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Distributing banknotes and coins 

Most people do not realize that banks do the job of distributing banknotes 

and coins around the country. The need for this job  is particularly apparent 

during the summer period. At this time of year, holidaymakers from the big 

cities go to the coast with their pockets bulging with notes and coins to spend. 

Eventually, this cash finds its way into the tills of shops, pubs and hotels and is 

then banked. The local banks find that they have too much for their immediate 

needs, so they load it into security vans and take it back to the cities. There it is 

ready to be reissued to the next train load of holidaymakers. 

 

Lending 

Commercial banks have another important function: they lend money 

to private individuals and to firms. A bank manager might refer to this as 

lending to the private and the corporate sector. For short-term loans, the 

banks may arrange for its customers to have an overdraft on their current 

account. For big businesses an overdraft could be for several millions of 

pounds for private individuals it might be for only a few pounds. With an 

overdraft the customer can write cheques for more than is in his or her 

current account - up to a limit of course! The advantage of having a loan 

in the form of an overdraft is that the bank will charge interest on the 

actual sum overdrawn on a day-to-day basis. In the case of an ordinary 

loan, the bank will charge interest on the full amount of the money, 

regardless of whether it is spent or not. This is why borrowing money can 

work out cheaper if it is arranged as an overdraft.