This document outlines the key functions of commercial banks which are accepting deposits and granting loans. It describes the major types of deposits banks accept including fixed deposits, savings accounts, current accounts, and recurring deposits. It also explains the different types of loans and advances banks provide such as cash credits, overdrafts, bill discounting, and term loans. Commercial banks play an important role in the economy by mobilizing savings from the public and providing credit to meet business and personal needs.

2. FUNCTIONS OF
COMMERCIAL
BANKS

4. ACCEPTANCE OF
DEPOSITS

5. 1.ACCEPTANCE OF DEPOSITS •
• DEPOSITS RECEIVED FROM THE PUBLIC
CONSTITUTE THE MAJOR RESOURCE AVAILABLE TO
A BANK .FOUR TYPES OF DEPOSITS ARE USUALLY
ACCEPTED BY BANKS.THEY ARE :
1.FIXED DEPOSITS
2.SAVINGS BANK DEPOSITS
3.CURRENT DEPOSITS
4.RECURRING DEPOSITS
;
.

6. GRANTING OF LOANS
AND ADVANCES

7. FIXED DEPOSITS
THIS DEPOSIT IS ALSO KNOWN AS TIME
DEPOSITS.IT IS REPAYABLE ON THE EXPIRY
OF A SPECIFIED PERIOD AGREED UPON AT
THE TIME OF DEPOSITS AND CANNOT
USUALLY BE WITHDRAWN BEFORE
MATURITY. FIXED DEPOSITS CARRY A
HIGHER RATE OF INTEREST THAN ANY
OTHER FORMS OF DEPOSITS..

8. SAVINGS BANK DEPOSITS
THIS TYPE OF DEPOSITS HELPS IN THE
MOBILIZATION OF SAVINGS OF THE
GENERAL PUBLIC. THIS ACCOUNT IS IDEAL
FOR ORDINARY PERSONS WITH
MODERATE INCOME.THERE ARE CERTAIN
RESTRICTIONS ON OPERATING THIS
ACCOUNT SUCH AS KEEPING A MINIMUM
BALANCE IN THESE ACCOUNTS, LIMIT TO
THE NUMBER OF WITHDRAWELS OF
MONEY ETC.SAVINGS DEPOSIT CARRIES A
LOWER RATE OF INTEREST THAN FIXED
DEPOSITS.

9. CURRENT DEPOSITS
THIS TYPE OF ACCOUNT IS
USUALLY OPERATED BY
BUISINESSMEN THERE IS NO
RESTRICTION ON THE FREQUENCY
AND VOLUME OF DEPOSITS OR
WITHDRAWALS OF MONEY . THIS
DEPOSIT DOES NOT GENERALLY
CARRY ANY INTEREST.

10. RECURRING DEPOSITS
THIS TYPE OF DEPOSITS IS DESIGNED
TO ENCOURAGE REGULAR SAVINGS
AMONG THE PUBLIC ESPECIALLY
THE FIXED INCOME GROUP . A
FIXED AMOUNT IS TO BE
DEPOSITED AT REGULAR INTERVALS
FOR A FIXED PERIOD OF TIME .THE
AMOUNT DEPOSITED IS REPAID ON
THE DATE OF MATURITY TOGETHER
WITH THE INTEREST.

11. 2.GRANTING OFLOANS AND ADVANCES
THIS IS THE SECOND IMPORTANT
FUNCTION OF COMMERCIAL BANK.
BANKS USUALLY LEND MONEY IN THE
FORM OF CASH CREDIT,OVERDRAFT,
LOANS AND ADVANCES AND BY
DISCOUNTING BILLS OF EXCHANGE.
VARIOUS TYPES OF LOANS AND ADVANCES
PROVIDED BY COMMERCIAL BANKS ARE
DISCUSSED BELOW.

12. a. CASH CREDIT
• THIS IS PROVIDED TO THE BORROWERS
AGAINST THE SECURITY OF CURRENT
ASSETS .THE BANKS OPEN CASH CREDIT
ACCOUNT IN THE NAME OF THE
BORROWER AND PERMIT HIM TO
WITHDRAW MONEY UP TO THE
SANCTIONED LIMIT. INTEREST IS TO BE
PAID ON THE AMOUNT ACTUALLY
WITHDRAWN BY HIM.

13. b. OVERDRAFT
OVERDRAFT IS AN ARRANGEMENT
WHERE CUSTOMERS ARE
PERMITTED TO WITHDRAW UP TO A
LEVEL OVER AND ABOVE THEIR
DEPOSITS IN THE ACCOUNT.
INTEREST IS TO BE PAID ONLY ON
THE ACTUAL AMOUNT OF OVER
DRAFT AVAILED BY HIM.

14. C, DICOUNTING BILL OF
EXCHANGE
THIS IS A SHORT-TERM ACCOMMODATION
GIVEN TO THE CUSTOMERS.THEY
CAN AVAIL THE FACILITY OF
DISCOUNTING THESE BILLS IN TIMES OF
FINANCIAL EMERGENCIES. THE BANKER
WILL CREDIT THE AMOUNT OF THE BILL
IN CUSTOMERS ACCOUNT AFTER

15. d. TERM LOAN
APART FROM SHORT TERM FINANCIAL
ACCOMADATION, BANK ALSO PROVIDE
MEDIUM AND LONG TERM LOANS TO THEIR
CUSTOMERS. THE AMOUNT OF LOAN MAY
VARY DEPENDING UPON THE
REQUIREMENTS OF THE BORROWER. THE
AMOUNT MAY BE PAID EITHER IN CASH OR
CREDITED TO HIS ACCOUNT. INTEREST WILL
BE CHARGED ON THE ENTIRE AMOUNT OF
LOAN CREDITED OR WITHDRAWN IN CASH.