Business Services-2 — OCM STD 11 Commerce — Question
Gujarat BoardEnglish MediumSTD 11 CommerceOCMBusiness Services-25 Marks
Question
Explain : Functions of bank.
✓
Answer
Introduction :
The terns 'commerce' includes support services such as bank, insurance, warehouse, transportation, communication etc. related to trade. Banking is related to all other services.
One can't think of trade and commerce without banking services.
It is a wrong belief that bank provides services to trade and commerce only.
In modern times banks on behalf of customers many financial and non-financial functions.
Banking services are interwoven with human life.
What is Bank ?
According to the Reserve Bank of India "Bank is an institution which collects deposits in order to land them with condition to return it at the end of the fixed term or whenever, it is demanded." $3.$ Core Functions of Bank :
Following are the main functions of bank.
To accept deposits.
To lend money
To invest money.
To perform inter-banking (transactions)
To Accept / Collect Deposit :
Bank accepts unused money from public in four different accounts
Saving Account
Current Account,
Recurring Account,
Fixed Deposit Account.
Bank pays interest on the amount deposited in all these accounts.
The rate of interest varies.
The greatest responsibility of bank is to maintain the trust of depositors.
To Lend Money :
The bank accepts deposits from public and these money received through deposit is lended by bank.
Bank pays low interest to the depositors and lends to the borrowers at higher rate of interest. Interest that paid to the depositors is lower than interest charged to the borrowers.
The difference between the two is the profit of the bank. Normally banks lend money through $(A)$ Loan $(B)$ Overdraft $(C)$ Cash Credit.
Explanation about overdraft and Cash Credit is given in short answer to questions Np. $6$ and $7$).
To Invest :
If bank can not invest properly or land amount of deposit received or its capital, it can not get sufficient return.
It is the most important function of bank to invest money properly with safety with calculation.
When critical financial situation arises in bank, then with the purpose of easy liquidity of investment made by bank as per the rule of RBI. certain percentage of deposit amount should be invested in government securities of low interest. The remaining amount is invested in financially prosperous units.
To do Inter-banking Transactions :
Every bank has to do inter-banking transactions to remove short- term financial crisis. It may be for $24$ hours only, or less than that. If such situation arises $RBI$ is informed.
Through the appointed agencies by $RBI$, unutilized money is sent to the needy bank by $RBI$. During this transactions money lender and money borrower bank do not come indirect contact.
The borrower bank has to pay interest on the amount received. Rate of interest is determined on the basis of demand and supply of money in the market and it is known as 'Call Money'.
In this transaction money is received before twenty four hours. That is why it is called 'Call Money'.
Conclusion :
The number of account holders increase due to regularity and care in core functions of bank.
The more the carefulness of the bank, the more is the number of account holders of the bank.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.