Functions Accepting Deposits Advancing loans Agency Services General Utility Services Transfer of funds Credit Creation - - Banking investments on behalf of their customers. A credit voucher is sent to customers for information when any income is collected by the bank. (iii) Paying Expenses Commercial banks make payments for various obligations of customers, such as telephone bills, insurance premium, school fees, rents etc. Similar to credit voucher, a debit voucher is sent to customers for information when expenses are paid by the bank.
( ) General Utility Functions: It implies that commercial banks provide some utility services to customers by performing various functions. (i) Providing Locker Facilities Commercial banks provide locker facilities to its customers for safe custody of jewellery, shares, debentures, and other valuable items. This minimizes the risk of loss due to theft at homes. Banks are not responsible for the items in the lockers.
(ii) Issuing Traveler’s Cheques Banks issue traveler’s cheques to individuals for traveling outside the country. Traveler’s cheques are the safe and easy way to protect money while traveling. (iii) Dealing in Foreign Exchange Commercial banks help in providing foreign exchange to businessmen dealing in exports and imports. However, commercial banks need to take the permission of the Central Bank for dealing in foreign exchange.
. Transferring Funds It refers to transferring of funds from one bank to another. Funds are transferred by means of draft, telephonic transfer, and electronic transfer. .
Letter of Credit Commercial banks issue letters of credit to their customers to certify their creditworthiness. (i) Underwriting Securities Commercial banks also undertake the task of underwriting securities. As public has full faith in the creditworthiness of banks, public do not hesitate in buying the securities underwritten by banks. (ii) Electronic Banking It includes services, such as debit cards, credit cards, and Internet banking.
(C) Other Functions: (i) Money Supply It refers to one of the important functions of commercial banks that help in increasing money supply. For instance, a bank lends lakh to an individual and opens a demand deposit in the name of that individual. Bank