what is the function of commercial banking ?

Primary functions of a bank

The primary functions are the main functions of commercial banks. It includes (1.) Accepting deposits (2) Advancing loans and (3) Transferring bank deposits. 

1. Accepting Deposits: The most important functions of commercial bank is that of accepting deposits. Deposits are broadly classified primary deposits like fixed deposits, current deposits and saving deposits. Derived deposits are those deposits which banks secure when it gives loans to its customers. 
   
   • Fixed deposits or time deposits: - In the case of fixed deposits banks pay money after the expiry of fixed period with the predetermined interest. Money is accepted by banks for a specific period say one, two five or more years Money cannot be withdrawn before the expiry of the period and interest rate is usually high for such deposits
   • Current or demand deposit:-Businessmen keep their money as current deposit on which no interest is paid by the bank. This can be withdrawn at any time without any notice by using cheques. So they are known as current deposits. 
   • Savings deposits.:- Savings deposits belong to small savers and middle class people. They stand midway between current deposits and fixed deposits. The rate of interest to them is less than that is allowed to fixed deposits. Some restrictions are also imposed on the withdrawals of savings deposits.
2. Advancing Ioans:-Another important function performed by commercial bank is the granting of loans to its customers. The money accepted commercial banks from its customers are used to give loans at slightly higher rates of interest. The difference between the lending rate and the deposit rates constitute the margin of profit for the banks. 
   The following are the principal types of loans advanced by commercial banks. 
   
   • Loans and advances:-Advances are granted for short periods to customers while loans are granted for longer periods against security like gold, property or other valuables. 
   • Cash credit:- The bank advances loans to manufacturers and businessmen against certain specific securities like raw materials or finished products.
3. Transferring bank deposits:Commercial banks transfer money from one name to another in the same place or another place. Suppose a person in Chennai wants to make a payment to another person in Trivandrum he may send his cheques or bank draft to the person in Trivandrum.