How many types of functions does a commercial bank have? (2024)

How many types of functions does a commercial bank have?

The two primary characteristics of a commercial bank are lending and borrowing. The bank receives the deposits and gives money to various projects to earn interest (profit).

Answer: The primary functions of a commercial bank are accepting deposits and also lending funds. Deposits are savings, current, or time deposits. Also, a commercial bank lends funds to its customers in the form of loans and advances, cash credit, overdraft and discounting of bills, etc.

Banking services mainly include accepting deposits, lending money, facilitating transactions, and offering various financial products like savings accounts, loans, and credit cards. Banking plays a crucial role in the economy by facilitating the flow of money and enabling economic activities.

Commercial banks have the primary functions of accepting customer deposits in the current account, savings, and fixed deposits, lending money as credit to borrowers who then pay with interest, and disbursing payments in the form of transactions and customer payments.

Functions of Commercial Banks: - Primary functions include accepting deposits, granting loans, advances, cash, credit, overdraft and discounting of bills. - Secondary functions include issuing letter of credit, undertaking safe custody of valuables, providing consumer finance, educational loans, etc.

Answer: Commercial banks also have some special features. It plays an important role in the economy of a particular country. It provides various financial services to the general public, while a central bank plays an important role in managing the economy of that particular country.

Explanation: Issuing currency is not a function of a commercial bank. The issuance of currency is the responsibility of a country's central bank, which is the monetary authority that controls the money supply and regulates the banking system.

The major categories of financial institutions are central banks, retail and commercial banks, credit unions, savings and loan associations, investment banks and companies, brokerage firms, insurance companies, and mortgage companies.

The 5 most important banking services are checking and savings accounts, loan and mortgage services, wealth management, providing Credit and Debit Cards, Overdraft services. You can read about the Types of Banks in India – Category and Functions of Banks in India in the given link.

What are the secondary functions of a commercial bank?

Commercial banks have the following functions: Accepting deposits, issuing loans, advances, cash, credit, overdraft, and bill discounting are all primary functions. Secondary functions include issuing letters of credit, safekeeping valuables, providing consumer financing, and educational loans.

Capital is supposed to protect a bank from all sorts of uninsured and unsecured risks apt to turn into losses. This is where we get to the two prin- cipal functions of capital – to absorb losses and to build and maintain con- fidence in a bank. Capital is needed to allow a bank to cover any losses with its own funds.

Central bank can be called the apex bank, which is responsible for formulating the monetary policy of an economy. Commercial banks, on the other hand, are those banks that help in the flow of money in an economy by providing deposit and credit facilities.

What Is a Commercial Bank? The term “commercial bank” refers to a financial institution that accepts deposits, offers checking account services, makes various loans, and offers basic financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses.

Under the umbrella of banking and finance, the industry has commercial banks—which are consumer facing like Bank of America—as well as central banks—the government entities that regulate the industry and manage monetary policy.

The two essential functions of banks in the economy are accepting deposits and granting advances or lending loans. Banks collect deposits from the public in the form of savings deposits, fixed deposits, current deposits, and recurring deposits. This function is important because people earn interest from some deposits.

lender of the last resort for financial stability; being a bank to the government; implementing monetary policy; regulating the financial sector.

What is the management of commercial bank?

Mostly it deals with the management of deposits, lending activities, investments, bank capital, bank liquidity and off-balance sheet activities. It also covers the use of derivatives and asset backed securities such as credit derivatives etc. to manage the market risk.

Public Account Deposit is not accepted by commercial banks.

Answer: (B)

Explanation: A commercial bank's main functions are to receive deposits and to lend money. Savings, current, and time deposits are all types of deposits. A commercial bank also provides money to its clients in the form of borrowings, cash credit, borrowings, and bill discounting, among other things.

Banking facilities to public is not the function of the Central Bank.