Commercial Banks

Definition : - An Institution which Accepts Deposits, Makes Business Loans & Offer Related Services . - A commercial Bank is a type of Financial Intermediary & a type of Bank. It is a bank which Provides Checking Accounts , Savings Accounts & Money Market Accounts : Wikipedia - An Institution whose primary Function is to make Loans to Businesses .

Functions of Commercial Banks:

1)

Primary Functions : a) Accepting Deposits: The Most Important Activity of Commercial Banks is to Mobilise Deposits from the Public. b) Grant Loans & Advances : The second Important Function of a commercial Bank is to Grant Loans & Advances to public & Business Community.

2) Secondary Functions:  a) Issuing letters of credit, travellers cheques, circular notes etc.  b) Undertaking safe custody of valuables, important documents, and securities by providing safe deposit vaults or lockers;  c) Providing customers with facilities of foreign exchange.  d) Standing Guarantee on behalf of its customers for making payments for purchase of goods, machinery, vehicles etc.  e) Collecting and supplying business information;  f) Issuing demand drafts and pay orders; and,  g) Providing reports on the credit worthiness of customers.

Entrepreneur:
The term Entrepreneur is defined in a variety of ways. Yet no Consensus has been arrived at on the precise skills & abilities that makes a person a successful Entrepreneur. Definition : - An Individual who Bears the Risk of Operating a Business in the Face of Uncertainity about the future conditions. - A person who Promotes Ideas into a Business : Arthur Dewing. - An Entrepreneur is an Economic man who tries to maximise his Profits by Innovations. : E.E. Haggen.

Role of Commercial banks in Entrepreneur Development :



Commercial Banks Provides Development Finance , Venture Capital ,Working Capital , Credit Facilities ,Extension Services & Management Consultancy. Development Finance : Institutional Agencies & Banks grant Financial Assistance to small scale Industrial units for : Participation in Equity Capital Acquisition of Fixed Assets by way of term Loans Working Capital.

i)

ii) Venture Capital: Equity support to fund new concepts that involves a high risk & at the same time has high growth & profit potential. It also Includes Providing seed capital , Supplying funds for product development, Marketing expenditure, to Extending bridge finance prior to IPO.

iii) Package scheme of Assistance: Some Institutions & banks offers a package of assistance to entrepreneurs to enable them to translate their project ideas into a raising operation. It Extends to : Equity participation in Joint Ventures. Setting up units public sector for optimum uitilisation of state resources. Plant Location: Guidance on Incentives , raw materials etc., Merchant banking , Equipment finance & Equipment Leasing Term Lending.

iv) Assistance for marketing: a) Maximum assistance upto Rs.3 lakh per sales van, not Exceeding six Vehicles per borrower. b) Assistance upto Rs.7.50 Lakh per setting up new sales outlets.

Debt-Collection Service: Factoring is a Debtcollection service where the factor usually a financial institution buys out a clients (suppliers) book Debts ( Accounts Receivables ). At Present only a part of of the receivables are finances by the Commercial banks.


a) b) c) d)

Scheme of Financial Assistance: The Following assistance is offered by the Commercial banks: Financing of new projects in the small & medium size category. Financing of modernisation of these industries. Financing of rehabilitation of these industries Financing of import of capital Equipment.