What is commercial banks ?state the merits and de-merits
Answers
Answer:
A commercial bank is a type of bank that provides services such as accepting deposits, making business loans, and offering basic investment products that is operated as a business for profit.
Explanation:
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Commercial banks have been set up across the world to facilitate people to save or invest money and borrow money for their individual or organisational needs. In India, commercial banking is being given a thrust in the last ten years or so, as successive Governments have realised its importance as an engine of growth. The main merits of having a proper network of commercial banks are as follows:
1) The people pay a reasonable rate of interest on their borrowings than what they would pay to private financiers or moneylenders.
2) The government has several schemes under which money is easily made available to industry and the disadvantaged.
3) Savings schemes like recurring deposits and fixed deposits are available to depositors for their money to earn interest and grow in amount.
4) Surplus money with individuals can be put into savings accounts and drawn as per requirement. Money in this type of account too earns interest.
5) With the installation of ATM machines, a bank’s customers can do certain banking activities even when the bank is closed, like withdrawal and deposit of money, updating passbooks etc.
The main demerits of commercial banks are as follows:
1) Lack of bank branches or ATM machines in most of rural India.
2) Over so many years the banks have not been able to inculcate banking habit among the rural population or among the poorer section in urban India.
3) Banks have avoided lending to the rural population in a significant way.
4) Banks have not paid interest on deposits commensurate with inflation or in conformity to the standard of living.
5) Customers earn much less on bank deposits than on shares or mutual funds.
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