Secondary Functions of Commercial Banks | Agency Function | Banking
The secondary functions of the banks consist of agency functions and general utility functions.
Agency Functions
Agency functions include the following: –
Collection of cheques, dividends and interests
As an agent the bank collects cheques, drafts, promissory notes, interest, dividends etc., on behalf of its customers and credit the amounts to their accounts. Customers may furnish their bank details to corporate where investment is made in shares, debentures, etc. As and when dividend, interest, is due, the companies directly send the warrants/cheques to the bank for credit to customer account.
Payment of rent, insurance premiums
The bank makes the payments such as rent, insurance premiums, subscriptions, on standing instructions until further notice. Till the order is revoked, the bank will continue to make such payments regularly by debiting the customer’s account.
Dealing in foreign exchange
As an agent the commercial banks purchase and sell foreign exchange as well for customers as per RBI Exchange Control Regulations.
Purchase and sale of securities
Commercial banks undertake the purchase and sale of different securities such as shares, debentures, bonds etc., on behalf of their customers. They run a separate ‘Portfolio Management Scheme’ for their big customers.
Act as trustee, executor, attorney
The banks act as executors of Will, trustees and attorneys. It is safe to appoint a bank as a trustee than to appoint an individual. Acting as attorneys of their customers, they receive payments and sign transfer deeds of the properties of their customers.
Act as correspondent
The commercial banks act as a correspondent of their customers. Small banks even get travel tickets, book vehicles; receive letters etc. on behalf of the customers.
Preparations of Income-Tax returns
They prepare income-tax returns and provide advice on tax matters for their customers. For this purpose, they employ tax experts and make their services, available to their customers.
