Explain the Agency Functions of Commercial Banks

By BYJU'S Exam Prep

Updated on: November 14th, 2023

The Agency Functions of Commercial Banks include providing specialized services to their customers in exchange for a commission. Below is a list of a few of a commercial bank’s agency duties.

  • Cheques, bills, and draughts are collected.
  • Interest, loan installments, insurance premiums, etc.
  • Securities sales and purchases
  • Collecting dividends, interest, etc.
  • Transfer of payments by mail transfers, demand draughts, etc.
  • Purchasing and selling foreign currency.

Agency Functions of Commercial Banks

A commercial bank is a type of financial institution that handles all activities related to deposits and withdrawals of public money, lending money for investment, etc. These banks are profit-driven businesses that operate solely to increase their bottom line.

Other agency functions of commercial banks are divided into two main categories: primary functions and secondary functions.

Primary Agency Functions of Commercial Banks

  • Accepting deposit
  • Providing loans and advances
  • Crediting Cash

Secondary Agency Functions of Commercial Banks

  • Securities being purchased and sold
  • Availability of Locker Facilities
  • Discounting bills of exchange
  • Availability of overdraft facility
  • Paying and Gather the Credit – It uses different instruments like promissory notes, cheques, and bills of exchange

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