Introduction to Commercial Banking

Objectives of Week #1 Discussion

After studying this lesson, you will be able to Describe the various functions of commercial banks Differentiate between primary and secondary functions of commercial banks

Classify and discuss the primary functions of modern commercial banks

Enumerate the various modes of acceptance of deposits

Identify various methods of granting loans

Describe agency and general utility services of modern commercial banks.

What Is A Bank?
A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers with capital deficits to customers with capital surpluses.

Functions of Commercial Banks

The functions of a commercial banks are divided into two categories: i) Primary functions ii) Secondary functions including agency functions.

Functions of Commercial Banks

i) Primary functions: The primary functions of a commercial bank include: a) accepting deposits; and b) granting loans and advances

ii) Secondary functions

a) Issuing letters of credit, travellers cheques, circular notes etc.

b) Undertaking safe custody of valuables, important documents, and securities by providing safe deposit vaults or lockers;
c) Providing customers with facilities of foreign exchange.

d) Transferring money from one place to another; and from one branch to another branch of the bank.
e) Standing guarantee on behalf of its customers, for making payments for purchase of goods, machinery, vehicles etc. f) Collecting and supplying business information; g) Issuing demand drafts and pay orders; and, h) Providing reports on the credit worthiness of customers.

Difference between Primary and Secondary Functions of Commercial Banks

Difference between Primary and Secondary Functions of Commercial Banks

Structure of Banking Sector in Pakistan

Scheduled Banks .Commercial Banks .Specialized banks

NBFIs
Modarabas Leasing Companies Mutual Funds Investment banks Housing Finance Companies

Specialized Banks

Commercial Banks

Foreign Banks

Domestic Banks