Functions, Duties and Rights of Bank and Financial Institutions

 

Functions, Duties and Rights of Bank and Financial Institutions :- 

Commercial banks are established basically for the profit motives. They carry out all activities under their rules and regulations considering the economic policy of the nation. Because of different policy and economic structure of different nations, the functions of commercial banks may differ. In the same way, the functions of commercial banks changes with the economic development and banking habits of the people within the nation. The evolution of the bank shows that the functions of the commercial banks are expanding gradually over years. 

Some important functions and duties of banks are mentioned below:

1. Accepting deposits

Accepting deposits from the customers is one of important functions of the commercial bank. It manages different accounts such as current, saving, and fixed. In current account, bank does not provide interest rate to the customers; but is ready to return the money of the account at any time. Bank provides some interest on saving account, with the withdraw facility. In the fixed account, customers have to deposit money for a certain or fixed time. It provides quite higher interest rate for the fixed account, because of chance of investment for a long time.

2. Advancing loan

Commercial bank provides loan to the customers. Lending is the important aspect of the bank, and its sustainability depends on the lending of its resources in efficient ways. Generally the commercial banks provide loans, on the basis of certain mortgage, such as valuable ornaments and metal, land certificates, and on the recommendation of responsible persons. Commercial bank provides loans on different purposes such as business, agriculture, industry, etc. It can also provide overdraft to the responsible customers.

3. Agency functions 

Commercial banks carry out agency function as an agent in economy. The agency functions changes according to the development of economic activities. Some agency functions are presented below:

a. Bank helps to transfer money from one place to another with commission or charges. 

b. It helps to mobilise the fund of customers, which is kept in the bank.

c. It purchases and sells shares and government debentures.

d. It helps to pay insurance premium of the customers.

e. It helps to keep permanent funds of the institutions, religious trusts, schools, temples, etc. 

f. It helps to pay tax and other duties of customers on the request of the customers. 

g. Commercial banks certify the property of customers under given condition and commission.

4. Foreign exchange function

Commercial banks carry out foreign exchange transactions after getting the permission from the central bank. They exchange foreign currencies according to the guidelines of the central bank. In liberal economy, commercial banks do the foreign exchange activities quite independently. But they have to follow the rules and regulations.

5. Help in foreign trade

Commercial banks help in foreign trade. They manage the payment of trading parties. Banks discount the bills of businessmen and provide loan to the investors.

6. Other functions

In addition to the above-mentioned functions, commercial banks carry out other functions too. 

They are as below:

• Protection of valuable metals.
• Issuing travels cheques.
• Help in the formulation of financial policy.
• Underwriting debentures of companies, properties of other individual and institutions. 
• Accepting exchange bills.
• Implementation of monetary policy introduced.
• Giving economic and technical advice to the customers. 
• Collection of information and publication of banking activities.