Fundamentals of Banking Operations

1. Structure of the Banking System

The banking system forms the backbone of a modern economy by facilitating financial intermediation between surplus and deficit units. It mobilizes savings, allocates credit, supports trade, and stabilizes monetary systems. Without a structured banking system, economic growth, investment, and financial inclusion would be severely constrained.

This chapter examines the institutional architecture of the banking system. It distinguishes between commercial banks, central banks, microfinance institutions, and investment banks, highlighting their respective mandates, operational models, and regulatory environments. Understanding this structure is essential for appreciating how funds circulate within an economy and how monetary policy is transmitted.