Answer :

Commercial banks make up a significant role for the source of credit. The banks accept deposit from the households who have excess money advance loans to the households who are in need of it. It is one of the easiest ways of getting a loan for the households.


Functions of commercial banks


Accepting deposit


The commercial bank accepts various types of deposits from the public, especially from its clients. It includes saving account deposits, recurring account deposits, fixed deposits, etc. These deposits are payable after a certain time period. There are different types of deposits that are accepted by the commercial banks; they are namely: savings deposit, current account deposit, permanent deposit.


Savings deposit is the deposit accepted by the commercial banks for inculcating the savings habit among the individuals. They provide interest rate against the deposit, but the interest rate will be lower compared to permanent account deposit.


Current account deposit is the deposit advanced to the people who withdraw the deposit frequently for the business purposes. The interest rate for this deposit is lower than the savings deposit.


Permanent deposit is also known as fixed deposit. The deposit which is deposited in a bank cannot be withdrawn by the account holder frequently without passage of fixed time period. The interest rate is very much higher and cannot be withdrawn within the maturity date.


Advancing loan


They advance loan to the people who are in need of the money. The commercial banks provide loans and advances of various forms. It includes an overdraft facility, cash credit, bill discounting, etc. They also give demand and demand and term loans to all types of clients against proper security. This is the most important function because this is the function which channelizes the fund into very much ideal way. This contributes to the capital formation in the society.


Other functions


Credit creation is the other function which is carried in by the commercial banks. One of the main functions of the commercial bank is credit creation. It is the banks that create credit for the producers to invest in the economy. The banks make the credit available by accepting the deposit from the people. The investment of the investors makes the economy better off and investment is made available by the bank.


Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Related Videos
Heights and Distances-IHeights and Distances-IHeights and Distances-I45 mins
Sphere and HemisphereSphere and HemisphereSphere and Hemisphere16 mins
Resources and Development RevisionResources and Development RevisionResources and Development Revision28 mins
Cube and CuboidCube and CuboidCube and Cuboid41 mins
History - Concept and QuestionsHistory - Concept and QuestionsHistory - Concept and Questions57 mins
Corrosion: Types, Pros and ConsCorrosion: Types, Pros and ConsCorrosion: Types, Pros and Cons41 mins
Right Circular Cone And FrustumRight Circular Cone And FrustumRight Circular Cone And Frustum43 mins
Right Circular CylinderRight Circular CylinderRight Circular Cylinder45 mins
Revision on Substitution and  Elimination MethodRevision on Substitution and  Elimination MethodRevision on Substitution and Elimination Method44 mins
Area Related to Circles- Important Formula and ConceptsArea Related to Circles- Important Formula and ConceptsArea Related to Circles- Important Formula and Concepts59 mins
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
caricature
view all courses
RELATED QUESTIONS :

Explain the diffeRajasthan Board Social Science

What are self- heRajasthan Board Social Science

Extend the functiRajasthan Board Social Science

Write an article Rajasthan Board Social Science

What is the role Rajasthan Board Social Science

Explain the moneyRajasthan Board Social Science

Explain the main Rajasthan Board Social Science

Who is the countrRajasthan Board Social Science

Who is the financRajasthan Board Social Science

Which notes are mRajasthan Board Social Science