- Accepting deposits-they play a vital role in economy mobilizing domestic savings and enabling efficiency and convenience in transactions accepting depositsie cash items,warrants,E.F.Ts,night safes etc in three main accounts ie
- Current accounts.
- Deposits of any amount can be made at any time.
- here the deposits may earn intrest and the account holder is expected to pay some fee to the bank for services provided e.g. account maintenance.
- Money deposited in this account is withdrawable on demand means of cheque.
- Money can be withdrawn from this account at any time during working hours so long as the account has sufficient funds.
- No minimum cash balance is required to be maintained.
- Does not earn intrest but instead the bank charges ledger fees for services rendered.
- The banks may allow customers to withdraw more money than they have in their current accounts and this is known as bank overdraft that carries interest at an agreed rate.
- SAVINGS ACCOUNT.
- This are accounts operated people who have the intentions of saving money(small savers).
- The balance on the account above a certain minimum earns intrest.
- Funds are not withdrawn use of cheques.
- Overdrafts are not usually allowed.
- In most cases one is required to maintain a certain amount in account.
- Withdrawal of money exceeding a certain maximum amount might require a notice to be given the customer of the intended withdrwal.
- Ordinarily withdrwals can only be made the account holders themselves.
- Banks don’t use this money as compared with fixed deposit accounts.
- TIME DEPOSITS/FIXED ACCOUNTS.
- Do not allow withdrwal/addition of money into the account before the end of a fixed pre-detrmined period.
- They are appropriate for people who have money that they have no immediate use for
- Earnsintrest at an agreed rate and the rate of intrest depends on the amount deposit as well as the period taken the deposit.usually higher than savings account .
- There is usually a minimum amount that can be allowed for this type of account
- On expiry of deposit period,the account holder can withdraw all the money together with intrest or even renew the contract for another similar different term.
- If the account holder withdraws the money before the expiry date of the agreed deposit period he/she not only loses the accrued intrest but might also be charged for breach of contract.
- There are no bank charges to the account holders.
- The money held in fixed deposits can be used as security for getting a loan.
- Lending money/provide loan facilities –this can also be offered even in form of overdraft.others are short term,medium term or long term.
- Safekeeping of valuable items-e.g. title deeds,sharecertificates,jewellery and wills for safe keeping for their customers and they provide safety vaults and lockers and a nominal fee is charged.
- Provides money transfer facilities-money can be transferred from Nairobi to London via commercial banks.some employees have their salaries transferred to their accounts from employers accounts.this arises mainly through standing orders,credittransfers,telegraphictransfers,cheques,bankoverdrafts,letters of credit,credit cards and travellers cheques.
- Provision of foreign exchange/effect foreign exchange payments-a person with foreign currency can convert it into local currency.
- Provide financial information ie giving advice on investment and management of funds –ie best shares;saving in a fixed deposit account as well as information on how to engage in foreign trade.
- Provide trusteeship(trustee services)-banks act as managers on behalf of their clients.the bank also act as a trustee on behalf of a client who dies and there is no person to manage his/her business affairs effectively.also takes into account property estate
- Act as guarantors and referees-this usually happens to clientswhowish to engage in credit transactions to secure loans from other financial institutions or get goods on credit from new suppliers.
- Act as intermediary between savers and borrowers-a link is created between savers and borrowers of money and through such a link,economic activities are facilitated.
- Discounts bills of exchange-banks discount bills of exchange and accept promissory notes from their trusted clients.discountinga bill means that the bank accepts a bill from its customer and exchanges it for less cash than the amount on the bill because the bill has not yet matured.
- Provides safer means of payment-commercial banks provide safe and reliable means of payment iecheques,bankoverdrafts,credit transfers and other means that are used to make payments
- Credit creation-this refers to the process of creating money from the deposits in the customers accounts.
- Helps in financing international trade-ie offering mediums of exchanges , promissory notes and letters of credit.