COMMERCIAL BANKS

COMMERCIAL BANKS

COMMERCIAL BANKS – The term Bank has been generally defined in the banking law of the country. This countries try to provide operation which governs banking business within the country.

A Commercial bank is a type of financial institution that provides services such as accepting deposits, making business loans, and offering basic investment products. (Wiki pedia)

Nevertheless, banking as defined by the Bank and Other Financial Institution Decree (BOFID), 1991 is the business of receiving deposit on current account, savings account and other similar account, paying or collecting cheques drawn by or paid in by customers, provision of finance or such other business as the governor of the CBN may by order published in the gazette designate as banking. (Section 61).

THE STRUCTURE OF COMMERCIAL BANKS

According to Agu A. (1988), in his book titled “Structure of Commercial Bank in Nigeria” said that the structure of commercial is analyzed as follows; Modem commercial banking in Nigeria dates back to early, colonial period when the African banking corporation opened an office in 1892. Being the oldest unit of the Nigeria financial institution. The other financial intermediaries are restricted both in their capital resources and in their scope of activities most of them are new development. These gives the commercial banks an edge over the others particularly similar institution such as Federal Saving Banks, Merchant Banks and Mortgage Banks in collecting deposit and extending credit to the economy.

FUNCTION OF COMMERCIAL BANKS

The functions of commercial Bank according to Ekezie E.S. in his book “The Element of Banking” are illustrated below

1. POOLING OF SAVINGS

Commercial banks perform this very important function to all sector of the economy by making available the facilities for the pooling of savings through the acceptance of deposits from the public and then making these funds available for economically and socially desirable purposes.

2. PAYMENT MECHANISM

One other important function performed by commercial banks is the provision of a payment mechanism or the transfer of funds. This function becomes increasingly important as more and more Nigerians place greater reliance on the use of cheques and credit cards. Because of the poor banking habits of an average Nigerian, coupled with the fraudulent tendencies among us, the economy tends to remain a cash economy.

3. EXTENSION OF CREDIT

One of the primary functions of commercial banks is the extension of credit to worthy customers. A commercial bank lends certain percentage of the cash lying in the deposit on a high interest rate than it pays on such deposit. Sec 23(1) of decree No 25 of BOFID 1991, demands that every bank shall display at its office it’s lending and deposit interest rate for the interest of the public.

4. FINANCING FOREIGN TRADE

A commercial bank transacts through it foreign exchange department or international banking department, other foreign business of buying and selling of foreign currencies. Many Nigerians who travel abroad demand the services of the foreign exchange department of the commercial bank.

5. SAFE KEEPING OF VALUABLES

Commercial banks accept valuables for safe keeping on behave of their customers such as will, jewelry, certificate of occupancy.