Question

What functions do commercial banks serve in a modern economy? Explain

Answer 1

Any financial institution such as commercial bank has a function to facilitate allocate funds from savers to borrower.

Two primary function of commercial banks are:

Collecting deposits - People with access funds, save in banks and receive interest on the amount funds.

Making loans - People in need of funds, borrow from banks and pay interest on it. The rate of interst in savings account is less than rate of interest in loan account.

Apart from this commercial bank in today's time provides general utility services such as ATM's, cards, safeguarding money and valuables etc.

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