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What are the functions of a commerce Bank?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Renju M.R asked over 2 years ago

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

> What are the functions of a commerce Bank? --The main functions of commercial banks are accepting deposits from the public and advancing them loans. However, besides these functions there are many other functions which these banks perform. All these functions can be divided under the following heads: **1. Accepting Deposits:** The most important function of commercial banks is to accept deposits from the public. Various sections of society, according to their needs and economic condition, deposit their savings with the banks. For example, fixed and low income group people deposit their savings in small amounts from the points of view of security, income and saving promotion. On the other hand, traders and businessmen deposit their savings in the banks for the convenience of payment. **2. Giving Loans:** The second important function of commercial banks is to advance loans to its customers. Banks charge interest from the borrowers and this is the main source of their income. Banks advance loans not only on the basis of the deposits of the public rather they also advance loans on the basis of depositing the money in the accounts of borrowers. In other words, they create loans out of deposits and deposits out of loans. This is called as credit creation by commercial banks. **3. Over-Draft:** Banks advance loans to its customer’s upto a certain amount through over-drafts, if there are no deposits in the current account. For this banks demand a security from the customers and charge very high rate of interest. **4. Discounting of Bills of Exchange:** This is the most prevalent and important method of advancing loans to the traders for short-term purposes. Under this system, banks advance loans to the traders and business firms by discounting their bills. In this way, businessmen get loans on the basis of their bills of exchange before the time of their maturity. **5. Investment of Funds:** The banks invest their surplus funds in three types of securities—Government securities, other approved securities and other securities. Government securities include both, central and state govern­ments, such as treasury bills, national savings certificate etc. Other securities include securities of state associated bodies like electricity boards, housing boards, debentures of Land Development Banks units of UTI, shares of Regional Rural banks etc. **6. Agency Functions:** Banks function in the form of agents and representatives of their customers. Customers give their consent for performing such functions. The important functions of these types are as follows: (i) Banks collect cheques, drafts, bills of exchange and dividends of the shares for their custom­ers. (ii) Banks make payment for their clients and at times accept the bills of exchange: of their cus­tomers for which payment is made at the fixed time. (iii) Banks pay insurance premium of their customers. Besides this, they also deposit loan installments, income-tax, interest etc. as per directions. (iv) Banks purchase and sell securities, shares and debentures on behalf of their customers. (v) Banks arrange to send money from one place to another for the convenience of their custom­ers. **7. Miscellaneous Functions:** Besides the functions mentioned above, banks perform many other functions of general utility which are as follows: (i) Banks make arrangement of lockers for the safe custody of valuable assets of their custom­ers such as gold, silver, legal documents etc. (ii) Banks give reference for their customers. (iii) Banks collect necessary and useful statistics relating to trade and industry. (iv) For facilitating foreign trade, banks undertake to sell and purchase foreign exchange. (v) Banks advise their clients relating to investment decisions as specialist (vi) Bank does the under-writing of shares and debentures also. (vii) Banks issue letters of credit. (viii) During natural calamities, banks are highly useful in mobilizing funds and donations. (ix) Banks provide loans for consumer durables like Car, Air-conditioner, and Fridge etc.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered over 2 years ago

Commercial banks are provide banking services to businesses and consumers through network of branches. These banks are in business to make profit for their owners. The primary function of commercial banks are accepting deposits from the public and granting credit to all sectors of the economy. Following are some of the functions of Commercial Banks 1. Accepting Deposits from Customers which can be savings account, current, fixed deposits 2. Lending to Customers and outsiders against collateral 3. Agency Services like payment of rent, insurance premium, telephone bills, collection of cheques from customers, currency exchanges. 4. General Utility services such as ATM service, Credit Card Service, transferring money, Merchant Banking. 5. Bank also provide other services such as investment banking, investment advisor. 6. Cash Management 7. Treasury Managment 8. Private Equity Financing 9. Purchase and sell of securities 10. Acting as trustee, attorney, correspondent

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Open uri20170510 32134 ivjxpn?1494421728 Shreedhar Sutar answered over 2 years ago

Hi Renju M.r Commercial banks are provide banking services to businesses and consumers through network of branches. These banks are in business to make profit for their owners. The primary function of commercial banks are accepting deposits from the public and granting credit to all sectors of the economy. **Following are some of the functions of Commercial Banks** 1. Accepting Deposits from Customers which can be savings account, current, fixed deposits 2. Lending to Customers and outsiders against collateral 3. Agency Services like payment of rent, insurance premium, telephone bills, collection of cheques from customers, currency exchanges. 4. General Utility services such as ATM service, Credit Card Service, transferring money, Merchant Banking. 5. Bank also provide other services such as investment banking, investment advisor. 6. Cash Management 7. Treasury Managment 8. Private Equity Financing 9. Purchase and sell of securities 10. Acting as trustee, attorney, correspondent 11. Accepting Tax proceeds. 12. Processing payments via Telegrahic Transfer

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