In India alone the money in banks would run, on a rough and ready estimate, into more than several million crores. Let us give our attention to the services rendered by the banks. Money is safer in the banks than in unprotected houses. Banks create and encourage the habit of saving and thoughtful spending among the people. Fixed deposits earn a rising scale of interest according to the length of the period of which the money is kept in the bank. A good bank balance means economic security. Banks are of great benefit to governments and to national life. Banks help very greatly in capital formation. In addition to private deposits there is a vital sum of money of firms ad companies, of great industrialists and of the government, deposited in the banks.
How are the banks able to make money and to pay their depositors? Suppose a certain house of business has ten lakhs of rupees in a certain bank. Suddenly this house of business receives a consignment of goods needing an immediate payment of fourteen lakhs of rupees. These goods are almost sure to be sold out to comparatively small business-men within twenty days for seventeen lakhs of rupees. The bank will advance to the house of business four lakhs of rupees in addition to the ten lakhs which the house of business has to its credit in the bank. Within tewnty days or so rupees seventeen lakhs will be earned a the price of the goods bringing a profit of three lakhs. Out of these, let us say, the bank will charge first of all th four lakhs of its own money which it has advanced to the house of business. And it may charge in additio, say sixt to seventy thousand rupes for the short-temr loan of four lakhs to the house of business which will in its turn earn a profit to two lakhs and thirty to forty thousand. That is how the banks keep the wheels of business going with profits to themselves, to their shareholders and depositrs and with huge profits to the houses of business.
But banks need some sort of centralised control. In our country this control is exercised by the Reserve Bank of India. There is a growing demand in the country for greater public control of the banks. Often the big and poiwerful shareholders of a bank use the bank fr making unfair gains. If this could be stopped or curtailed, the government and the nation stand to gain considerably. That is why the government of India took over fourteen major banks under its control.
All government or public money is deposited in the banks and only a part of it remains in the government treasury. The monthly salaries of the police and the army and various other payments made by the government involve large number of rupees. Banks are the best repositories and channels for this purpose. The State Bank of India with its hundreds of branches is seen to be humming with life and subdud animation every working day of the week. But on the first of every month which is the pay day, this life and animation are at the peak, banks have sometimes their branches in every country of the world. High-class training in banking business is given by competent institutions. The World Bank is the biggest banking organisation in the owrld. All trade and commerce are able to maintain their sped and efficiency through the numerous banking establishments functioning all over the world.
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