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Partha Assignment 22

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16 views2 pages

Partha Assignment 22

Uploaded by

ruhitnath966
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as RTF, PDF, TXT or read online on Scribd
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Commercial Bank

What is Commercial Bank?


A commercial bank is a kind of financial institution which carries all the operations related to
deposit and withdrawal of money for the general public, providing loans for investment, etc.
These banks are profit-making institutions and do business only to make a profit.
The two primary characteristics of a commercial bank are lending and borrowing. The bank
receives the deposits and gives money to various projects to earn interest (profit). The rate of
interest that a bank offers to the depositors are known as the borrowing rate, while the rate at
which banks lends the money is called the lending rate.

Functions

Function of Commercial Bank?


The functions of commercial banks are classified into two main divisions.

(a) Primary functions –

· Accepts deposit – The bank takes deposits in the form of saving, current and fixed
deposits. The surplus balances collected from the firm and individuals are lent to the temporary
required of commercial transactions.

· Provides Loan and Advances – Another critical function of this bank is to offer loans
and advances to the entrepreneurs and businesspeople and collect interest. For every bank, it is
the primary source of making profits. In this process, a bank retains a small number of deposits
as a reserve and offers (lends) the remaining amount to the borrowers in demand loans,
overdraft, cash credit and short-run loans, etc. Commercial Banks: Functions - Credit Creation -
Central Banking: Functions - Methods of Credit control
· Credit Cash- When a customer is provided with credit or loan, they are not provided with
liquid cash. First, a bank account is opened for the customer and then the money is transferred
to the account. This process allows a bank to create money.

· Discounting bills of exchange – It is a written agreement acknowledging the amount


of money to be paid against the goods purchased at a given point of time in the future. The
amount can also be cleared before the quoted time through a discounting method of a
commercial bank.

· Overdraft Facility – It is an advance given to a customer by keeping the current account


to overdraw up to the given limit.

· Purchasing and Selling of the Securities – The bank offers you with the facility of
selling and buying the securities.

· Locker Facilities – Bank provides lockers facility to the customers to keep their valuable
belonging or documents safely. Banks charge a minimum of an annual fee for this service.

· Paying and Gather the Credit – It uses different instruments like a promissory note,
cheques and bill of exchange

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