What is a commercial bank? - Study24x7
Social learning Network
Edubabble LLP
22 Jul 2022 10:31 AM study24x7 study24x7

What is a commercial bank?

Banking
Like Comment | 1 Share
study24x7
Write a comment
  • Dev kumar

    • An organization that provides checking and savings account services, makes loans, and takes deposits is known as a commercial bank. It is a financial entity that accepts public deposits and disburses loans for profit-making investments and consumption.
    A commercial bank is a type of financial organization that handles all transactions involving public money deposits and withdrawals, lending money for investments, and other similar activities. These banks are for-profit organizations that operate solely for financial gain. Lending and borrowing are a commercial bank's two main qualities. The bank accepts deposits and disburses funds to various initiatives so that interest can be earned (profit). The borrowing rate is the interest rate that a bank charges its depositors, whereas the lending rate is the interest rate at which a bank extends credit.
    Types of Commercial Banks:
    There are three different types of commercial banks.
    Private bank –: It is a category of commercial banks where the majority of the share capital is owned by private individuals and companies. All private banks are listed as limited liability firms. Examples of such banks include Industrial Credit and Investment Corporation of India (ICICI) Bank, Yes Bank, and Housing Development Finance Corporation (HDFC) Bank.
    Public bank –: It is a particular class of nationalised bank in which the government has a sizable ownership interest. For instance, Bank of Baroda, Punjab National Bank, Dena Bank, Corporation Bank, and State Bank of India (SBI).
    Foreign bank –: These banks were founded in other nations and have branches there as well. Examples of such banks are American Express Bank, Citibank, Standard & Chartered Bank, and Hong Kong and Shanghai Banking Corporation (HSBC).
    Function of Commercial Bank:
    The functions of commercial banks are classified into two main divisions.
    (a) Primary functions
    Accepts deposit: Savings, current, and fixed deposits are all forms of deposits accepted by the bank. The corporate and individual surplus balances are lent money to cover the short-term needs of business transactions.
    Provides loan and advances: This bank's ability to provide loans and advances to business owners and entrepreneurs while also collecting interest is a crucial function. It is the main source of revenue for every bank. In this method, a bank offers (lends) the remaining deposits to the borrowers in the form of demand loans, overdrafts, cash credits, short-term loans, and other similar loans while keeping a tiny portion of the deposits as a reserve. Credit cash: Customers are not given liquid cash when they are given credit or a loan. The customer's bank account is opened first, and then the funds are transferred to it. The bank is able to produce money through this technique.
    (b) Secondary functions
    Discounting bills of exchange: It is a written agreement that acknowledges the sum of money to be paid in exchange for the products that were acquired at a specific future point in time. Through a commercial bank's discounting approach, the cash may also be paid out earlier than the stated time.
    Overdraft facility: It is an advance given to a customer by keeping the current account to overdraw up to the given limit.
    Purchasing and selling of the securities: The bank offers you with the facility of selling and buying the securities.
    Locker facilities: A bank provides locker facilities to the customers to keep their valuables or documents safely. The banks charge a minimum of an annual fee for this service.
    Paying and gathering the credit: It uses different instruments like a promissory note, cheques, and a bill of exchange.

    See more

    Like
    Reply 26 Jul 2022 11:35 AM
    Related Questions
    500+   more Questions to answer

    Popular Courses

    Reasoning Special by Parwez Sir for... All Levels हिन्दी By Reasoning special by Parwez Alam
    Average and Alligation for Bank PO ... All Levels हिन्दी By logicalangle
    English Special Course for SSC CGL,... All Levels English By Topline Coaching 999 1,499 33% off
    BANKING AWARENESS PREMIUM COURSE All Levels English By RAU IAS COACHING 499 799 38% off
    Free Full Paid English Grammar All Levels English By Uphaar Classes - By Sumit Sir (YouT...
    Ratio,Proportion and Partnerships f... All Levels हिन्दी By logicalangle
    Featured Courses
    Popular Pages

    Featured Courses

    BESTSELLER
    Reasoning Special by Parwez Sir for all Government... All Levels हिन्दी By Reasoning special by Parwez Alam
    FREE
    5.0
    IBPS PO (PRE) English Special by Pooja Mam All Levels English By Topline Coaching
    FREE
    5.0
    BANKING AWARENESS PREMIUM COURSE All Levels English By RAU IAS COACHING 499 5.0
    Government Jobs Exam Syllabus All Levels English By GOVERNMENT JOB NOTIFICATION
    FREE
    5.0

    Popular Pages

    SAT (Scholastic Assessment Test)

    18 followers

    Reasoning special by Parwez Alam

    148 followers

    Study24x7

    1225 followers

    Henry Harvin

    60 followers

    CBSE Study Materials

    86 followers

    Get the App

    Download the Study24x7 App, so you can connect and collaborate.

    study24x7
    study24x7
    Most Related Articles