Let’s look at the meaning and functions of commercial banks in Zambia. first of all, What is a bank and what are the main functions? A bank is an institution in charge of lending, keeping and exchanging money, according to this source. While other Economists, and Adam Smith, “defines banks been institutions that accept deposits from the public and advances loans.”
Banking Features And Functions
Banks create loans, advance debits and other various activities. Therefore, all functions combined, are known to be “banking”. Contribute to the nations wealth, GDP and GNP. Hence the banking regulations act of 1949 defines banking, been any process of accepting deposits for purposes of lending and investment.
Hence from the above definition, you can see this includes:
- Deposits of money from the public re-payed on demand,
- Only withdrew by check, Automated teller machines and Order Checks.
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10 Functions Of Commercial Banks In Zambia
- Banks play a crucial role in acceptance of deposits from the public and lending of money.
- Banks help in the circulation of money, increasing productivity.
- Development of the economy advancing payments to workers.
- Regulating money circulation to avoid high inflation rate of the country.
- Banks influence the economies development through offering loans
- They influence production process and control on money supply in the economy
- Help in controlling shortage of capital formation. Which can occur due to low savings. To balance it banks offer low interest rates.
- Finance agriculture by advancing short loans and credit.
- Company and personal account opening
- Finally banks accept deposits for individuals and companies.
Also Read: How To Open A Zambian Bank Account
Primary Functions of Commercial Banks In Zambia
1.Accepting Bank Deposits
Functions Of Commercial Banks In Zambia, include supporting, acceptance and receiving deposits using the following deposit methods.
- Fixed deposits involves money deposited for a period time. The longer the period the higher the interest rate.
- Savings deposit refers to money which can only be withdrawn once. Account holders allowed to deposit anytime. Done to control frequent money withdrawals.
- Current deposits: allows for money deposits and withdrawal. Such accounts carry no interest and payable on demand. Mostly used buy individuals and companies.
- Recurrent deposits: Allow banks to accept bank deposits from people every month for an agreed period. Approximately after 1-2 months money mostly collected bears interest accrued.
2. Advancing of Loans
Banks provide both loan and short term loans.Therefore, primary functions, include cash credit. Grants people and companies opportunities to borrow money up to a certain limit. Second type of loan is overdraft. An overdraft is an agreement between account holder and bank, allowing withdrawals more than a balance on credit ti a specific limit. Interest is based on a daily overdraft charges incurred.
Other functions of commercial banks in Zambia is advancing of loans. Which mainly done on three terms.
- Short term loan: Requires principal payment amount at maturity date. Loans can be of two types interest bearing and none interest bearing depending on the banks policy and terms.
- Cash credit loan: Advances given to companies by the bank to help companies with financial state.
- Demand loans: Any form of loan which the bank can request its payment any time. Banks in Zambia offer these form of loans as well, adding to there secondary functions.
3. Fund And Money Transfer
Banks act as financial agents, transfer money from one location to another. Compilation of information related to trade and commerce. Serve as money transfer agents, banks also make insurance payments on behalf of customers. They offer claims, dividends and premium. Also perform locker services, which includes safe keeping of documents. Selling and buying of securities, providing letter of credit and underwriting of loans. Finally managing operations on behalf of Bank of Zambia. To regulate, control purchasing and discounting of loans. Commercial banks ensure small lending institutions follow banking terms and conditions.
This covers both the primary and secondary functions of banks in Zambia. For further questions,or help. comment below and I will gladly reply. See our related articles
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