Commercial bank
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A commercial bank is a financial institution that accepts deposits from the public and gives loans for the purposes of consumption and investment to make a profit.
It can also refer to a
History
The name bank derives from the Italian word banco "desk/bench", used during the Italian Renaissance era by Florentine bankers, who used to carry out their transactions on a desk covered by a green tablecloth.[1] However, traces of banking activity can be found even in ancient times.
In the United States, the term commercial bank was often used to distinguish it from an
Role
The general role of commercial banks is to provide financial services to the general public and business, ensuring economic and social stability and
In this respect,
Primary functions
- Commercial banks accept various types of deposits from the public especially from its clients, including saving account deposits and fixed deposits. These deposits are returned whenever the customer demands it after a certain time period.
- Commercial banks provide loans and advances of various forms, Such as [overdraft] facility, cash credit, bill discounting, money call, etc. They also give demand and term loans to all types of clients against proper security. They also act as trustees for wills of their customers etc.
- The function of credit creation is generated on the basis of credit and payment intermediary. Commercial banks use the deposits they absorb to make loans. On the basis of check circulation and transfer settlement, the loans are converted into derivative deposits. To a certain extent, the derivative funds of are increased by interval times the original deposits which greatly improves the driving force of commercial banks to serve the economic development.[2]
Regulations
In most countries, commercial banks are heavily regulated and this is typically done by a country's
Services by product
Commercial banks generally provide a number of services to its clients; these can be split into core banking services such as deposits, loans, and other services which are related to payment systems and other financial services.
Core products and services
- Accepting money on various types of Deposit accounts
- Lending money by overdraft, and loans both secured and unsecured.
- Providing transaction accounts
- Cash management
- Treasury management
- Private equity financing
- Issuing Bank cheques
- Processing payments via internet banking, or other payment methods.
Other functions
Along with core products and services, commercial banks perform several secondary functions. The secondary functions of commercial banks can be divided into agency functions and utility functions.
Agency functions include:
- To collect and clear cheques, dividends, and interest warrant
- To make payments of rent, insurance premium
- To deal in foreign exchange transactions
- To purchase and sell securities
- To act as the trustee, attorney, correspondent and executor
- To accept tax proceeds and tax returns
Utility functions include:
- To provide safe deposit boxes to customers
- To provide money transfer facility
- To issue traveler's cheques
- To act as referees
- To accept various bills for payment: phone bills, gas bills, water bills
- To provide various cards such as credit cards and debit cards
See also
- Assets and Liabilities of Commercial Banks in the United States
- Glass–Steagall legislation
- Investment banking
- Mortgage constant
- Retail bank
- Universal bank
References
- ^ de Albuquerque, Martim (1855). Notes and Queries. London: George Bell. pp. 431.
- ISSN 2519-7924.
Further reading
- Brunner, Allan D.; Decressin, Jörg; Hardy, Daniel C. L.; Kudela, Beata (2004-06-21). Germany's Three-Pillar Banking System: Cross-Country Perspectives in Europe.
- Khambata, Dara (1996). The practice of multinational banking: macro-policy issues and key international concepts (2nd ed.). New York: Quorum Books. p. 320. ISBN 978-0-89930-971-2.
- Commercial Banks directory and guidelines Commercial Banks Archived 2014-01-08 at the Wayback Machine
