CBSE Class 11 Business Studies - Commercial Bank

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CBSE Class 11 Business Studies - Commercial Bank

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Q. Explain the various functions of Commercial Bank.

A. Functions of Commercial Banks are:

1. Collection of Deposits: One of the basic functions of commercial banks is that they accept deposits from their customers. Depositors can withdraw their money from their accounts in the form cash or through cheques and drafts. The banks pay interest to their customers on the deposits etc.

These deposits are generally taken through:

a) Opening saving account.

b) Opening current account.

c) Accepting recurring Deposits.

2. Granting Loan: The second basic primary function of commercial bank is granting loan. The banks grant loans. The banks lend the money which they get in the form of deposits from their customers. The funds help in the development of Trade, industry.

3. Collection of Cheques and Bills: The banks collect the cheques for their customers drawn on other banks. To collect cheques banks have clearing houses. The banks also accept bills of exchange and encash them by charging commission called discount before the maturity date.

4. Agency Functions : Banks pay insurance premimum on behalf of their clients. Banks also collect dividend, premium, interest, pension etc. on behalf of customers and put the same in their accounts. Banks also buy shares, debentures and bonds of different companies on behalf of the customers.

5. Remittance Facility : A person can send money to another person at distant place with the help of demand draft , pay orders etc . can be enchased by the receiver by presenting the draft in the bank branch of his city. The bank charges some commission for issue of draft.

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