COMMERCIAL BANKING : Privately owned and Aims – profits
- Acceptance of Deposits – Custodians of valuables
- Granting Loans – Night safe
- Acts as agent of payment – Cash dispenser
- ACCEPTANCE OF DEPOSITS : oldest function
- Current accounts,
Deposit account ADVANTAGES OF CURRENT ACCOUNT
- Fixed deposit accounts – Businessman can carry out his activities regulatory & promptly
- CURRENT ACCOUNT : – Businessman can make direct payments to creditors via cheques
Withdrawn at any time with cheque – Enables the bank to collect money on behalf of customers
– Account holder is given cheque – Enables the account holder to obtain overdrafts & other loans.
– Customer pays bank charges – Can conduct internet or online banking
– Can be given loans & overdrafts
– No restriction as to number of withdrawals
– May be given a bank statement
- DEPOSIT ACCOUNT: Money is deposited at any time & withdrawn at anytime but notification of 7 days or charges. (to promote savings )
- Issued pass books
- Customer is paid interest
- Withdrawals are made with use of passbook
- Customer must maintain a minimum amount in his account.
- No loan or overdraft facilities.
ADVANTAGES OF DEPOSIT ACCOUNT
- It encourages savings.
- The account holder can earn incomes from interests
- It help account holder to carry out online shopping (internet banking)
- It keeps records of all online transactions
- It provides ATM facilities.
FIXED DEPOSIT ACCOUNT: This means the account is for a particular purpose and times. The deposit is fixed and repayable only after a specific period of time. Interests paid on this account depends on the amount, period & from bank to bank.
FEATURES OF FIXED DEPOSIT ACCOUNT
- The purpose is fixed
- The amount can, is some cases be deposited only once.
- The period may range from 15 days to 10 years.
- A higher interest rate is paid to holder by the bank.
- Withdrawals are not allowed until.
- The depositor is given a deposit receipt which may need to be reproduced at maturity
ADVANTAGES OF FIXED DEPOSITS : GRANTING OF LOANS :
- It encourages savings – Direct bank loans (collaterals securities)
- The account holder earns higher interest rate – Bank overdrafts
- Account holder can obtain loans – Discounting of bills.
- The bank can give it out as loans to business in need.
BANK LOANS (Collaterals securities)
FACTORS TO CONSIDER WHEN GRANTING LOANS
- Credit worthiness of customer
- Amount of the loan
- Duration of loan
- Purpose of loan
- Ability of borrower to manage the loan.
- The age of the borrower
- Bank’s lending policy
- Collateral security provided.