Functions of commarcial banks

Commercial banks are the most important components of the whole banking system.

Functions of commarcial banks

The commercial banks serve as the king pin of the financial system of the country. They render many valuable services.

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The important functions of the Commercial banks can be explained with the help of the following chart. Primary Functions The primary functions of the commercial banks include the following: Acceptance of Deposits 1.

These are deposits repayable after a certain fixed period. These deposits are not withdrawn able by cheque, draft or by other means. It includes the following. The Functions of commarcial banks can be withdrawn only after expiry of certain period say 3 years, 5 years or 10 years. The banker allows a higher rate of interest depending upon the amount and period of time.

Previously the rates of interest payable on fixed deposits were determined by Reserve Bank.

Functions of Commarcial Banks Essay Sample

However, banks are not permitted to offer different interest rates to different customers for deposits of same maturity period, except in the case of deposits of Rs. These days the banks accept deposits even for 15 days or one month etc. In times of urgent need for money, the bank allows premature closure of fixed deposits by paying interest at reduced rate.

The Fixed Deposit Receipt cannot be transferred to other persons. After a certain period, say 1 year or 3 years or 5 years, the accumulated amount along with interest is paid to the customer.

Functions of commarcial banks

It is very helpful to the middle and poor sections of the people. This deposit system is a useful mechanism for regular savers of money. Cash certificates are issued to the public for a longer period of time. It attracts the people because its maturity value is in multiples of the sum invested.

It is an attractive and high yielding investment for those who can keep the funds for a long time. It is a very useful account for meeting future financial requirements at the occasion of marriage, education of children etc.

Cash certificates are generally issued at discount to face value. It means a cash certificate of Rs.

It includes the following: The savings deposit promotes thrift among people. The savings deposits can only be held by individuals and non-profit institutions. The rate of interest paid on savings deposits is lower than that of time deposits.

But there are some restrictions on withdrawals. Corporate bodies and business firms are not allowed to open SB Accounts. Co-operative banks are allowed to pay an extra 0. These accounts are maintained by the people who need to have a liquid balance.Commercial bank can also refer to a bank, or a division of a large bank, which more specifically deals with deposit and loan services provided to corporations or large/middle-sized business - as opposed to individual members of the public/small business.

Commercial bank - Wikipedia

known as a "credit creation from commercial banks". Primary functions. Commercial banks. ADVERTISEMENTS: Commercial banks are the most important components of the whole banking system. A commercial bank is a profit-based financial institution that grants loans, accepts deposits, and offers other financial services, such as overdraft facilities and electronic transfer of funds.

7 Main Functions of a Commercial Bank

According to Culbertson, “Commercial Banks are the institutions that make short make short term bans [ ]. Central banking functions have evolved gradually over decades. Their evolution has been guided by ever-changing need to find new methods of regulating, guiding . The commercial banks serve as the king pin of the financial system of the country.

They render many valuable services. The important functions of the Commercial banks can be explained with the help of the following chart.

The deposits can be withdrawn only after expiry of certain period say 3 years. Functions of Commercial Banks. The functions of commercial banks are explained below: Primary functions. Collection of deposits; Making loans and advances; Collection of deposits: The primary function of commercial banks is to collect deposits from the public.

Such deposits are of three main types: current, saving and fixed. Commercial banks mark significant importance in the economic development of a country as well as serving the financial requirements of the general public. Functions of Commercial Banks: Commercial banks are institutions that conduct business for profit motive by accepting public deposits for various investment purposes.

7 Main Functions of a Commercial Bank