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ii. Providing Loan
A commercial bank provides loan to persons and institutions for certain productive
purposes against the security of patents, shares, debenture, gold, silver and other fixed
properties. It provides short-term, mid-term and long-term loan for which it charges
interest at a certain rate greater than that given on the clients’ deposit. It also provides
overdraft facility to the distinguished/reputed clients.
iii. Serving with Agency Functions
A commercial bank performs a number of agency services like payment to the
creditors, water and electricity bills, subscriptions, insurance premium, etc. and collection
from debtors receiving dividends, interest and commission, etc. on behalf of the clients
as per outstanding instructions. It charges a certain commission for serving with such
agency functions.
iv. Exchanging Foreign Currencies

Various businessmen frequently demand foreign currencies to conduct their foreign
trade. General individuals may also need foreign currencies for their foreign tour and
study programmes. A commercial bank provides the necessary foreign currencies on
the permission of Nepal Rastra Bank. Commercial banks can also quote open market
exchange rate of foreign currencies as the prevailing system within the framework of the
central bank’s policy,
v. Transfer of Money
Commercial banks transfer money from one place/person to another in a fast and
safe way by means of different instruments of payment. Telegraphic transfer, traveller’s
cheque, credit cards, bank drafts, electronic transfer, etc. are the different instruments
used by the banks to transfer money. This helps to settle the accounts of the customers
and the suppliers from time to time. They take certain charges for transferring money
between places and persons. So, a bank is the most reliable means of payment/transfer of
money.
vi. Opens Letter of Credit (L.C.)

Commercial banks provide Letter of Credit (LC) facility to their clients. LC is a kind of
guarantee given to the supplier or exporter by the purchaser or importer’s bank on behalf
of the purchaser/importer as deposit to provide such a guarantee letter. This promotes
the foreign trade dealing. Similarly, banks issue credit cards to their clients at their request
and assure the sellers for the payment of what is purchased by the customers.

vii. Issuing Capital
Commercial banks also help trading and industrial companies by issuing or
providing capital through the sale of shares, debentures, etc. by motivating the investors.
They also provide finance or capital in terms of investment or lending, which is the base
for companies to conduct their activities smoothly onward and adding new programmes
and projects.

70 Aakar’s Office Practice and Accountancy - 10 Financial Institutions 71