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Questions
Explain three important functions of a commercial bank.
Explain briefly the main functions that a commercial bank performs.
Answer in Brief
Solution
Three Important Functions of a Commercial Bank are as follows:
- Accepting Deposits: A commercial bank accepts deposits from the public. People can deposit their cash balances as chequable or non-chequeable deposits.
- Advancing loans: A bank advances loans both for productive purposes as well as consumption purposes. Through credit creation (i.e., by creating demand deposits through loans), it contributes to money supply in the economy.
- Agency functions: Commercial banks act as an agent on behalf of their customers. Agency functions include; transfer and collection of funds, purchase and sale of shares, collection of dividends and interest, payment of bills and premia, executor of wills, etc.
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Commercial Banks: Functions
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