Secondary Functions of Commercial Banks
Apart from the basic or primary
functions commercial banks render various other services which are known as secondary
functions. These services can be broadly classified into agency services and
general utility services.
Banks act as agents of customers and
provide certain services. They are called Agency Functions which are as
cheques, travelers’ cheques, etc. and help in transfer of funds from one place
to another. Customers need not carry cash. They can just forward the draft
issued by the bank to the receiving institution. A small commission is
collected by banks for this service.
After instruction from the customers,
banks undertake the monthly payment of insurance premium, rent, telephone bill,
etc. from the accounts of customers. Now a days these payments are made through
electronic clearing system facility offered by the banks.
On behalf of customers bank collect the cheques deposited into the accounts of customers from other banks and deposit cash in the customers’ accounts. Similarly cheques issued by a customer is honoured and the amount paid as directed by the customer.
Banks act as executors of will of the
customers and implement their will after their death. As a trustee a bank takes
care of the funds of the customers. Banker signs transfer deed of the
properties of the customers in the capacity of attorney to customers.
A Demat account should be opened with
Depository Participant and that demat account should be linked with savings
bank account by the customer. Then the customer can ask the bank to conduct
online purchase or sale of securities, on behalf him.
Banks prepare the annual income tax
return on behalf of the customers and provide income tax related advices to
Banks buy and sell foreign currencies on
behalf o customers.
Banks act as correspondent of customers
and receive travel ticket, passport, etc.
In addition to primary, secondary and
agency functions, commercial banks offer some services for the general welfare of the customers. They are
called general utility services. They are as follows.
drafts and Bankers
Cheques are issued to public and customers
as well. Instead of sending money
they can attach these instruments for payment of educational fees, etc.
Banks accept bills on behalf of
customers and make payments to the foreign exporter. Afterwards, the banks
collect from the customers.
Valuable documents, jewels, etc. can be
kept safely in a vault provided by bank for a rent. These vaults room is called
This document is given by bank on behalf
of importing customer to the exporter guaranteeing payment for the imported
goods. It is a very important document in international trade.
Customers need not carry cash during
travel in India or abroad. The denomination and words are printed in the
cheque. It is accepted as money in shops, hotels, travel agencies, etc.
These denomination printed cheques are
available in attractive design so that it can be presented during wedding,
birthday functions, etc.
Business firms can give their bank’s
name as reference to the new business institution with which they want to
establish commercial relationship. Banks willingly act as referees and provide
information about the financial standing of their customers.