Please enable JavaScript.
Coggle requires JavaScript to display documents.
Commercial bank and its functions (Secondary functions - General utility…
Commercial bank and its functions
Definition:
Commercial banks are banking institutions that accept deposits from the public and grant short-term loans and advances to their customers.
Functions of commercial banks are divided into two categories;
Primary functions
Accepting deposits
Lending money
Secondary functions
Agency services
General utility services
Primary functions - Accepting deposits:
The most important activity of a commercial bank is to accept deposits from the public
Different types of deposit accounts - Fixed deposit Account, Recurring Deposit Account, Current Account, Savings Bank Account, etc., with varying rates of interest
Primary functions - lending money:
The second important function of a commercial bank is lending of money to the public as well as to the business houses
It takes the form of loans and advances to the customers at the prescribed rates of interest
Secondary Functions - Agency Services
Banks provide agents to the customers for;
Collection and payment of cheques and bills
Collection of dividends, interest and rent, etc.,
Purchase and sale of securities (shares, debentures, bonds etc.,)
Payment of rent, interest, insurance premium, subscriptions etc.,
Acting as a trustee or executor
Acting as agents or correspondents on behalf of customers for other banks and financial institutions at home and abroad
Secondary functions - General utility services
These services are rendered by commercial banks not only to the customers but also to the general public.
These are available to the public on payment of a fee or charge
i) Issue of bank drafts, pay order (banker's cheque), travellers' cheques
ii) Issue of letters of credit
iii) Safe-keeping of valuables in safe deposit locker
iv) ATM card, debit card, and credit card faciltiy
v) Internet banking and phone banking
vi) Sale of prospectus and application forms of various competitive examinations
vii) Accepting telephone bills, electricity bills
viii) Underwriting loans floated by government and public bodies
ix) Supplying trade information and statistical data useful to customers
x) Acting as referee regarding the financial status of customers