Finance and Banking are perhaps two of the most used words when it comes to financial terminology. While banking is concerned with accepting deposits from public by paying them interest on deposits and giving that money received through deposits to industrialists and general public on credit so as to earn interest on that credit, however from past few years banking has become much broader as it covers investment banking, insurance, mutual funds and many other ancillary activities. Finance, on the other hand, is a broader concept as it is about management and study of money, investments, balance sheets, financial statements of companies and it also includes banking in its gamut.
When one look from banking point of view the relationship between finance and banking is like big ship and sea just like a big ship cannot sail in rivers or small ponds and it requires big sea so as to sail smoothly in the same way banking is like a big ship which requires finance in order to run smoothly because in banking one make use of various financial concepts and statements while giving loans to corporates and individuals. In short, banking uses various concepts of finance while running its operations and without finance, it will be like that ship which is in the museum for exhibition purpose and is of no commercial use.
When one look from finance point of view the relationship between finance and banking can be compared to salt in the food just like without salt no matter how well the food is prepared the taste will not be there, in the same way, finance will not be same without banking as banking through its various services, functions, and use of financial data in day to day activities add value to the finance.
As one can see from the above that finance and banking has an important relationship when it comes to financial world and that is the reason why finance students and finance professionals should have an idea about both finance and banking as having knowledge of only finance or banking is similar to knowing only about the day and not about the night.