Banking, Insurance, Finance and Economics Definition, Differences and their Systems

Before Know some terms that are very useful. 

What is the difference between Insurance and Banking ?

Insurance is the protection of life or assets or property in terms of monetary value as an compensation of probable damage and injury of life or assets or property in the future. While banking system can be termed as a safe cash flow between depositor and  debtor. Banks are the mediator only who manage the system and secure the system in smooth flow. They earn profits from the interest differences. 

In Insurance system, a person has to pay certain annuity (Equal deposit) amount in equal period of time. It depends on the time value of money. But not only this, it guarantees total future worth if any accidental case occurs shortly. 

In Banking System, people deposits certain amount on the bank. Bank provides effective interest rates. In Nepal normally, bank provides Quaternarily compounding interest. It means, the bank compounds the capital for every three months generally. Based on the account type, it may vary. After a depositor deposits money, bank provides Loan to the trusted individual or company, with higher interest rate. 

For example: If Person A deposits money to a Bank with 7% interest, the Bank gives the loan to Person B with Interest rate 14% for same amount deposited. Then bank earns gross profit of 14% of Capital minus 7% of Capital. That is: 7% of capital. This is how a banking system works. 

Difference between Finance and Economics

Finance and Economics are the output based terms of a company or project or investment. If a company invested certain amount to build up a project and the total benefits gained by the company after the project fully launched to their Customers can be termed as Finance of that company or Financial stats of a company. Generally Private companies, business, and projects are based financial. 

But in the similar project, if the project benefits the maximum number of people or users; OR the service of the project is very reliable to users and useful, it can be termed as economics or economical stats of a project or company.

Generally Government projects are based on Economics and Economical Stats. 

LOAN vs DEPOSIT

-updating soon.