In this blog post we are going to be looking at commercial Banks, meaning, characteristics and functions of commercial Banks.
COMMERCIAL BANKS
Commercial banks are financial institutions which accept deposits and other valuables from the public for safekeeping with the sole aim of making profit. They are owned by private individuals, institutions or governments. Commercial banks are limited liability companies.
Some examples of commercial banks in Nigeria are:
- United Bank for Africa (UBA) Plc
- Union Bank of Nigeria (UBN)
- Diamond Bank of Nigeria plc (now merged to access Bank of Nigeria)
- First Bank of Nigeria Plc
- Zenith Bank Plc
- Access Bank Plc
- Skye Bank Plc
Characteristics and functions of commercial Banks are as follows:
Characteristics of Commercial Bank
- Commercial Bank is a limited liability company.
- The motive for its establishment is profit making.
- They are members of the money market.
- Commercial banks are Incorporated.
- Another characteristics of commercial Bank is that they accept deposit and other valuables.
Functions of commercial Banks
- Accepting deposits: Commercial banks accept deposit from the public for safekeeping. This is the oldest functions of commercial banks which helps in taking care of people’s money. Money can be kept in current, fixed and savings account.
- Lending to customers: This is perhaps the most profitable functions of commercial banks. Deposit from different customers pooled together and giving out as loans with interest to people and firms for profitable investments.
- Agent of payments: Commercial banks can act as agent of payment on behalf of their customers. They encourage and permit customers to have current account in which they can draw without notice by cheque. Money can also be transferred from one account to another, e.g, credit transfer.
- Safe keeping of valuables: One of the functions of commercial Banks is to keep customers valuables such as jewelry, certificates, will etc.
- Discounting bill of exchange: Creditors can be paid by the bank immediately by discounting bill of exchange for their customers. This enables the creditor to be paid instantly, and the debtor is allowed a period of credit.
- Issuance of bank statement: At regular intervals, the bank will prepare and send bank statement to their customers to show their transactions with them.
- Investment and stock Exchange transaction: Banks act as agents for their customers in the purchase or sale of securities, share in the stock exchange.
- Issuance of travelers Cheque: Travelers Cheques are often issued to those traveling overseas in order to facilitate their commercial transactions.
- Foreign change transaction: Commercial banks makes foreign currencies available to their customers. They participate in foreign exchange market and help in solving any problem relating to foreign exchange.
- Provide financial Advice: Commercial banks encourage an advise businessmen on the type of project they should invest their money in.
- Facilitate International Trade: Commercial banks provide credit to exporters, and this facilitate payment in foreign trade. To visit my page on types and meaning of international or foreign trade [click here]
- Act as executors for their Customers: Commercial banks can act in the capacity to execute the will of its customers.