FUNCTIONS OF COMMERCIAL BANKING

The following are the functions of commercial banks
Primary Functions
Secondary functions
I. Primary Functions :
The basic functions performed by the banks are as follows
1.Accepting Deposits :
The first and primary function of hte bank is to accept deposits from those people who want to save . People consider more rational to deposit money in a bank because by doing so they can earn interest and at the same time they can avoid the danger of theft.
To attract more savings from all sorts of individuals banks maintain different types of accounts.
a) Fixed deposit accounts :
Money in this accounts is deposited for a fixed period of time(1 or 2 or 5 years) and cannot be withdrawn before the expiry of htat period.The rate of interest on this account is higher than that on other types of deposits.The longer the period,the higher will be the rate of interest.
Fixed deposits are also called as " Time deposits " or " Time Liabilities ."
b) Current deposit accounts :
These accounts are generally maintained by tradersand business man who have to make number of payments everyday.Money from this account can be withdrawn in as many times
and in as much amount as decide by the depositers.Normally , no interest is paid on htis account. the depositers have topay certain incidental charges to the bank for hte services rendered by it. Current Deposits are also called "Demand deposits" or "Demand liabilities."
c) Saving deposit accounts :
The aim of this account is to encourage small savings of public.Certain restrictions are imposed on the depositors regarding a number of withdrawals.Cheque facility is provided to depositors. Rate of interest paid on these deposits is low as compared to that on fixed deposits.
d) Recurring deposit accounts :
The purpose of these accounts is to encourage regular savings by the public,particularly by the fixed income group.Generally money in this account is deposited in monthly installments for a fixed period and is repaid to the depositors along with the interest on maturity.The rate of interest on these deposits is nearly same as on fixed deposits.
e) Home Save accounts :
The other scheme that aims to promote saving habits among the people is home save account.Under this scheme the safe is supplied to the depositors to keep it home and put his small savings in it.priodically the safe is taken to the bank where the amount is safe is credited to his account.