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Explain ancillary functions of commercial bank.

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Ancillary functions or Agency function of a commercial bank: Agency Functions : Commercial Banks render several services as the agents of their customers. These services are known as their agency functions. Some of the most important agency functions are as follows :

(1)  They collect the payment of the bills of exchange, promissory notes, cheques, etc., on behalf of their customers. 

(2)  They collect dividends on debentures interest on shares, rent, etc., on behalf of their customers.

(3)  They buy and sell shares and securities on behalf of the customers as per their instructions.

(4)  They transfer funds from one branch of the Bank to another and from the place to another. 

(5)  They make payments of loan installments, interest, insurance premiums, taxes etc., on behalf of their customers.

(6)  They act as trustees or executors and deal with the financial matters, relating to other institutions, for their customers.

Miscellaneous Functions : Commercial Banks also perform several miscellaneous services which are described below : 

(1)  They provide safety vaults or lockers for the safe custody of jewelry, valuable possessions of their customers. 

(2)  They issue letters of credit, like circular notes, drafts and traveler’s cheques. 

(3)  They give correct information to the customers about the credit of other customers. (4) They give references about the financial position of their customers, when it is so required. 

(5)  They supply various kinds of trade information which is useful to their customers.

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