General Utility Functions of Bank: In addition to the agency functions mentioned earlier, banks carry out various other functions that offer general benefits to customers. These functions, known as general utility functions, are outlined below:
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Safe Custody
Banks ensure the safety of public money and valuables by offering various deposit schemes and secure storage spaces, such as lockers. Lockers, small compartments within strong cupboards, are situated in the bank’s secure strong room. Both the hirer and the bank require their respective keys to access the locker, ensuring dual-locking security. Banks provide the physical structures for lockers, cabinets, security arrangements, and maintain access records. Offering locker facilities involves significant expenditure for banks due to expenses on cabinets, security, and staffing, yet banks provide this as a customer service to attract deposits.
Safe Deposit Vaults
Banks offer safe deposit vaults housed in a secure room. Lockers of varying sizes are leased to the public, requiring a lease agreement outlining the terms. Customers pay annual rental charges, and the locker is opened with two keys – one with the hirer and the other, a master key retained by the bank. The person needs to sign a register while accessing the locker. The banks typically have no knowledge of the locker’s contents.
Funds Remittance
Apart from depositing and lending money, banks transfer funds domestically and internationally on behalf of their customers. This service includes issuing demand drafts, banker’s cheques, money orders, and facilitating quick transfers known as telegraphic or tele cash orders. Banks charge a pre-decided sum for this service known as exchange, commission, or service charge, which varies based on the mode and speed of transfer.
Pension Payments
Pensioners can receive their pension by having it credited to an individual savings/current bank account. The scheme doesn’t allow joint accounts for pension disbursement. However, pensioners can now have their pension credited to a joint account operated by them and their spouse, following specific terms and conditions outlined by the bank. The liability of the government/bank ceases once the pension is credited to the pensioner’s account. In case of the pensioner’s demise, the bank must be notified immediately to avoid further pension crediting.
Acting as a Foreign Exchange Dealer
Banks engage in foreign exchange transactions, facilitating commercial dealings with foreign nationals. They provide services such as discounting foreign bills of exchange, arranging transport, insurance, and warehousing for goods. This is a profitable business area for banks, and many commercial banks have dedicated departments for freight and insurance.
General Utility Functions of Bank FAQ
Banks perform several other functions known as general utility functions that are beneficial to customers. These include safe custody of valuables, funds remittance, pension payments, and acting as a foreign exchange dealer.
Safe Custody is a service provided by banks to safeguard the valuables of customers. It involves renting lockers, secure compartments within strong cupboards stored in the bank’s secure room, to store valuable items securely.
Yes, individuals can lease safe deposit vaults of various sizes offered by banks. They need to sign a lease agreement outlining terms and conditions.
Funds Remittance includes transferring money domestically and internationally through services like demand drafts, money orders, and telegraphic transfers. Banks charge a service fee for these transfers.
Banks facilitate pension disbursement by crediting the pension amount to an individual’s savings or current bank account. Joint accounts for pension disbursement have specific terms and conditions outlined by the bank.
