A bank is an institution which deals in money and credit. Thus, bank is an intermedi­ary which handles other people’s money both for their advantage and to its own profit. But bank is not merely a trader in money but also an important manufacturer of money. In other words, a bank is a factory of credit.

Let us see the definitions of bank and banking, given by various authorities.

Crowther defines a bank as, “one that collects money from those who have it to spare or who are saving it out of their income and lends the money so collected to those who require it”. –

Dr. L. Hart says that the bankers are “one who in the ordinary course of business honours cheques drawn upon him by persons from and for whom he receives money on current accounts”.


Sir Jhon Paget says that, “no person or body corporate otherwise can be a banker who does not, (z) take deposit accounts, (ii) take current accounts, (iii) issue and pay cheques, and (iv) collect cheques, for his customers”.

Sir Kinley, “A bank is an establishment which makes to individuals such advances of money as may be required and to which individuals entrust money when not required by them for use”.

Prof. Sayers says that “Banks are not merely purveyors of money but also in an impor­tant sense, manufacturers of money”.

Although the above definitions have described the meaning of bank, none of them precisely defined, ‘Banking’ incorporating its entire functions. However, an attempt has been made in Section 5(1) (b&c) of the Banking Regulation Act, 1949 to define ‘Banking’ and ‘Banking Company’.


According to Section 5(1)(b), “Banking means accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheques, draft, order or otherwise”.

Section 5(1) defines banking company as, “any company which transacts the busi­ness of banking in India”.

Scheduled Banks

Scheduled Banks are those banks which are listed in the Second Schedule to the Re-


(a) that the Bank’s paid up capital plus free reserves are not less than Rs. 5.00 lakh, and

(b) That the affairs of the Bank are not conducted to the detrimental interest of the depositors.

The Reserve Bank also has powers to reschedule a bank, when the abovementioned conditions are not satisfied. It may be noted that presently, the RBI has prescribed a mini­mum capital of Rs. 100 crore for starting a new commercial bank.