Meaning of Commercial Banks:

The bank which performs all kinds of banking business generally finance trade and commerce are called commercial banks. The functions of commercial banks are accepting deposits, advancing loans, credit creation and other agency functions.

Commercial banks are profit-oriented institutions that play a very important role in the financial system. They are operated and regulated by government authorities. Their primary objective is to provide financial services that help facilitate the flow of money within the economy.

Functions of commercial banks:

• Primary Functions
• Secondary Functions

Primary functions:-

• Accepting deposits:
• Current Account deposit: Deposit payable on demand money can be withdrawn any number of times as decided by the depositor no interest is paid on this deposit. These deposits are also called demand deposit.
• Saving account deposits: People with low income, salary earners generally open this account, control on number of withdrawal’s ,rate of interest paid on this deposits.
• Fixed deposits: Money in this account is deposited for a fixed period of time and cannot be withdrawn before the maturity of the period rate of interest paid on the deposits are quite higher.
• Recurring deposit: Money in this account is deposited in monthly installment for a period of 1 year or more. After the completion of the last installment the amount accumulated is paid to the depositor along with the interest.
• Advancing loans:
• Overdraft: It is a facility provided by bank to its accounts holder the bank allows such customers to overdraft. Their account up to contain limit, these facilities generally to business firms and companies.
• Cash credit: It is a type of loan which is given to the borrowed against the current assets such as shares, stocks, bonds etc. The bank opens the open the account in the name of the borrowed and allows him to withdraw money from time to time up to certain limit.
• Loans: It is a financial arrangement in which credit is provided by commercial bank through opening a separate account is called loan account.
• Discounting of bill of exchange: This is another type of lending by the modern banks. Discounting the bills of exchange means encashing the bills of exchange from the bank before the date of maturity.

Secondary functions:

• Agency services:
• Remittance of funds: Banks perform certain agency services banks helps the customer in transferring funds from one place to another through draft check etc.
• Collection and payment of credit instrument: Banks collect and pay various credit instruments like cheques, bills of exchange, promissory note etc.
• Buying and selling of security: Banks undertaken and selling of various securities like shares and stocks, bonds and debentures Etc. on behalf of their customers.
• Collection of dividends: On behalf of the customers Bank collects dividends on shares, interest on bonds and debentures.
• Making of payments: Commercial bank help the customer by making payments of their electric bills, insurance premium, water bills etc.
• Income tax consultancy: Banks may also employee income tax experts to give advice to its customers on income tax matters.
• Acting as trusty and executor: The bank preserve The wills of their customer and execute them after their death.
• Acts as correspondent: The bank act as correspondent and representative of their customers they obtained passport, traveler ticket, book vehicles and plots for their customers.
• General  utility services:
• Locker facility: Bank provides locker facility to keep their valuables like gold, silver, diamonds, documents etc.
• Issue of traveler’s cheques: Banks issue traveler cheques to carry money safely while travelling within a country or abroad.
• Letter of credit : letters of credit are issued by the banks to their customers regarding the credit worthiness useful in foreign trade.
• ATM facility: The bank today has automated teller machine facility easy and quick money in 24 hours a day.
• Credit cards: It means it is an instrument which can be used to purchase goods and services without paying immediate cash.

also read: explain the importance of commercial banks.