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Functions of commercial and central bank

 A. Commercial banks 1. Receiving Deposits: The first and foremost function of a commercial bank is to receive or collect deposits from the public in different forms of accounts e.g. current, savings, term deposits. No interest is charged in the current account, a lower rate of interest is charged in the savings account, and comparatively higher interest rates charged in fixed deposits. Thus, commercial bank builds up customer network. 2. Accommodation of loans and advances: Commercial Bank attaches much importance to providing loans and advances at a higher rate than the deposit rates and thus earns profits on it. Working capital is accommodated to the borrower for expansion and smooth running of the business. In a similar manner, the commercial bank extends financial accommodation for the development of agriculture and industry. Credit accommodation is provided to the entrepreneurs for reviving sick and old industries as per Govt. directives. Thus, the commercial bank also exte...
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Different Types of Banks in India

Commercial banks: Commercial banks are the most important types of banks. The term ‘commercial’ carries the significance that banking is a business like any other business. In other words, commercial banks are essentially profit-making institutions. They collect deposits from the public and lend money to business firms, traders, farmers, and consumers. Commercial banks normally meet the working capital needs of trade and industry and are a part of the money market. The current account deposits of commercial banks are used as a medium of exchange, i.e., for making transactions. Deposits of other banks are not so used. These are specialized institutions that give loans to various sectors of the economy. Development banks: Development banks are parts of a country’s capital market. In India, they are called public financial institutions. They are specialized financial institutions that supply long-term finance to large and medium industries. They also perform various promotional functions ...
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Banking role in modern economy

 Banks play a very useful and crucial role in the economic life of every nation. They have control over a large part of the supply of money in circulation, and they can influence the nature and character of production in any country. 1) Removing the deficiency of capital formation In any economy, economic development is not possible unless there is an adequate degree of capital accumulation (or) formation. The deficiency of capital formation is the result of low savings made by the community. The serious capital deficiency in developing economies is reflected in the small amount of capital equipment per worker and the limited knowledge, training, and scientific advance. At this juncture, banks play a useful role. Banks stimulate savings and investment to remove this deficiency. A sound banking system mobilizes small savings of the community and makes them available for investment in productive enterprises. The important implications of this activity include Banks mobilize deposits ...
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