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Question
Explain the agency function of commercial banks.
Solution
The commercial banks perform various agency functions with the primary purpose of acceptance of deposits and granting of loans. Their functions include:
- Transfer of funds- The banks provide an easy flow of funds from place to place via mail transfers, demand drafts etc.
- Collection of funds- The banks also collect funds on behalf of their customers through bills, cheques etc.
- Collection- Banks also collect insurance premiums, dividends, interest on debentures etc.
- Assistance- Banks assist in the process of tax payment by the account holders.
- Role of trustee- Commercial banks also play the roles of trustees or executors.
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