Trends in Commercial Banking

8/4/2019 Trends in Commercial Banking

1/23


2/23

Muhammad Khurram

Ilyas Jehan

Sameer Khan

Zeyab Muazzam


3/23

TRENDS IN COMMERCIAL

BANKING


4/23

Commercial Bank

It is a type of financial institutions and

intermediary that provides

transactional, saving and money market

accounts and that accepts timedeposits.

It is also known as banking business.


5/23

Origin

Word Bank is of European origin.

It is derived from Italian word Banco

Banco means desk or bench.

This name was given because of lambordian

money changers.

They used wooden benches to carry on their

business activities,

GERMAN:BANC>JOINT STOCK FIRM


6/23

Evolution of Banking

As regards the growth of modern commercialbank, it can be traced to as early as 600 BC.Crowther in his famous book An outline of

money has traced the history of moderncommercial banking. According to him thepresent day banker has three ancestors.

1. The merchants 2. The goldsmiths

3. The money lenders


7/23

1. The merchants:

The earliest stage in the growth ofbanking can be traced to the workingof merchants.

They were involved in trading

activities. Risks in transportation of metallic

money.

The traders with high reputation begin

to issue receipts These receipts or letters of transfer

also called hundi.


8/23

2. The Goldsmiths:

The second stage in the growth ofbanking is normally traced to theearlier goldsmith (seths)

These goldsmiths used to receive gold

and silver for safe custody. The goldsmiths begin to issue receipts

for the metallic money

These receipts became payable to the

bearer on demand. In this way the goldsmith note became

a medium of exchange and a mean ofpayment.


9/23

3. The money lenders:

The third stage in the development ofbanking arose when goldsmithsbecame money lenders.

By experience the goldsmithcame to

know that they could keep a smallproportion of the total deposits formeeting the demands of customersfor cash and the rest the could easilylend.

When every money lender/goldsmithissued receipts with overdraft facilitiesthere were then too much confusionin the banking system.


10/23

Continued

The failure on the part of the moneylenders/goldsmiths to return money causedwide spread distress among the people.

In order to create confidence among thepeople, steps were taken to regulate the

banking organization. The 1st central bank was formed in Geneva

in 1578. Bank of England was established in1694.

The modern commercial banking systemactually developed in nineteenth century.


11/23

TRENDS

A general direction in which something is

developing or changing. In banking it means where the Bank was and

now where the bank is.


12/23

Banking activities in history

Carrying out currency exchanges

Discounting commercial notes

Making business loans Offering saving deposits

Safekeeping of valueables

Supporting government activities with credit


13/23

Banking activities in history

Offering checking accounts (Demand deposits)

Offering trust services


14/23

Banking activities developed more

recently

Granting consumer loans

Financial advising

Cash management Offering equipment leasing

Making venture capital loans

Selling insurance policies

Selling retirement plans


15/23

Banking activities developed more

recently

Offering security brokerage services

Offering investment banking and merchant

banking services convenience The sum total of all bank

services


16/23

REASONS FOR THE TRENDS

Service Proliferation

Rising Competition Deregulation

Rising Funding costs

An Increasingly Interest-SensitiveMix of Funds

Technology Revolution


17/23

REASONS FOR THE TRENDS

Consolidation

Geographic Expansion Globalization of Banking


18/23

The functions of a commercial banks are divided

into two categories:

1. Primary functions, and

2. Secondary functions


19/23

Function ofcommercial Banks

Primary functions

Acceptingdeposits Lending investment

Credit

creation

Secondary functions

AgencyFunctions

GeneralUtility

Functions


20/23

A) Accepting deposits: People who have surplus income andsavings find it convenient to deposit the amounts with banks.

B) Lending:Another function of commercial banks is to make loansand advance out of the deposit receive in various forms. Bank Applythe accumulated public deposits to productive uses by way of loansand advances, overdraft and cash credits against approved securities.

C) Investment:Now a days commercial banks are alsoinvolved in Investment. Generally investment means long termand medium term investments.


21/23

D) Credit creation : It is most significant function of thecommercial banks. While sanctioning a loan to a customer, abank does not provide cash to the borrower Instead it opens adeposit account from where the borrower can withdraw. Inother words while sanctioning a loan a bank automaticallycreates deposits. This is known as a credit creation from

commercial bank.


22/23

Besides the primary functions of acceptingdeposits and lending money, banks performa number of other functions which are

called secondary functions.Agency Functions : Various agencyfunctions of commercial banks are to collectand clear cheque, dividends and interest

warrant.

To make payment of rent, insurance premium,etc.

To deal in foreign exchange transactions.

To urchase and sell securities.


23/23

General Utility Functions :Thegeneral utility functions of the commercial banks

include To provide safety locker facility to

customers.

To provide money transfer facility.

To issue traveller's cheque.

To act as referees.

To accept various bills for payment e.g phone bills,

gas bills, water bills, etc.

Trends in Commercial Banking

Documents

Transcript of Trends in Commercial Banking