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Question
Answer in detail:
What are the secondary functions of commercial banks?
Solution
The agency functions and the general utility functions are classified as the secondary functions of commercial banks.
Agency functions
The commercial banks perform various agency functions with the primary purpose of acceptance of deposits and granting of loans. Their functions include: i. Transfer of funds − The banks provide an easy flow of funds from place to place via mail transfers, demand drafts etc.
ii. Collection of funds − The banks also collect funds on behalf of their customers through bills, cheques etc.
iii. Banks collect insurance premiums, dividends, interest on debentures etc.
v. Banks assist in the process of tax payment by the account holders.
vi. Banks also play the roles of trustees or executors.
General utility functions These include:
i. Providing locker facility
ii. Underwriting of shares and debentures
iii. Purchase and sale of foreign exchange
iv. ATM, debit card and credit card facility
v. Providing information and statistical data useful to customers
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