A commercial bank is a type of financial organisation that handles all transactions involving the deposit and withdrawal of money for the public, as well as the provision of loans for investment purposes and other similar activities.
1. Accept Deposits: Deposits are accepted at the bank in the form of savings, current, and fixed deposits. Surplus funds received from businesses and people are lent to meet the short-term needs of commercial operations.
2. Credit cash: When a customer receives credit or a loan, they do not receive liquid cash. The customer's bank account is opened first, and then the funds are sent to the account. The bank is able to manufacture money through this technique.
3. Provides loan and advances: Another important duty of this bank is to provide loans and advances to entrepreneurs and business persons, as well as collect interest. It is the most important source of earnings for any bank.
4. Overdraft facility: This is a loan offered to a customer in exchange for keeping their current account open and allowing them to overdraw up to a certain limit.
5. Discounting bills of exchange: A discount bill of exchange is a written agreement that acknowledges the sum of money to be paid for products acquired at a future date. A commercial bank's discounting strategy can also be used to clear the payment before the quoted period.
6. Locker facilities: Customers can use a bank's locker facilities to store their valuables or papers discreetly. This service is charged at least once a year by the banks.
7. Purchasing and selling securities: The bank provides you with the option of buying and selling securities.