Introduction To Banks
Banks induce got developed around 200 years ago. The natures of banks induce got changed equally the fourth dimension has changed. The term banking concern is related to fiscal transactions. It is a fiscal establishment which uses, coin deposited past times customers for investment, pays it out when required, makes loans at involvement exchanges currency etc. nonetheless to empathize the concept inward particular nosotros postulate to run into some of its definitions. Many economists induce got tried to plough over unlike meanings of the term bank.
Nature of Commercial Banks
Commercial banks are an arrangement which commonly 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 induce got deposits its liabilities increment in addition to it becomes a debtor, simply 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 of piece of employment concern human relationship holders.
Definitions of Commercial Banks
While defining the term banks it is taken into line of piece of employment concern human relationship that what type of trouble is performed past times the banks. Some of the famous definitions are given below:
According to Prof. Sayers, "A banking concern is an establishment whose debts are widely accepted inward village of other people's debts to each other." In this definition Sayers has emphasized the transactions from debts which are raised past times a fiscal institution.
According to the Indian Banking Company Act 1949, "A banking fellowship way whatever fellowship which transacts the line of piece of employment 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 past times cheque, draft or otherwise."
Functions of Commercial Banks
Commercial banking concern beingness the fiscal establishment performs various types of functions. It satisfies the fiscal needs of the sectors such equally agriculture, industry, trade, communication, etc. That way they play really important role inward a procedure of economical social needs. The functions performed past times banks are changing according to alter inward fourth dimension in addition to lately 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 concern accepts various types of deposits from populace specially from its clients. It includes saving line of piece of employment concern human relationship deposits, recurring line of piece of employment 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, pecker discounting, etc. They also plough over demand in addition to demand in addition to term loans to all types of clients against proper security.
- Credit creation : It is almost important business office of the commercial banks. While sanctioning a loan to a customer, a banking concern does non render cash to the borrower Instead it opens a deposit line of piece of employment concern human relationship from where the borrower tin withdraw. In other words spell sanctioning a loan a banking concern automatically creates deposits. This is known equally a credit creation from commercial bank.
Secondary Functions of Commercial Banks
Along amongst the primary functions each commercial banking concern has to perform several secondary functions too. It includes many agency functions or full general utility functions. The secondary functions of commercial banks tin survive 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 deed equally trusty, attorney, correspondent in addition to executor.
- To induce got 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 deed equally referees.
- To induce got various bills for payment e.g telephone bills, gas bills, H2O bills, etc.
- To render merchant banking facility.
- To render various cards such equally credit cards, debit cards, Smart cards, etc.
