Home > Posts > Economics > Primary Functions of Commercial Banks

Primary Functions of Commercial Banks

Can you imagine a world without banks?! sure not where will we put our money or take loans but any way commercial banks have more functions you may not hear of it and in this article I will tell you in detail about the Primary Functions of Commercial Banks.

What is a commercial bank

A commercial bank is a place that collects small amounts of small savings of the people in exchange for interest and provides loans to the other party for interest.

Types of commercial banks 

-Public sector banks 

This type of banks is nationalized by the government of a country. In public sector banks, the major stake is held by the government. 

-Private Sector Banks

These banks are registered as companies with limited liability.

-Foreign Banks

This type Refers to commercial banks that are headquartered in a foreign country but operate branches in different countries like CIB bank and HSBC bank. Commercial banks mark significant importance in the economic development of a country as well as serving the financial requirements of the general public.

Primary Functions of Commercial Banks

-Accepting deposits

The most important function of commercial banks is the deposit function which means that the People who have surplus income and savings find it convenient to deposit the amounts with banks. Depending upon the nature of deposits, funds deposited with bank also earn interest.

-Grant of loans and advances

The second important function of a commercial bank is to grant loans and advances. Such loans and advances are given to members of the public and to the business community at a higher rate of interest than allowed by banks on various deposit accounts.

-Time Deposits

this function refers to deposits that are for a certain period of time. Banks pay higher interest on time deposits.m because these deposits can be withdrawn only after a specific time period is completed by providing written notice to the bank.