What are function of commercial banks

1. It accepts deposits. A commercial bank accepts deposits in the form of current, saving and fixed deposits. It collects the surplus balance of the individuals and firms and finances the temporary needs of commercial transactions. The first task is, therefore, the collecting of the savings of the public. This the bank does by accepting deposits from its customers. Deposits are lifeline of banks. Deposits are of 3 types as under.
(i) Current account deposits. Such deposits are payable on demand and are therefore, called demand deposits. These can be withdrawn by the depositors any number of times depending upon the balance in the account. The bank does not pay any interest on these deposits but provides cheque facilities. These accounts are generally maintained by businessmen and industrialists who receive and make business payments of large amounts through cheques.
(ii) Fixed deposits (Time deposits). Fixed deposits have a fixed period to maturity and are referred to as time deposits. These are deposits for a fixed term, i.e., period of time ranging from a few days to a few years. These are neither payable on demand nor they enjoy cheque facilities. They can be withdrawn only after the maturity of the specified fixed period. They carry higher rate of interest. They are not treated as a part of money supply. Recurring deposit in which a regular deposit of an agreed sum is made is also a variant of fixed deposits.
(iii) Saving account deposits. These are deposits whose main objective is to save. They combine the features of both current account and fixed deposits. They are payable on demand and also withdrawable by cheque. But bank gives this facility with some restrictions, e.g., a bank may allow five or seven cheques in a month. Interest paid on saving account deposits is lesser than that of fixed deposit.