Question

Write Short Notes on the following:

Primary functions of commercial banks

Answer 1

The following are the primary functions of commercial banks:

i. Accepting deposits - Banks accept various types of deposits from the public such as savings account deposits, current account deposits and fixed account deposits and pay interest on them. They are indebted to repay the depositor the amount deposited by him or her.

ii. Granting loans and advances - Banks grant loans and advances on the basis of the total deposits available with them. These loans and advances can be in the form of overdrafts, discounted trade bills, cash or consumer credits, etc. The interests charged on these loans are a major source of profits for banks.