As per Negotiable Instrument Act 1881 and Bank Company Act
1991, “Banker means the accepting, for the purpose of lending or investment, of
deposit of money from the public, repayable on demand or otherwise and
withdrawable by cheque, draft, and order or otherwise”. A commercial bank is a
type of financial institution and intermediary. It is a bank that lends money
and provides transactional, savings and money market accounts and that accepts
time deposits.
Prof. Rozer “the bank which deals with money and money’s
worth with a view to earning profit is known as commercial bank”
Prof. Nath, “commercial bank is an intermediary profit
making institution”.
The traditional functions of a Commercial bank are to
receive deposit from the surplus unit with a condition to repay on demand or
otherwise and allowing loans/advances/investment to the
deficit unit. But now-a-days the functions of a commercial
bank diversified and acting as a
superstore. So, the functions may be divided into five
categories, such as (1) General functions, (2) Functions related to foreign
trade and foreign exchange, (3) Agency functions, (4) Welfare functions and (5)
Other functions
General functions are:
a) Maintain account of the clients,
b) To receive deposits of various types,
c) To make advance/investment against with or without
securities, d) To create deposits,
e) To create medium of exchange through cheque, Draft, Pay –
order etc. f) To issue guarantees (local)
g) To discount Bills.
Functions related to Foreign trade & Foreign exchange:
a) To make correspondent banking with overseas banks,
b) To place foreign currency funds with correspondents
abroad, c) To issue Letter of Credit (LC),
d) To issue Back to Back Letter of Credit (BTB L/C),
e) To amend L/Cs,
f) To extend investment/credit facilities to the importers
through creating PAD/MIB, MTR/LTR, LIM/LAM/MP etc,
g) To extend credit/investment facilities to the exporters
through the modes of Musharaka Pre-
shipment/PC/ECC, LDBP, FDBP etc,
h) Acceptance of Bill of Exchange and make payment,
i) Make forward booking of foreign exchange on behalf of
importer for preventing them from exchange loss,
j) Sale and purchase of Foreign currency, TC, Credit Cards,
k) Maintaining Foreign Currency accounts,
l) Outward foreign remittance for import, foreign tour,
travel, education, treatment, pilgrims, training etc.,
m) Inward foreign remittance – export proceeds, wage earners
remittance etc., n) Issuing guarantees (foreign).
a) To transfer money,
b) To collect funds and makes payment for the clients, c) To
maintain confidentiality of customers,
d) To sale and purchase of shares and securities,
e) To make payments for utility charges and insurance
premium on behalf of the client, f) To receive rent, dividend, premium etc.
g) To work as trustee,
h) To work as representative of Central Bank.
Welfare functions:
a) Social welfare functions/Corporate Social Responsibility,
b) Functions related to the welfare of the employees/retired
employees such as
• Establishment of institution,
• Establishment of Trust,
• Pensions and allowance.
a) Underwriting,
b) Work as safe custody through Locker service, c) Advices
the clients on business matters,
d) Repo,
e) Customer financing, f) Leasing,
g) Income sharing,