It is a popular view that bank is a place where people keep their money. Is this view wrong? It is true that a bank is a place where people keep their money. However, it will be wrong for us to confine ourselves on that view because apart from that there a lot more functions which banks can perform.

What is wrong with the popular view that a bank is a place where people can keep their money?

It is a popular view that a bank is a place where people keep their money. Is this view wrong? Continue to read to find out.

The concept of bank     

Bank can simply defined as an entity that is engaged in the banking business. 

However In the case of United Dominions Trust Ltd V. Kirkwood bank is defined to mean cooperation which accepts money on current, accounts, pay cheques to drown upon such account on demand and collect cheques for customers.


What is wrong with that Popular View?

It is true that a bank is a place where people keep their money. However, it will be wrong for us to confine ourselves on that view because apart from that there a lot more functions which banks can perform.

Generally, there are two major groups of banks i.e Central Bank and Commercial Banks. Each group performs different functions as follows.


Central Bank

There is no single definition of what is a Central Bank; a Central Bank can well be defined based on its functions. The following are the functions of a Central Bank.

  • it is the only bank that has the mandate to issue the national currency.
  • It regulates and supervise banks and financial institutions including mortgage financing, development financing, lease financing, licensing and revocation of licenses.
  • It formulates, implement and be responsible for monetary policy, including exchange rate policy
  • it functions as the lender of the last resort. When saying the lender of the last resort it implies that the central bank assumes the responsibility of meeting director indirect all reasonable demands for accommodation by commercial banks in time difficulty and crisis.

Commercial Banks

On the other hand Commercial Banks have varieties of functions that are engaged in which are distinct from those of the central bank. The major aim of commercial banks is to generate profit for its shareholders. Its perform both primary functions (banking services) and secondary functions (non-banking services)


Primary Functions

  • To collects deposits from the public i.e Saving Deposits, Fixed Deposits, Current Deposits, and Recurring Deposits. These are what sometimes referred to as accounts in banking.
  • To grant loans and Advances in form of the Overdraft facility, Cash Credits or Discounting of Bill of Exchange.

Secondary Functions

1. Agency functions

Commercial banks perform the following agency functions.
      


  • Collection of Cheques
  • Periodic Payments
  • Portfolio Management
  • Periodic Collections
  • They act as trustees, executors, advisors, and administrators on behalf of its clients. 


2. General Utility Functions


  • Issue of Drafts and Letter of Credits
  • Locker Facility
  • Underwriting of Shares
  • Dealing in Foreign Exchange
  • Project Reports
  • Participate in different Social Welfare Programmes
  • It acts as a referee to the financial standing of customers. It collects creditworthiness information about clients of its customers. It provides market information to its customers, etc. It provides travelers' cheques facility.



Wrapping Up

From the highlights above, the popular view that a bank is a place where people can keep their money appears to be right but very narrow. 

Because at the beginning banks had only a few functions and these were simply depositing and withdrawing the money but as time went by banks found them expanding to other varieties of functions as mention above. 

It is, however, should appear in our mind that the central bank and commercial banks are both banks but very distinct in their function as we have above seen.

Which Bank function you are using most? Comment below

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Refferences
Ellinger & Lomnicker(1994) “Modern banking law”; 2nd ed Publ. info. - Oxford: Clarendon Press, 

Hapgood, M.(2007),  Pagert’s law  of Banking, 13th  ed; Lexis Nexis Butterworths, London

Khubchandan, B.S(2007), Practice & Law of Banking for Macmillan   India Ltd, New Delhi.

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