FAQs on Functions of Commercial Bank Video Lecture - Business Economics for CA Foundation
1. What are the functions of a commercial bank? |
|
Ans. Commercial banks perform several important functions in an economy, including:
- Accepting deposits: Commercial banks allow individuals and businesses to deposit their money, which can be withdrawn at any time.
- Granting loans: Commercial banks provide loans to individuals and businesses for various purposes such as purchasing a house, starting a business, or funding education.
- Issuing credit cards: Commercial banks issue credit cards that allow individuals to make purchases on credit, which is later repaid to the bank.
- Providing financial services: Commercial banks offer a wide range of financial services such as foreign exchange, investment advisory, wealth management, and insurance.
- Facilitating payments: Commercial banks enable the transfer of funds between individuals and businesses through various payment methods such as checks, electronic transfers, and mobile banking.
2. How does a commercial bank accept deposits? |
|
Ans. Commercial banks accept deposits through different channels, including:
- Opening savings and current accounts: Individuals and businesses can open savings and current accounts with a commercial bank by submitting necessary identification documents and completing the account opening process.
- Accepting cash deposits: Individuals can deposit cash directly at the bank's branch counter by filling out a deposit slip.
- Accepting check deposits: Individuals and businesses can deposit checks received from others into their bank accounts by submitting the checks along with a deposit slip.
- Accepting electronic transfers: Individuals and businesses can transfer funds electronically to their bank accounts from other banks or through online payment systems.
- Accepting standing instructions: Individuals can set up standing instructions to deposit a fixed amount into their bank accounts periodically, such as monthly salary credits.
3. What are the benefits of taking a loan from a commercial bank? |
|
Ans. Taking a loan from a commercial bank offers several benefits, including:
- Access to funds: Commercial banks provide individuals and businesses with the necessary funds to fulfill their financial needs, such as buying a house, starting a business, or funding education.
- Flexible repayment options: Commercial banks offer various repayment options, allowing borrowers to choose a repayment schedule that suits their financial capabilities.
- Competitive interest rates: Commercial banks often offer competitive interest rates on loans, which can be lower than borrowing from other sources such as private lenders or credit card companies.
- Credit history improvement: Timely repayment of a loan from a commercial bank helps establish a positive credit history, making it easier to obtain credit in the future.
- Additional services: While taking a loan, commercial banks may provide additional services like insurance coverage, flexible overdraft facilities, or credit card offers.
4. How can commercial banks facilitate international transactions? |
|
Ans. Commercial banks facilitate international transactions through the following methods:
- Foreign exchange services: Commercial banks provide foreign exchange services, allowing individuals and businesses to convert one currency into another for international transactions.
- Letters of credit: Commercial banks issue letters of credit, which serve as a guarantee of payment to foreign suppliers on behalf of their customers. This helps mitigate the risk of non-payment in international trade.
- International wire transfers: Commercial banks facilitate international wire transfers, enabling individuals and businesses to send and receive funds across borders securely.
- Trade finance: Commercial banks offer trade finance services such as export financing, import financing, and documentary collections to support international trade transactions.
- International payment cards: Commercial banks issue international payment cards, such as credit cards or debit cards, which can be used globally for making purchases or withdrawing cash.
5. How do commercial banks provide financial services? |
|
Ans. Commercial banks provide financial services through various means, including:
- Investment advisory: Commercial banks offer investment advisory services, providing individuals and businesses with guidance on investment opportunities and strategies based on their financial goals and risk tolerance.
- Wealth management: Commercial banks provide wealth management services, helping high-net-worth individuals manage and grow their assets through investment planning, financial planning, and estate planning.
- Insurance services: Commercial banks offer insurance services, including life insurance, health insurance, property insurance, and other types of coverage to protect individuals and businesses from financial losses.
- Retail brokerage: Commercial banks may have a retail brokerage division that allows individuals to buy and sell stocks, bonds, mutual funds, and other securities.
- Retirement planning: Commercial banks assist individuals in planning for retirement by offering retirement savings products such as individual retirement accounts (IRAs) and annuities.