Commercial Banks Essay

Banks produce developed around two hundred years ago. The natures of deposes have changed as the clipping has changed. The bound bank is related to monetary trans dressions. It is a fiscal establishment which uses, capital deposited by customers for investment, pays it out when required, makes adds at hobby exchanges currency and so forth however to infer the concept in detail we requisite to see some of its definitions. M either economists have tried to give different meanings of the margin bank.Nature of mercantile BanksCommercial banks ar an organisation which normally performs certain fiscal transactions. It performs the twin delegate of judge deposits from members of overt and make advances to needy and worthy volume form the society. When banks accept deposits its liabilities increase and it becomes a debtor, but when it makes advances its assets increases and it becomes a creditor. Banking transactions argon accessiblely and legally approved. It is responsib le in maintaining the deposits of its key holders.While defining the line banks it is taken into account that what type of task is performed by the banks. Some of the famous definitions be given at a lower placeAccording to Prof. Sayers, A bank is an asylum whose debts atomic number 18 wide accepted in settlement of new(prenominal) peoples debts to each other. In this definition Sayers has emphasized the transactions from debts which are raised by a financial institution.According to the Indian Banking Company pretend 1949, A banking company means any company which transacts the business of banking . Banking means accepting for the purpose of lending of investment of deposits of currency from the public, pay fit on demand or other wise and withdraw able by cheque, gulp or otherwise. Commercial bank being the financial institution performs diverse types of functions. It satisfies the financial needs of the sectors much(prenominal) as agriculture, industry, trade, communic ation, etc. That means they piddle away very significant role in a process of economic social needs. Thefunctions performed by banks are changing match to change in time and recently they are becoming customer central and widening their functions. Generally the functions of technical banks are divided into two categories viz. native functions and the secondary functions. The following chart simplifies the functions of banks. aboriginal Functions of Commercial BanksCommercial Banks performs various simple functions some of them are given below 1. Accepting Deposits Commercial bank accepts various types of deposits from public especially from its clients. It complicates saving account deposits, recurring account deposits, fixed deposits, etc. These deposits are payable after a certain time period. 2. Making Advances The technicalized banks fork up loans and advances of various forms. It includes an over draft instalment, cash credit, bill discounting, etc.They to a faul t give demand and demand and term loans to all types of clients against proper security. 3. Credit human beings It is most significant function of the commercial banks. While sanctioning a loan to a customer, a bank does not provide cash to the borrower Instead it opens a deposit account from where the borrower can withdraw. In other words while sanctioning a loan a bank automatically creates deposits. This is known as a credit creation from commercial bank. tributary Functions of Commercial BanksAlong with the primary functions each commercial bank has to perform some(prenominal) secondary functions too. It includes many way of life functions or general utility functions. The secondary functions of commercial banks can be divided into billet functions and utility functions. A. Agency Functions Various agency functions of commercial banks are* To collect and fair cheque, dividends and interest warrant.* To make payment of rent, insurance premium, etc.* To deal in remote exch ange transactions.* To purchase and sell securities.* To act as trusty, attorney, correspondent and executor.* To accept measure proceeds and tax returns.B. General utility Functions The general utility functions of the commercial banks include* To provide safety locker facility to customers.* To provide money transfer facility.* To deal travellers cheque.* To act as referees.* To accept various bills for payment e.g phone bills, gas bills, water bills, etc.* To provide merchant banking facility.* To provide various tease such as credit cards, debit cards, Smart cards, etc.