Functions of All Commercial Banks in Totality
All commercial banks put together
perform certain functions to the development of the country’s economy.
These banks supply the
vitamin money to all sectors of the economy including
manufacturing sector. As a result all the sectors produce more.
Banks encourage savings habit among
people and accumulate their small dormant savings. These funds can be
fruitfully channelized for productive purposes of the economy.
Thousands of crores required to
establish a mega factory is not available from a single source. Banks join
together and provide consortium finance in such cases.
Branches of the banks are opened in
rural and village areas so that the non-banking areas are provided banking
Banks transfer funds from surplus areas
and make them available in scarce districts or areas for the formation
and operation of business
institutions. Even growth of different regions can be achieved through this
For the efficient functioning of all
traders and business institutions in a country, safe keeping of their funds,
transfer of funds, payment and collection of funds when and where needed is
very much necessary. Banks perform this function.
Banks design methods
and instruments of financing each sector differently. They
provide finance for small farmers, medium traders as well as industries. For
example banks allow micro credit to SHGs, overdraft to traders and issue
Certificate of Deposits to finance industries.
Banks have established customer relationship
with all public and business institutions through the network of branches.
Broad guidelines or rules of the Government for the monetary sector of a
country cannot be applied without such banks.
Banks open foreign branches or establish
correspondent relationship with
banks in foreign countries to
help exporters. Instruments like letters of credit and international factoring
services are undertaken to help exporters and importers.
Entrepreneurs obtain project loans and
establish new business houses. By providing the required credit banks generate
more economic activities and new employment opportunities.