Definition of Conventional Banks

This time we will discuss the meaning of conventional banks and their purpose and principles. Without going into detail, let’s look at the explanation.

 

Table of contents :

Definition of Conventional Banks

According to Dr. BN Ajuha

According to Pierson

According to PSAK (Statement of Financial Accounting Standards) No.31

Purpose of Conventional Banks

Conventional Bank Functions

  1. Agent of Trust
  2. Agent of Development
  3. Agent of Service

Principles of Conventional Banks

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Definition of Conventional Banks

Based on Act Number 10 of 1998 Conventional Banks, namely banks that carry out conventional business activities which in their activities provide services in payment traffic based on predetermined procedures and conditions.

 

According to Dr. BN Ajuha

Banks are places to channel capital from people who cannot use money profitably to those who can make money more productive to benefit society.

 

According to Pierson

A bank is a business entity that accepts credit but does not provide credit. In this case, the Operational Bank is only passive, only accepting the money deposited.

 

According to PSAK (Statement of Financial Accounting Standards) No.31

Bank is an institution that acts as a financial institution between parties that have more funds and institutions that need funds, as well as institutions that support payment traffic.

 

Purpose of Conventional Banks

In general, the aim of Indonesian banking is to help carry out national development in order to achieve equity, economic growth and increase the welfare of the people.

 

Based on these objectives, Banks in Indonesia must carry out their duties and functions properly based on economic democracy.

 

Basically, economic activities and development in Indonesia are closely related to banking. So, if you have thought that the Bank only aims to get maximum profit, then you are wrong.

 

Also Read:   Understanding Financial Accounting

Conventional Bank Functions

Definition of a conventional bank

 

  1. Agent of Trust

Banking activities can run well only if there is trust from the public. If the public believes in the Bank, they will not hesitate to deposit their funds in the Bank.

 

Public trust that the funds they deposit in the Bank will always be safe and can be withdrawn at any time.

 

Likewise, on the other hand, channeling funds deposited to the public in the form of loans is based on trust and applicable law.

 

  1. Agent of Development

In economic activity, there are two things that cannot be separated, namely the real sector and the monetary sector. The two of them influence each other.

 

The Bank’s activities to collect and distribute public funds open up opportunities for the public to carry out investment activities, distribution and other economic activities that cannot be separated from the use of money.

 

If all of these activities can run well, it will have a major impact on improving the economy of the community as a whole.

 

  1. Agent of Service

Apart from collecting and channeling funds, the Bank also has other banking services offered to the public.

 

As stated in the definition of the Bank above, these banking services include money transfer services, payment services, savings, credit cards, and others.

 

Principles of Conventional Banks

Interest becomes the foundation of conventional banks in carrying out their activities, apart from other administrative costs. In the principle of conventional banking, there are two methods used:

 

Set interest as the price, both for savings products such as savings, time deposits, and loan products (credit) that are given based on a certain interest rate.

For other bank services, the bank uses or applies various fees in a certain nominal or percentage. This costing system is called cost-based.

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