A commercial bank is a financial institution that provides services such as accepting deposits, giving business loans, mortgage lending, and basic investment products such as savings accounts and certificates of deposit.
The commercial bank is also called a joint-stock bank because it is organized on the lines of joint-stock companies. Features of commercial banks are as follows:
Features of Commercial Banks
- A commercial bank deals with money accepts deposits and advances short-term loans to traders.
- Its main aim is to earn profit and create demand deposits which serve as a medium of exchange.
Importance of Commercial Bank
- A commercial bank helps traders and industrialists by providing financial assistance. Its cheques and drafts are useful for large-scale trading.
- It accepts deposits from people who have a surplus amount and provides loans to investors who are in need of productive activity. Thus, they encourage savings and promote production activities by investing in them.
- It helps in the distribution of surplus capital from regions where it is abundant and transfers it to a scarce region.
- It provides concessional loans to the priority sectors such as agriculture, small-scale industry, retail trade and export.
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