role of banking to business

1. Collections of Savings and Advancing Loans

Acceptance of deposit and advancing the loans is the basic function of commercial banks. On this function, all other functions depend accordingly. Bank operates different types of accounts for their customers.

2. Money Transfer

Banks have facilitated the making of payments from one place or persons to another by means of cheques, bill of exchange and drafts, instead of cash. Payment though cheques, draft is more safe and convenient, especially in case of huge payments, this facility is a great help for traders and businessmen. It really enhances the importance of banks for business community.

3. Encourages Savings

Banks perform an invaluable service by encouraging savings among the people. They induce them to save for profitable investment for themselves and for national interest. These savings help in capital formation.

4. Transfer Savings into Investment

Bank transfer the savings collected from the people into investment and thus increase the amount of effective capital, which helps the process of economic growth.

5. Overdraft Facilities

The banks allow the overdraft facilities to their trusted customers and thus help them in overcoming of temporary financial difficulties.

6. Discounting Bill of Exchange

Importance of banks can be seen through the facility of discounting bill of exchange. Banks discount their bill of exchange of consumers and help them in the financial difficulties. By discounting bill of exchange, they able to get the desire amount for investment they want.

7. Financing Internal & External Trade

Banks help merchants and traders in financing internal and external trade by discounting foreign bill of exchange, issuing of letter of credit and other guarantees for their customers.

8. Act as an Agent

The bank act as a agent and help their customers in the purchase and sales of shares, provision of lockers payment of monthly and dividends on stock.

9. Issue of Traveler’s Cheques

For the convenience and security of money for travelers and tourists, bank provides the facility of traveler’s cheques. These cheques enable the travelers and tourists to meet their expenses during their journey, as these are accepted by issuing bankers, restaurants, and other businessmen both at home and abroad. No doubt, this is also one of the great functions of banks and shows the importance of banks for us in more precise ways.

10. General Utility Services

Existence of commercial banks is essential for contribution to general prosperity. Banks are the main factors in raising the level of economic development of the world. In addition to above-cited advantages, banks also provide many services of general utilities to the customers and the general public.