Services Offered By Modern Commercial Banks

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Generally, modern commercial banks offer following services to customers or public:

1. Accepting Deposit
Accepting deposit from savers or account holders is the primary function of bank. Banks accept deposit from those who can save money, but cannot utilize in profitable sectors. People prefer to deposit their savings in a bank because by doing so, they earn interest.

2. Advancing Of Loans
Banks are profit oriented business organizations. So they have to advance loan to public and generate interest from them as profit. After keeping certain cash reserves, banks provide short-term, medium-term and long-term loans to needy borrowers. 

3. Discounting Of Bill Of Exchange
Bill of exchange is a negotiable instrument, which is accepted by the debtor, drawn upon him/her by the creditor and agrees to pay the amount mentioned on maturity. Discounting bill of exchange is another function of modern commercial bank. Under this, banks purchase bill of exchange from holder in discount after making some marginal deduction in the form of commission. The banks pay the deducted value to the holders when traders discount it into bank.

                       Also read: Concept And Meaning Of Bank

4. Cheque Payment
Banks provide cheque pads to the account holders. Account holders can draw cheque upon bank to pay money. Banks pay for cheques of customers after formal verification and official procedures. .

5. Remittance
Remittance is a system, through which cash fund is transferred from one place to another. Banks provide the facilities of remittance to the customers and earn some service charge.

6. Collection And Payment Of Credit Instruments
In modern business, different types of credit instruments such as bill of exchange, promissory notes, cheques etc. are used. Banks deal with such instruments. Modern banks collect and pay different types of credit instruments as the representative of the customers.

                      Also read: Meaning Of Unit Banking

7. Foreign Currency Exchange
Banks deal with foreign currencies. As the requirement of customers, banks exchange foreign currencies with local currencies, which is essential to settle down the dues in the international trade.

8. Consultancy
Modern commercial banks are large organizations. They can expand their function to consultancy business. In this function, banks hire financial, legal and market experts, who provide advices to customers in regarding investment, industry, trade, income, tax etc.

9. Bank Guarantee
Customers are provided the facility of bank guarantee by modern commercial banks. When customers have to deposit certain fund in governmental offices or courts for specific purpose, bank can present itself as the guarantee for the customer, instead of depositing fund by customers.

Concept And Meaning Of Bank

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A bank is financial institution, which deals with money and credit. Bank accepts deposits from the public and mobilizes the fund to productive sectors. Bank also provides remittance facility to transfer money from one place to another. Generally, bank accepts deposits from business institutions and individuals , which is mobilized into productive sectors mainly business and consumer lending. So bank is also called a dealer of money. At present context, a bank may engaged in different types of functions such as remittance, exchange currency, joint venture, underwriting, bank guarantee, discounting bills etc. The modern bank refers to an institution having the following characteristics:

* Bank deals with money: it accepts deposits and advances loans.
* Bank also deals with credit: it has the ability to create credit by expanding its liabilities.
* Bank is commercial institution: it aims at earning profit.

Banks are the principal source of credit for millions of individuals and families and for many units of government. They are among the most important financial institutions in the economy. Moreover, for small local businesses to large dealers, banks are often the major source of credit to stock the shelves with merchandise. Banks grand more installment loans to consumer than any other financial institutions.
Banks are among the leading buyers of bonds and notes issued by government to finance public facilities, ranging from hospitals and football stadiums to airports and highways. Moreover, bank reserves are the principal channel for government economic policy to stabilize the economy.
Banks are the important sources of short-term working capital for businesses. They have become increasingly active in recent years in making long-term business loans for new plants and equipment. When businesses and consumers must make payments for purchase of goods and services, more often they use bank provided cheques, debit or credit cards, or electronic accounts connected to a computer network.
Bank is a intermediary which accepts deposits and grants loans. It offers widest menu of services of any financial institution. In fact, a modern bank performs such a variety of functions that it is difficult to give a precise and general definition of a bank.

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Disadvantages Of Decentralization

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Decentralization has the following drawbacks or disadvantages:

1. Decentralization Increases Expenditure
Decentralization needs qualified, competent and skilled managers at the middle and lower levels. They are to be paid remuneration on the basis of their qualification and experience. Besides, there is the possibility of duplication of effort, which unnecessarily may increase cost of production.

2. Decentralization Creates Conflict
In decentralization, the top level management puts more pressure on departmental managers to increase output and revenue. In such a situation, every department lays more emphasis on their own departmental goals instead of corporate goals. This may give rise to inter-departmental conflict and too much fragmentation creates problems in coordination and control.

3. Decentralization Is Unsuitable For Emergency Situation
In decentralization, lower and middle level managers are assigned authority only for routine decisions. Whenever they face complex and non-programmed problems they cannot take a decision due to limited authority.

4. Decentralization Maximizes Risk
In decentralization, decision making authority is delegated to the subordinate level. If subordinate level managers are unskilled and incapable, they may take wrong decision, which may increase the risks and result in losses.

5. Decentralization Is Unsuitable For Specialized Services
The concept of decentralization is not applicable in some types of services. It is not suitable for specialized nature of services like accounting, human resource, engineering, surgery etc.

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Advantages Of Decentralization

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Decentralization has the following advantages:

1. Decentralization Facilitates Managers' Development
In decentralization, appropriate responsibility and authority is delegated to subordinate level managers. It gives them an opportunity to hone their skills and efficiency so as to get promotions. Therefore, decentralization creates the reserve of talency.

2. Relief To Top Managers
In decentralization, most of the routine managerial responsibilities are delegated to middle and lower level managers. It minimizes the excessive workload of the top managers. It gives sufficient time to the top managers to concentrate on non-programed decisions like planning, policy making, strategy formulation etc.

                                 Also read: Concept And Meaning Of Decentralization

3. Effective Control
In decentralization, it is convenient to set standards of performance. This helps to compare actual performance with standard performance more quickly. This helps in taking prompt decisions to correct deviations. This leads to maintaining effective control.

4. Possibility Of Better Decision
Decentralization delegates the decision making authority to the managers nearest to the level of operation. The managers working nearest to the operation are in a better position to understand the complexity of problems. This helps in taking a better decision to solve the problems.

                         Also read: Disadvantages Of Decentralization

5. Decentralization Facilitates Diversification
The addition of new product lines or expansion of existing lines of business develops complexity in an organization. This also develops a challenge to the top management. The top managers can meet such challenges by delegating authority to their subordinates. Top managers can only play the role of coordinators.

6. High Morale And Motivation
Decentralization is highly motivational as it gives the subordinates the freedom to act and take decisions. This develops among the subordinates a feeling of status and recognition and ultimately a feeling of dedication and commitment. This helps in maintaining high motivation and morale of subordinates.

                        Also read: Concept And Meaning Of Centralization

Concept And Meaning Of Decentralization

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Decentralization is the systematic delegation of managerial authority to middle and lower level management according to their weightage of responsibility. In practical, it is not possible to delegate absolute authority to the lower level management. Top level management can delegate only substantial power to the lower level management. Therefore, every organization has to decide how much authority should be centralized and how much should be decentralized. Decentralization depends on the size and nature of the organization and responsibility vested on the lower level. The top level management has to delegate such degree of authority to the lower level so that quick decisions and their implementation are possible.

Therefore, decentralization may be known as the philosophy of scientific and systematic delegation of managerial authority to the middle and lower level managers in accordance with their responsibility. This philosophy states that the top level management should keep limited authority and delegate maximum authority to operating levels. Top management has to play the role of supervisor.

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