Important Functions of Banks briefly described

By | November 24, 2019

Bank is defined as “ Accepting for the purpose of lending or investment, of deposits of money from the public and repayable to the customers on-demand or when needed and withdraw by cheque, ATMs, draft order or otherwise” Here are some Important functions of Banks.

Important Functions of Banks

There are some Important Functions of Commercial Banks

Important functions of commercial banks


First of all, it collects deposits from customers. Customers deposit their money in their bank accounts for the security of their cash and money and for the purpose of getting interested in it after a specific period.

Customers have three types of accounts in the Banks. These can be Current accounts, Savings accounts, and PLS (Profit and loss sharing). Current Accounts are for those who just want a basic regular account for deposit and withdraw money when needed. But in Savings accounts you can not withdraw money from below the savings.

2- Loans

The second function of the commercial bank is to provide loans to customers. These customers may or may not be the account holders of those banks. Banks give loans for the purpose of getting interested in it after the period. Loans can be short-term, Medium-Terms, and Long-terms.

3- Investments

The basic function of the bank is the investment of the money. Banks do investments in different sectors and companies to get profit and that profit is the income of any commercial bank.

4- ATMs

Bank have ATMs machines for the use of Debit cards and credit cards. Now, what is the debit card and credit card?

ATM cards credit card debt card

i) Debit Card: In the Debit card you are using your own money from your bank account. You cannot withdraw more amount then your bank account has.

ii) Credit Card: In Credit card, you are using Bank’s money on credit, It does not concern whether you have money in your account or not. But the bank provides these cards only those customers who have good monthly income so that they can return the bank’s money. Bank charge interest on credit card money usage according to days and amount used from credit cards.

5-Online Banking

Online banking is the latest function of commercial banks. It provides its customer online access to their accounts, balance, and other information.

6- Mobile Banking

Mobile Banking is the facility of the bank to customers to deposit money and transfer money to other accounts. The customer can pay utility bills and can also access its bank statement or daily transaction summary and history. This mobile banking service also inform the customers through messages and email about their account details and its rules and regulations. And all other important notifications.

7- Utility Bills Deposits

Banks accept the deposits from utility bills to increase its liquidity. Banks charge something on certain bills and make earning.

8- Foreign Exchange Transactions

Many Commercial Banks do foreign exchange transactions. The bank charges its fee as per transaction and according to the amount.

9- Consumer Financing

Banks also involve in consumer Financing as it provides, credit cards, car financing, personal loans, Mortgage financing, etc..

10- Prize Bonds

Bank sells and purchases bonds and other securities. It also has lockers for the precious assets of the customers to be secure. Banks have demand draft and pay order facilities and functions for the help of the customers within the city and inter-cities money transactions.

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