in 1999. Since then, major banking institutions have been permitted to operate in the
investment and commercial arenas. However, while there are some blended institutions, most U.S. banks have
chosen to remain as either investment banks or commercial banks.

There are a number of potential benefits to combination investment/commercial banks. For example, acting as an
investment bank, an institution can aid a company in selling its IPO, and then utilize commercial banking to
extend credit to the new company, thereby simplifying the company's financing needs.

9 Basic Principles that Commercial Banks Follow

Commercial banks follows certain principles
to serve the maintain some principles which are very important for banks to remain in the competition in modem
days.
The bank which deals with money and money a worth with a view to earning prom is known as the commercial
bank.
Commercial banks must maintain some principles which are very important for banks to remain in the competition
in modem days.
Some principles are discussed below;
1. Principle of Liquidity
The principle of liquidity is very important for the commercial bank. Liquidity refers to the ability of an asset to
convert into cash without loss within the short time.
Paying the deposited money on demand of customers is called liquidity in sense of banking.
2. Principle of Solvency
Solvency means the financial capability or sufficiency in capital. To stay in these competitive market commercial
banks must have sufficient capital. If the funds are not sufficient the bank cannot run his business.
The main source of fund of the commercial bank is the deposited money by the depositors through the different
type of account.
Depositors keep cash in the bank, especially for safety. So commercial bank must ensure the safety of deposited
fund.
3. Principle of Profitability
The main objective of the commercial bank is to earn a profit. For earning profit commercial bank have to make
the investment by providing short term loan, before providing loan commercial bank have to compensate a certain
amount of money as liquidity.
4. Principle of Loan and Investment
The main source of profit of bank is granting loans to any individual or organization. Investment is the profitable
and sound source of income. Commercial banks invest in business and investment sector.
5. Principle of Savings
Commercial banks collect fund by creating savings facilities. Commercial banks try to collect savings from
society surplus.
The commercial bank makes the investment from this savings to generate profit. So, more savings, more
investment, and more profit.
6. Principle of Services
Commercial bank ensures best services to their customers. The success of a bank depends on the services provided
by the bank. Customer chooses those banks that provide improved services.
7. Principle of Secrecy
Customers want to keep secret about their valuable assets and money. So banks must have to keep secret about
their customers account. If a commercial bank does not maintain secrecy the customer will be dissatisfied.
8. Principle of Efficiency
The commercial bank should operate their business efficiently. So that they can succeed at the objective.
In this competitive market, there is no alternative way without efficiency in management. So commercial bank
must train their employees to increase the efficiency in management.
9. Principle of Location
Commercial banks must have to locate their branches in the commercial area where many customers are available.
The location must be safe for the customers and easy communication system must exist.
Other principles;

The principle of goodwill.

The principle of the economy.
The principle of technology.
The principle of publicity.

These are the basic principles of the commercial bank. The commercial bank must follow these principles.