Business Studies JSS 2

Week 5

Topic: Bank Services

Contents:

  1. Meaning of Bank
  2. Types of Banks
  3. Function of Banks
  4. Commercial bank services

A. Meaning of Bank

A bank is an establishment authorized by a government to accept deposits, pay interest, clear checks, make loans, act as an intermediary in financial transactions, and provide other financial services to its customers. Money can also be borrowed from the banks for business activities or for personal use. A bank is a financial institution that creates credit by lending money to a borrower, thereby creating a corresponding deposit on the bank’s balance sheet. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial system and influence on national economies, banks are highly regulated in most countries. A bank is a financial institution licensed as a receiver of deposits. There are two types of banks: commercial/retail banks and investment banks. Banks play an important role in buying, selling and distribution activities in the economy. It is an aid to trade

B. Types of Banks

There are different kinds of banks in Nigeria. They include

Central Bank of Nigeria (CBN): The CBN is the government bank and it acts as the banker to other banks.

Commercial Banks: These are the most relevant banks to trade. They carry out their commercial activities to make profit like any other business. Some of the commercial banks in Nigeria are  First Bank of Nigeria (FBN), Union Bank of Nigeria (UBN), Zenith Bank (PLC) Guaranteed Trust Bank (PLC)

Mortgage Banks: These are banks that are into granting loans to individuals and co-operate bodies for building purpose. Examples of Mortgage bank are Union Homes and Savings Ltd, AG Homes and savings Ltd etc.

Merchant Banks: These are banks which perform special functions such as accepting bill of exchange, issuing new shares, issuing loans for foreign transaction. They are sometimes called as Acceptance Houses. Examples: Merchant Bank of Africa, First City Merchant Bank etc.

Development Banks: These are banks which provide long term credit or loans to other enterprises for capital projects. They provide loans in the area of Agriculture, Commerce and Industry.

C. Functions of Commercial Banks

We are going to discuss the functions of commercial banks because it’s the most common and relate with our course of study. Some of the functions are:

  • They accept deposits (money or other valuables) from customers for safe keeping
  • They lend to customers
  • They serve as agent of payments
  • They provide financial advice to their customers
  • They facilitate international trade
  • They issue traveler’s cheque.

D. Commercial Banking Services

The most important function of the commercial banks is safe keeping of money until the owner needs it. To save money in the bank, a person must open a bank account with a certain amount of money. If you bring in money the bank will credit your account and debit your account if you withdraw the money.

Some of the services provided by commercial banks are:

  1. Opening and Operating a Current Account: A current account is the account from which the owners can withdraw money at any given time provided there is enough money in the account. When a person wants to open an account, the commercial banks takes the person through the process of opening the account. Documents needed for completion to operate a current account in a bank include:a) Letter of introduction or references from persons who may be existing customers of the bank or other banks.b) Personal data form given to him by the bank for completion.c) Specimen signature formd) Two (2) passport photographs to be returned with data form
  2. Opening and operating savings Account: The commercial banks also involve in the opening of savings account.  Savings Account is an account in which the money saved earns interest at prevailing interest in the economy at the given time. Deposits made into a savings account are not for a specified fixed period of time for the purpose of interest.

Requirements for opening a Savings Account

The following are some of the requirements for opening a savings Account

  • An identification document (a) letter from employer plus an ID card (b) a driver’s license or an international passport.
  • Evidence of permanent address-recent PHCN bill with your name on it or with confirmation letter from your landlady or landlord.

When the account is opened, the bank will give the following documents to the customer.

i. Cash deposit booklet or slip

ii. Withdrawal forms/booklet

iii. The bank identity card

iv. A passbook

v. Automated Teller Machine Card (If customers request for it and it is at a certain fee)

  1. Opening and Operating Fixed Deposit Account: A fixed deposit account is a special account. In this account, money is kept for a specified period like six months or a year or more. Customers who have sufficient money not immediately needed for use operate fixed deposit account.
  2. Bank Statement: It is the practice for banks to issue a statement of account to each customer monthly, bi- monthly or on a request. The following are the contents of a bank statement.

i.   Name of the customer

ii.  Account number

iii. Payment or deposit made to the bank within a stated period

iv. Withdrawal effected within the same period

v.  Bank charges for its service

vi. Balance for the stated period

vii. The address of the customer

Other banking services are:

  1. Giving Overdrafts to customers
  2. Issuing loans
  3. Issuing traveler’s cheque
  4. Operating the Automated Teller Machine (ATM)
  5. Operating E- Banking (Electronic Banking)

5. Bank Channels

Banks offer many different channels to access their banking and other services:

  • Automated teller machines
  • A branch in a retail location
  • Call center
  • Mail: most banks accept cheque deposits via mail and use mail to communicate to their customers, e.g. by sending out statements
  • Mobile banking is a method of using one’s mobile phone to conduct banking transactions
  • Online banking is a term used for performing multiple transactions, payments etc. over the Internet
  • Relationship managers, mostly for private banking or business banking, often visiting customers at their homes or businesses
  • Telephone banking is a service which allows its customers to conduct transactions over the telephone with automated attendant or when requested with telephone operator
  • Video banking is a term used for performing banking transactions or professional banking consultations via a remote video and audio connection. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine), or via a video conference enabled bank branch clarification
  • DSA is a Direct Selling Agent, who works for the bank based on a contract. Its main job is to increase the customer base for the bank.

Test and Exercise

  1. A financial institution where money is put for safe keeping and where money can be paid out to the owners when the need arises is called (a) warehouse (b) bulk room (c) bank (d) school
  2. Merchant bank is sometimes referred to as (a) acceptance houses (b) delivery junction (c) bulk room (d) acceptance location
  3. The Government bank is the (a) commercial banks (b) Central Bank of Nigeria (c) merchant bank (d) mortgage bank
  4. One of the function of the commercial bank is all of these except (a) they issue traveler’s cheque (b) they facilitate international trade (c) they give loans for building purpose (d) they accept deposits
  5. All the following are examples of commercial bank except (a) First Bank of Nigeria (b) Guarantee Trust Bank (c) Union Bank of Nigeria (d) Central Bank of Nigeria.

 

 

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