00:00 Hello, good day and welcome to class. My name is Miss Lydia and in our commerce class today

00:17 we will be treating another Aids to trade which is banking. Now by the end of this class, I expect

00:22 you to be able to state the functions of the central bank of Nigeria, commercial banks

00:27 and specialized banks. And you should be able to explain the types of accounts, discuss

00:31 the forms of payments, distinguish between the operations of specialized banks and commercial

00:36 banks and also trace the origin of central bank of Nigeria.

00:44 Now what is a bank? A bank is a financial institution. It is one which performs various financial

00:50 activities such as accepting and handling deposits of customers. Banks are financial institutions

00:56 that create money and give loans to people. It is also a place where money and other valuables

01:01 like wheels, jewelries and so many other valuables are kept for safety.

01:09 Now let's discuss the origin of banking. The first banking function was accepting deposits

01:16 of cash from merchants who had no safe place to keep their money. The goldsmiths at first

01:22 demanded a charge for looking after their money. That is in times before, in times past,

01:30 merchants who were, merchants are big traders. They didn't have a safe place to keep their

01:35 money. Their money was at risk whenever it was with them or at their home. So they took

01:38 it to these goldsmiths for safe keeping and they were charged some amount for this duty.

01:48 Now the second stage came when receipts for these deposits began to be issued, began to

01:52 be used as a means of payments by merchants. Now this made the early bankers to issue

01:58 banknotes of fixed denominations which were more generally acceptable.

02:04 The next stage in development of banking system was the development of money lending to

02:09 customers with interest charged on it. Now this provided a profitable business hence

02:15 bankers began to offer inducements of interest to encourage merchants and other increase

02:21 and others to increase their deposits. That is when this much has brought money to these

02:29 goldsmiths initially, it was as the goldsmiths doing the merchants a favor. But in this stage

02:35 of development of the banking system, when the merchants were now being induced with

02:41 interest that is keep your money with us and will give you a particular sum of interest

02:45 because it was more profitable to this bank and such that they lent out this money to

02:51 other people by collecting a huge sum of interest from this point then they began to make

02:58 good money from it. So they started encouraging merchants to increase their deposits with

03:03 them. Now over time, most of the status systems have been introduced into the banking industry.

03:10 Now let's take a look at the types of banks. We have the commercial banks which are

03:16 the regular banks we all know. Then we have the central bank and the highest financial

03:22 institution in any country. Then we have the merchants bank, we have the savings bank,

03:28 we have the development bank and we have the agricultural bank. Now let's discuss commercial

03:34 banks now. These are financial institutions which are set deposits and other valuables

03:39 from the public for safe keeping with the sole aim of making profit. That is, these commercial

03:45 banks are into business, into the banking industry, into the banking business for the aim

03:51 of making profit. They are set deposits and valuables from their customers for safe keeping

03:57 with the aim of making profits on these services. Now they are owned by private individuals.

04:03 That is, a private individual can set up a commercial banks and they can also be owned

04:09 by organizations at these institutions and the government. Now commercial banks are limited

04:14 liability companies. Now some examples of commercial banks in Nigeria, the United Bank

04:20 for Africa, that is the UBA, we have UBA, that we have first bank PLC, we have Zenith

04:26 Bank PLC, we have GT Bank PLC, that is the Grand Citrus Bank, we have access bank and

04:33 so much more. Now let's take a look at the characteristics of commercial banks. That

04:38 is what is very peculiar to these commercial banks. Now commercial banks are limited liability

04:44 companies. That is, they are, the liability of these companies is limited to the amounts

04:49 they have contributed to as capital. Then the motive for the establishment of commercial

04:55 banks is to make profit. That is, that is the main aim. This is the sole aim of these commercial

05:00 banks. That is to come by services for people, charge the people for the services and in turn

05:05 make profits. Now there are, another characteristics that they are, they are members of the money markets.

05:11 Then commercial banks are incorporated, commercial banks are incorporated and also they accept

05:17 deposits as well as other valuables. Now when we say they accept deposits, we mean cash

05:22 deposits. The commercial banks accept cash deposits from their customers, from the public,

05:27 from their various customers as well as other valuables like wheels, jewelries, that is

05:32 very, very expensive, costly jewelries, that cannot just be kept anywhere. So commercial

05:37 banks accept these items for safe keeping but at the charge because their sole aim is to

05:44 make profit. Now let's take a look at these functions of commercial banks. We say they

05:49 accept deposits. The bank takes deposits in forms of saving, current and fixed deposits.

05:56 The surplus balances collected from the firm and individuals are lent to the temporary

06:01 requirements of the commercial transactions. Now let me explain this properly to you. That

06:08 is when customer A goes to GT bank to deposit some cash or let's put it as yes, goes to GT

06:18 bank to deposit some cash which is not needed for the meantime. GT bank doesn't just keep

06:22 that money. They use it for other commercial activities that is learning to other customers

06:28 that might need the cash at that point for overdraft services and so on.

06:38 Then we have lending of funds. Another important activity of commercial banks is the loan funds

06:42 to customers in forms of loans and advances, cash credits, overdrafts and discounting

06:49 of bills. Now loans are advances that a bank extends to his customer with or without security

06:54 for a specified time and at an agreed rate of interest. Now when we say with or without security

07:03 that is collateral, most of the time when people want to loan money from banks when people

07:08 apply for loans from bank, you have to provide a collateral that is what backs up your loan.

07:14 So sometimes also these collaterals are not required when getting loans from banks.

07:19 Now this loan, before you can apply for this loan, you must have discussed with the bank

07:26 or few they form specifying the time or the process by which this money will be returned.

07:33 And also for an agreed rate. Now further, the bank credits the loan amounts in the customer's

07:37 accounts which he withdraws as far as he needs. Now they facilitate international

07:43 commercial banks provide credits to exporters and disfacilities payments in foreign trade.

07:50 Now commercial banks help in transferring funds, as is transfer of funds, they provide

07:55 the service of transfer of funds. So commercial banks are able to transfer funds of

07:59 a customer to another customer's account, true checks, drafts, mail transfers, telegraphic

08:04 transfers and even electronic fund transfers. That is, it is easy to transfer money from

08:12 one customer's account to another customer's account, even using another bank, using

08:17 another banking institution. It is easy to transfer from one customer's account to another

08:21 customer's account with this, with checks, mail transfers or electronic fund transfer

08:27 method. Now let's take a look at the types of banks account, bank accounts. There are three

08:35 major types of bank accounts which a customer can open in a bank with the institution where

08:41 they charge a commission by the bank for their services. Now they obtain a overdraft from

08:45 the bank as well. Now let me explain this, what the meaning of this overdraft. Now take

08:51 for example, a customer has 10,000 error in his bank account, but needs 20,000 error.

08:58 Frankly, at step points, the customer can apply for an overdraft and get up to 20,000

09:05 error from his bank account and that is what is called an overdraft. It is a form of

09:10 learning, learning bots is a smaller form. So this, this money would be removed from the customer's

09:17 account. The next time he gets an alert or this next time he has money in that, in his account.

09:22 Did that sum of overdraft to be removed from his account? That is what an overdraft is. So

09:27 they kind of obtain overdraft from the bank as well. Now simply put, a current account is an

09:32 account in which checks can be drawn, in which checks are drawn. Now let's take a look at the

09:38 features of a current account. Now money can be drawn frequently from a current account

09:44 as per your need, as per when you need it. Now customers are entitled to the use of checkbooks.

09:49 Payments of commission is made by the customers of the bank. That is, commission is paid by the

09:55 customer of this bank to, of the bank to the financial institution. They pay the bank a commission

10:02 for their banking services. Now order of current, orders of current accounts are not entitled to

10:08 interest instead. They pay commission. Now order people can withdraw money from the account

10:13 on behalf of the customers with the use of checks or bank instructions.

10:19 Now let's take a look at the procedures for opening a current account. Now the customer who

10:26 have to collect and fill an application form for opening a current account, specifying that he

10:31 wants to open a current account. Then he or she will submit a prescribed number of photo

10:36 passports, that is, passports photographs. Then two guarantors who are accounts for the bank

10:42 must be provided to recommend the applicant. Then the customer will submit their complete

10:50 particular class of the bank showing personal details. That is their name, their nationality,

10:56 and very, very important details that may be required by the bank. Then the bank will issue the

11:02 applicants with a pay-in-slip booklet. Also, he or she will be issued an account number

11:09 that is peculiar to him alone. Then he or she will pay an initial deposit with the pay-in-slip.

11:14 That is, pass a specified sum of amounts into their account. Then also a checkbook will be given

11:22 to the customer for his personal transactions going forward. Now let's take a look at

11:28 savings accounts. This type of account is operated by low-income owners who are small savers.

11:34 Now, customers pay small regular savings which will accumulate over time.

11:38 Holders are entitled to interest but cannot withdraw frequently. They have to inform the bank

11:45 before they can withdraw. Now, customers will be given a passbook with which to make

11:49 occasional withdrawal from the bank. Let's take a look at the features of a savings accounts.

11:55 Money can only be withdrawn occasionally, not all the time because it is for the purpose of saving.

12:00 Then it attracts a favorable rate of interest that is, instead of paying commission to the bank

12:05 unlike the, that is like the current accounts holders. The bank pays them a sum of interest

12:11 over time for keeping it for saving on their money. Now, holders are issued with a passbook.

12:18 We draw cannot be made by another person on behalf of a customer because these people are not

12:23 giving checkbooks unlike current accounts holders in which they can send someone to withdraw on their

12:29 behalf. We draw cannot be made on behalf of a customer who holds a savings account.

12:35 Now, let's take a look at deposit account which is the third one. Also, it is referred to as time

12:43 deposit. Now, this is an account in which money is saved in the bank for a fixed period of time to

12:48 earn interest. Money is saved in the bank for a fixed period of time to earn interest. It could be

12:54 over a period of one year, two years, three years, and so on. Now, holders are entitled to high interest

13:00 rates than savings accounts because these people leave their money in the bank for a very long period

13:06 of time and do not come to withdraw. Now, customers can withdraw subject to seven days of notice that

13:12 they must have notified their bank at least seven days before trying to process a withdraw. Now,

13:20 people can save money in deposit account for a specific purpose and can be renewed on maturity.

13:27 That is, when people save, it could be an agreement between the customer and the bank to

13:31 deposit so, so amount over for a period of three years. Now, if this period of three years is over,

13:37 they can withdraw their money or even renew their deposit, their deposit with the bank. Now,

13:44 the customer will be issued with a deposit account passbook. Fixed deposit is withdrawable at an

13:50 agreed time. It is withdrawable at an agreed time. Now, let's look at the features of a deposit account.

13:58 Now, money is deposited for a specific period of time, one year, two years. It is usually not short.

14:04 It attracts higher interest rates on other like these savings accounts. Then, a notice of seven days

14:11 must be given before any form of withdrawal is made from deposit accounts. Now, let's take a look at

14:17 checks. Now, this is an example. This is a pictorial example of what a check looks like.

14:24 Now, taking a look at the definition, a bill of exchange acts defines a check as a bill drawn on a

14:32 bank or payable on demand. Now, a check is an order written by the draw to a bank to pay on demand,

14:39 a specified sum of money to the person named as payee on the check. Now, to complete a check,

14:46 the draw writes the name of the payee. The amount used to be paid in words and figures, date and

14:52 his signature. Now, let's take a look at the characteristics of a check. Now, a check is an order to pay,

14:58 that is, another to pay the payee. Then, it is an unconditional order. Then, the amount must be

15:05 specified. The amount to be paid to the payee must be specified on a check. Then, it must be written

15:12 and not or out. That is, you cannot verbally pass out information, pass out information as regards

15:18 a check that, okay, pays the person in check. It must be in writing the order for paying someone

15:25 through a check, must be in writing. Then, the account number of the draw is stated on the check.

15:31 The name and branch of the bank appears on the check. It is addressed by one person to another.

15:38 Then, the name of the payee must be shown on the check and amounts must be clearly written

15:43 in words and figures. Now, to validate all these points, that's the point of the characteristics of

15:50 the check. Let's go back to the picture of the diagram of the check we had earlier. Now,

15:56 this is the name of the bank. This is the address of the bank. Now, the date is specified also on the

16:02 check. The amount to be paid was written in figures. They have it there, 10,000 error and those

16:08 written in words as well. Then, we have the signature of the draw of the check, that is, the person who

16:15 is issuing out of the check to the payee. Then, this is the payee's name. This is the payee's name.

16:22 The payee written on the check is stated on the check. Then, the bank's name is also written

16:27 on the check. The date and signature is written on the check. Now, let's take a look at the advantages

16:34 of payments by check. It is convenience. It is more convenience currently checked around other

16:39 than bulky cash. So, people don't really take huge amounts of cash around with them and take a

16:47 take, for example, now, when a trade-on wants to pay is applied at the sum of 2 million error and

16:54 that is quite some amount of money to taking around. So, instead of paying out cash to the supplier,

17:01 a check can be written and given to the supplier to cash out from the bank. Then, we have it's the

17:06 safe means of payments. That is, a check is the safe means of making payments, especially when

17:10 for record purposes. The draw can use the counter for keeping proper record of payments and receive

17:16 when I say the counter for that. This duplicates copy of the check. Now, let's discuss the

17:21 parts to check. We have the draw, we have the draw, and we have the payee. Now, the draw is the

17:26 person responsible for drawing up a check. He is the owner of the account on which the check is

17:31 drawn. He is the person who writes the who issues out the check to someone for payment, for

17:39 as a payment other. So, he is the owner of the account on which this check is drawn, on which the

17:44 money is going to be withdrawn from. Then, we have the drawee. Now, the drawee is the bank on which

17:49 the check is drawn. That is, the bank where the check will be presented for cash. Now, we have the

17:55 payee. Now, this is the person to whom the check is payable. Now, taking by the example on the

18:00 board, Mr. Atte writes a check to Mr. Uchena to be drawn from Oceanic bank. Now, in this example, Mr.

18:09 Atte is the draw of the check. He is the one who wrote a check. Mr. Uchena is the payee. He is the

18:14 person whom the cash withdrawn from the bank is to be paid to. He is the payee. In this example,

18:21 then, Oceanic bank is the drawee of, is the drawee of this check. Taking it again, Mr. Atte writes a

18:30 check to Mr. Uchena. Mr. Atte is the drawer. Oceanic bank is the drawee and Mr. Uchena to whom the

18:36 cash is to be paid to is the payee. Now, let's take a look at the types of check. We have the other

18:43 check. Our check is called an other check when the bearer written on the check is cancelled or marked.

18:49 Now, this check can be cast by the person whose name is mentioned on the check. In a few circumstances,

18:56 the check can be cast out by some other person or endorsed payee if the if or order is mentioned

19:03 alongside the name of the payee. That is this word or order must be mentioned alongside the name

19:11 of the payee for it to be cast to some other person. Then, we have the bearer check. The bearer

19:17 check, this check is called the bearer check when the bearer written on the right side of the check

19:23 is not cancelled or marked. The 10 bearer mentioned on the check means that the one that the one

19:29 whoever is in possession of the check can withdraw it. Therefore, these types of checks are risky

19:36 in nature. That is, it's irregardless of the name written on the check. The person who presents the

19:41 check can cash out this check. So, it is very risky in nature such that if the original bearer of

19:47 the check meets places this check, if someone a stranger can just pick it up and easily cash it

19:53 out from the bank. If a bearer check is lost, yes, like we just said, if a bearer check is lost,

19:59 it can be cashed out by the person who finds it. Therefore, it is the same as cash in nature

20:04 and it is advised to be handled carefully. Of course, bank don't verify the identity of the person

20:10 caching out the check. There is no need to mention the name of the bearer check or pay to the other

20:16 of cash can be written at the place of the bearer's name. Now, we have the cross check. A check is called

20:25 cross check when two parallel lines are drawn on the top left corner or top right corner of the check.

20:32 Additional words like and code or accounts payee or not negotiable can also be mentioned

20:38 along with the two parallel lines. Now, this check cannot be encached on the bank's counter. It can

20:44 only be deposited into the bank account of the payee. That is this kind of cash, this kind of check

20:51 sorry, this cross check cannot be presented for cash. The instead the amount of name named on the check

20:58 can only be transferred to the bank account of the payee. That is the best thing coming to cash the

21:04 check. Now, therefore, these types of check are considered the safest types of check. A payee must

21:10 have a bank account to encache the cross check and is advisable to write the same name as the payee

21:16 on as the payee has on these or a bank's passbook. In case of wrong spellings or unreadable writing,

21:23 the check will not be accepted by the bank. That is the name of the payee written on the check

21:30 on the cross check must be the same as his bank name. There we have the open check. A check is called

21:38 an open check when the check is not crossed by drawing to parallel lines or needs. It's more like the

21:43 opposite of a cross check. Now, cash can be obtained on the bank's counter by using this type of check

21:48 and this type of check can be a bearer or order check. Now, we have come to the end of this lesson.

21:56 But before we go, I would like you and the sheet of people who are with someone discuss the following

22:00 question. Now, state and explain five functions of the commercial bank. We had earlier listed them

22:06 that they accept the deposit, they accept cash deposits, they give loans to their customers and

22:10 so on. Then also list the advantages and disadvantages of commercial banks. Then list and explain

22:17 the types of banks account, bank accounts. Thank you for watching my name is Miss Lydia till next time.