As an agent of RBI, the SBI also performs certain Central Banking functions such as:
1. Bankers to Government: As an agent of the RBI, SBI acts as banker to the Central and State Government as a bankers as a adviser as a agent into there capacities:
(a) As a bankers.
(b) As an agent.
(c) As an advisor.
As a Government banker the SBI performs the following functions:
(a) It maintains and operates deposit account of the central and state governments.
(b) It receives and collects payment on behalf of the Central and state governments.
(c) It makes payments on behalf of the central and state governments.
(d) It provides short term advances to government for which are called ways and means advances etc.
As a Government agent the SBI perform the followings functions:
(1) Collect tax and other payments on behalf of the government.
(2) Raise loan from the public and thus manages public debts.
(3) Transfer funds and provide remittances facilities to the government etc.
2. Bankers Bank: As an agent of the RBI, SBI acts as a banker to all the other banks.
(a) Custodian of cash reserve of the bank: As an agent of the RBI, SBI acts as the custodian of cash reserve of the banks.
(b) Clearing agent: In India the central clearing functions is managed by the RBI or the SBI is authorized to manage clearing house functions every day. Each commercial bank receives a number of cheques for collection from other banks on account of their customers.
Other functions of the SBI as General Banks act
(A) Primary functions:
(a) Acceptance of deposits: It is the most important function of a bank. Under this function, bank accept deposits from individuals and organizations and finances the temporary needs of firms.
(b) Making loans and advances: The second important function of banks is advancing loan. The commercial bank earns interest by lending money.
(c) Investments of Funds: Besides loans and advances, banks also invest apart of its funds in securities to earn extra income.
(d) Credit Creations: The Bank creates credit by opening an account in the name of the borrower while making advances. The borrower is allowed to withdraw money by cheque whenever he needs.
(B) Secondary functions of a bank: This function is divided into two parts
(1) Agency functions: These functions are performed by the banker for its own customer. For these bank changes certain commission from its customers. These functions are:
(d) Remittance of Funds: Banks help their customers in transferring funds from one place to another through cheques, drafts etc.
(e) Collection and payment of Credit Instruments: Banks collects and pays various credit instruments like cheques, bill of exchange, promissory notes etc.
(f) Purchasing and Sale of securities: Banks undertake purchase and sale of various securities like shares, stocks, bonds, debentures etc. on behalf of their customers.
(g) Income Tax Consultancy: Sometimes bankers also employ income tax experts not only to prepare income tax returns for their customer but to help them to get refund of income tax in appropriate cases.
