Explain the various secondary functions of commercial banks.
These services can be broadly classified into agency services and general utility services.
I. Agency Functions:
Banks act as agents of customers and provide certain services. They are called Agency Functions which are as follows:
1. Transfer of Funds: Banks issue demand drafts, bankers' cheques, travelers’ cheques, etc. and help in the transfer of funds from one place to another.
2. Periodic Payment of Premiums, Rent, etc.: After instruction from the customers, banks undertake the monthly payment of insurance premium, rent, telephone bills, etc. from the accounts of customers.
3. Collection and Payment of Cheques: On behalf of customers bank collect the cheques deposited into the accounts of customers from other banks and deposit cash in the customers’ accounts.
4. Acting as Executors, Trustees, and Attorneys: Banks act as executors of the will of the customers and implement their will after their death.
5. Conduct Share Market transactions: A Demat account should be opened with Depository Participant and that Demat account should be linked with savings bank account by the customer.
6. Preparation of Income Tax Return: Banks prepare the annual income tax return on behalf of the customers and provide income tax-related advice to them.
7. Dealing in Foreign Exchange: Banks buy and sell foreign currencies on behalf of customers.
8. Acting as Correspondent: Banks act as correspondent of customers and receive travel tickets, passports, etc.
II. General Utility Functions:
- Issue of Demand Drafts and Bankers’ Cheques
- Accepting Bills of Exchange on behalf of Customers
- Safety Lockers
- Letters of Credit
- Travelers Cheques
- Gift Cheques
- Reference Service