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features of commercial bank

Besides these main functions, the banks perform several others as given below: Ornaments and valuable documents can be kept in safe deposit with a bank, in its strong room fitted with lockers, on payment of a small sum per year. Usually he opens a current account with that amount the bank, if he already has not got an account with this bank. These deposits stand midway between current and fixed accounts. Those like security brokers whose credit needs fluctuate generally, take such loans on personal security and financial assets. The two most distinctive features of a commercial bank are borrowing and lending, i.e., acceptance of deposits and lending of money to projects to earn Interest (profit). A scheduled bank must have a paid-up capital and reserves of at least Rs 5 lakh. (vi) They create credit in the sense that they are able to give more loans and advances than the cash position of the depositor’s permits. Deposits are the lifeline of banks. A borrower rarely wants to draw the whole amount of his loan in cash. It receives money from those who want to save money in the form of deposits and lends to those who … Account history - See account activity for up to years in batches of 31 daysPrint your account transaction historyView cheque images presented through clearing 3. Funds can also be remitted to foreign countries. Accepting Deposits: This is one of the primary function of commercial banks of Ethiopia. initial cash deposits and (ii) Legal Reserve Ratio (LRR), i.e., minimum ratio of deposits which is legally compulsory for the commercial banks to keep as cash in liquid form. In short, banks borrow to lend. Higher interest is paid on them—the rate rising with the length of the period and the amount of deposit. They advance loans to their members at fair rate of interest. In other words, they can get more than they have deposited, but they have to pay interest on the extra amount which has to repaid within a short period. The bank does this by accepting deposits from its customers. A commercial bank accepts deposits in the form of current, savings and fixed deposits. But bank gives this facility with some restrictions, e.g., a bank may allow four or five cheques in a month. These deposits may be of any of the following types: 2. They provide references about the financial position of their customers when required. David P. Stowell, in Investment Banks, Hedge Funds, and Private Equity (Third Edition), 2018. Similarly, the bank creates credit when it buys securities and pays the seller with its own cheque. The two primary characteristics of a commercial bank are lending and borrowing. Privacy Policy3. (iv) Acts as Trustee and Executor of property of its customers on advice of its customers. An established commercial account with a bank will make it easier to borrow money when you grow your business. (viii) Thus, they make optimum utilisation of resources possible. A commercial loan is done between a bank and a business, used to fund operating costs and capital expenditures. They generally finance trade and commerce with short-term loans. They constitute nerve centre of production, trade and industry of a country. If the seller needs … The investment in bills is considered quite safe, because a bill beats the security of two businessmen, the drawer as well as the drawer, so that if one proves dishonest or fails, the bank can claim the money from the other. Money creation by commercial banks is determined by two factors namely (i) Primary deposits i.e. These deposits are not as freely withdraw-able as current accounts. (vii)They help commerce and industry to expand their field of operation. These accounts are generally maintained by businessmen and Industrialists who receive and make business payments of large amounts through cheques. They are payable on demand and also withdraw able by cheque. 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