Use of Banker’s Fund

Use of Banker’s Fund

Commercial banks use their funds to make the maximum profit. The important use of these funds is advancing loans (Financing). Banks also keep some of their funds as cash reserve to meet their current obligations. Main uses of bank funds are:

Use of Banker’s Fund

                                                       informationmaker.blogspot.com

Advancing Loan:                                                       

The loans are granted to the different sectors of economy to meet the increasing needs of economic development. The commercial banks after evaluating the prospective borrower’s application precisely and objectively extend credit for a certain period.

Direct Investment:

Some banks having sound financial background establish their own business projects like manufacturing units, commercial enterprizes etc. By this type of investment banks can earn more profit through direct operations.

Purchase of shares and Debentures:

Banks also employ their funds in purchasing shares and debentures of different companies to earn profit. Sometimes they purchase more than 50% shares of a company and become the authority in all the decision to the company due to majority.