Functions of Commercial bank is business enterprises profit through banking business. But the institutions also provide some unique services to economy. Economy is regulated or economic development is ensured through banks. Thus modern commercial banks perform the a number of activities for the government and the nation. Usually commercial banks perform the following function.
Functions of Commercial Bank
- Mobilization of saving and capital: Commercial banks collect the drifts of the savings from the hands of scattered individuals accumulate funds in one place and provides capital for investment and thus create in the economy by mobilizing idle saving.
- Acceptance of deposits of savings: Banks especially commercial banks are institutions for the safe custody or deposit of public money. Banks are also risk- free investment place for the public. Banks provide facilities of different types of deposits. such as fixed deposits , current deposit saving deposits and certificate of deposits. These deposits provide safety to the client’s money and also ensures earning some returns on the deposited money.
- Provision of short-term credit or financing: Credit is the lifeblood of modern economy. Credit enhances the briskness of economic activities Commercial banks provide short -term credit or financing to the borrower or businessman and thus, help the business development.
- Creation of medium of exchange: In our modern monetary economy money is the medium of exchange. But banks also create a parallel medium of exchange through cheek. Documents like commercial bank cheek bank draft , bill of exchange, traveler’s cheek etc. are also used as medium of exchange to some extent and known as bank money .
- Acceptance and discounting of Bill of Exchange: Credit transaction is usual feature of modern business to keep documentary evidence is created Sometimes , commercial banks accept this bill and also provide discounting to time bill . By discounting time bill commercial banks provide finance to the client , make investment of own funds, and earn returns.
- Assistance and financing to foreign trade: Foreign trade is very important in the economy of any country in the recent time. Transaction in the foreign trade is impossible without the help of commercial bank . By providing finance and guarantee through letter of credit accepting foreign bill and discounting and or collecting g those, commercial banks help foreign trade immensely.
- Assistance in remittance repaying of money: Money transfer is risky in the face of increased terrorism. Banks provide valuable service in this respect. Banks help client to transfer money from one place to another through check bank d raft pay order money order transfer and telegraphic transfer and , thus provide safety and swiftness to remittances .
- Provision of safety to valuables: Banks provide safety to the valuable things like ornaments, deeds of lands etc. By keeping those in its safe custody through locker service.
- Personal services to client: Commercial banks provide some personal services to the clients. Banks on behalf of the client repay house rent income tax insurance premium , telephone bill electrical bill etc . to the related authority or collect school fees from the client.
- Investment counseling: Commercial banks provide investment counseling and information to the clients.
- Assistance in the investment activities: Banks sell and purchase shares debentures and other investments securities of the client and provide counseling for portfolio management .
- Trusteeship function: Sometimes banks take care of the assets of the client and attends as guarantee for the client to some other patties.
- Introducing the client: Commercial banks introduce the client to the outsiders, if any businessman wants to do business with a new client, he want to know information about the clients financial solvency & repayment behavior. Bank provides his information about the client.
- other function: Commercial banks perform other functions like agency function for the client acting as government ‘s bank, etc. in the economy, and miscellaneous other function.