Functions of an Urban Co-operative Bank

As a bank, a UCB performs the same broad functions as any bank, which are conveniently grouped into primary (main) functions, secondary (agency) functions and general utility services.

A. Primary functions. These are the two functions that make it a bank at all.

• Accepting deposits — It receives the savings of its members and the public in different forms to suit different needs:
  • Current (demand) deposits — for traders and businessmen, withdrawable at any time by cheque; usually no interest is paid.
  • Savings deposits — for small savers, allowing limited withdrawals and carrying a modest rate of interest.
  • Fixed (term) deposits — a lump sum left for a fixed period at a higher rate of interest.
  • Recurring deposits — a fixed sum paid in every month for an agreed period, encouraging regular saving.
• Granting loans and advances — Out of the funds so collected it lends to its members and customers, mainly for trade, small industry, self-employment and personal needs, through:
  • Term loans — repayable in instalments over a period, for buying equipment, vehicles or premises.
  • Cash credit and overdraft — a running limit against stock or security, letting a trader draw as needed.
  • Discounting of bills — advancing money against bills of exchange before they mature.

B. Secondary (agency) functions. Here the bank acts as an agent of its customer, usually for a small commission:

• Collecting cheques, bills, dividends and interest on the customer's behalf.
• Making periodic payments such as insurance premiums, electricity bills and instalments on standing instructions.
• Transferring funds from one place or account to another.
• Acting, in some cases, as trustee or executor for its customers.

C. General utility services. These are services of general convenience to the public:

• Providing safe-deposit lockers for valuables and documents.
• Issuing demand drafts, pay orders and traveller's/ gift instruments for the safe transfer of money.
• Offering modern facilities such as ATMs, and where permitted, electronic transfers (NEFT/RTGS/UPI) and mobile/internet banking, so that a small-town customer enjoys the same conveniences as a city one. …