FUNCTIONS OF

COMMERCIAL BANKS

AARADHYA MESTRY 58
VISHAL BHATU 10
DAKSH GUPTA 29
AAKASH DAMA 17
AADESH BORA 117
 MEANING OF
COMMERCIAL BANKS

Commercial banks are the oldest and fastest

growing banks in India. Commercial banks are
simple business organizations which provide
various types of financial services to customers
in return for payments in one form or another,
such as interest, discount, commission, fees, etc.
Their objective is to make profits.
 FUNCTIONS OF COMMERCIAL BANKS
Primary Functions Secondary Functions

Receiving of Deposits Lending Agencies General Utility

of Funds Services Services

Time Liabilities Demand 1.Overdraft 1.Payment of 1. Safe Custody Deposits

Liabilities rent, etc 2. Safe Deposit Locker
2.Cash credit Facilities
2.Collecting 3. Transfer of Money
1.Fixed Deposit 1. Saving 3.Discounting of cheques 4. Issue of Traveler’s
bank A/c bills of cheque
2.Recurring exchange 3.Dealing in 5. Acting as Referees
Deposit 2. Current Foreign 6. Merchant Banking
A/c 4.Loans and exchange 7. Teller system
3.Miscellaneous Advances 8. Automated teller
types of deposit 4. Acting as machine
5.Venture Trustees 9. Credit cards
4.Cash Capital 10. Gift cheques
Certificates 11. Executor & Trustee
6.Guarantees
 FUNCTIONS OF COMMERCIAL BANKS
Primary Functions Secondary Functions

Receiving of Deposits Lending Agencies General Utility

of Funds Services Services

Time Liabilities Demand 1.Overdraft 1.Payment of 1. Safe Custody Deposits

Liabilities rent, etc 2. Safe Deposit Locker
2.Cash credit Facilities
2.Collecting 3. Transfer of Money
1.Fixed Deposit 1. Saving 3.Discounting of cheques 4. Issue of Traveler’s
bank A/c bills of cheque
2.Recurring exchange 3.Dealing in 5. Acting as Referees
Deposit 2. Current Foreign 6. Merchant Banking
A/c 4.Loans and exchange 7. Teller system
3.Miscellaneous Advances 8. Automated teller
types of deposit 4. Acting as machine
5.Venture Trustees 9. Credit cards
4.Cash Capital 10. Gift cheques
Certificates 11. Executor & Trustee
6.Guarantees
 TIME LIABILITIES
1. FIXED DEPOSIT - A fixed deposit is a financial
instrument provided by banks or NBFCs which provides
investors a higher rate of interest than a regular savings
account, until the given maturity date. It may or may not
require the creation of a separate account.

2. RECURRING DEPOSIT - A recurring deposit is a

special kind of term deposit offered by banks in India
which help people with regular incomes to deposit a fixed
amount every month into their recurring deposit and earn
interest at the rate applicable to fixed deposits.
 TIME LIABILITIES
3. MISCELLANEOUS DEPOSITS - Miscellaneous
deposits transaction is used for posting cash received that
has not been as a result of a receipt from a sales invoice.
Miscellaneous deposits is accessed via the Activities menu.

4. CASH CERTIFICATES - Cash Certificates are a type of

deposit that is purchased for a certain amount. The account
holder purchases the cash certificate for a certain amount,
but needs to make payments toward this amount only as
long as the term of the certificate lasts.
 FUNCTIONS OF COMMERCIAL BANKS
Primary Functions Secondary Functions

Receiving of Deposits Lending Agencies General Utility

of Funds Services Services

Time Liabilities Demand 1.Overdraft 1.Payment of 1. Safe Custody Deposits

Liabilities rent, etc 2. Safe Deposit Locker
2.Cash credit Facilities
2.Collecting 3. Transfer of Money
1.Fixed Deposit 1. Saving 3.Discounting of cheques 4. Issue of Traveler’s
bank A/c bills of cheque
2.Recurring exchange 3.Dealing in 5. Acting as Referees
Deposit 2. Current Foreign 6. Merchant Banking
A/c 4.Loans and exchange 7. Teller system
3.Miscellaneous Advances 8. Automated teller
types of deposit 4. Acting as machine
5.Venture Trustees 9. Credit cards
4.Cash Capital 10. Gift cheques
Certificates 11. Executor & Trustee
6.Guarantees
 DEMAND LIABILITIES
1. SAVINGS ACCOUNT - A savings account is a basic
type of bank account that allows you to deposit money,
keep it safe, and withdraw funds, all while earning
interest. Savings accounts are offered by most banks,
credit unions, and other financial institutions.

2. CURRENT ACCOUNT - A current account is opened

by businessmen who have a higher number of regular
transactions with the bank. It includes deposits,
withdrawals, and contra transactions. It is also known as
Demand Deposit Account.
 FUNCTIONS OF COMMERCIAL BANKS
Primary Functions Secondary Functions

Receiving of Deposits Lending Agencies General Utility

of Funds Services Services

Time Liabilities Demand 1.Overdraft 1.Payment of 1. Safe Custody Deposits

Liabilities rent, etc 2. Safe Deposit Locker
2.Cash credit Facilities
2.Collecting 3. Transfer of Money
1.Fixed Deposit 1. Saving 3.Discounting of cheques 4. Issue of Traveler’s
bank A/c bills of cheque
2.Recurring exchange 3.Dealing in 5. Acting as Referees
Deposit 2. Current Foreign 6. Merchant Banking
A/c 4.Loans and exchange 7. Teller system
3.Miscellaneous Advances 8. Automated teller
types of deposit 4. Acting as machine
5.Venture Trustees 9. Credit cards
4.Cash Capital 10. Gift cheques
Certificates 11. Executor & Trustee
6.Guarantees
 LENDING OF FUNDS
1. OVERDRAFT - An overdraft facility is a credit
agreement made with a bank that allows an account holder
to use or withdraw more money than what they have in
their account up to the approved limit. The sanctioned
overdraft limit will differ from bank to bank.

2. CASH CREDIT - A Cash Credit is a short-term source

of financing for a company. It enables a company to
withdraw money from a bank account without keeping a
credit balance. The account is limited to only borrowing
up to the borrowing limit.
 LENDING OF FUNDS
3. DISCOUNTING BILLS OF EXCHANGE - After
getting the bill, the bank will pay cash to the drawer equal
to the face value less interest or discount at an agreed rate
for a number of days it has to run. This process is known as
discounting of a bills of exchange.

4. LOANS AND ADVANCES - Money provided by the

bank to entities for fulfilling their short term requirements
is known as Advances. Loan is a kind of debt while
Advances are credit facility granted to customers by banks.
Loans are provided for long duration which is opposite in
the case of Advances.
 LENDING OF FUNDS
5. VENTURE CAPITAL - Venture capital is a type of
private equity, a form of financing that is provided by
firms or funds to small, early-stage, emerging firms that
are deemed to have high growth potential, or which have
demonstrated high growth.

6. GUARANTEES - A bank guarantee is a promise from a

bank or other lending financial institution that if a
particular borrower defaults on a loan, the bank will cover
the loss.
 FUNCTIONS OF COMMERCIAL BANKS
Primary Functions Secondary Functions

Receiving of Deposits Lending Agencies General Utility

of Funds Services Services

Time Liabilities Demand 1.Overdraft 1.Payment of 1. Safe Custody Deposits

Liabilities rent, etc 2. Safe Deposit Locker
2.Cash credit Facilities
2.Collecting 3. Transfer of Money
1.Fixed Deposit 1. Saving 3.Discounting of cheques 4. Issue of Traveler’s
bank A/c bills of cheque
2.Recurring exchange 3.Dealing in 5. Acting as Referees
Deposit 2. Current Foreign 6. Merchant Banking
A/c 4.Loans and exchange 7. Teller system
3.Miscellaneous Advances 8. Automated teller
types of deposit 4. Acting as machine
5.Venture Trustees 9. Credit cards
4.Cash Capital 10. Gift cheques
Certificates 11. Executor & Trustee
6.Guarantees
 AGENCY SERVICES
1. PAYMENT OF RENT, INSURANCE PREMIUM, ETC
- Commercial Banks are the agents of their customers.
They collect subscription, rents, income tax, insurance
premium on behalf of their customers. The banks charge
nominal commission for these services.

2. COLLECTION OF CHEQUES - The banks collect and

pay the cheques on behalf of their customers. Commercial
banks act as an agent of their customers. The banks charge
nominal commission for these services.
 AGENCY SERVICES
3. DEALING IN FOREIGN EXCHANGE - The interbank
market is an important segment of the foreign exchange
market. It is a wholesale market through which most
currency transactions are channeled. It is mainly used for
trading among bankers.

4. ACTING AS TRUSTEES - Many people may consider

hiring a bank to act as a trustee instead of appointing a
relative or friend to manage their financial affairs. A bank
has more experience managing property and would be
more likely to mange the trust’s assets.
 FUNCTIONS OF COMMERCIAL BANKS
Primary Functions Secondary Functions

Receiving of Deposits Lending Agencies General Utility

of Funds Services Services

Time Liabilities Demand 1.Overdraft 1.Payment of 1. Safe Custody Deposits

Liabilities rent, etc 2. Safe Deposit Locker
2.Cash credit Facilities
2.Collecting 3. Transfer of Money
1.Fixed Deposit 1. Saving 3.Discounting of cheques 4. Issue of Traveler’s
bank A/c bills of cheque
2.Recurring exchange 3.Dealing in 5. Acting as Referees
Deposit 2. Current Foreign 6. Merchant Banking
A/c 4.Loans and exchange 7. Teller system
3.Miscellaneous Advances 8. Automated teller
types of deposit 4. Acting as machine
5.Venture Trustees 9. Credit cards
4.Cash Capital 10. Gift cheques
Certificates 11. Executor & Trustee
6.Guarantees
 UTILITY SERVICES
1. SAFE CUSTODY DEPOSITS - Safe Custody is the
safe keeping of important documents and valuables. Items
commonly requested by customers to be held in safe
custody by the bank include property deeds, a Will as well
as other valuables and documents.

2. SAFE DEPOSIT LOCKER - A safe deposit box, also

known as a safety deposit box, is an individually secured
container, usually held within a larger safe or bank vault.
Safe deposit boxes are generally located in banks, post
offices and other financial institution.
 UTILITY SERVICES
3. TRANSFER OF MONEY – A bank transfer is when
money is sent from one bank account to another bank
account. Transferring money from your bank account is
usually fast, free and safer than withdrawing and paying in
cash.

4. ISSUE OF TRAVELER’S CHEQUE - A traveler’s

cheque is a medium of exchange utilized as an alternative
to hard currency. The product typically is used by people
on vacation in foreign countries. They offer a safe way to
travel overseas without cash.
 UTILITY SERVICES
5. ACTING AS REFEREES - Banks act as referees and
provide information as to the financial standing, business
reputation and respectability of their customers on
enquiries made by third parties. Banks provide this service
only on the acceptance of the customers.

6. MERCHANT BANKING - A merchant bank is

historically a bank dealing in commercial loans and
investment. Merchant banks were the first modern banks
and evolved from medieval merchants who traded in
commodities, particularly cloth merchants.
 UTILITY SERVICES
7. TELLER SYSTEM - A teller system is the integrated
hardware and software used for retail and wholesale
banking transactions, most systems communicate with a
core banking system or mainframe over a secured
network.

8. AUTOMATED TELLER MACHINE - An automated

teller machine (ATM) is an electronic banking outlet that
allows customers to complete basic transactions without
the aid of a branch representative or teller.
 UTILITY SERVICES
9. CREDIT CARDS - A credit card is a plastic card,
usually with a magnetic strip or an embedded microchip,
connected to a credit account and used to buy goods and
services.

10. GIFT CHEQUES - A Gift cheque is a decorative

cheque issued for a small extra charge by the banks for use
by customers who wish to give presents of money on
special occasions. Gift cheques may be purchased in
unlimited numbers from every branch of the CB Bank.
 CONCLUSION
Commercial banks is a profit making
business organization, which deals in claims to
money i.e. borrowing and lending of money.
The primary functions are the basic functions of
a commercial bank which consists of receiving
deposits and lending funds. And banks also
perform many secondary functions which
include agency and utility services.
THANK YOU!