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Unit 9: Commercial Banking Services

The principal function of the working reserve is to take of both regular and exceptional Notes
requirements.
Since they have to meet the obligatory demands of human, predicting about their requirements
is very difficult and that's why determining working reserve determining is complicate. How
much of total deposit liabilities should be held in the form of working reserves is a basic
problem which confronts a commercial bank, A commercial bank has to trade off between
liquidity and profit. In order to determine the proper size of the working reserve a banker
should consider all those variables, which affect the quantum and nature of money inflows, and
cheques are collected.

The various factors, which generally affect are:
1. Banking habit of the people
2. Nature of Business conditions
3. Seasonal factors

4. Existence of clearing house arrangements
5. Cash reserves held by other Banks
6. Structure of Deposits
7. Size of Deposit Accounts

8. Ownership of deposit accounts
9. Size of secondary Reserve
10. Location of Bank
11. availability and cost of borrowings

12. Ownership of deposit account
13. Banks inclination and ability to adjust working reserve position.

9.14 Cash Management in a Commercial Bank

An efficient utilization of cash is essential for the successful survival of a bank. A bank receives
money from customers in various deposit accounts and pays cash to depositors and demand
cheques or demand drafts or bank orders etc. The basic issues involved in cash management in
a bank are:
1. The management has to keep the cash balance at the lowest possible level in order to
avoid the loss of opportunity income.
2. A low cash level will mean a greater risk of running out of cash and higher cost of
replenishment.
Prudence in the management of cash lies in striking a balance between the two factors. The
banks have to compile data weekly about:
1. Cash receipts from the customers
2. Cash receipts by way of remittances
3. Routine cash payments to customers.

4. Payments in the form of remittances to the head office
5. The amount of cash receipts utilized for the purpose of making everyday.

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