Question

Describe the functions performed by a commercial bank.

Answer 1

Answer:

Explanation:

Commercial banks plays a vital role in the entire banking system. It is the most important component of the banking industry.

A commercial bank performs different business activities for its customers which help earn profit. Some of these activities include providing overdrafts, electronic transfer, providing loans, accepting deposits etc.

Commercial bank acts as a life line for the industries and businessmen by providing both short term as well as medium- term financial assistance. They however do not go for long-term credit assistance.

General public can withdraw funds from these banks at a short period of notice as a result banks are comfortable in providing credit for a shorter time frame which is often covered  by marketable and tangible securities.These  banks also provides loans to business houses but only after considering crucial factors like size and nature of business, financial stability and business profitability and its ability to pay back the loan

Hope this helps..

Answer 2

Functions of commercial banks :-

1) Collection of Deposits - They accept deposits from their clients . The common types of deposits accepted by bank are

• Saving account deposits

• Current account deposits

• Recurring deposits

• Fixed term deposits

2) Lending of Funds - It provide loans and advances out of the money received through deposits . These advances can be made in the form of overdraft cash credit .

3) Cheque Facility - The banks collect the cheques for their customers drawn on other banks . To collect cheques banks have clearing houses .

4) Agency Functions - Bank pay insurance premium on behalf of their clients , Bank also collect divided premium , interest , pension , etc .

5) Allied Services - In addition to above functions bank also provide allied services such as bill payments , locker facilities , etc .