QS Study

General Functions of Commercial Banks

A commercial bank is the bearer of credit. So, collecting deposit and giving loan is the main task of the commercial bank. But as an important catalyst for an economy, it has to do many diversified tasks. The commercial banks perform different significant functions regarding in general, representative, service oriented and others. Here briefly describe general functions of Commercial Banks.

General Functions: Generally commercial banks are engaged in the following functions.

(a) Collection of Deposit

Commercial banks collect the surplus money from people and form it into capital and the deposit collection is unlimited in nature. This money is invested in different sectors.

(b) Loan Sanction

These banks sanction lean to different sectors. Without this, no business can survive.

(c) Medium of Exchange

These banks create a medium of exchange in many ways. For example- cheque, bill of exchange, draft, etc. These are used as the money.

(d) Loan Deposit

Creating a loan deposit is one of the main tasks of the commercial bank. Bank gives loan through opening an account and transfers that amount to that account. The borrower then collects the loan from that account. By this way, the bank creates a loan deposit.

(e) Assisting in Foreign Business

Commercial banks help in foreign trade by supplying necessary fund and by many other ways. Issuances of the bill of exchange, opening L/C etc are done by commercial banks that accelerate the foreign business.

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