Structure and functions of commercial bank

Discounting of Bills of Exchange 5. Investment of Funds 7.

Structure and functions of commercial bank

Types and Functions of Commercial Banks of India! It provides safe custody for those savers who want to put their savings with it and earns an income also, offers facilities to the busy businessmen or professional as the cheque facility, thus making the flow of payments and receipts easier while at the same time acting as the custodian of their funds.

It also provides finance for the needy ones by allowing overdraft and loan facilities by creating credit. Banks can be classified into different groups either on the basis of their structure or on the basis of their function.

Commercial Banks in India: Role, Structures and Importance

Structurally banking can be divided into Branch banking and Unit Banking. This refers to a system under which two or more banks are opened under a single ownership.

Structure and functions of commercial bank

This refers to that system of banking in which banking operations are carried on through a single organisation, without any branches. This system used to be popular in America. One great advantage of branch banking is that the same bank can cater to several parts of a large country through its branches situated in those parts which a unit bank would find difficult to do.

As against this, a unit bank has the advantage that its efforts are concentrated in one area so that it can serve that area well. This is a system under which two or more banks, separately incorporated, are connected by being controlled by a single holding company as trust. This is similar to Group Banking.

Here two or more banks are controlled by a single group through the ownership of shares or otherwise. In this category, the banks act as custodian or trustees of the depositors.

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This refers to banks whose main function is to provide finance for investment to industrial concerns. They provide this by purchasing shares and debentures of newly floated companies.

Most banks in India play both roles. Deposit Banking and Investment Banking. Such type of banking is called mixed banking. Functions of Commercial Banks: The major functions of Commercial Banks are as follows: The main function of commercial banks is to accept deposits from the public.

Banks maintains demand deposits accounts for their customers and converts deposit money into cash and vice versa, at the direction of the latter. Demand deposits are technically accepted in current accounts, which are with draw able any time by the depositor by means of cheques.

Deposits are made in fixed deposit accounts which are with draw able only after a specific period.

Thus, fixed deposits are time liabilities of the banks. Deposits are also received in saving bank accounts subject to certain restrictions on the amount receivable and with draw able. This is how banks pool the scattered savings of the community and serve as the reserves of its savings.

Giving Loans and Advances: Another function of commercial banks is to extend loans and advances out of the money which comes to them by way of deposits to businessmen and entrepreneurs against approved securities such as gold or silver bullion, government securities, easily saleable stocks and shares and marketable goods.

Bank advances to customers may be made in the following ways: Banks also render important services by providing an expensive medium of exchange, such as cheques. In modern business transactions, the use of cheques to settle debts is found to be much more convenient than the use of cash.

In fact, the cheque is also known as the most developed credit instrument.33 Functions of Commercial Banks Introduction You have studied in the earlier lesson about different types of banks and their nature. It . Jun 26,  · A strong organizational structure can help a bank thrive while offering a variety of financial services.

and home equity loan functions. Commercial banking will often have managers working in. Commercial Banks in India: Role, Structures and Importance!

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7 Main Functions of a Commercial Bank

Role and Importance of Commercial Banks: The functions of commercial banks explain their importance in the economic development of a country. History of Commercial Banks.

In , Congress enacted the Glass-Steagall Act in an effort to avoid another banking collapse. This law forced banks into two separate business entities, the securities business and commercial banking.

Commercial Banks in India: Role, Structures and Importance! 1.

Structure and functions of commercial bank

Role and Importance of Commercial Banks: The functions of commercial banks explain their importance in . About the Federal Reserve System. The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S.

economy and, more generally, the public interest.

Commercial Banks in India: Role, Structures and Importance