Describe the functions of modern commercial banks.

Functions of Modern Commercial Banks

1. Accepting Deposits:

• Current Account: Banks offer current accounts to individuals and businesses for regular transactions. These accounts typically do not earn interest but offer facilities such as overdrafts.
• Savings Account: Savings accounts are used by individuals to save money and earn interest on their deposits. These accounts have restrictions on withdrawals and often require a minimum balance.

2. Providing Loans and Advances:

• Personal Loans: Banks provide personal loans to individuals for various purposes such as education, medical emergencies, or buying consumer durables.
• Business Loans: Banks offer business loans to entrepreneurs and businesses for starting or expanding their operations.
• Housing Loans: Banks provide housing loans to individuals for purchasing or constructing homes. These loans have longer tenures and lower interest rates compared to other loans.

3. Credit Creation:

• Banks create credit by lending out a portion of the deposits they receive. This process helps stimulate economic activity by providing funds for businesses and individuals to invest and spend.

4. Payment Services:

• Banks offer a range of payment services, including issuing checks, providing debit and credit cards, and facilitating online and mobile banking transactions. These services make it easier for customers to make payments and manage their finances.

5. Investment Banking:

• Commercial banks also engage in investment banking activities, such as underwriting securities, providing advisory services for mergers and acquisitions, and managing investment portfolios for clients.

6. Foreign Exchange Services:

• Banks offer foreign exchange services, including currency exchange, international money transfers, and hedging services to help businesses manage their exposure to foreign exchange rate fluctuations.

7. Safe Custody Services:

• Banks provide safe custody services for valuable items such as jewelry, documents, and securities. Customers can rent a safe deposit box at the bank to store these items securely.

8. Wealth Management:

• Banks offer wealth management services to high-net-worth individuals, including investment advice, portfolio management, and estate planning.

9. Electronic Banking Services:

• Banks provide electronic banking services, such as internet banking, mobile banking, and ATM services, to offer customers convenient access to their accounts and transactions.

10. Government Banking:

- Banks act as bankers to the government, managing government accounts, facilitating government transactions, and participating in government borrowing and lending activities.

Conclusion:
Modern commercial banks play a crucial role in the economy by providing a wide range of financial services to individuals, businesses, and governments. Their functions have evolved over time to meet the changing needs of customers and the economy, making them an essential part of the financial system.