SECONDARY FUNCTIONS OF COMMERCIAL BANK?



Meaning: -The bank performs a number of secondary functions, also called as non-banking functions.


1.      Agency Functions: -The bank acts as an agent of its customers. The bank performs a number of agency functions, which includes.

a.      Transfer of Funds: -The bank transfer funds from one branch to another or from one place to another.

b.      Collection of Cheques: -The bank collects the money of the cheques through clearing section of its customers. The bank also collects money of the bills of exchange.

c.       Periodic Payments: -On standing instructions of the client, the bank makes periodic payments in respect of electricity bills, rent, etc.

d.      Portfolio Management: -Large banks undertake to purchase and sell the shares and debentures on behalf of its clients and accordingly debits or credits the account. This facility is called portfolio management.

e.       Periodic Collections: -The bank collects salary, pension, dividend and such other periodic collections on behalf of the client.

f.       Other Agency function: -
·         It acts as trustees, executors, attorneys, and administrators on behalf of its clients.
·         It acts as representatives of clients to deal with other banks and institutions.
·         Provide 24 hours ATM facilities to its customer

2.      General Utility Functions: - The bank also performs general utility functions, such as:

a.      Issue of Drafts, LCs, etc: -Banks issues drafts for transferring money form one place to another. It also issues letter of credit, especially in case of import trade. It also issues travellers cheques.

b.      Locker Facility: -The bank provides a locker facility for the safe custody of valuable documents, gold ornaments, and other valuables.

c.       Underwriting of Shares: -The bank underwriter’s shares and debentures through its merchant bank division.


d.      Dealing in Foreign Exchange: -The commercial banks are allowed by RBI to deal in foreign exchange.

e.       Project Reports: -The bank may also undertake to prepare project reports and feasibility studies on behalf of its clients.


f.       Social Welfare Programmes: -It undertakes social welfare programmes, such as adult literacy programmes. Public welfare campaigns, etc.