Secondary Functions of Bank: Agency and General Functions

Secondary Functions of Bank: The primary function of banks is to act as intermediary between savers and producers. They collect savings from people and lend them for productive purposes. Apart from these primary functions of collecting deposits and giving loans, they also perform some secondary functions which add to the utility of their customers and to the society.

Secondary Functions of Bank

We can not think modern commerce without banking. Banking is a business. Like any other business, banks are also profit seeking organisations. Borrowing and lending constitute the banking business and that these are two basic functions of a bank. It is to be noted that banking grew out of the need of the people for a safe place of deposit.

Later, the banks realised that their business could be made profitable if they lent out again what was received by them. Gradually banks started providing many other services to people. These are other functions which a modern banker performs. All these functions and services may be grouped under primary functions and secondary functions.

The secondary functions are classified as:

Must : Primary Functions of Banks

Agency Functions

Agency functions are those services that banks provide to their customers for which they receive some income. Thus, these functions add to the income of banks. Another advantage is that they know the financial position of their customers better and thus, have correct idea of their creditworthiness. Close relations are established between the banks and the customers. Following services are provided by the bank :

• Payment and Collection of Cheques
• Bills and Promissory Notes
• Execution of Standing Instructions
• Acting as a Trustee
• Executor OR Attorny

General Utility Functions

Besides the above mentioned agency functions, banks perform many other functions which are of general usefulness to the customers. These functions are called general utility functions. They are discussed below :

• Safe Custody
• Safe Deposit Vaults
• Remittances of Funds
• Pension Payments
• Acting as a Dealer in Foreign Exchange

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