Profit Maximization
The primary objective of commercial banks is Profit Maximization which is attained by offering a wide variety of services to individual and business customers. Commercial banks hold an important position in the economic development of the company.
What are the modern functions of commercial bank?
The most important functions of commercial banks are discussed below:
- Accepting deposits: The most significant and traditional function of commercial bank is accepting deposits from the public.
- Providing loans:
- Credit Creation:
- Transfer of funds:
- Agency functions:
- Other functions:
Which is the primary function of a commercial bank?
The primary function of a commercial bank is to accept deposits from customers and provide line of credits to prospective borrowers. However, there are several other functions that a commercial bank can undertake. These include – Credit creation. Investment of funds.
How are deposits created in a commercial bank?
These deposits may be created in two ways, such as by direct deposits, when a customer deposits their money in the bank by opening a bank account such as current account, fixed account or saving account and secondly by indirect or derivative deposits, which is credited by giving loans to their customers.
What are the different types of commercial banks?
There are three different types of commercial banks. Private bank –: It is a type of commercial banks where private individuals and businesses own a majority of the share capital. All private banks are recorded as companies with limited liability.
How does a commercial bank help foreign trade?
Financing Foreign Trade: A commercial bank helps in foreign trade by financing his customers and by accepting foreign bills of exchange. The bank encourages the documents like D/A (Documents against acceptance) and D/P (Documents against payments) in foreign payments.
