Functions of Bank (central and commercial) notes

This post covers the functions of banks.

here you will learn

• What is bank
• Types of bank
• functions of the Central Bank
• functions of Commercial Banks
  • primary functions
  • secondary functions
    • Agency functions of  commercial banks
    • General Utility Functions of commercial banks
• etc.

let’s get started

What is bank

Bank can simply be defined as an entity that is engaged in the banking business.

However In the case of United Dominions Trust Ltd V. Kirkwood bank is defined to mean cooperation that accepts money on current, accounts, and paycheques to drown upon such accounts on demand and collect cheques for customers.

Types of Bank

Generally, there are two major types of banks i.e Central banks and Commercial Banks.

It is true that a bank is a place where people keep their money.

However, it will be wrong for us to confine ourselves to that view because apart from that there are a lot more functions that banks can perform.

Functions of Bank

Here the functions of the bank are divided according to the types;

Meaning and functions of Central Bank?

There is no single definition of what is a Central Bank; a Central Bank can well be defined based on its functions. The following are the functions of a Central Bank.

1. The central bank is the bank that has the mandate to issue the national currency.
2. The central bank regulates and supervises banks and financial institutions including mortgage financing, development financing, lease financing, licensing, and revocation of licenses.
3. The central bank formulates, implements, and is responsible for monetary policy, including exchange rate policy
4. The central bank is the lender of the last resort. When saying the lender of the last resort it implies that the central bank assumes the responsibility of meeting all reasonable demands for accommodation of commercial banks in times of difficulty and crisis.

Meaning and functions of Commercial Banks

Commercial Banks are all banks that are engaged in functions that are distinct from the functions of the central bank. The major aim of commercial banks is to generate profit for their shareholders.

Commercial banks perform both primary functions (banking services) and secondary functions (non-banking services)