Premium Essay

Commercial Bank

In: Business and Management

Submitted By haxeeb8
Words 648
Pages 3
Commercial bank:
Commercial bank mostly deals with deposits and loans from corporations or large businesses.

Famous Commercial Banks of Pakistan are Muslim Commercial Bank(MCB),United Bank,Habib Bank.

Functions of Commercial Banks:
The functions of a commercial banks are divided into two categories:
- Primary functions
- Secondary functions including agency functions.
- Primary functions:
The primary functions of a commercial bank include:
- accepting deposits; and
- granting loans and advances

The role of commercial banks

Commercial banks engage in the following activities:

* processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or other means * issuing bank drafts and bank cheques * accepting money on term deposit * lending money by overdraft, installment loan, or other means * providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures * safekeeping of documents and other items in safe deposit boxes * sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products as a “financial supermarket” * cash management and treasury services * merchant banking and private equity financing * traditionally, large commercial banks also underwrite bonds, and make markets in currency, interest rates, and credit-related securities, but today large commercial banks usually have an investment bank arm that is involved in the mentioned activities.

Credit creation of commercial bank:
One of the important functions of commercial bank is the creation of credit. Credit creation is the multiple expansions of banks demand deposits. It is an open secret now that banks advance a major portion of their deposits to the borrowers and keep

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