The main functions of a commercial bank are :

a) Acceptance of deposits – The bank accepts three types of deposits

i) Current account deposits – they are payable on demand and can be withdrawn by cheque without any restriction. No interest is paid 

ii) Termed / fixed deposits – they are fixed for a certain time period ; are not payable on demand and bear high rate of interest. 

iii) Savings accounts deposits – these are payable on demand and with draw able by cheque but with restriction and bears lower rate of interest. 

b) Giving loans – Banks advance loans to the borrowers in different forms : 

– Cash credit 

– Demand loans 

– Short term loans.

c) Overdraft – Under this system, the customer can get more than what they have deposited, but with extra interest and a short period of time. This facility is generally given to the businessmen.

d) Discounting bills of exchange – The bank discounts the bills of exchange – a document acknowledging an amount of money in consideration for goods received after deducting the commission and pays the present value of the bill to the party. 

e) Investment – The bank invests extra funds in terms of purchasing securities. 

f) Agency function – The bank performs certain agency functions for its worthy customers in return for a commission. 

g) Miscellaneous function – It includes purchase and sale of foreign exchange, issue of traveller’s cheque, provision of locker and underwriting activities.