The roles / functions of commercial banks
- They accept deposits from the public on various accounts such as current accounts, saving accounts and fixed accounts. This money is repaid on demand
- They provide credit facilities and mortgages to the deficit spending units (borrowing) who in turn pay interest on the borrowed fund
- They provide safe custody for clients’ valuables such as education certificates, land titles, etc.
- They operate foreign exchange bureaus which facilitate international trade and foreign aid.
- They provide facility to transfer money from one place to another, from one bank to another, from one account to another and so on.
- They receive payments from employers on behalf of employees and distribute it to the accounts of the employers
- They assist the central bank in implementation of monetary policy through various policy instruments
- They discount bills; commercial banks can cash their customers and hold bills of exchange until they mature to be presented for payment in their own business names
- They offer advisory services and training to their customers with regard to business
- They provide facilities to pay customers tax and bills
- The assist government in tax collection since taxes are paid through banks
- Credit Creation: Whenever a loan or credit is provided to the customer, he/she is not given any cash. In fact, a bank account is opened in the name of that person and amount is transferred to that account. Through this process, the bank is able to create money.
- Purchasing and Selling of the Securities: For this function, banks give you a facility for purchasing and selling the securities.
- Bullion Trading: the commercial banks trade with many countries in the world. They trade in gold and silver and provide the same facility for their customers.
- Information Banks: commercial banks are primarily an information bureau, that collects the economic, statistical, and financial data related to the trade, commerce, and industry.
- Merchant services: Most commercial banks offer merchant services that include credit card processing, mobile payment solutions, gift cards, and electronic check services.
- Leasing: Many companies use leasing as a financing method for acquiring real estate, automobiles, factory equipment, and other major fixed assets.
- Treasury management services: Commercial banks offer funds collection, disbursement, and fraud prevention.
- They accelerate trade by offering agency services, overdraft facilities, and other solutions to wholesale and retail businesses.
CATEGORIES Economics
TAGS Dr. Bbosa Science
