25-08-2017, 09:32 PM
Other Banking Services
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Introduction
In previous lessons, you have learnt that commercial banks play an
important role in the field of trade, commerce and industry. They
promote and mobilize savings by providing safety, confidentiality and
attractive rate of interest. Banks inspire confidence in people and help
in creating banking habits in them. This promotes saving. Savings by
individuals are made available to those who wish to invest them in
developmental activities.
The primary functions of commercial banks may be summarized as
‘borrowing’ and ‘lending’ of money. Besides these two main functions,
a commercial bank also undertakes a variety of other activities. These
activities involve services offered by banks to help the customers
(account holders). Such activities include collection of cheques, dividend,warrants, etc. on behalf of customers as well as effecting transfer of funds, remittances by mail and telegram. In order to attract customers and make banking services effective, banks always make efforts to diversify their activities. Such diversification takes place by way of new service activities and schemes. These services offered by banks are generally known as agency services. These are also termed as non banking, general utility, and miscellaneous services.
Objectives
After studying this lesson, you will be able to :–
describe the supplementary functions performed by commercial
banks;
classify and enumerate the non-banking services of a modern
bank; and
discuss the significance and utility of non-banking
servicSupplementary Functions/Services of a Bank
Beside performing the two main banking functions of accepting deposits
and lending funds, a commercial bank renders a number of ancillary
services also. These services are known as supplementary functions.
They supplement the main functions of the bank. They are essentially
non-banking in nature and broadly fall under two categories:
Classifying and Enumerating the Non-BankingServices of a Modern Bank
As mentioned earlier, commercial banking functions include accepting
deposits and lending money for investment purposes and these two
functions are considered to be essential activities (main functions) of
banks. In addition, commercial banks render a number of other services.
Services to Customers
(i) Accepting and discounting bills of exchange.
(ii) Collecting cheques, bills, salaries, pension, dividends, interest on investments, etc. on behalf of clients.
(iii) Undertaking payment of subscriptions to clubs or other
associations, insurance premium, rents, taxes, etc
(iv) Acting as an agent of customers for buying and selling
shares and debentures, National Saving Certificates (NSCs),
and dealing in government securities.
(v) Acting as a Correspondent or authorised representative of
customers in dealing with other banks and financial
institutions.
(vi) Acting as an ‘executor’ or ‘administrator’ under power of
auttorney and carrying out the instructions of a deseased
as expressed in his will.
(vii) Acting as attorney. When the bank acts as an attorney, it
is generally authorised to receive dividends, interests on
securities, and to sign on behalf of customers on transfer
forms etc. for sale and purchase of securities.