Question

Answer the following question.
What are the primary functions of commercial banks?

Answer 1

The commercial banks has following two primary functions:

1. Accepting deposits: Commercial banks accept deposits from people, businesses, and other entities in the form of deposits which they have that includes saving deposit, current deposit, recurring deposit and fixed deposit where they provide different rate of interest on such deposits depending upon the nature of the deposit.

2. Lending credits: The other function performed by commercial bank is to lend funds to customers in the form of loans and advances, cash credit, overdraft etc. with or without collateral at an agreed rate of interest for the purpose of consumption and investment.