JSS2 Business Studies Lesson Note on Commercial Bank

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COMMERCIAL BANK

PREVIEW

1. Definition
2. Bank service
3. Ethical Issues in Banking

Full Content

Banks are public limited liability companies that are in the business of providing financial services to customers and businesses.

They receive, transfer, pay, exchange, lend, invest and safeguard money and other valuables for people or companies.

COMMERCIAL BANKS

A commercial bank is a financial institution that renders financial activities/services to customers to make profit. It performs a number of functions which are listed below:

FUNCTIONS OF COMMERCIAL BANKS/SERVICES PROVIDED BY

1. Accepting deposits from depositors/customers
2. Keeping money and valuables in safety for customers
3. Assisting customers with loan and overdraft to start or expand their business
4. Giving financial/investment advice to customers
5. Trading in foreign currency and giving traveler’s cheque to customers travelling abroad.
6. Assisting customers to transfer money from one country to another
7. Acting as a trustee or guarantor on behalf of their customers.
8. Issuance of travelers cheque to their customers
9. Planning of pension and retirement schemes
10. Issuing of credit cards, ATM cards and debit cards.
11. They engage in money transfer services

Let’s take a closer look into each of the functions.

FUNCTIONS/SERVICES OF COMMERCIAL BANKS

1. Acceptance of Deposit: By accepting deposits from borrowers and then lending the money to borrowers, banks encourage the flow of money to productive use and investment. This in turn allows the economy to grow.
2. Keeping Valuables in Safety for Customers: Commercial banks help in safe-keeping valuables such as jewelries, company’s share certificates, etc and thereby prevent such from being stolen or damaged.
3. Giving of Loans and Overdraft: This effort provide ready fund to those who want to engage in business but lack the fund to go into such businesses. A loan is a long term credit facility that enables a current account holder to borrow money from the bank while an overdraft is a short term credit facility that allows a current account holder to withdraw more than what he has in his account.

Giving Financial Advice to Customers:

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