Functions of Commercial Banks

Functions of Commercial Banks

1.    Accept Deposit from Public

Function of commercial bank include acceptance of deposit from the general public. Deposit can be classified into three types i.e. Current Deposit, Saving Deposit and Fixed Deposits.

2.    Loan to Public, Business and Government

Function of commercial bank also includes provision of loan and advances to the public and business community. Commercial bank also provides loan to the Government to meet its budget deficit (Deficit Financing). Loan can be broadly categories as individual loan, business loan, and loan to government.

3.    Facilitates Business Payment

Commercial bank also facilitates in making the business payment through cheques. Payment by bank is an effective control over payment made by the business community. Each and every payment can be traced from bank statement. Comparison of internal payment record with bank statement is an effective check on payments.

4.    Facilitate Business Receipt

Commercial bank can also receive payment on behalf of their customer; banks can receive payment by online transfer, crossed & Cheques and direct cash deposit. Business receipt on behalf of customer is effective internal control on business receipt against frauds i.e. (Employee cannot misappropriate cash).

5.    Safe Custody of Personal Assets

Commercial bank also provides locker facility to general public for safe custody of their personal assets like jeweler and property documents.

6.    Facilitate Foreign Trade

Commercial bank facilitates foreign trade by opening letter of credit and providing other services related to foreign trade including payment or funds transfer and providing bank guarantees on behalf of customer.

7.    Domestic Transfer of funds

Commercial bank facilitates immediate transfer of funds through online transfer to the different cities of the country. Online transfer has boosted the domestic trade, and national level trade has become easier.