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Functions of Commercial Bank in banking is very important

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Commercial Banks are one that receive deposits and advance loans and play an important role in credit creation. They help traders businessmen and offer various services in the growth of economy.


Functions
Functions of commercial banks are as under:
i. Primary function
ii. Secondary function

i. Primary functions: Primary functions are as follows:
• Receiving deposits: This is one of the most important function of commercial banks receive deposit from account holders under savings, Current, fixed accounts and utilize the money to earn interest.
• Advancing loans: Commercial bank finance the needs of businessmen by advancing loan to them an interest which is higher than that allowed on various kinds of account the loans may be secured and unsecured and short term and long term period.
ii. Secondary functions:
Secondary functions of commercial banks can be divided into two banks:
• Public utility services
• Agency services
Public utility services:
Bank performs following functions under his category.
Accepting and discounting bills of exchange:
Bill of exchange is a negotiable credit instrument which is accepted by bank on the behalf of the debtor and discounts it for the creditor. Discounting refers to payment of the bill before its maturity.
Transfer of money
Commercial banks transfer the money from one account to another account one bank to another bank one city to another city and one country to another country and saves time cost and security.

Creation of credit money :
Banks receive deposit and advance loan out of these credit money created. It is one of important function of commercial Banks which increase the quality of money in the currency.


Underwriting of shares:
Underwriting refers to purchasing the whole issue of share or bounds from the Principal company and reselling it to the public and earn commission on it which gives relaxation to the companies that their all stock will be sold.


Issuing of letter of credit:
Letter of credit is an open letter from a bank requesting the seller to send goods to the buyer and promise to pay the sum itself. An L.C. is a reliable guarantee for the exporter or seller from the bank. Through which seller draw bills of exchange.

Locker services:
Banks offer lockers for the safe custody of jewelry documents and other precious items and deduct some charges from customers account.

Credit cards:
Through credit cards commercial banks provide unsecure credit to card holder to buy goods and services and pay within banking without any interest. Charges of cardholders failed to pay the money within 30 days. Banks charged compound interest on the payable amount. It is short term credit which is allowed by the bank.

Debit card:
This card issued to the bank account holders who have sufficient account balance with the bank instead of drawing money from the banks. Card holders make direct purchase with their cards and this amount recovered from the account. This card can be used to withdraw money from A.T.M.

Automated Teller Machine:
The machine provides information about account balance, it is also used for payment of utility bills and for withdrawing money after banking hours. A PIN (Personal identification number) is required to operate the machine with debit or ATM card.
Agency services: Commercial banks act as attorney for their clients and perform following services:
Accepting cheque &bills:
Businessmen receive cheques in payment from other parties. These cheques may be drawn on other banks than theirs. They Deposit these cheques with their banks can get the payment. Banks also receive payments against electricity gas bills from customers and pay dividend and premium on behalf of their clients.
Dealing in shares & bonds:
On the instruction of its clients the bank buys and sells shares and bonds on the stock exchange.

Acting as attorney:
The bank acts as attorney to its clients and thus performs legal and commercial function for them.

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