Define the term Commercial Bank. Explain the main functions of Commercial Banks

A Commercial Bank is a financial institution that is authorized to provide various financial services, including accepting deposits, offering checking and savings accounts, and providing business, personal, and mortgage loans. They are profit-seeking businesses that are crucial to the financial health of the economy.

The main functions of Commercial Banks are:

1. Accepting Deposits: Commercial banks accept deposits from individuals, businesses, and organizations. These deposits form the main source of funds for the bank.

2. Granting Loans: One of the primary functions of commercial banks is to grant loans and advances to businesses and individuals. They earn interest on the amount loaned, which is a major source of income for them.

3. Overdraft Facilities: Banks provide overdraft facilities to their customers through which they are allowed to withdraw more money than what is deposited in their account. Interest is charged on the overdraft amount.

4. Discounting of Bills: Banks provide the facility of bill discounting to their customers, where the bank pays the amount mentioned in the bill before the maturity date.

5. Agency Services: Banks act as agents for their customers by collecting cheques, drafts, bills, and dividends, paying insurance premiums, handling taxes, and so on.

6. General Utility Services: Banks also provide many general utility services, such as locker facilities, issuing traveler's cheques, money transfers, and acting as trustees and executors.

7. Foreign Exchange Transactions: Banks deal with foreign currencies and are authorized to make foreign exchange transactions for their customers.

8. Creating Credit: Banks create credit in the economy by extending loans to the public. They have a significant role in the creation of credit, which affects the money supply in the economy.

In summary, commercial banks play a crucial role in the economy by providing a variety of financial services to individuals and businesses.