1.Accept Deposits: There are 3 types of deposits which a commercial bank can accept.

A: Term Deposits: Term deposits are of 2 types

· Fixed Deposits: In this account the depositor has to deposit a particular sum of money at once and there is restriction that he/she cannot withdraw his money before a particular period eg. 1 year 2 year or 5 years etc. This account offers the highest rate of interest among all types.

· Recurring Deposits: In this account depositor has to deposit a particular sum of money every month and in this he/ she cannot withdraw the money before the stipulated time period.

B: Current Account: This account is mostly help by those who have to do multiple transactions in a day such as businessmen. However these accounts do not yield any interest for the depositor because bank has to fulfill cash demands of the depositor anytime by maintaining sufficient amount of cash.

C: Savings Bank Account: Rate of interest of savings bank account is low but it promotes the habit of saving among the public. This is the reason for its popularity. The limitations for the depositor are limited number of withdrawals in a week is allowed.

2. Advancing of loans:Out of the deposits received by the bank, certain percentage as specified by the RBI of its kept as a cash reserve. The amount left after that is provided against certain interest to needy people in the form of loans. The bank checks all the required documents thoroughly in order to ascertain the credibility of the borrower, before lending him the money.

3. Investment of funds:Apart from granting loans and credit, banks also invest their surplus fund in government securities in order to yield interest from it. There are several provisions that bind commercial banks to necessarily buy the government securities because this fund ensures the liquidity in banks and protect them from threat of loss in near future.

4. Promote the use of cheques:All the commercial banks provide cheque leave to customers for free against the nominal cost. Banks also encourage the use of cheques among the customers because it is easier for the banks to facilitate the transactions. Cheque is the most widespread credit instrument among all others of money market.

5. Agency Functions of the bank:Agency functions are those functions performed by the banks against which it charges the customers with particular commission. Following are some of the services and functions performed by the bank:

üFund Transfer: Banks facilitate customer’s need of transferring amount from one account to another. Banks provide this service against a commission which depends on the amount transferred. The tool used by the bank is referred to as Bank Draft.

üCollecting customer’s funds:The funds of the customer are owed by any other bank. The bank collects his funds from that bank’s account and deposits it in his account. For e.g. the clearance procedure of the cheque.

üPurchase and sale of shares and securities for its customers:The bank also acts as a depository participant and plays a role of intermediary in the process of buying and selling of shares and securities and private and government companies. For e.g. Demat Accounts.

üCollecting dividends on the shares of the customers:the shares and other securities purchased by customers yield certain interest or dividend which the banks credit to the accounts of the customers.

üPayment of premiums:The customers may instruct the banks to do timely payment of premiums of their insurances purchased by the customers which the banks do on their behalf. Similarly they can instruct other payments too.

üBanks acts as trustee and the executor.Banks also keep the wills of the customer safe. It may also take actions as written in the will after the death of the customer.

üIncome Tax consultant:Banks provides their customer suggestions for tax savings. The bank can prepare the income tax statement for their customer for a certain fee.

üActs as a correspondent:Banks acts like representative or agent of the customer for processes like buying tickets, making payments etc.

6. Purchase and sale of foreign exchange. Purchase and sale of currencies itself is a business which their customer can do to make more money by taking advantages of changing rates of exchange.

7. Financing internal and foreign trade:Banks provide financial assistance to entrepreneurs by discounting and rediscounting of their bills. This service helps entrepreneurs to get payment when it is needed the most. They also provide short term credit to entrepreneurs by mortgaging their commercial papers.

8. Other functions of the bank.

Locker Facility

Issuing traveler’s cheque

Giving information about its customers

Collection of statistics

Underwriting of company debentures

Accepting Bills of exchange on behalf of the customers

Giving advice on financial matters.

9. Fulfilment of socio-economic objectives.