Commercial Banks — Flashcards

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A commercial bank is a financial institution that accepts deposits from the public and gives loans for consumption and investment to make a profit. Its main income comes from the difference between th…

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Commercial banks collect savings from people, keep money safe, provide credit for trade and industry, and help in economic development. They also help in capital formation by turning savings into inve…

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The main source of income for banks is the difference between the interest charged from borrowers and the interest paid to depositors. Banks pay a lower rate on deposits and charge a higher rate on lo…

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The functions of commercial banks are divided into three main groups: Primary Functions, Agency Functions, and General Utility Functions.

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The primary functions are accepting deposits and advancing loans. These are the most basic banking activities and form the base of banking business.

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A current account is a non-interest bearing bank account with no limit on the number of transactions in a day. It is mainly used for regular business transactions and allows cheque payments.

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Current deposits constitute money because cheques are widely used as a means of payment along with currency. They can be withdrawn by cheque whenever needed, so they function like money.

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A savings deposit account is meant for people who want to keep idle or surplus money for a short period. It pays low interest and allows limited withdrawals. A bank may allow only five cheques a month…