Functions of commarcial banks

functions of commercial banks pdf

The banks make loans to the customers in the form of term loans, cash credit, overdraft and discounting of bills of exchange. Functions of Commercial Banks: Commercial banks are institutions that conduct business for profit motive by accepting public deposits for various investment purposes.

There are various products offered by the bank to the customers for the deposit of their money, which includes savings account, current account, fixed deposit and recurring deposit.

modern functions of commercial banks

Banks pay higher interest on rime deposits. This is, in fact, the main source of income of the bank. When the bill matures the bank gets payment from the banker.

functions of commercial banks in india

In other words, depositors of current account make arrangement with the banks that in case a cheque has been drawn by them which are not covered by the deposit, then the bank should grant overdraft and honour the cheque.

According to the Indian Banking Company Act"A banking company means any company which transacts the business of banking. Smaller the LRR, larger would be the size of money multiplier credited to his account.

Five function of commercial bank

Promoting Cheque System: Banks also render a very useful medium of exchange in the form of cheques. That means they play very significant role in a process of economic social needs. Payment of insurance premium and subscriptions. Undertake to pay insurance premium 2. The quantitative outcome is called money multiplier. Post: Gaurav Akrani. A person can deposit a fixed amount say Rs. Agency Functions : Various agency functions of commercial banks are To collect and clear cheque, dividends and interest warrant. Adds extra burden on the borrower, who needs to incur cost in preparing legal documents for procuring loans d. To purchase and sell securities. Affects the goodwill of the organization, in case of delay in payment Cash Credit: Cash credit can be defined as an arrangement made by the bank for the clients to withdraw cash exceeding their account limit. If the bank succeeds in creating credit of, say, Rs 15,, it means that the bank has created credit 15 times of the primary deposit of Rs 1, These deposits are returned whenever the customer demands it or after a certain time period.
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Top 6 Functions of Commercial Banks