(a) Explain seven functions of a commercial bank.
(b) Explain three types of accounts that are operated in a commercial bank.
Explanation
(a) Functions of a Commercial Bank
(i) Accepts deposits from the customers.
(ii) Grants loans to businessmen and women.
(iii) Grants over-draft to businessmen and women.
(iv) Assist in paying through standing order
(v) Discounting of Bill of exchange.
(vi) Provides the right savings facilities.
(vii) Provides status enquiry facilities on its customers.
(viii) Assists companies in the collection of payments.
(ix) Provision of drafts for making payments.
(x) Provides investment services/advice to customers.
(xi) Provides foreign exchange services through sales of traveller’s cheques.
(xii) They keep valuables for customers (bailment).
(xiii) Acts as administrators of wills when needed etc.
(xiv) issue of shares on behalf of companies.
(xv) Provision of leasing facilities.
(xvi) Provision of factoring services.
(ii) Savings Account: This is an account in which money is paid to leave it there for some time. Money can be paid into this account by anybody but the withdrawal of cash can only be made personally by the account holder. The bank pays interest on this account regularly.
(iii) Fixed Deposit Account: This account has all the features of a Savings Account. In addition, it requires the owner of the account to give a stipulated period of notice before withdrawing from the account. The holder of the account receives higher interest than holders of the Savings Account. It can be used as security for loans.