Question
Briefly explain the primary functions of commercial banks.

Answer

Commercial banks perform two primary functions, that of acceptance of deposits and lending of funds.
  1. Acceptance of Deposits: Bank accepts deposits from their customers. They are considered as the borrowers of money. As borrower, they pay interest on the amount deposited. These deposits are generally taken through current account, savings account and fixed deposits.
  2. Lending of Funds: Second major activity of commercial bank is to provide loans and got advances out of the money received through deposits. These advances can be made in the JOBTIBO form of overdrafts, cash credits, discounting Te lo trade bills, etc.

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