Functions of Commercial Banks

The functions of commercial banks in India are:

  • Accepting deposits from the public in various forms, such as savings account, current account, and fixed deposit accounts. These deposits are the main source of funds for the banks to lend or invest.
  • Advancing loans and providing credit to the public for various purposes, such as consumption, investment, business, agriculture, trade, and commerce. The banks charge interest on the loans and credit, which is their main source of income.
  • Creating purchasing power in the form of bank notes, cheques, bills, drafts, etc. These instruments enable the customers to make payments without using cash. The banks also facilitate electronic transfers of funds through online banking, mobile banking, ATMs, etc.
  • Bringing borrowers and lenders together by acting as intermediaries between them. The banks assess the creditworthiness of the borrowers and match them with the suitable lenders. The banks also help in reducing the risk of default by providing collateral, guarantees, insurance, etc.
  • Guiding customers to mutual funds or direct investments by offering consultation and advising services. The banks help their customers to choose the best investment options according to their needs and goals. The banks also provide portfolio management and wealth management services.
  • Implementing and executing monetary policies as directed by the Reserve Bank of India (RBI), which is the central bank of India. The banks follow the RBI’s guidelines on interest rates, reserve ratios, cash reserve ratio (CRR), statutory liquidity ratio (SLR), etc. The banks also help in maintaining price stability and economic growth by controlling the money supply and credit flow.
  • Trading functions such as buying and selling of securities, foreign exchange, gold, etc. The banks also deal with derivatives, futures, options, swaps, etc. The banks earn profits from the differences in prices or exchange rates of these assets.
  • Sure, I can write about more functions of commercial banks in India. Here are some additional functions that commercial banks perform:
  • Issuing and accepting cheques and drafts: Commercial banks issue and accept cheques and drafts as a convenient mode of payment for their customers. Cheques and drafts are written orders to pay a certain amount of money to a specified person or entity. Cheques and drafts can be used to settle debts, pay bills, transfer funds, etc.
  • Providing ATM facilities: Commercial banks provide automated teller machine (ATM) facilities to their customers to enable them to withdraw cash, deposit money, check balance, transfer funds, etc. ATMs are located at various places such as malls, airports, railway stations, etc. ATMs operate 24/7 and offer convenience and security to the customers.
  • General utility services: Commercial banks provide various general utility services to their customers such as locker facilities, internet banking, electronic banking, etc. Locker facilities allow the customers to store their valuables or documents safely in the bank’s vaults. Internet banking and electronic banking allow the customers to access their accounts and perform various transactions online using computers or mobile phones.
  • Other financial services: Commercial banks also offer other financial services to their customers such as consultation and advising, portfolio management, wealth management, insurance, mutual funds, etc. These services help the customers to plan and manage their finances, invest in various options, protect their assets, etc.

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