Commercial banks play an important role in economic development by mobilizing savings, financing different sectors, and implementing monetary policy. They accept deposits and provide loans to individuals, businesses, and sectors like industry, trade, agriculture, and consumers. Banks offer various deposit accounts and loan products. They also perform agency functions and provide other services like foreign exchange, bill discounting, and underwriting. In developing countries specifically, banks help channel savings into productive investments, finance key sectors, and raise living standards by expanding access to credit.

2. Advanced financial institution
Presented to:
Sir Usman Danish
My Group Members:
1.Wasif Ali

3. Contents
• What is commercial banks
• Types of banking
• Functions
• Role and objectives

4. What is commercial banks
• An institution which accepts deposits, makes business loans, and
offers related services. Commercial banks also allow for a variety
of deposit accounts, such as checking, savings, and time deposit.
These institutions are run to make a profit and owned by a group
of individual, While commercial banks offer services to
individuals, they are primarily concerned with receiving deposits
and lending to businesses.

5. Types of banking
Banks can be divided into different groups either on the basis of
their
structure or on the basis of their function.
• Structurally banking
Branch banking
this refers to the system under which two or more banks are
opened under a single ownership. State bank of India, Punjab
national bank, Indian bank.

6. Types of banking
Unit banking
• This refers to the system of banking in which under two or more
banks are carried on through a single organization, without any
branches. This system used to be popular in amrica.

7. Advantage
• Same bank can cater to several parts of a large country.(through
its
branches situated in these parts) which a unit bank would find
difficult to do
A unit bank has the advantage its efforts are concentrated in one
area so that it can serve that area well.

8. Types of banking
• Group banking
this is a system under which two or more banks,separately
incorporated are connected by being controlled by a single
holding company as trust.
• Chain banking
here two or more banks are controlled by a single group
through the ownership of shares.

9. Types of banking
• Deposit banking
in this category the banks act as custodian or trustee of
depositors.
• Investment banking
they provide this by purchasing shares and debentures of
newly floated companies.

10. Types of banking
• Mixed banking
Most banks in India play both roles deposit banking and investment
banking.

12. ACCEPTANCE OF DEPOSITS:
• Other functions of a commercial bank are based upon this
function. Banks accepts deposits from those who have surplus
money in their hands but they are unable to use it in a profitable
way. The commercial bank provides an opportunity to general
public to make good use of their savings by depositing them in the
bank.

13. three different types of accounts
• Current Account:
Current account is one where the depositor is allowed to withdraw his
amount any time
be wishes. Normally the traders and merchants keep such accounts
with commercial
banks. This makes it possible for them to deposits or withdraws
money at their ease.

14. Current Account
• As the amount from this account can be withdrawn at any time so
the bank does not pay any interest on such account. Current
Accounts are sometimes called demand deposits also. Saving
Account:

15. Saving Account:
• Saving Account are helpful for those people who have low levels of
incomes and savings. Saving accounts help in the mobilization of
the saving of low income people. The amount from this account
can be withdrawn subject to certain terms and conditions of the
bank. A nominal rate interest is paid by bank in such accounts.

16. Fixed deposits:
• Fixed deposits as the name implies are accepted by the banks for
a certain fixed period of time. Before the expiry of that fixed
period of time, the amount can’t be withdrawn by the depositor.
The bank pays higher rate of interest on such accounts.

17. ADVANCING LOANS:
• Now, what banks do with the money that they have received from
the general public inthe form of deposits?

18. ADVANCING LOANS:
• The answer is, they lend from this money at a rate of interest
higher than that are paying to the depositors. This process of
advancing loans is the second fundamental functions of the
commercial bank.

19. ADVANCING LOANS:
• commercial banks do not lend blindly while lending 5 basic
principles are duly observed.
• Safety
• Liquidity
• Dispersal
• Remuneration
• Suitability

20. Overdraft
• This is a short period financing facility. Under this bank allows his
client to withdraw certain amount from his account over and
above the balance actually lying in his current account . The bank
charges interest in the amount overdrawn by the client.

21. Overdraft
• When the client has surplus funds at his disposal, he can pay the
amount to settle his overdraft balance. The overdraft facility is
for short term and is provident o:: the current account only.

22. 2.Discounting Bills of Exchange:
• Discounting of the fills of exchange refers to the process of making
payment before the maturity of the bill, The discount charged by
the bank for making payment before maturity of bill constitutes
the bank earnings.

23. 2.Discounting Bills of Exchange
• The payment made by the bank before the date of maturity is
then loan to the holder of the bill. At the maturity the drawee
makes the payment to the bank.

24. Cash Credit
• Cash credit is an arrangement whereby the bank allows the
borrower to draw amounts upto a specified limit. The amount is
credited to the account of the customer. The customer can
withdraw this amount as and when he requires. Interest is charged
on the amount actually withdrawn.

25. long term loans
• the bank management takes all necessary precautions to make
certain the return of the money advanced. The loans are normally
advanced against securities which are valued by the bank’s
experts. The amount of the loan is credited in the borrower’s
account and from thee money can be drawn through checques .
The interest is paid on the full amount borrowed.

26. SECONDARY FUNCTIONS:
1. Agency functions
2. General Utility services
3. Miscellaneous / Other

27. AGENCY FUNCTIONS:
The bank performs different functions for their clients and while
doing so they act as an agent of their clients.
• Collection of Dividends:
Banks acting as an agent of their clients collect dividends
and interest on stocks and shares. The bank charges a
nominal commission against the provision of such services.

28. AGENCY FUNCTIONS
• Collection of Cheques
Commercial banks act as an agent of its clients while
collecting and making payments of bills, checques etc.

29. Selling & Purchasing Securities
• Executor or Trustee
A client may direct his bank to act as an executor or trustee in
dealing with other business parties or while setting business
disputes with, otherparties, He may ask his bank to provide
technical knowledge or assistance on certain particular matters.
The bank shall perform such functions in the interest of his client.
The bank charges a small fee for providing such services or
technical assistance

30. GENERAL UTILITY SERVICES
• Financing Foreign Trade
Commercial banks discount foreign bills of exchange. While
performing this function they play their role in foreign trade and
in facilitating exports
• L/C Operations
Commercial bank plays an important role in foreign trade by
performing L/C operations. L/C is a guarantee that ensures a
reliable import / export deal.

31. GENERAL UTILITY SERVICES
• Underwriting Services
Commercial banks underwrite shares and debentures of companies.
They also underwrite loans raised by joint stock companies or
government > Banks also play role in carrying out of different public
private affairs.

32. Miscellaneous/others
• Zakat Collection:
Commercial bank in Pakistan and other Islamic countries collects
zakat from the Account holders. Zakat is deducted from the account
on a prescribed date on behalf of government.
• Collection of Utility Bills
Commercial banks on the behalf of government collect utility
bills from the general public. In this way it becomes convenient for
the masses to pay off the utility bills in time.

33. Role of commercial banks
• Besides performing the usual commercial banking functions, banks
in developing countries play an effective role in their economic
development. The majority of people in such countries are poor,
unemployed and engaged in traditional agriculture.

34. Mobilising Saving for Capital Formation
• The commercial banks help in mobilising savings through network
of branch banking. People in developing countries have low
incomes but the banks induce them to save by introducing variety
of deposit schemes to suit the needs of individual depositors. They
also mobilise idle savings of the few rich. By mobilising savings,
the banks channelise them into productive investments. Thus they
help in the capital formation of a developing country.

35. Financing Industry
• The commercial banks finance the industrial sector in a number of
ways. They provide short-term, medium-term and long-term loans
to industry.

36. Financing Industry
• In India, the commercial banks undertake short-term and medium-
term financing of small scale industries, and also provide hire-
purchase finance. Besides, they underwrite the shares and
debentures of large scale industries. Thus they not only provide
finance for industry but also help in developing the capital market
which is undeveloped in such countries.

37. Financing Trade
• The commercial banks help in financing both internal and external
trade. The banks provide loans to retailers and wholesalers to
stock goods in which they deal. They also help in the movement of
goods from one place to another by providing all types of facilities

38. Financing Trade
• such as discounting and accepting bills of exchange, providing
overdraft facilities, issuing drafts, etc. Moreover, they finance
both exports and imports of developing countries by providing
foreign exchange facilities to importers and exporters of goods.

39. Financing Agriculture
• They provide loans to traders in agricultural commodities. They
open a network of branches in rural areas to provide agricultural
credit. They provide finance directly to agriculturists for the
marketing of their produce, for the modernisation and
mechanisation of their farms, for providing irrigation facilities, for
developing land, etc.

40. Financing Consumer Activities
• People in underdeveloped countries being poor and having low
incomes do not possess sufficient financial resources to buy
durable consumer goods. The commercial banks advance loans to
consumers for the purchase of such items as houses, scooters,
fans, refrigerators, etc. In this way, they also help in raising the
standard of living of the people in developing countries by
providing loans for consumptive activities.

41. Help in Monetary Policy
• The commercial banks help the economic development of a
country by faithfully following the monetary policy of the central
bank. In fact, the central bank depends upon the commercial
banks for the success of its policy of monetary management in
keeping with requirements of a developing economy.

42. Help in Monetary Policy
• Thus the commercial banks contribute much to the growth of a
developing economy by granting loans to agriculture, trade and
industry, by helping in physical and human capital formation and
by following the monetary policy of the country.

43. ANY QUESTION