Scope of Banking

The word "Scope " mean the extent of Knowledge. The scope of banking refers to the extent to which it deals with the receipts of deposits and advancing loans. The scope of banking covers all the forms of business coming within the legitimate of a banker. The scope of banking is normally determined by the legislation regulations and business requirements. Development in the last few decades has extended the scope of banking. The scope of banking can be described by the help of following points:

1. Accepting Deposits: Banks accept deposits from its customers. The customers are allowed to draw their money by cheques. Deposits are the basis of Bank's activities. The deposits are of four kinds like Saving Deposits, Current or Demand deposits, Fixed Deposits and Foreign Currency Deposits.
2. Advancing Loans: The deposits received from customers are not kept idle by the banks. The banks advance loans to their customers maintaining safety and profitability. Banks allows the loans in form of Cash, Credit, Call loans, Over draft and Discounting Bills of Exchange.
3. Financing Foreign Trade: A bank finances foreign trade by accepting foreign bills of exchange from foreign banks. Banks also issue letter of credits to the businessmen to facilitate international trade.
4. Acts Upon Standing Instructions: Sometimes the customer may issue instructions in writing to his bank to do something on his behalf regarding the conduct of his account. These written instructions are called standing instructions. These instructions are usually given in respect of payment of insurance premium, subscriptions and similar payments.The bank acts upon these instructions.
5. Collects Dividend or Interest: The customer may ask the bank to collect dividend on shares or interest on investment. The bank acts upon the instructions of his customers and collects dividend and interest on investment made by customer. Banks also collect pension and other sums.
6. Investment: Banks made investment by purchasing shares, bonds and securities. The purchase of securities and shares f reputed companies is considered safe investment, because shares and securities can be pledged by the bank for securing loans in times of need.
7. Purchase and sale of securities: Sometimes bank purchases and sells securities on behalf of its customers. The securities may include shares, bonds and government securities. Banks can do it well because they are aware of market conditions.
8. Foreign Exchange: Commercial banks deal in foreign exchange. This enables the individuals and businessmen to obtain foreign currency in exchange of their home currency. For dealing in foreign exchange, commercial banks have to obtain permission from central bank of the country to act as a dealer in foreign exchange.
9. Acts as a Referee: To act as a referee is very valuable service to businessmen. It enables them to receive reliable information about the general standing of the people with whom they have business transactions. This information should be collected by a banker with great care and utmost secrecy.
10. Hajj Services: The commercial banks provide free Hajj services to the intending pilgrims. Bank receives Hajj applications. Banks also facilitates to form Hajj groups. Training of intending pilgrims is also arranged by the commercial banks.
11. Remittance of Funds: Modern commercial banks facilitate transfer of money from place to place and country to country by drawing bank drafts on their branches.
12. Safe Custody of Valuables: Banks provide facility of safe custody of valuables, important documents, ornaments etc. of their customers. 
13. Acts as a Trustee & Attorney: On behalf of customer banks act as a trustee & attorney.
    
14. Issue of Traveler's Cheque: Bank issues traveler's cheque to the customers for traveling in and outside the country.
15. Accepts Utility Bills: Bank receives utility bills from customers on behalf of government bodies.
16. Trade Information: Bank provides trade information and tender advice to its customers about financial matters.
17. Issue Credit Cards: Banks issue credit cards to their trustworthy and valued customers. This facilitates the customers to pay for their necessities of life.
18. Modaraba Company: The commercial banks acts as Modaraba and leasing companies under the provision of Modaraba Companies Ordinance 1980.
19. Purchase PTCs: Commercial banks underwrite or purchase Participation Term Certificate (PTCs), Term Finance Certificate (TFCs), and Modaraba Certificates.
20. Electronic Banking: Electronic banking has enlarged the scope of banking. At present banks are offering improved services to the customers as follows:                    

• ATM Cards
• Credit Cards
• Electronic Transfer of Money