1.1 Introduction

In any modern economy, dealing with banks has become an integral part of everyday life. Bank offices or branches are a familiar sight in marketplaces in cities and towns. The setting up of automated teller machines (ATMs) as a form of extension of bank branches has further expanded the presence of banks. Not only urban centres and small towns, but even the rural parts of India today are no longer unfamiliar with banks and banking. It is quite common for the general public to avail ordinary banking services like obtaining a bank loan for business or farming, operating a savings bank deposit account, taking a home or automobile loan, using a credit or debit card or making or receiving small denomination payments using the Unified Payments Interface (UPI). The reader may have some exposure to banks and banking activities in her day-to-day life. However, not everyone may be quite aware about the technical aspects of banking operations and the banking business. Many may not have adequate understanding about various types of assets and liabilities of banks and the technical details related to various banking products and functions. In this chapter, we provide the basic details about a bank and its activities to facilitate a comprehensive understanding of the banking business. The objective is to provide a formal introduction to banks and banking in the Indian context.

Section 1.2 describes ordinary banking services in the form of opening bank deposit accounts, facilitating financial transfers and extending loans. In the process, a typical bank acts as an interface between savers and borrowers. The bank is a legal entity incorporated under the law of the land. The legal provisions in India defining banks and banking functions are also briefly discussed.