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Distinguish between commercial banks and merchant banks

(a) Distinguish between commercial banks and merchant banks.

(b) Explain each of the following:

(i) Order cheque

(ii) Bearer cheque

(iii) Certified cheque

(iv) Non-Negotiable cheque.

Differences between Commercial banks and Merchant banks are;
commercial banks merchant banks
(i) Deal with both small and big customers
(ii) Give out short term loans to individuals and businesses
(iii) can act as an agent to issuing houses
(iv) partake in all kinds of banking activities
Deal with large corporate bodies
Give out long term loans to a large corporation
can act as issuing houses
perform specialised banking activities

b)(i) Order cheque; is a cheque made payable to a person named on it or his order. What this means is that an order Cheque is only paid to the person whose name appears on it or another person to whom he will authorise the bank to pay the money by endorsing the cheque to be paid to the person. By endorsing an order cheque, it becomes a bearer cheque, which anybody can present for payment.

(ii) Bearer cheque; is a cheque that is made payable to whoever presents it and that is the meaning of the word bearer. It does not mean that no name is written on the cheque. This means that anybody can present the cheque despite the name written on it and the bank is obliged to honour it. It, therefore, means that a bearer cheque is not safe.

(iii) Certified cheque; cheque was drawn or ratified by a bank on behalf of a customer. known Banks do this to restore confidence or genuineness on a cheque. If a creditor doubts the authenticity of a debtor’s cheque, the creditor may request the debtor to give him a certified cheque.

(iv) Non-Negotiable cheque; is a cheque carrying a warning to whoever is accepting it that he has no better right to it than the transferee. The words do not imply that the cheque cannot be endorsed to a third party.