Profitability, liquidity, safety and social welfare are the major principles which commercial banks strive to incorporate in their working. explain
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The commercial bank is the type of bank which is run by the private sector i.e; the ownership of these banks is of individuals or private firms. These banks accept deposits, give loans and provide basic investment products.
The main purpose of a commercial bank is to earn profit. It does so by the creating credit. When a bank has a amount it reserves a ratio and provide loan of the rest; it also has a set percentage of interest it gains. Hence, profitability is one of the basic aspects to the establishment of commercial banks.
Liquidity is the way to keep money easily accessible in terms of need. As the commercial bank keeps providing loans, it has to keep the money liquid as it is in constant need of money/assets for loaning.
Commercial banks do not take risks in terms of investment as their main purpose is to earn profit and create credit. They provide small and personalised loans which keeps their investment safe.
Commercial banks are established for small industries such as agricultural welfare banks or old age benefit banks. These banks provide loans on minimal interest rates which makes social welfare a part of their important aspects.
The main purpose of a commercial bank is to earn profit. It does so by the creating credit. When a bank has a amount it reserves a ratio and provide loan of the rest; it also has a set percentage of interest it gains. Hence, profitability is one of the basic aspects to the establishment of commercial banks.
Liquidity is the way to keep money easily accessible in terms of need. As the commercial bank keeps providing loans, it has to keep the money liquid as it is in constant need of money/assets for loaning.
Commercial banks do not take risks in terms of investment as their main purpose is to earn profit and create credit. They provide small and personalised loans which keeps their investment safe.
Commercial banks are established for small industries such as agricultural welfare banks or old age benefit banks. These banks provide loans on minimal interest rates which makes social welfare a part of their important aspects.
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Answer:
The main purpose of a commercial bank is to earn profit. It does so by the creating credit. When a bank has a amount it reserves a ratio and provide loan of the rest; it also has a set percentage of interest it gains. Hence, profitability is one of the basic aspects to the establishment of commercial banks.
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