As an agent of the Reserve Bank, the State Bank performs the following functions:
(i) It acts as the government’s bank, i.e., it collects money and makes payments on behalf of the government and manages public debt.
(ii) It acts as the bankers’ bank. It receives deposits from and gives loans to commercial banks. It also acts as the clearing house for the commercial banks, rediscounts the bills of exchange of the commercial banks and provides remittance facilities to the commercial banks.
Ordinary Banking Functions:
The State Bank of India performs all kinds of commercial banking functions:
(i) It receives deposits from the public.
(ii) It gives loans and advances against eligible securities including goods, bills of exchange, promissory notes, fully paid shares of companies, immovable property or documents of title, debentures, etc.
(iii) It invests its surplus funds in government securities, railway securities and securities of corporations and treasury bills.
The State Bank of India also performs the following other functions:
(i) It buys and sells gold and silver.
(ii) It acts as agent of cooperative banks.
(iii) It underwrites issues of stocks, shares, debentures, and other securities in which it is authorised to invest funds.
(iv) It administers, singly or jointly, estates for any purpose as executor, trustee or otherwise.
(v) It draws bills of exchange and grants letters of credit payable out of India.
(vi) It buys bills of exchange payable out of India with the approval of the Reserve Bank; it subscribes buys, acquires, holds and sells shares in the capital of banking companies.
The State Bank of India has been prohibited from doing certain businesses by the State Bank of India Act:
(i) The State Bank cannot grant loans against stocks and shares for a period more than six months.
(ii) It can purchase no immovable property other than its own offices.
(iii) It can neither rediscount nor offer loans against the security of exchange bills whose maturity period exceeds six months.
(iv) It cannot rediscount bills which do not carry at least two good signatures.
(v) It can neither discount bills nor grant credit to individuals or firms above the sanctioned limit.