Banks are financial institutions which are used by individuals to deposit their money and earn interest on their savings.
Banking helps in the credit creation process and allows lenders to borrow money and take loans by paying interest and providing the adequate resources as collateral security.
Banking is the approach used to help people to encourage them to save their money and help in the process of creating credit for the economy.
With manuals as Overview of Fractional Reserve Banking homework answers, you can get complete details of the fact.
Queries that you may have:
Here are some of the basic queries that you may have in regards to this subject.
Banks are an essential part of the financial world and have a lot of importance functions as have been described below:
Banks encourage people to use the banks to save their money and get a return on their savings in the form of interest. Such behavior in the population results in a healthier and safer economy.
Banks provide a lot of services amongst them the most frequently used is the lending and borrowing service. The banks act as the lender of money to their customers in the form of loans, advances and over-drawing limits. They charge interest on such services.
The banks provide their customers various ways to use their money without the hassle of carrying them around with them. Some of them are:
When the banks collect deposits from their customers, instead of just collecting the amount in their bank vaults, they use the Fractional Reserve Banking method. An Overview of Fractional Reserve Banking homework answers is that instead of just letting the entire amount of the deposits sit with them, they just store a certain fraction of the total deposit. The rest of the deposits are used for a lot of different purposes to help the bank in making profit.
In an Overview of the Fractional Reserve Banking system are primarily two types of money which are:
This is a number of deposits made by the customers to their respective banks which are then used by the banks as loans and advances.
This is the form of money used by the Central Bank of the country. It can be in the form of gold reserves, bank notes, certificates, electronic money, bonds or precious metal.
The certain fraction of the total deposits kept by the bank is known as Reserve Requirement. This is reserved to ensure the liquidity of the bank and help the consumers to undertake their necessary transactions. As per the Overview of Fractional Reserve Banking homework answers, the deposits of the bankâ€™s customers are represented as a liability in the balance sheet of the bank. But the bank accounts provided to the customers are an asset for them. Thus the deposits are a property of the banks, and the remainders from the Reserve Requirement are used by the banks to gain revenue from providing various facilities.
With the help of an Overview of the Fractional Reserve Banking method, the banks, and the economy are able to be benefitted in a lot of ways. Manuals Overview of the Fractional Reserve Banking homework answers you can get a detailed idea. Some of them are:
In a Fractional Reserve Banking system, there is a hierarchy present which is as follows:
The Government or the presence of a Central Bank regulates the rules and regulations in a Fractional Reserve Banking System. It regulates the following:
As described above the other banks maintain the reserve requirements and give loans and advances for the betterment of the economy.
As per the Overview of the Fractional Banking homework answers, the needs for a reserve requirement are as follows:
There are a lot of benefits to the economy when there is an Overview of Fractional Reserve Banking homework answers, but there are a few cons too which have been described briefly below: