Commercial Banks

In the words of Sayers, a bank” is an institution whose debts are widely accepted in settlement of others debt to each other.”

According to banking regulation act 1949, banking is defined as “accepting for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise and withdraw able by cheque drafts, order or otherwise.

Functions of banks.

1)   Acceptance of deposits

2)   Creation of credits

3)   Lending

4)   Transferring of money and other related activities.

Ancillary function

Services such as remittances of funds or transfer of money from one place to another through mail, telex, telegram, and network. It provides mechanism for clearance and collection of checks,. The banks act as agents  and trustees for managing the property affairs of their customers. They  also provide safe custody for the valuables of their customers.

In addition to the above they also perform

1)   Merchant banking and underwriting business

2)   Provision of market intelligence, both technical and financial

3)   Financing import and export business

4)   Issue of letters of credit and doing foreign exchange business.

Role of commercial banks.

1)   Mobilization of savings.

2)   Facilitate commerce and trade.

3)   Balanced regional development.

4)   Development of agriculture and other priority sectors.

5)   Provision of finance to backward communities and the neglected sector of the economy.

Theory of banking.

1)   Concept of liquidity and profitability

2)    Credit creation.