Commercial Bank is organized financial institution which accepts the deposits form the savior and provides them to the borrower for investment while acting an intermediary it wants to earn for itself as well as for its client.
Function of Commercial Bank
A commercial bank is certified to provide the following functions.Some function of commercial are as under:
Commercial Bank accepts the deposit from the customers because these deposits are source of income and increase his balance. Bank gives the money to the customer and earns income. Deposits are accepts in three accounts.
- Fixed Deposit A/C
Fixed deposit is those deposits which are repayable only after a specified period. The longer the period of deposit the higher rate of interest.
- Current A/C
The money deposited in the current account can be with drawn at any time by the depositors. The banks normally do not pay interest on this account.
- Saving A/C
Saving account is generally popular with middle income group. The bank undertakes to repay the money to the depositors up to a certain limit fixed by the rules of the bank. They are draw by cheques. The saving bank account carries a lower rate of interest.
Bank provides the deposit as loan to the borrower. Loans are lent against collateral securities. Bank also grants loans against different instrument of like promissory note, bill of exchange. The bank discounts all such instrument. It also provides overdraft facility. Loans are given for short, medium and long term.
Agency Services to the Customer
Bank creates credit against deposit. It provides locker services to it clients. It provides agency utility services for its clients. Bank remit the money from one place to another place through draft. It collect and clear the cheques draw on other banks. A commercial bank also acts as agent, correspondent or representative of his customers at home and abroad. The commercial banks are now issuing credit cards which are acceptable worldwide. It acts as agents to its customers in the collection and payment of cheques, bills and promissory notes. The bank provides very useful services in the collection of dividends on interest earned on stock and share held by his customer.
General Utility Services
The banks also issue traveler’s cheque for the convenience of the travelers and charge a nominal commission.
In many countries of the world renowned commercial banks publish a monthly bulletin which contains all information relating to trade, business, and industry. The customers benefit a lot from this valuable economic and financial information.
A bank provides a useful service to his customer by acting as a referee for his credit worthiness.
A commercial bank also undertakes acceptance business in connection with bill of exchange and thus enables his customer to obtain the desired credit.
The banks have established export promotion cells. These cells provide information and guidance to the exporter at no extra cost.