Explain the various functions of commercial banks
Answers
Answer:
A commercial bank is a bank that makes short term loans using money from current or checking accounts. Functions of commercial bank are :
PRIMARY FUNCTIONS-
1. Accepting deposits : Commercial banks accepts various types of deposits from public like saving deposit account, recurring deposit account and fixed deposit account, the deposits are payable after certain period.
2. Making Advances : Commercial banks provide loans and advances like overdraft facility, bill discounting etc. These are provided against the proper security.
3. Credit creation : It is the most important function of commercial banks, when a bank provides loan to customer it does not provide cash but instead it opens deposit account where the borrower can withdraw, while sanctioning loans bank automatically creates deposit. This is also known as credit creation from commercial banks.SECONDARY FUNCTIONS-
1. Agency functions: To make payment of rent,insurance premium,to deal in foreign exchange transactions, to purchase and sell securities,to accept tax proceeds and tax returns, to collect dividend and interest.
2.General Utility functions: To provide safety locker facility to customers, provide money transfer facility, issue travellers cheque,provide debit cards and credit cards and provide merchant banking facility.
Explanation:
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Answer:
The primary functions of a commercial bank are accepting deposits and also lending funds. Deposits are savings, current, or time deposits. Also, a commercial bank lends funds to its customers in the form of loans and advances, cash credit, overdraft and discounting of bills, etc.
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