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Main functions of commercial banks - Coggle Diagram
Main functions of commercial banks
Accept deposits
Allows money to be kept in a safe place
Types of bank account
Current account
Sometimes called demand/sight account
Easy and immediate access to money
Interest is not paid
Mainly used to receive and make payments
Deposit account
Also known as time account
Period of notice has to be given before money can be withdrawn
Interest is applied
Used for savings
Lend money
Borrowing ways
Overdraft
Allows to spend more than what is in the account
Interest is charged on amount borrowed
Relatively expensive, used to cover short-term gap between expenses and income
Loan
borrowing for a particular purpose and for a particular time period
Interest is charged on the full amount but rate of interest is lower
Customers may be asked some form of security, known as collateral
This is to ensure that if the loan is not repaid the asset given as collateral can be sold to recover the money
Enable customers to make payments
reffered to as acting as agents for payments and providing money transmission services
Payments can be received or paid through credit/debit cards or online banking