Difference Between Bank and Banking

Bank vs Banking

Bank is an organization or a company like any other company, which sells and buys goods and services in the market. The main difference between other companies and banks is that, other companies are trading goods and services for money, but in the case of bank the trading item itself is MONEY, instead of tangible goods or intangible services. How a bank works can simply be explained as accepting deposits from customers by paying interest to their deposits, while lending this money deposited to required parties for an interest rate, which is higher than that paid to depositors. The net gain is the main source of income to banks (especially for commercial banks, because the central bank and investments banks have other ways of earning revenue). This is a classical view of a bank; however nowadays, banks are engaged in other activities as well. All the activities carried out by a bank is called banking.

Bank

The oxford dictionary defines bank as “an organization offering financial services, especially loans and safe keeping of customers money”. There must be a central bank in every country, which is authorized with monitory policy making by the government of that nation. It acts as a financial intermediary. Other than the central bank, there are several types of banks like retail banks, investment banks etc. The commercial banks mostly deal with accepting deposits and providing loan facilities. Community development banks, community banks, and postal saving banks are some examples for retail banks. Merchant banks and industrial banks are good examples for investment banks.

Banking

Banking is the business activity of a bank. Simply, any activity carried out by a bank for business purposes is called banking. Accepting savings, Lending money, leasing properties to needy people, paying for cheques, providing mortgage facilities, acting on to standing orders, statement of instructions, providing safety locker facilities for valuable things, providing over draft facilities to current account holders, acting as institutional investors in financial market, issuing ‘letter of credit’ in the business of import and export, act as money changer, issuing travelers’ cheques are some of the activities carried out by modern banks in the banking industry. Nowadays, banking can be done via the internet, which is called on line banking.

Though the words bank and banking seem to be conveying the same meaning, they have some differences between them.