CHAPTER 9

BANKING

SYNOPSIS
1. Meaning of commercial banks
2. Functions of commercial banks

1. Meaning of Commercial Banks

 Commercial Banks are institutes or companies or
enterprises engaged in the buying and selling of money or
borrowing or lending of capital funds for the sake of profit. Thus
commercial banks are institutions which borrow or receive funds
from the general public and give loans and advances to those who
need them.

2. Types of Commercial Banks

 There are many types of commercial banks like deposit-
banks, industrial banks, mixed banks, agricultural banks, saving
banks, foreign exchange banks etc.
i) Deposit banks are those banks which receive deposits for short
periods and make loans and advances against them who borrow or
receive deposits for short periods.
ii) The industrial banks give loans to industrial houses for long
periods to acquire land machinery etc
iii) Mixed banks are those which do the function of deposit banks
and industrial banks.
iv) Agricultural banks are those which provide funds/loans to
farmers.
v) Agricultural credit banks are also called primary agricultural
co-operative credit societies. They are organized on co-operative
principle and they provide loans to farmers for short periods . They
also receive deposits to the public and raise funds for NABARD
(National Bank for Agricultural and Rural Development) and use
these funds o give loads to the farmers for short periods of about 15
months
vi) Land Development Banks (LDB) are those banks which
provide loads to farmers for long periods of about 15 to 20 years for
sinking wells, buying tractors/tools, machines, revitalizing the soil,
fencing, buying additional land etc.
vii) Saving banks are special banks to help people to save. E.g: We
have post-office savings banks.
3. Functions of Commercial Banks

i) To receive deposits for general, public(demand deposits, fixed

deposits, savings deposits)
ii) To make loans and advances
iii) Other functions.
a. To develop instruments of credit, to settle payments and to
transfer funds from one place or person to another.
b. To provide safety vaults or lockers in which the customers can
keep their jewellery and other valuables in safe custody.