Introduction: -In addition to the primary
functions of accepting deposits and granting loans and advances, banks performs
a number of other functions which are called secondary functions. They are the
following two types.
A.
Agency Functions:
- Agency functions includes the following:
1.
Collection
of Cheques, dividends and Interests: -As an agent the
bank collects cheques, drafts, promissory notes, interests, dividend, etc., on
behalf of its customers and credits the amount to their accounts.
2.
Payment
of rent, insurance premiums, etc: -The bank makes the
payment such as rent, insurance premiums, subscriptions, etc on standing
instructions until further notice. Till the order is revoked the bank will
continue to make payments regularly by debiting the consumer's account.
3.
Dealing
in foreign exchange:
-As an agent, the commercial bank purchases
and sells foreign exchange for customers as per RBI Exchange Control
Regulations.
4.
Purchase
and Sales of Securities:
-Commercial banks undertake the purchase and sale of
different securities such as shares, debentures, bonds, etc on behalf of their
customer. They run a separate 'Portfolio Management Scheme' for their big
customers.
5.
Acts
as trustee, executor of will, attorney, etc: -The bank acts as
executives of will, trustees and attorneys. It is safe to appoint a bank as a
trustee than to appoint an individual. Acting as attorneys of their customers,
they receive payments and sign transfer deeds for the properties of the
customers.
6.
Acts
as Correspondent:
-The commercial banks act as a correspondent
of their customers. Small bank even get travel tickets, book vehicles, receive
letters, etc., on behalf of their customers.
7.
Preparation
of Income Tax Returns:
-They prepare income tax returns and provide advises
on tax matters for their customers. For this purpose, they employ (use) tax
experts and make their services available to their customers.
8.
Bank
Drafts:
-A Bank draft is a financial instrument
with the help of which money can be remitted from one place to another. Anyone
can obtain a bank draft after depositing the amount in the bank. It is less
risky for a creditor.
9.
Underwriting
of Shares:
-Underwriting services include guarantee by the bank
to the company. In case the company shares are not sold, the bank
will take the responsibility of the unsold shares. Bank charges commission for
this service.
10. Demat Account: -Demat account facility has
been introduced by commercial banks to facilitate the customers who are
shareholders
B.
Utility Functions:
- Utility functions of the bank includes the following:
1.
Safe
deposit vault/lockers:
-Safety of valuables like jewels,
documents, etc is provided by commercial banks by way of safe deposit vaults or
lockers. 'Lockers' are small
receptacles (cabinets) which are fitted in steel racks and kept inside
"strong rooms' known as vaults.
2.
Traveler's
Cheques:
-Traveler's Cheques are used by domestic
travelers as well as by international travelers. Bank issues travelers cheques
to help carry money safely while travelling within India or abroad. Thus, the
customers can travel without fear, theft or loss of money.
3.
Letter
of Credit (L/C):
-Letter of Credit is a payment document provided by
the buyer's banker in favour of the seller. This document guarantees payment to
the seller upon presentation of documents mentioned in the Letter of Credit
evidencing dispatch of goods to the buyer.
4.
Provides
Trade Information:
-The commercial bank collects information
on business and financial conditions etc for their customers which help them to
plan their strategy. Trade information service is very useful for those
customers going for business with companies outside the country.
5. Gift Cheques: - The commercial
banks offer Gift cheque facilities to the general public. These cheques receive
a wider acceptance in India. Under this system by paying equivalent amount one
can buy gift cheque for presentation on occasions like wedding, birthday, etc.
