The main functions of commercial banks are accepting deposits from the public and advancing them loans. However, besides these functions there are many other functions which these banks perform. All these functions can be divided under the following heads: 

1. Accepting Deposits: The most important function of commercial banks is to accept deposits from the public. Various sections of society, according to their needs and economic condition, deposit their savings with the banks. Generally, there are three types of deposits which are as follows:

• Saving Bank Account: These account are introduced by the bank to mobilise small saving of low and middle income group of people. The saving account’ is generally opened in bank by salaried persons or by the persons who have a fixed regular income. 
• Current account: This account is opened by businessmen who have a higher number of regular transactions with the bank. 
• Recurring Deposit Account: In recurring deposit account, certain fixed amount is invested every month for a specified period and the total amount is repaid with interest at the end of the particular fixed period.
• Fixed Deposit Account: If the money deposited by customer with a bank for a fixed period of time for a fixed rate of interest. It is repayable on expiry of specified period of time.

2. Giving Loans: The second important function of commercial banks is to advance loans to its customers. Banks charge interest from the borrowers and this is the main source of their income. Banks advance loans not only on the basis of the deposits of the public rather they also advance loans on the basis of depositing the money in the accounts of borrowers. In other words, they create loans out of deposits and deposits out of loans. This is called as credit creation by commercial banks.

Banks generally give following types of loans and advances:

• Bank Overdraft: An overdraft is an advance given by the bank allowing a customer to overdraw his current account up to an agreed amount. interest is charged at an agreed rate only on the amount overdrawn. 
• Cash Credits: Cash credit is a short term cash loan to a company. It is a financial accommodation under which an advance is granted on a separate account called cash credit account up to a specified limit. 
• Demand Loans: These are such loans that can be recalled on demand by the banks. The entire loan amount is paid in lump sum by crediting it to the loan account of the borrower, and thus entire loan becomes chargeable to interest with immediate effect. 
• Short-term Loans: These loans may be given as personal loans, loans to finance working capital or as priority sector advances. These are made against some security and entire loan amount is transferred to the loan account of the borrower.

Discounting of Bills of Exchange: It is a short term finance assistance extended by the bank usually to the businesses that they have current account with bank. When a bill of exchange is presented before the bank for encashment, bank credits the amount to customer’s account after deducting some discount, On maturity of the bill, the payment is received by the bank from the drawee. 

3. Investment of Funds: The banks invest their surplus funds in three types of securities such as Government securities, other approved securities and other securities.

• Government securities include both, central and state governments, such as treasury bills, national savings certificate, etc. 
• Other securities include securities of state associated bodies like electricity boards, housing boards, debentures of land development banks units of UTI, shares of regional rural banks, etc.

4. Agency Functions: Banks function in the form of agents and representatives of their customers. Customers give their consent for performing such functions. The important functions of these types are as follows:

• Banks collect cheques, drafts, bills of exchange and dividends of the shares for their customers. 
• Banks make payment for their clients and at times accept the bills of exchange of their customers for which payment is made at the fixed time. 
• Banks pay insurance premium of their customers. Besides this, they also deposit loan instalments, income-tax, interest, etc. as per directions. 
• Banks purchase and sell securities, shares and debentures on behalf of their customers. 
• Banks arrange to send money from one place to another for the convenience of their customers.

5. Miscellaneous Functions: Besides the functions mentioned above, banks perform many other functions of general utility which are as follows:

• Banks make arrangement of lockers for the safe custody of valuable assets of their customers such as gold, silver, legal documents, etc. 
• Banks give reference for their customers. 
• Banks collect necessary and useful statistics relating to trade and industry. 
• For facilitating foreign trade, banks undertake to sell and purchase foreign exchange. 
• Banks advise their clients relating to investment decisions as specialist. 
• Bank does the under-writing of shares and debentures also. 
• Banks issue letters of credit. 
• During natural calamities, banks are highly useful in mobilizing funds and donations.