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This is the most prevalent and important method of advancing loans to the traders for short-term
purposes. Under this system, banks advance loans to the traders and business firms by
discounting their bills. In this way, businessmen get loans on the basis of their bills of exchange
before the time of their maturity.
5. Investment of Funds:
The banks invest their surplus funds in three types of securities—Government securities, other
approved securities and other securities. Government securities include both, central and state
governments, such as treasury bills, national savings certificate etc.
Other securities include securities of state associated bodies like electricity boards, housing
boards, debentures of Land Development Banks, units of UTI, shares of Regional Rural banks
etc.
6. Agency Functions:
Banks function in the form of agents and representatives of their customers. Customers give their
consent for performing such functions. The important functions of these types are as follows:
a. Banks collect cheques, drafts, bills of exchange and dividends of the shares for their
customers.
b. Banks make payment for their clients and at times accept the bills of exchange: of their
customers for which payment is made at the fixed time.
c. Banks pay insurance premium of their customers. Besides this, they also deposit loan
instalments, income tax, interest etc. as per directions.
d. Banks purchase and sell securities, shares and debentures on behalf of their customers.
e. Banks arrange to send money from one place to another for the convenience of their
customers.

E-Banking:

The growth of Internet and e-commerce is dramatically changing everyday life, with the World
Wide Web and e-commerce transforming the world into a digital global village. The latest wave
in information technology is internet banking. It is a part of virtual banking and another delivery
channel for customers. In simple terms, internet banking means any user with a PC and a
browser can get connected to the banks website to perform any of the virtual banking functions
and avail of any of the bank’s services. There is no human operator to respond to the needs of the
customer. The bank has a centralised data base that is web-enabled. All the services that the bank
has permitted on the internet are displayed on a menu. Any service can be selected and further
interaction is dictated by the nature of service.

In this new digital market place banks and financial institutions have started providing services
over the internet. These type of services provided by the banks on the internet, called e-banking,
lowers the transaction cost, adds value to the banking relationship and empowers customers. E-