1) Safekeeping of cash
Banking facilitates deposit of cash safely in the savings, current and fixed deposit account
2) Means of making payment
Payment can be made conveniently and safely through the current account, or by way of bank drafts, bank transfers and bills of exchange
3) Financing
Banking also provides or lends funds in the form loans, overdrafts or discounted bills of exchange
4) Advice
Banking also provide advice on financial investments or on credit-worthiness of customers, local or abroad
Types of Banks
There are two types of banks
1. Central Bank
2. Commercial Bank
Central Bank
Central Bank of Brazil
The Central Bank controls the operation of the whole banking system in the country and carries out its financial policy
The main functions are
1. To issue, control and supply of money in the country
2. To act as banker and financial adviser to the government
3. To act as banker to the commercial banks
4. To promote monetary stability and a sound financial structure in the country
However, Brunei Darussalam don’t have their own Central Bank but Brunei Darussalam have the Monetary Authority of Singapore (that Central Bank in Singapore) to act as the Central Bank of Brunei Darussalam
Commercial Banks
These banks are privately-owned, profit seeking financial institutions
Examples: Hongkong and Shanghai Banking Corporation (HSBC), Bank Islam Brunei Darussalam (BIBD), Baiduri etc
They give different types of services:-
o Saving and ATM cards
o Credit and Debit Card
o Remitting services
o Loan and Overdraft
o Safe deposit box
o Standing Orders
o Foreign Currency exchange
o Transfer of money
o Travellers’ cheques
o Telebanking
o Night safe facilities
o Saving, Current and Fixed Deposit Account
o Cheques
Bank services
Saving and ATM (Auto Teller Machine) cards
Banks provide Saving or ATM card to its customers who have either saving or current account
The services enable the customers to perform banking transactions anytime in the day at ATM
Examples of the banking transactions:-Withdraw of money, paying bills, deposit of cash or cheques, transfer of funds between accounts, check bank balance etc
Some banks like Baiduri have extended services like buying Easi or B.Moblie recharge card at their ATM
Credit Card
Credit Card enables holders to make credit purchases by the bank at local or overseas businesses (like shops, hotels, restaurant, etc) which accept these cards.
The most common credit card in Brunei Darussalam are Visa and MasterCard
Advantage of having a Credit card
1. Travellers don’t have to carry any traveller’s cheques or cash
2. Travellers can charge their expenses to the card and put his cash as reserves for better use
3. The holder is informed by monthly statement of the amount of credit they have taken and the due date for making the payment
Debit Card
Debit card has the same function as credit card but instead of given credit, Debit card withdrawn the funds directly from the cardholder’s bank account
Advantage of having a Debit card
1. Anyone who is above 16 years old can get it
2. Its acted like Credit Card
3. The cardholders can only spend what he/she have in his/her account
Remitting services
Remitting services the sending of money from one place to another without the actual physical movement of cash.
Example:- Bankers’ cheque, bank draft, mail transfer and telegraphic transfer
1. Banker’s cheque or cashier’s order is a bank’s cheque drawn upon itself. It can be used for payment of any amount within the same town.
2. Bank draft is an unconditional order in writing drawn by one bank on another bank requesting the drawee bank to pay a third party on demand a specified sum of money
3. Mail transfer is a written instruction given by a remitting bank to its brand or agent bank to pay a certain sum of money to a third party
4. Telegraphic is an instruction that is cabled or telexed to a branch or agent bank by the remitting bank to pay a certain sum of money to a third party
Loan
Personal Loan
Bank may offer personal loans to customers who have an account with the bank
The loan is discussed with a senior bank official and if the official is satisfied that the customer has a regular and dependable income, the loan is granted
Example: To buy new car or computer, household repairs or improvement
The loan is repaid monthly, usually over two or three years but longer in certain cases
Business Loan
Business Loans are often granted to small traders or self-employed professional people
This loan might be needed for modify present premises, buy new equipment or start a new business
Collateral security is required for larger loans
Collateral security is the name given to items of value, which the business agree to give the bank, if they can’t able to repay the loan.
Example: Share certificates, jewellery, cars etc
Bank Overdraft
A bank overdraft is a cheque drawn on the bank itself and not on the individual customer’s account and it usually for large sum of money
The money is taken out of the customer’s account and put into the bank account before the draft is issued
Safe deposit box
Banks offers security and safe-keeping for documents and valuables, which can be stored in the strong-rooms of the banks
Standing Orders
The customer can instruct the bank to make monthly payments on his behalf by filling and signing a standing order
These payment can be
1. Rentals
2. Installments
3. Insurance premiums
4. Subscriptions to trade journals, club, etc
Foreign Currency exchange
Banks can change their loan currency to foreign currency, for example, Brunei dollar to US dollar, Brunei dollar to Sterling
Bank can also change foreign currency to local currency, for example, Yen to Brunei dollar, Euro to Brunei dollar
Travellers’ cheques
Bank can issues traveller’s cheques where these can be exchange for cash when they are signed in other countries
They are safer to carry then money because its are valueless until they are signed by the person to whom they were issued
Transfer of money
Money can be transfer by this following ways
1. Mail transfer – where the bank sends a letter to the branch or agent requesting it to pay a certain sum to the person stated in the letter
2. Air mail transfer – where the bank send the letter by air
3. Telegraphic transfer where the bank send a telegram to its branch or agent if money is to be sent urgently
Telebanking
Customers can pay bills or make loan payment, check bank balance, order cheques books and request statement of accounts through the use of their telephones
Its operates 24 hours a day anywhere using the push-button telephone linked with the bank’s computer centre
Night safe facilities
This can be used to deposit a trader’s daily takings after banking hours
The money is put in a locked bag and dropped into the night safe, located outside the bank and goes through a chute leading to the vault
Saving Account
This is an account which encourages people to save and earn interest
The saving account holder can withdraw the money when needed
Fixed Deposit Account
This is an account where the money is deposited in the bank for a period of time so its can earn interest
Current Account
This is an account from which money can withdrawn for payments by means of cheques
Other services available to the current account holder are overdraft, standing order, direct debiting and credit transfer services
