Roles Of A Commercial Bank

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Banking refers to all the services and businesses offered by a bank. A bank is a financial institution that accepts deposits from the public and creates credit. The process of lending and all its activities is managed either directly or indirectly (by use of capital markets). Most banks in most countries are regulated due to their importance in the economic development. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In considering all the other regulations planned to guarantee liquidity, banks are usuallyfocusedon maintaining a minimum capital requirements based on an international set of capital standards, known as …show more content…

Commercial banks can also refer to a bank, or a division of a large bank, which more specifically deals with deposit and loan services provided to corporates or large-sized business - as opposed to individual members of the small business - retail banking, or merchant banks.

In countries like the United States and the UK the term "commercial bank" was often used to differentiate it from an investment bank due to differences in banking regulations.

Role of commercial banks:
The over-all role of a commercial bank is to offer financial services to thegeneral public and business, making sure that there is economic and social stability and justifiable growth of the economy.
In this respect, "credit creation" is the most noteworthy function of commercial banks. While sanctioning a loan to a customer, they do not provide cash to the borrower. As an alternative, they open a deposit account from which the borrower can withdraw. In other words, while sanctioning a loan, they automatically create deposits, known as a "credit creation from commercial banks".

Primary

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