Overview of Banks (Continue)

Function of Bank

Bank have to perform a variety of the function which are common both to develop and developing country. These are known as “General Banking” function of the banking institution. The modern bank performs to variety of function. These can be broadly divided into two categories: (a) Primary function and (b) Second Functions.

A.      Primary Functions

Primary function of the banking institution includes:

1.       Acceptance of deposit: Accepting deposit is the primary function of a bank mobile savings of the household sector. Banks generally accept three type of deposit: (a) Current deposits, (b) Saving deposit and (c) Fixed deposit.

(a)    Current deposit: These deposits are known as demand deposit. These deposit can be withdraw at any time. Generally, no interest is allowing on current deposit and in case the costumer is require to leave a minimum balance undrawn with the bank. Cheek are sued to withdrawn the amount. These deposits are keeping by the businessman and industrialist who receive and make large payment through the bank.

(b)   Saving deposits: the is the meant mainly for professional men and middle class people to help them deposit their small savings. Money can be deposited at any time. Interest is allowed on the credit balance of his account.

(c)    Fixed Deposits: These deposits are also known as time deposit. This depositcannot be withdrawn before expired of the period. They are attracting by the payment of interest which is usually higher for the longer period. Fixed deposit are like by depositor both for their safety and as well as for their interest.

2.       Creating of credit: A unique function of the bank is to create the credit. Bank supply money to trader and manufacture. They also create or manufacture the money. Bank deposit is regarded as the money. They are as good as cash. The reason is they can be used for the purchase of goods and service and also in payment of debts. When a bank grant the loan to its costumer. It does not pay cash. It’s simply credit the account of the borrower. He can withdraw the amount whenever hewants by check. In this case bank has created a deposited without receive cash.

3.       Remittance of funds: Commercial bank, on account of their network of branches throughout the country, also provide facilities to remit funds from one place to other their customer by issuing bank drafts., mail transfer. As compare to the postal money order or other instrument, bank drafts have proved to be a much cheaper mote of transferring money and have help the business community considerably.

4.       Promote the use of Check: the banking institution render an important service by providing to their customer a cheap medium of exchange like check. It is fund much more convenient to settle debt through the use of cash. The check is the money market.

B.      Secondary Functions

The secondary function of the banking institution include:

1.       Agency Services: Bank also performs certain agency function for and on behalf of their customers. The agency service is the immense value to the people at large. The various agency service rendered by the banks are as follows:

(a)    Collection and payment of credit instrument bank collect and pay various credit instruments like check and bills as behalf of their customers.

(b)   Purchase and sale securities: the bank is purchase and sells securities like share. Stock, bond on behalf of their customers.

(c)    Collection of dividend on share: the bank collects dividend and interest on share of their customer and credits them to their accounts.

(d)   Income-Tax consultancy: bank may also employ income tax expert to prepare income tax return for their customer and to help them to get refund of income tax.

2.       General Utilities Service: in addition to agency service, the modern bank provide many general utility service for the community as given:

(a)    Locker facility: the bank provides the locker facility to their customer. The customer can keep their values, such as gold and silver ornament, important document, share in this locker for safe custody.

(b)   Travelers of check and credit card: bank issue have traveler to help their customer too travel without the fear of theft or loss of money. With this facility, the customer needs to not take risk of carrying cash with them during their travels.

(c)    Latter of Credit: are issued by the banks for their customer certifying their credit worthiness. Latter of credit are very useful for the businessman and manufacture in foreign trade.

(d)   Collection of Statistics: Bank collection of statistic is giving important information relating to trade. Commercial, industrial, money and banking. They also public valuable journal and bulletin containing article on economic and financial statement.