The banks cannot simply keep the resources with them without employing them profitably outside. Before a banker can plan intelligently for the employment of funds to advantage, he must be completely familiar with the nature of the funds with which he has to work. Various uses of banks fund are discuss below:
Uses of banks fund
The total working funds may vary from bank to bank depending upon the capital, reserves, deposits and borrowings of each bank; but the banks’ own funds, viz, paid-up share capital, reserves and unallocated profits as stated earlier, accounts for only a small percentage of working funds.
The contributions coming from various deposits in Current, Savings, Fixed and other Accounts constitute the major part of bank’s funds. As these deposits from the public are payable on demand, or at a very short notice, banker cannot make advance whole of them.
A part of the deposit is kept in cash to meet withdrawals of the depositors and a portion in the form of other liquid assets to maintain statutory cash reserve with the Central Bank, i.e., Bangladesh Bank.
Commercial Banks cannot lockup their funds for long periods. They usually grant short term advances which are utilized to meet the working capital requirements of the borrowers repayable at short notice.
Only a small portion of a bank’s demand and time liabilities is advanced on a long term basis where the banker usually insists on a regular repayment by the borrower.
Thus a banker has to employ his funds wisely so that he is able to meet the obligations and at the same time make maximum profit.
Advances play an important part in gross earnings of a bank. It also promotes the country. All types of business activity including trade, industry and agriculture have to depend on bank finance in one form or the other, Banks, by channelizing accumulated savings of the nation into productive uses, help both the depositors and the borrowers.
Banks assist tin creating more avenues of employment and, thus, help raise the standard of living of the people.
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