What are the Functions of Commercial Bank?

Understanding what are the functions of Commercial Bank can be tricky if we don’t fully understand what a Commercial Bank is? I say so from experience. So, I am going to first tell you what is commercial bank and its functions can then be comprehended in a better way.

A commercial bank in India is a financial institution that serves the purpose of carrying out activities related to withdrawal and deposit of money from customers, offering and sanctioning loans to them, and many more. The main motive of such banks is to make a profit and hence are also called profit-making institutions.

What are the functions of Commercial Bank?

Commercial banks have both primary and secondary functions as

1. Accepting deposits:

   Commercial banks take deposits from their customers in the form of fixed deposits, savings, or current deposits. 

2. Providing advances and loans: This is another very important function of a commercial bank. They provide loans to people, businesses, and entrepreneurs and collect interest on those loans. It is the most crucial and primary source of income or profits for commercial banks. The banks lend to the customers, keeping some amount of money as a reserve.

1. Discounting the bills of exchange: Bills of exchange are a kind of written agreement that is used to acknowledge the money that has to be paid in the future for the items purchased. This amount can be paid before the specified date through the method of discounting the bills of exchange through a commercial bank.

2. Facility of overdraft: A commercial bank, by the way of keeping current accounts to overdraw, offers an advance to its customers.

3. Securities buying and selling: Commercial banks also offer to buy and sell securities to their customers.

These are what are the five functions of commercial bank. I hope my answer could help you understand what are the functions of commercial bank clearly.