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Functions of Bank

Functions of bank

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11 views

Functions of Bank

Functions of bank

Uploaded by

py620781
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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FUNCTIONS OF COMMERCIAL BANK

ADV. DR. SUMATHI GOPAL


Primary Function
 Accepting Deposits

 Savings Deposits

 Fixed Deposits

 Current Deposits

 Providing Loans

 Credit Creation
II. Secondary Functions

A. Agency Functions
Banks render a number of useful services to the customers apart from
performing the primary functions.
Commercial banks act as agents of their customers in following ways-
1. Collection and Payment of Credit: The commercial banks collect and pay
the various negotiable instruments like cheques, bills of exchange,
promissory notes, hundies etc. Barks also make payment on behalf of
the customers like payment of rents, Income tax, fees, Insurance
premium etc.
2. Purchase and Sale of Securities: The modern commercial banks also
undertake the purchase and sale of various securities like shares,
stocks, bonds units and debentures etc. on behalf of the customers.
Banks perform the functions of a broker and do not give any advice
regarding the suitability of a security.
3. Trustee and Executor : Banks also act as trustees and executors
of the property of their advice. Banks undertake administration of
will or settlements and trusteeship functions through its expert staff
and specialised departments. Sometimes banks also undertake
income-tax services on behalf of the customer.
4. Remittance of Money: Banks also remit money from one place to
the other. The commercial banks remit funds on behalf of customer
from one place to another through cheques, drafts, mail transfers,
telegraphic transfer etc.
5. Representation and Correspondence: Sometimes commercial
banks act as representatives and/or correspondents of the clients,
especially in obtaining passports, travel tickets, booking of vehicles,
plots etc.
B. General Utility Services
Banks provide many more utility services in addition to agency services-
1. Locker Facilities: Banks provide locker facilities to their customers.
People can keep their gold or silver jewellery or other important
documents in these lockers at a very nominal annual rent. In this way
bank accepts the valuable articles and documents for safe custody.
2. Acting as a Referee : Banks also act as a referee. Banks give
information about the economic position of their customers to
domestic and foreign traders. Bank can be referred by the third
parties for getting information regarding the financial position of the
Customer. The bank will act as referee only if it is desired by the
customer, otherwise the secracy of a customer's account is
maintained very carefully.
3. Issuing Letter of Credit: Letter of credit is a very popular
document in foreign trade. Banks certify the credit worthiness of his
customers in a way by issuing letter of credit. Issuing of letter of
credit to their customers to enable them to go abroad.
4. Acting as Underwriters: Banks also underwrite the new issues of
Government and Corporate bodies for a commission. The name of a
bank as an underwriter encourages investors to have faith in the
shares of company.
5. Acting as Information Banks: Commercial banks also act as
information bureau as they collect the financial, economic and
statistical data relating to industry, trade and commerce. The
information is made available to various interested parties.
6. Issuing of Traveller's Cheques : Banks have been rendering great
service by issuing traveller's cheques which enable a person to
travel without fear of theft or loss of money. Now, some banks have
started credit card system under which a credit card holder is
allowed to avail credit from the listed outlets without any additional
cost or effort. So, a credit card holder need not to carry cash all the
time.
7. Issuing of Gift Cheques: Certain banks issue gift cheques of
various denominations e.g. some Indian banks issue gift cheques of
the denominations of Rs. 11, 21, 31, 51.101, 501, etc. These are
generally issued free of charge.
8. Dealing in Foreign Exchange: Major commercial banks also
transact business of foreign exchange through their main branches.
Commercial banks are the main authorized dealers of foreign
exchange in India.
9. Merchant Banking Services: Commercial banks also render
merchant banking services to the customers. They help in availing
loans from non-banking financial institutions. However, in recent
past most of the banks have transferred the merchant banking
services to their separate subsidiaries.

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