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Functions of Commercial Banks

Commercial banks have primary functions like accepting deposits and lending loans for housing, education, shares, and more. They also have secondary functions including agency functions like cheque collection and foreign exchange, and general functions like safety deposit boxes, payment services, letters of credit, and credit/debit cards. Banks contribute to various sectors by accepting deposits, providing loans, overdraft facilities, and other services to individuals, businesses, and organizations in industries, agriculture, banking/finance, trade, infrastructure development, investment, and more. They also contribute to household income and consumption through deposit accounts, insurance, loans, credit cards, and cheque services.

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541 views12 pages

Functions of Commercial Banks

Commercial banks have primary functions like accepting deposits and lending loans for housing, education, shares, and more. They also have secondary functions including agency functions like cheque collection and foreign exchange, and general functions like safety deposit boxes, payment services, letters of credit, and credit/debit cards. Banks contribute to various sectors by accepting deposits, providing loans, overdraft facilities, and other services to individuals, businesses, and organizations in industries, agriculture, banking/finance, trade, infrastructure development, investment, and more. They also contribute to household income and consumption through deposit accounts, insurance, loans, credit cards, and cheque services.

Uploaded by

9639166250
Copyright
© Attribution Non-Commercial (BY-NC)
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 banks

Primary functions

Secondary functions

1. Acceptance of deposits 2. Advancing of loans 3. Housing finance 4. Educational loan scheme 5. Loan against shares/securities 6. Loan against saving certificates 7. Consumer loan and advances 8. Securitization of loan 9. Credit creation 10. Other primary functions like deciding interest rates

1. Agency function 2. General function

Agency functions
1. 2. 3. 4. 5. 6. 7. Collection of cheques, dividends, and interests Payment of rent, insurance premiums Dealing in foreign exchange Purchase and sale of securities Act as trustee, executor, attorney, etc Act as correspondent Preparations of Income-Tax returns

General functions
1. Safety Locker facility 2. payment Mechanism or Money Transfer 3. travelers' cheques 4. circular Notes or Circular Letters of Credit 5. Issue "Travelers Cheques" 6. Letters of Credit 7. Acting as Referees 8. Provides Trade Information 9. ATM facilities 10. Credit cards 11. Gift Cheques 12. Accepting Bills 13. Merchant Banking 14. Advice on Financial Matters 15. Factoring Service

Contribution to industrial sector

1. Acceptance of current deposits accounts of companies, businessmen 2. Corporate bond purchased by commercial banks for financing corporate business of industrial sector. 3. Businessmen often use credit card debt to get short term loan for big payment while doing business. 4. overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of commercial bills, traditional revolving credit card account to government, business or individual by a bank or other financial institution. 5. Overdraft facility to businessmen and company account to manage their day to day payment smoothly. 6. Discounting bill and drawing and clearance of cheques.

Contribution to agriculture sector

1. Acceptance of current deposits accounts of companies, businessmen

Contribution to banking and finance

1. Acceptance of current deposits accounts of companies, businessmen 2. Selling mortgage property across interbanking environment and to other financial institutes. 3. Corporate bond purchased by commercial banks for financing corporate business of financial institution.

Contribution to global trade relationship

1. Acceptance of current deposits accounts of companies, businessmen

Contribution to infrastructure

1. Acceptance of current deposits accounts of companies, businessmen 2. overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of commercial bills, traditional revolving credit card account to government, business or individual by a bank or other financial institution to expand infrastructure.

Contribution to foreign direct investment

1. Acceptance of current deposits accounts of companies, businessmen

Contribution to currency value improvement

1. Acceptance of current deposits accounts of companies, businessmen

Contribution to income and consumption

1. Acceptance of current, saving, fixed and recurring deposits accounts of employed customers, shareholders, 2. Acceptance of cash certificates for by people for family management 3. Home Construction deposit scheme, Sickness Benefit deposit scheme, Children Gift plan, Old age pension scheme, Mini deposit scheme for people. 4. Home loan, car loan, education loan. 5. Insurance facilities like life insurance, property insurance, vehicle insurance, mortgage loan. 6. People often use credit card to make big payment while doing shopping and in canteens etc. 7. Installment loans and payday loans 8. Discounting bill and drawing and clearance of cheques.

Contribution to education sector

1. Acceptance of current deposits accounts of companies, businessmen 2. Education loan

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