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Commercial banks (examples of commercial banks in Vietnam (Orient…
Commercial banks
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Definitions
A commercial bank is a type of financial institution that accepts deposits; offers checking account services; makes business, personal and mortgage loans; and offers basic financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses
example
A commercial bank may specialize in just one or a few types of loans. Customer deposits, such as checking accounts, savings accounts, money market accounts and CDs, provide banks with the capital to make loans. Customers who deposit money into these accounts effectively lend money to the bank and are paid interest
Primary function
The public deposits are used by commercial banks for the purpose of granting loans to individuals and businesses. Commercial banks grant loans in the form of overdraft, cash credit, and discounting bills of exchange. (b) Secondary Functions: Refer to crucial functions of commercial banks
Accepting deposit
Accepting deposits is the most important function of a commercial bank. The bank borrows money from the public by way of accepting different kinds of deposits. They are repayable on demand. Generally banks accept the following types of deposits:
Making advances
Making advances
Demand Loan
In a demand loan account, the entire amount is paid to the debtor at one time, either in cash or by transfer to his savings bank or current account.
Overdraft
An overdraft is a fluctuating account wherein the balance sometimes may be in credit and at other times in debit. Overdraft facilities are allowed in current accounts only.
Credit creation
money supplied by commercial banks is called credit money. Commercial banks create credit by advancing loans and purchasing securities. They lend money to individuals and businesses out of deposits accepted from the public.
Secondary function
The public deposits are used by commercial banks for the purpose of granting loans to individuals and businesses. Commercial banks grant loans in the form of overdraft, cash credit, and discounting bills of exchange.Secondary Functions: Refer to crucial functions of commercial banks.