How a Commercial Bank Functions

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Commercial banks are most common banks that an average individual visits or uses every day. These banks constitutes of larger part of banking sector. There is a lot of commercial bank of different types like Private Bank, Public Bank, Cooperative bank or others. These bank functions a little differently than that of other banks. In this article, we will briefly discuss about the different functions of the Commercial Bank and the services offered by them.

Primary Function

The primary function is the main function of the bank and it contains two main process that is as follows-

Accepting Deposit
Lending

Accept Deposit

Accept Deposit is very important for the bank as it is how bank includes the money in to the banking system. More money is in the system, the more lending the bank can do and more interest the bank can earn. The cash flow in the banking system is necessary as it is how a country grows economically. Commercial bank offers different accounts to save the money of the individual by providing the following account

Savings Account

Savings Account is the account used to save money with full liquidation and no restriction are implemented of any sort. Some banks can set up the withdrawal limit, or limit of banking transaction for a day but overall there is still a lot of liquidation available for the customer also, the customer earns an interest on the savings bank account. Generally, savings bank account provides Missed Call Balance Inquiry number facility, Debit Card, Net Banking, and Mobile Banking and other core banking operations services like fund transfer etc.

Time Deposit

Time deposit is the full savings account and is time bounded. Until the savings scheme attains the pre defined time limit the amount is not liquidated and the account holder cannot withdraw the money. The interest rates are high in this type of account.

Fixed Deposit

Fixed Deposit is similar to the Time Deposit difference being on the liquidation. You can with draw the FD whenever you want and he interest is also paid which is higher than the Savings Account.

Lending

Lending money to the needy individual or business is important for the bank as it is the main income source for the bank. The following are the tools provided by the banks to their customer as a lending banking tool.

Credit Card

Credit Card are the card that offers the card holder money as a loan for a short term. If the card holder withdraws the money and return it within the month then the card holder need not required to pay any interest. Usually the best use of credit card is to use it as a EMI option for the product you require. The interest rate of the credit card is very high and has to be used cautiously.

Loan

Loan can be of any type like business loan, car loan, home loan etc. it is provided to buy anything that requires huge upfront money, average person cannot present the upfront money so banks lend that money and the loan taker will pay the EMI as per the document mentions