COMMERCE 101

BANK

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Bank is a financial institution, set up purposely for safekeeping of money valuable goods and documents like Wills & Others. They are institutions that create money, and give out loans to people.

Types of Banks:

They are different types of banks and they include:

1. Commercial Bank

2. Central Bank

3. Merchant Bank

4. Saving Bank

5. Development Bank.

COMMERCIAL BANK

  Commercial Banks are setup for keeping and lending money to people, with the aim of making profit. They are owned by private individuals, institutions or governments. Examples

of Commercial Banks- United Bank of Africa (UBA), Union Bank of Nigeria, Guarantee Trust Bank Plc, Diamond Bank of Nigeria Plc, City Bank etc.

Characteristics of Commercial Bank:

* Commercial Bank is a Limited Liability Company that deals with money and other valuable securities.

* They are established by individuals, organisations or governments.

* The main purpose of their establishment is profit-making.

* There is no limit to the number of commercial bank that can be established in a country.

* They carry out ordinary retail banking.

Functions of Commercial Bank:

# They accept deposits from the public for safe custody through three methods namely: Savings, Currents and Fixed Accounts.

# They lend money to businessmen and other members of the public inform of loans and overdraft with interest for profitable investment.

# They encourage and permit customers to have current account in which they can draw without notice by cheque.

# They keep customers valuable such as Jewelries, Certificates and Wills etc.

# They encourage and advise businessmen on the type of project, they should invest their money into.

Types of Bank Account:

There are three types of Accounts which customer can open in a bank and they include:

a.  Savings Account- This is operated by low income earners who are small savers. This type of Bank Account is operated with the user of Passbook. The holders are entitled to interest but can't withdraw frequently. The withdrawer can't be made by another person on behalf of the customer.

b. Current Account- This is usually opened by businessmen and group of individuals or organisation that frequently make use of money. It is operated with the use of cheque. The holders of current account are not entitled to interest but are charged by the bank. Other people can withdraw money from the account on behalf of the customer.

c. Fixed Deposit Account- This is an account in which money is saved in the account for a fixed period of time to earn interest. Customers can withdraw with a seven day notice and it is withdrawable at an agreed time.

ROLES OF COMMERCIAL BANKS IN INTERNATIONAL TRADE

·         They provide Credit Facilities to Exporters with helps in Payment for Goods.

·         They help to arrange for the Purchases and Sales of Foreign Currencies, which are used to Finance Import and Export Trade.

·         They Facilitate International Trade by Issuing Travelers Cheque to Businessmen going aboard.

·         They help in confirming letters of credit to ensure fault in payment is reduced.

Commercial Banks can act as agents of lending by means of loans, overdrafts and discounting means of exchange.

DIFFERENCES BETWEEN LOANS & OVERDRAFTS

Loans	Overdrafts
1. Collateral Security is Required.	Collateral Security is not required.
2. It attracts lower rate of Interest.	It attracts higher rate of interest.
3. The Money is repayable at a fixed time.	There is gradual reduction from the customer's account.
4. A Separate Account is opened.	No Separate Account is opened.

This brings us to the end of today's session. Hope this was very helpful to you, leave a comment of what you think of this tutorial and of your questions below. Have a Blessed Day and Remember You are Amazing. God Bless.