Commercial Banks Essay

3505 WordsOct 8, 201315 Pages
commercial bank is a type of bank that provides services, such as accepting deposits, giving business loans and basic investment products. Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to individual members of the public (retail banking). * In the most basic terms, commercial banks take deposits from individual and institutional customers, which they then use to extend credit to other customers. They make money by earning more in interest from borrowers than they pay in interest to those whose deposits they accept. They're different from investment banks and brokerages in that those kinds of institutions focus on underwriting, selling, and trading corporate and municipal securities. Most of us maintain checking accounts at commercial banks and use their ATMs. The money we deposit in our neighborhood bank branch or credit union supports economic activity through business loans, mortgages, auto loans, and home repair loans. Banks also provide loans in the form of credit card charges, and render local services including safe deposit, notary, and merchant banking. The bank branch or credit union office remains the cornerstone of Main Street economic life. FUNCTIONS Commercial banks perform many functions. They satisfy the financial needs of the sectors such as agriculture, industry, trade, communication, so they play very significant role in a process of economic social needs. The functions performed by banks, since recently, are becoming customer-centred and are widening their functions. Generally, the functions of commercial banks are divided into two categories: primary functions and the secondary functions. The following chart simplifies the functions of commercial banks. Commercial banks perform various primary functions, some of them are

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