What are the methods adopted by commercial banks to mobilise funds from the public? Will it be loans and advances: cash credit, overdraft facility etc?????
Answers
Yes that it the correct answer. Commercial banks can mobilise savings in many ways and this one of the numerous ways. Acceptance of deposits is equally accepted but loans and advances is not wrong!
A commercial bank is a financial institution that fulfills the functions of accepting deposits from the general public and providing investment loans for profit.
A commercial bank's two most distinguishing features are borrowing and lending, i.e. accepting deposits and lending money to interest (profit) projects. In short, to lend, banks borrow.
The interest rate offered to depositors by the banks is called the borrowing rate, while the lending rate is called the rate at which banks lend.
An eligible borrower is first sanctioned with a credit limit and a certain amount can be withdrawn on a given security within that limit. The withdrawal power depends on the current assets of the borrower, whose stock statement he submits to the bank as the security basis. The bank charges interest on the part of credit (loan) drawn or used.