Banks usually borrow and lend money from the customers, investors and other people. After taking deposits from the customers, banks pay annual interest to the customers in return. In fact, banks do use this deposit to lend it to various other customers in the form loans.
Whosoever wishes to save, keeps their money secure in banks and then banks use this money to lend to other people. This is how the whole circle keeps on going and thus banks play an important role in the economy. In the same manner, the banks play an important role in offering finance to businesses who wish to invest and expand. However, these loans and business investments are important and enable economic growth.
Though, banks play a huge role in stabilizing and supporting an economy, but there are some main purposes of banks that people can easily associate with and the purposes are mentioned below:
- Keeping money safe for customers: Keeping all your cash under your bed is no more a good option. In fact, you can use banks to keep your deposits safe as it one of the safest places to do so. Doing so, you can be free of any kind of stress about your money. The commercial banks in the UK are guaranteed by the Bank of England; this is why consumers can feel safe and find banks safe places to deposit money.
- Offer interest on deposits to customers, help them to protect against money losing value against inflation. This is very known fact that commercial banks pay an interest on deposits. Usually, it quite low for the currents accounts but for saving accounts, the interest rates can be highly significant.
- Lending money to firms, customers and home buyers on the basis of current and savings account and also provides loans and mortgages depending upon the requirement of the customers.
- Current account: This bank account enables quick and easy access to money. The best thing is that a customer can withdraw the money at a small notice. The customer can enjoy features such as debit card and cash points.
- Savings account: Usually, these accounts have limits on the amounts of money that a person can withdraw at one time. Moreover, the banks even ask for the notice of at least 7 days (a week) in prior to pay money that is requested by the customer.
- Loans: Banks usually lend a percentage of deposits to other customers, which results in huge profits for the banks.
- Different types of bank lending: This section can vary from unsecured personal loans to secured mortgage lending. Obviously, the unsecured lending tends to be at a higher interest rate because of the risk factor that it involves. Secured mortgage lending is at a lower rate.
With these descriptions, you must have understood about the basic function and purpose of banks in the United Kingdom. If you also want to keep your money in safe hands, just get in touch with professionals at Santander contact number.