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BFN 121 COMMERCIAL BANK CHEQUE SYSTEM.docx - COVENANT...

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COVENANT UNIVERSITYCOLLEGE OF DEVELOPMENT STUDIESDepartment of Banking and FinanceLECTURE NOTEBFN 121: MONEY & BANKINGWEEK 5TOPIC:COMMERCIAL BANK CHEQUE SYSTEM, SOURCE AND USE OFFUNDCourse Outline – At the end of the topic the student will knowa.What is a Commercial Bankb.The functions of a commercial bankc.Types of account kept by commercial bankd.Various cheque system use by commercial banke.How commercial banks clear their chequesf.The sources of commercial bank fundg.The uses of commercial bank fundINTRODUCTIONBefore the widespread and acceptability of modern banking system there existed a traditionalcredit group usually refer to as esusu’. These were agencies that supplied credit to its membersparticularly small scale farmers and businessmen. Usually they had low financial resources attheir disposal and their interest charge was usually excessive and exploitative. They still exist inlarge parts f the rural areas of West Africa but the intervention of the government both at theState and Federal level as availability of rural banking diminished their importance in moderneconomy.What is bank?As important as a bank is in any economy there is still much confusion aboutexactly what the definition of a bank is. They are identified by the role and function they performin the economy; this may be as a result of the changes in the function of the banks. Therefore,Bankcan be describe as a financial intermediary accepting deposits and granting loan; offers thewidest menu of services to any financial institution. It can also be described as a financialinstitution, which accepts, and safeguards deposits of money from customers; allow money to bewithdrawn or transferred from one account to another and also lend the surplus of moneydeposited to customers who wish to borrow. Banking also includes provision of other services asrequired by the customer such as: money transmission, financial and advisory services, andforeign services.CBN Report 1998commented that Bank as a financial institution perform intermediation rolesgenerally through mobilization of idle resources and channeling such resources to productive
activities within an economy. In the process, resources are channeled from surplus sectors of theeconomy to the deficit sectors, thereby ensuring a more efficient resource allocation andutilization.Commercial Banks –They are financial institutions that are involved in retail banking wheresmall to medium savings are mobilized and disbursed in the form of loans and advances. Theyhold themselves out to the public by accepting deposits, and giving out advances as well asperform other services for their customers.With current development in the economy and the liberalization of the financial sector,commercial bank now engage in other areas of business where large amount of funds areinvolved especially in loan syndication and other activities that are traditionally within theinvestment banking and corporate finance function.

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Term
Spring
Professor
NoProfessor
Tags
Cheque, Deposit account

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