Question

What are the secondary functions of commercial banks? 

Explain secondary functions of Bank.

Answer 1

Here is an explanation of the Bank's secondary functions:

1. Agency Functions: Commercial Bank acts as an agent to its customers for various services like:
   1. Collecting bills, drafts, cheques, and similar financial documents.
   2. Paying insurance premiums, loan instalments (EMI), rents, etc.
   3. Acting as a representative for customers to buy or sell securities on the stock exchange.
   4. Preparing and submitting income tax returns, including claiming refunds.
   5. Enabling fund transfers between branches or between different banks.
   6. Offering dematerialisation services to clients for holding securities in electronic format and facilitating electronic share transfers.
   7. Facilitating the purchase and sale of foreign exchange on behalf of clients.
2. Utility Functions: A commercial bank performs utility functions for the benefit of its clients. It provides certain facilities or products to its clients.
   1. Commercial banks issue drafts and cheques to transfer money between branches of the same bank or to other banks.
   2. They offer rental locker facilities for the secure storage of clients' valuables.
   3. They prepare project reports and conduct feasibility studies for clients.
   4. They issue gift cheques and gold coins to both account holders and non-account holders.
   5. They offer underwriting services to companies.
   6. They provide gold-related services to their customers.
   7. They issue debit and credit cards to their customers.
3. E-Banking: E-Banking, also referred to as electronic banking or virtual banking, is made possible by advancements in electronics and computers. In E-Banking, banking operations are automated through computer systems. Some key components of E-Banking include:
   1. Automated Teller Machine (ATM): ATMs are electronic machines that allow customers to independently withdraw or deposit money. They can also be used for checking account balances, requesting cheque books, and obtaining bank statements.
   2. Credit Cards: A credit card is a payment card that lets the cardholder make payments for various transactions. Banks provide a line of credit to their customers through these cards.
   3. Debit Card: A debit card enables users to make payments directly from their bank accounts. Unlike credit cards, banks do not offer any credit with debit cards.
   4. RTGS: RTGS (Real Time Gross Settlement) is a system for transferring funds or money from one bank to another on a real-time basis.
   5. NEFT: NEFT (National Electronic Fund Transfer) is an electronic system that facilitates the transfer of funds from one branch to another or between different banks.
   6. Net Banking and Mobile Banking: Net Banking allows customers to perform various banking tasks via computers or laptops. Mobile Banking refers to accessing banking services through mobile phones, enabling functions like balance inquiries, fund transfers, cheque book requests, etc.
   7. IMPS Facility: IMPS (Immediate Payment Service) allows customers to instantly transfer funds to any other bank account.