Commercial Banking

Prepared By:
M2020 – Jeemol Raji Oommen
M2021 – Jidnyasa Darne
 What is Commercial Bank?
• Financial institution which accepts deposits from the public
•Gives loans for the purposes of consumption and investment to
make profit.
•Commercial banks include private sector banks and public
sector banks.
• Accepting Deposit • Acts as an agent
• Providing Loans • Overdraft
and Advance Facility
• Credit Creation • Discounting bill
of exchange
• Provides Locker
facility
• Issues traveler
Cheque
 Primary Function
1. Accepting Deposits – Commercial banks accept deposits from their customers.

Types of Deposits:
• Savings Deposits –These deposits are preferred by individuals with a fixed income,
utilized to create savings over time.
• Fixed Deposits – Fixed deposits come with a predetermined lock-in period. Fixed
deposits are also referred to as time deposits as the funds are deposited for a
specific time frame.
• Current Deposits – Current deposits allow account holders to deposit and withdraw
money whenever necessary.
 Primary Functions
2. Providing Loans – provides credit to organizations and individuals, and profit
from the earned interest.
• Commercial banks provide both secured and unsecured loans, categories are-
 Cash Credit –include extending advances to individuals and organizations
against bonds, inventories, and other types of securities.
 Short-Term Credits –offering a smaller loan amount and repayment tenor.
These are also referred to as personal loans.

3. Credit Creation – A unique function of commercial banks is credit creation.

Instead of offering liquid cash, banks create a line of credit and transfer the loan to
a business or commercial body all at once.
 Secondary Function
1. Providing locker Facilities – Commercial banks provide locker facilities to
customers who want to store valuables safely.

2. Dealing in Foreign Exchange – Commercial banks help provide foreign exchange

to individuals and organizations which export or import goods from overseas.

3. Exchange of Securities –trade in bonds and securities. Customers can purchase

or sell the units from the financial institution itself, which offers more convenience
than alternate approaches.
 Secondary Functions
4. Discounting Bills of Exchange – The main function of a commercial bank in today’s date is to discount
bills of businesses. Bill discounting is considered as a profitable investment for banks. Bills create a
steady flow of funds, while not becoming a risky venture during payment as it is considered as a
negotiable instrument. These also do not involve the financial institution in any litigation. 

5. Bank as an Agent – Commercial Bank and its Function also requires them to provide finance-related
services to customers, fulfilling the role of an agent. These services usually include – 
• Acting as an administrator, trustee, or executor of a customer-owned estate.
• Assisting customers with tax returns, tax refunds, and other similar tasks.
• Serving as a platform to pay premiums, repay loan instalments, etc.
• Offering a platform for electronic transaction of funds, processing of cheques, drafts, bills, etc.
Types of Commercial Bank
 Public Sector Bank
• These are banks where majority stake is held by government
of India or Reserve Bank of India
• Examples of Public Sector Banks – State Bank of India , Bank
of Baroda , Punjab National Bank
 Private Sector Bank
• Majority of share capital of the Bank is held by private
individuals
• These Banks are registered as companies with Limited
Liability.
 Foreign Bank
• These Banks are registered and have their Headquarter in a
Foreign Country but operate their branch in our Country
• Foreign Bank operating in our Country – The Hongkong and
Shanghai Banking Corporation Limited , Citi Bank , American
Express Bank.
Thank You
Quiz
Q1. A type of institution that offers basic financial products.

A) Rural Bank
B) Commercial Bank
C) Public Bank
D) Bank of Commerce
Q1. A type of institution that offers basic financial products.

A) Rural Bank
B) Commercial Bank
C) Public Bank
D) Bank of Commerce
 Q2. Which kind of deposits can be easily withdrawn by
individuals without any prior notice to the bank?

A) Current Account Deposit

B) Saving Deposit
C) Fixed Deposit
 Q2. Which kind of deposits can be easily withdrawn by
individuals without any prior notice to the bank.

A) Current Account Deposit

B) Saving Deposit
C) Fixed Deposit
 Q3. SBI Belong to which type of Bank?

A) Foreign Bank
B) Private Sector Bank
C) Public Sector Bank
 Q3. SBI Belong to which type of Bank?

A) Foreign Bank
B) Private Sector Bank
C) Public Sector Bank
Q4.______________ are Financial institution registered as companies
with Limited Liability

A) Private Sector bank

B) Non Scheduled Bank
C) Foreign Bank
Q4.______________ are Financial institution registered as companies
with Limited Liability

A) Private Sector bank

B) Non Scheduled Bank
C) Foreign Bank
 Q5. Which is not a Primary Function of Commercial Bank?

A) Accepting Deposit
B) Providing Loans
C) Providing Locker Facility
 Q5.Which is not a Primary Function of Commercial Bank

A) Accepting Deposit
B) Providing Loans
C) Providing Locker Facility
Q6. Commercial banks provide locker facilities to its customers
for safe keeping of?

A) Debentures
B) Jewelry
C) Shares
D) All of the Above
Q6. Commercial banks provide locker facilities to its customers
for safe keeping of?

A) Debentures
B) Jewelry
C) Shares
D) All of the Above
 Q7. Short term loan also referred as _______

A) Personal Loan
B) Exchange of security
C) Bills of Exchange
 Q7. Short term loan also referred as _______

A) Personal Loan
B) Exchange of security
C) Bills of Exchange
Q8. Foreign Banks are registered and have their Headquarter in a Foreign
Country but operate their branch in our Country

A) True
B) False
Q8. Foreign Banks are registered and have their Headquarter in a Foreign
Country but operate their branch in our Country

A) True
B) False
Q9. ________is considered as a profitable investment for
banks

A) Bills Receivable
B) Bills Discounting
C) Bills Payable
Q9. _______ is considered as a profitable investment for
banks

A) Bills Receivable
B) Bills Discounting
C) Bills Payable
Q10 . Which banks operate under guidelines of Central
Bank

A) Public Sector Bank

B) Private Bank
C) ICICI Bank Ltd
Q10 . Which banks operate under guidelines of Central
Bank

A) Public Sector Bank

B) Private Bank
C) ICICI Bank Ltd