Which of the following is not a function of a commercial bank?

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• Macroeconomics • Financial Sector • Commercial Banks Commercial Banks Is your local bank a commercial bank? Most probably, yes. Commercial banks are one of the most important financial institutions in an economy. What are the functions of commercial banks? What benefits do commercial banks offer? And can you recognize examples of commercial banks in the financial landscape around you? As you turn the pages of this article, you'll find the… Commercial Banks • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Is your local bank a commercial bank? Most probably, yes. Commercial banks are one of the most important financial institutions in an economy. What are the functions of commercial banks? What benefits do commercial banks offer? And can you recognize examples of commercial banks in the financial landscape around you? As you turn the pages of this article, you'll find the answers to these questions and much more. So, students, fasten your mental ...

Commercial banks are the most important components of the whole banking system. A commercial bank is a profit-based financial institution that grants loans, accepts deposits, and offers other financial services, such as overdraft facilities and electronic transfer of funds. According to Culbertson, “Commercial Banks are the institutions that make short make short term bans to business and in the process create money.” In other words, commercial banks are financial institutions that accept demand deposits from the general public, transfer funds from the bank to another, and earn profit. ADVERTISEMENTS: Commercial banks play a significant role in fulfilling the short-term and medium- term financial requirements of industries. They do not provide, long-term credit, so that liquidity of assets should be maintained. The funds of commercial banks belong to the general public and are withdrawn at a short notice; therefore, commercial banks prefers to provide credit for a short period of time backed by tangible and easily marketable securities. Commercial banks, while providing loans to businesses, consider various factors, such as nature and size of business, financial status and profitability of the business, and its ability to repay loans. Commercial banks are of three types, which are as follows: (a) Public Sector Banks: Refer to a type of commercial banks that are nationalized by the government of a country. In public sector banks, the major stake is held by the government. I...

More • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Credit Creation by Commercial Bank The process of credit creation is considered one of the most important functions performed by a commercial bank. Â The central bank of a country is responsible for ensuring the supply of money in the economy by circulating the currency. It also ensures that for fulfilling all the transactions, there should be appropriate currency in the system. This process cannot be implemented by the central bank alone. For this, they require the help of commercial banks and their reserves. Commercial banks perform the function of credit creation in an economy. Therefore, the money that is created by commercial banks is known as credit money. This is achieved by the commercial banks in the form of purchasing securities and providing loans. The commerci...

ADVERTISEMENTS: 1. Such deposits are generally maintained by businessmen with the intention of making transactions with such deposits. 2. They can be drawn upon by a cheque without any restriction. 3. Banks do not pay any interest on these accounts. Rather, banks impose service charges for running these accounts. (ii) Fixed Deposits or Time Deposits: ADVERTISEMENTS: Fixed deposits refer to those deposits, in which the amount is deposited with the bank for a fixed period of time. 1. Such deposits do not enjoy cheque-able facility. 2. These deposits carry a high rate of interest. Basis Demand Deposits Fixed Deposits Cheque facility They are chequeable deposits. They are non-chequeable deposits. Interest payments They do not carry any interest. They carry interest which varies directly with the period of time. Number of transactions The depositor can make any number of transactions for deposit or with drawl of money. Depositor generally makes only two transactions: (i) Deposit of Money in the beginning; ADVERTISEMENTS: 1. The depositors are given cheque facility to withdraw money from their account. But, some restrictions are imposed on number and amount of withdrawals, in order to discourage frequent use of saving deposits. 2.They carry a rate of interest which is less than interest rate on fixed deposits. It must be noted that Current Account deposits and saving deposits are chequable deposits, whereas, fixed deposit is a non-chequable deposit. 2. Advancing of Loans: The de...

In our routine life, we must have visited banks. These banks help us in many Commercial banks have a lot of other functions to do than what is mentioned above. What are those functions? What will happen if the commercial banks cease to perform all the banking activities? Are there any other types of banks that might help the masses? All these questions will be addressed in our discussion that is based on the functions of Commercial Banks. What are Commercial Banks? (Image will be uploaded soon) Before diving straight into the topic of functions of commercial banks, first, it is obligatory to know what are Commercial Banks. A commercial bank is a typical financial institution that accepts as well as deposits from the general public and also, they give loans for the purposes of consumption activities and investment activities, to make their own profit. Commercial banks are profit-based institutions that offer financial services like loans, as well as services like deposits, electronic transfers of funds, etc. to their customers. Commercial banks have a significant role in a country’s economy as these organizations fulfill the short and mid-term financial requirements of industries. The functions of commercial banks are primarily based on a business model of accepting public deposits and utilizing that fund for various investment purposes. Such functions can be classified into two categories, primary and secondary functions. These functions will be discussed in our upcoming s...