Commercial Banks

Commercial Banks - they lend is their asset which they will...

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Commercial Banks i. Nature and Functions: Modern commercial banks have been functioning for over two centuries. They perform a variety of functions. They accept money deposits, lend money , transfer money, issue checks and drafts, provide safe deposit vault facilities, act as trustees, act as financial agents, finance agriculture, industry and foreign trade etc. Modern bankers mainly act as middlemen between lenders and borrowers. Their deposits are collected out by the small savings of households and firms. Their borrowers are usually investors and businessmen or needy households asking for consumption loans. The loans are normally made by discounting bills. Money that banks receive creates liabilities on their part for future repayment. Money that
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Unformatted text preview: they lend is their asset which they will get back sometime in the future. Tabular arrangement of the accounts of a banker is called a Balance Sheet . The loans issued by banks are also known as advances . Balance sheet Liabilit ies Assets 1) Share Capital 500 1) Reserve s with Central Bank and Cash in hand 1200 2) Reserve Fund 1000 2) Call Money 1500 3) Saving (Deman d) Deposit s 3500 3) Bills Discoun ted 4300 4) Fixed (Time) Deposit s 4000 4) Investm ents, Loans, Advanc es 2200 5) Borrowi ng from other banks 1000 5) Premise s, Propert y etc. 800 Total 10,000 Total 10,000 The Balance sheet of a banker always balances. This is because it is only a technical device of equating assets with liabilities ....
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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Commercial Banks - they lend is their asset which they will...

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