The banking system

A bank is a financial institution that keeps the money of people and firms, lends, makes payments and works with securities; the word “bank” comes from the Italian “banco” (a bench). It collects money “lying idle” in people’s hands as deposits and lends it for interest to entrepreneurs who need it, thereby developing production. Uzbekistan has a two-tier banking system: the Central Bank and commercial banks. The Central Bank of the Republic of Uzbekistan issues the national currency, the so‘m (emission), regulates money circulation, supervises commercial banks, lends to them, announces the exchange rate and keeps the state’s reserves; it is the “bank of banks” and does not serve people and firms directly. Commercial banks keep the deposits of people and firms, give credit, carry out payments and settlements and exchange currency. A term deposit is placed for a set period for interest, while a current deposit can be withdrawn at any time. With simple interest the loan interest is I = P · r · t and the total repaid is S = P + I (P — the loan, r — the annual rate, t — years); with compound interest, after n years P_n = P · (1 + r)^n is repaid.