General Utility Functions of Bank: Besides the above mentioned agency functions, banks perform many other functions which are of general usefulness to the customers. These functions are called general utility functions. They are discussed below :
1) Safe Custody :
Bankers are in the business of providing security to the money and valuables of the general public. While security of money is taken care of through offering various type of deposit schemes, security of valuables is provided through making secured space available to general public for keeping these valuables. These spaces are available in the shape of lockers. The lockers are small compartments with dual locking facility built into strong cupboards.
These cupboards are placed in the bank’s strong room and are fully secure. Lockers can neither be opened by the hirer or the bank individually. Both must come together and use their respective keys to open the locker. To make this facility available to its customers, the bank must provide : i) physical structures to house the lockers, ii) locker cabinets, iii) security arrangements, and iv) record of access to lockers. Hiring of lockers is a losing proposition for the banks if seen in isolation as it involves major expenditure on buying the cabinets, for providing a secure place to keep them, and for manning the facility so that the customers are serviced immediately. Banks offer this facility as a sop to attract deposits.
2) Safe Deposit Vaults :
Banks provide the facility of safe deposit vaults kept in a strong room. Lockers of different size are given to the public on hire. A person has to execute a lease agreement. It contains certain terms and conditions of hire. In this transaction, the relationship between a bank and customer is that of a lessor and a lessee. The customer has to pay annual rental charges to the bank. A locker is opened by two keys. One of the key is given to the hirer and the other i.e. master key is retained by the banker. The person has to sign the register at the time of opening the locker. The banks may not have any knowledge about the contents of the lockers.
3) Remittances of Funds :
Apart from accepting deposits and lending money, banks also carry out on behalf of their customers the act of transfer of money, both domestic and foreign, from one place to another. This activity is known as remittance business. Banks issue demand drafts, banker’s cheques, money orders etc. for transferring the money. They also have the facility of quick transfer of money, also known as telegraphic transfer or tele cash orders.In remittance business, Bank ‘A’ at a place ‘a’ accepts money from a customer ‘C’ and makes arrangement for payment of the same amount of money to either customer ‘C’ or his ‘order’, i.e. a person or entity designated by ‘C’ as the recipient, through either a branch of bank ‘A’ or any other entity at place ‘b’.
In return for having rendered this service, the banks charge a pre-decided sum known as exchange or commission or service charge. This sum can differ from one bank to another. This also differs depending upon the mode of transfer, and the time available for effecting the transfer of money. The faster the mode of transfer, the higher the charges.
Under the facility of disbursement of pension through authorised banks available to pensioners, a pensioner is entitled to receive his / her pension by getting it credited to a savings / current bank account operated individually by him / her. Paragraphs 4.1, 4.2 and 12.9 of the “Scheme for Payment of Pension for “Central Government Civil Pensioners Through Authorised Banks” outline the present procedure for credit of pension to bank account of the pensioner.
However, operation of a joint account is not permitted under the existing scheme.The matter, whether pensioners should be given an option to receive pension by getting it credited to their savings or current bank accounts operated jointly with their spouse, has been under consideration. It has now been decided to permit credit of pension also to a joint account operated by the pensioner with his / her spouse in whose favour an authorisation for family pension exists in the Pension Payment Order (PPO). The joint account of the pensioner with the spouse could be operated either by “Former or Survivor” or “Either or Survivor” basis subject to the following terms and conditions :
- a) Once pension has been credited to a pensioner’s bank account, the liability of the government / bank ceases. No further liability arises, even if the spouse wrongly draws the amount.
- b) As pension is payable only during the life of a pensioner, his / her death shall be intimated to the bank at the earliest, in any case, within one month of the demise so that the bank does not continue crediting monthly pension to the joint account with the spouse, after the death of the pensioner. If however, any amount has been wrongly credited to the joint account, it shall be recoverable from the joint account and / or any other account held by the pensioner / spouse either individually or jointly. The legal heirs, successors, executors etc. shall also be liable to refund any amount, which has been wrongly credited to the joint account.
- c) Payment of Arrears of Pension (Nomination) Rules, 1983 would continue to be applicable to a joint account with the pensioner’s spouse. This implies that if there is an ‘accepted nomination’ in accordance with Rules 5 and 6 of these Rules, arrears mentioned in the Rules shall be payable to the nominee.
Acting as a Dealer in Foreign Exchange :
The banks also deal in foreign exchange transactions. The commercial community receives facilities for its dealings with foreign national. This is also a profitable business for a bank. Banks provide this service by discounting foreign bills of exchange. Sometimes, a bank has to arrange for the transport, insurance and warehousing of goods. Therefore, many commercial banks have a freight and insurance departments.