Introduction To Banks
Banks direct hold developed some 200 years ago. The natures of banks direct hold changed every bit the fourth dimension has changed. The term banking corporation is related to fiscal transactions. It is a fiscal establishment which uses, coin deposited yesteryear customers for investment, pays it out when required, makes loans at involvement exchanges currency etc. nevertheless to sympathise the concept inward particular nosotros request to encounter some of its definitions. Many economists direct hold tried to laissez passer on unlike meanings of the term bank.
Nature of Commercial Banks
Commercial banks are an organisation which ordinarily performs for certain fiscal transactions. It performs the twin trouble of accepting deposits from members of populace in addition to brand advances to needy in addition to worthy people shape the society. When banks direct hold deposits its liabilities increment in addition to it becomes a debtor, merely when it makes advances its assets increases in addition to it becomes a creditor. Banking transactions are socially in addition to legally approved. It is responsible inward maintaining the deposits of its line concern human relationship holders.
Definitions of Commercial Banks
While defining the term banks it is taken into line concern human relationship that what type of trouble is performed yesteryear the banks. Some of the famous definitions are given below:
According to Prof. Sayers, "A banking corporation is an establishment whose debts are widely accepted inward short town of other people's debts to each other." In this definition Sayers has emphasized the transactions from debts which are raised yesteryear a fiscal institution.
According to the Indian Banking Company Act 1949, "A banking fellowship way whatsoever fellowship which transacts the line concern of banking . Banking way accepting for the purpose of lending of investment of deposits of coin from the public, payable on demand or other wise in addition to withdraw able yesteryear cheque, draft or otherwise."
Functions of Commercial Banks
Commercial banking corporation existence the fiscal establishment performs various types of functions. It satisfies the fiscal needs of the sectors such every bit agriculture, industry, trade, communication, etc. That way they play really important role inward a procedure of economical social needs. The functions performed yesteryear banks are changing according to alter inward fourth dimension in addition to latterly they are becoming client centric in addition to widening their functions. Generally the functions of commercial banks are divided into 2 categories viz. primary functions in addition to the secondary functions. The next nautical chart simplifies the functions of banks.
Primary Functions of Commercial Banks
Commercial Banks performs various primary functions some of them are given below
- Accepting Deposits : Commercial banking corporation accepts various types of deposits from populace particularly from its clients. It includes saving line concern human relationship deposits, recurring line concern human relationship deposits, fixed deposits, etc. These deposits are payable afterward a for certain fourth dimension period.
- Making Advances : The commercial banks render loans in addition to advances of various forms. It includes an over draft facility, cash credit, neb discounting, etc. They also laissez passer on demand in addition to demand in addition to term loans to all types of clients against proper security.
- Credit creation : It is close important component of the commercial banks. While sanctioning a loan to a customer, a banking corporation does non render cash to the borrower Instead it opens a deposit line concern human relationship from where the borrower tin withdraw. In other words spell sanctioning a loan a banking corporation automatically creates deposits. This is known every bit a credit creation from commercial bank.
Secondary Functions of Commercial Banks
Along alongside the primary functions each commercial banking corporation has to perform several secondary functions too. It includes many agency functions or full general utility functions. The secondary functions of commercial banks tin hold upwardly divided into agency functions in addition to utility functions.
- Agency Functions : Various agency functions of commercial banks are
- To collect in addition to clear cheque, dividends in addition to involvement warrant.
- To brand payment of rent, insurance premium, etc.
- To bargain inward unusual telephone commutation transactions.
- To buy in addition to sell securities.
- To human activity every bit trusty, attorney, correspondent in addition to executor.
- To direct hold taxation proceeds in addition to taxation returns.
- General Utility Functions : The full general utility functions of the commercial banks include
- To render security locker facility to customers.
- To render coin transfer facility.
- To lawsuit traveller's cheque.
- To human activity every bit referees.
- To direct hold various bills for payment e.g telephone bills, gas bills, H2O bills, etc.
- To render merchant banking facility.
- To render various cards such every bit credit cards, debit cards, Smart cards, etc.
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