Banking Mechanisms and Deposit Systems: An Analytical Overview

Abstract

     This chapter explores the fundamental structure, functions, and types of banks in contemporary financial systems, with a particular focus on Pakistan and Islamic banking principles. It examines the formation (taʾsīs / formation) of banks, the procedures for deposit collection (deposits / ʿumānat), and the mechanisms of credit creation (qurūḍ / credit creation). The discussion highlights the roles of banks in profit and loss distribution (al-munafaʿ wa al-khasāʾir / profit and loss), investor protection, and public confidence building. Various types of banks (ashkāl al-bunūk / types of banks) are analyzed, including commercial, agricultural, industrial, cooperative, investment, mortgage, and Islamic banks. The chapter also outlines the operations of key international financial institutions such as the International Monetary Fund (IMF / Ṣunduq al-Nuqūd al-Dawli) and the World Bank (Al-Bānk al-ʿĀlamī / World Bank), along with the central banking system (al-bānk al-markazī / Central Bank) and their regulatory frameworks. Special attention is given to Islamic banking principles, emphasizing Shariah-compliant (al-sharīʿah / Shariah) financial practices, prohibition of riba (interest / fa’ida), and ethical investment strategies. The chapter provides a comprehensive understanding of how banks mobilize resources, facilitate trade, and support economic development, while ensuring compliance with both conventional and Islamic legal and financial frameworks.