Principles of Banking, Commercial and Cooperative
Here are the Principles of Banking that aspirants must know how are willing to build their career in Banking Sectors as the Banking Professionals.
Priyanka Dahima8 May, 2024
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Principles of Banking: Principles of Banking, its 12th edition is designed to give those new to banking a general understanding of the field. Recognized as the most comprehensive introduction to the banking industry for over 40 years, it introduces the basic concepts and principles of banking, the foundations of banks as a service provider and business, the obligation to act safely and prudently and mitigate risks, and the responsibilities of bank employees in customer-centric financial service environment.
Principles of Banking
A bank is a financial institution that provides banking and other financial services to its customers. A bank is generally understood as an Institution that provides basic banking services, such as accepting deposits and issuing loans. There are also non-banking institutions that provide certain banking services without meeting the legal definition of a bank. Banks are part of the financial services sector. Banking sector in India is divided into two, organized and unorganized sector. The organized sector consists of the Reserve Bank of India, Commercial and Cooperative banks, and specialized financial institutions (IDBI, ICICI, IFC, etc.).Principles of Commercial Banking
Principle of Liquidity
Commercial Bank offers two types of deposits- Subsequent deposits that the bank must repay on demand, such as a Savings Account.
- Time deposits that the bank must repay after a certain time period. In addition, customers withdraw and deposit cash every day. Therefore, all commercial banks must maintain a certain amount of cash to meet the cash needs of customers.
Principle of Profitability
The primary goal of all business ventures is to make a profit. The Commercial Bank is also a commercial enterprise. That is why it is trying to make a profit.Principle of Solvency
Commercial banks must be solvent. In addition, they must maintain the capital necessary to operate the business.Principle of Security
Commercial Bank receives deposits from its customers and then invests them. However, because it invests the money of the investor, it prioritizes the security of the money.Principles of Collection of Savings
This is one of the most important principles in banking today. Commercial banks collect large amounts of unused money from their customers. In fact, bank employees are given targets to collect more savings from people.Principles of loan and investment policy
Commercial Bank makes money mainly through loans and investment activities. It also ensures that the investor's money is put into profitable projects. Therefore, banks need strong lending and investment policies to earn good returns.Principle of Economy
Commercial banks always try to avoid unnecessary expenses. Therefore, they try to manage their activities within a certain budget and increase profits.Principles of Providing Services
Commercial banks are generally service-oriented banks. After all, good service guarantees a better reputation and thus also profits.Principle of Secrecy
Commercial banks ensure that they maintain confidential accounts of their customers. Access to accounts is also granted only to legal entities.Principles of Modernization
We live in an age of technology and modernization. Therefore, commercial banks are adopting modern technical services such as internet banking, mobile banking etc. to face the development of the world.Principles of Specialization
In addition to modernization, we also live in an era of specialization and super-specialization. Therefore, commercial banks divide all their operations into smaller units and allocate employees according to their efficiency.Principle of Location
In general, commercial banks choose a location where they believe they will find many customers.Principle of Relation
All commercial banks strive to maintain good relationships with their existing and potential customers.Principle of Publicity
Every successful business needs good publicity. That's why most successful businesses advertise to get more customer attention. Commercial banks therefore follow the principles of disclosure.Principles of Banking FAQs
Q1. Where can I get the details of Principles of Banking?
Ans. You can get the details of Principles of Banking in our PW blog section.
Q2. Banking in India is divided into how many sectors?
Ans. Banking in India is divided into two sectors these are Organized and Unorganized Sectors.
Q3. What are the Principles of Commercial Banking?
Ans. There are 14 Principles of Commercial Banking and we have discussed all of them in our article.
Q4. What is the Principle of Banking?
Ans. Banks must maintain a balance between what they own (assets) and what they owe (liabilities) to ensure that withdrawal requests and other financial obligations are handled. Strategic management of this balance helps avoid liquidity crises, which contributes to the overall strength of the financial system.
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