01 Economic and Nonstate Institutions

• Banks


  Institutions that conduct business purely on profit motive
• Primary functions of banks

  • Accepting deposits
  • Granting of loans and advances
• Types of deposits


  • Savings
  • Fixed
  • Current
  • Recurring
• Overdraft


  Advances given to current account holders, no separate account maintained, interest charged on actual amount withdrawn, granted against collateral security
• Cash credits


  Client allowed cash credit up to a specific limit, separate account maintained, interest charged on amount withdrawn in excess of limit, given against security of tangible assets and/or guarantees
• Loans


  Normally for short term (1 year) or medium term (5 years), repayment can be in instalments or lump sum, interest charged on actual amount sanctioned whether withdrawn or not, normally secured against tangible assets
• Discounting bills of exchange


  Bank advances money by discounting or purchasing bills of exchange, both domestic and foreign, bank pays bill amount to drawer/beneficiary after deducting discount charges, collects amount on maturity from drawee/acceptor
• Secondary functions of banks

  • Agency functions
  • General utility functions
• Agency functions


  • Transfer of funds
  • Collection of cheques
  • Periodic payments
  • Portfolio management
  • Periodic collections
• General utility functions


  • Issue of drafts and letter of credits
  • Locker facility
  • Underwriting of shares
  • Dealing in foreign exchange
  • Project reports
  • Social welfare programs
• Corporation


  Most common form of business organization, chartered by a state and given legal rights as an entity separate from its owners, characterized by limited liability of owners, issuance of shares of easily transferable stock, and existence as a going concern
• Key responsibilities and functions of corporations

  • Selecting a CEO
  • Providing continuity
  • Managing resources effectively
  • Increasing profits
  • Social responsibilities
• Cooperatives


  Autonomous associations of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise
• Functions of trade unions

  • Militant functions
  • Fraternal functions
  • Social functions
  • Political functions
• International organizations


  Entities established by formal political agreements between their members who have the status of international treaties, their existence is recognized by law in their member countries, and they are not treated as resident institutional units of the countries in which they are located
• Principal international economic affairs bodies

  • World Bank
  • International Monetary Fund (IMF)
  • World Trade Organization (WTO)
• Transnational advocacy groups


  Advocates of principled causes, ideas, and values such as human rights or the environment, they do not work alone nor are they limited by national boundaries
• Development agencies


  Establish and support sustainability programs for the community, e.g. Economic Development Agency - its goals are to help create and support economic growth within a specified city, region, or state by providing necessary resources and assistance