Bank is a profit seeking institute that deals with money and credit creation. It performs various functions and these are divided majorly into two types of function, that is, primary and secondary functions. Primary functions deals with accepting deposits and providing loans whereas secondary functions deals with discounting of bill of exchange, pay clients bill, do cheque payments and many more other functions. In India, there is mixed banking system. Furthermore which do those typical benefits of the business about saving money for example, tolerating deposits, providing for crazy credits?
In , there were 14 major commercial banks that deposits 50 crores of capital for being nationalized. Later in six more banks were nationalized. In present, 20 commercial banks are nationalized and SBI and its seven subsidiaries constituting public sector banks that controls over ninety percent of the banking business in India. Current deposit can be drawn at any time when the depositor needs to with draw it, whereas fixed deposits can't drawn at any time but at the fixed time where the agreement specifies.
Deposit services is very vital function as it makes depositors' many safe and secure and enables the depositors to get a benefit of deposit interest. Giving Loans: The second main function of commercial banks in Ethiopia is rendering loan services to their customers. Most of the time the banks require mortgage in giving loan to their customers for guaranteeing of their loans.
The banks get loan interest as a benefit from their borrowers. The banks provide this loan service by using the many that they have deposits from their customers. Specially in this time the commercial banks are engaged in giving loans to the productive sectors of the Ethiopian economy such as the manufacturing and agricultural sector.
Many transfer services: The commercial banks are engaged in transferring of many from one branch to another branch. They collect service charge for their many transfer services. Buying and selling of foreign-exchange: The commercial banks of Ethiopia can also buy and sell foreign exchange.
As we see every day in EBC, the foreign exchange rate is disclosed to the public by business news. Discounting of bill of exchange: This is the most prevalent and important method of advancing loans to the trader.
Under this system, banks advance loans to the traders and business firms by discounting their bills. In this way, businessmen get loans on the basis of their bills of exchange before the time of their maturity.
For this banks demand a security from the customers and charge very high rate of interest. Agency services: They render some services on behalf of the government and some times on behalf of their customer. A good example of this is the Commercial Bank of Ethiopia pays the salary of the government employees and the beneficiary of retirement benefits, accept deposits of condominium registered persons and the Development Bank of Ethiopia similar sells bonds of the Renaissance Dam. Banks also pay cheques issued by their customers.
Miscellaneous services: Commercial banks provide miscellaneous banking activities to the government and the society. Some of the miscellaneous activities are; issuing of bank statement to their customers, collect necessary and useful statistics relating to trade and industry, give reference for their customers and give some financial information to the tax authority where then authority asks by a letter.
No developmental strategy can be achieved with out the heavy involvement of the commercial banks of Ethiopia, as all strategies needs many for their implementation. For this reason the role and contribution of these commercial banks is indispensable if we like to ensure development to our country. And as our group investigates the roles of the commercial banks are; I. Financing Industry: The commercial banks play an important role in financing the industry sector of the economy.
Industries needs huge capital and they need the help of banks for loan services and these commercial banks are providing this loan services to the industry sector of the economy. Download now. Related titles. Carousel Previous Carousel Next. Jump to Page. Search inside document. Distingusish between demand deposit and fixed deposit Demand deposit Fixed deposit 1. Advancing of loans Commercial banks give loans and advances to businessmen, farmers, consumers and employers against approved securities.
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