DEPARTMENT OF TECHNICAL EDUCATION
ANDHRA PRADESH
Name : [Link]
Designation : Senior Lecturer
Branch : Commercial and Computer Practice
Institute : Government Polytechnic, Srikakulam
Year/Semester : V semester
Subject : Banking
Subject code : CCP 504(B)
Topic : Banking, types of banks
Duration : 50mts
Sub topic : Primary functions of
Commercial Banks
Teaching Aids : PPT
CCP504(B).4 1
Objectives:-
On Completion of this Topic you, would be
able to understand:
Primary Functions of Commercial Banks.
CCP504(B).4 2
Recap
There are various types of Banks which cater to the
needs of the different sectors.
The Banks are classified on the basis of their
functions, domicile and ownership.
Commercial banks are one of the various types of
banks which plays a predominant role in the
development of any country.
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Name some Banks in your locality?
Have you ever visited a Bank?
Have you observed what they will do?
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Functions of Commercial Banks
Functions of Commercial Banks are classified into 3 categories.
Functions of Commercial Banks
Primary Agency General
Functions Services Utility
Services
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Primary Functions
Accepting Deposits
Lending of Loans
Credit Creation
Promoting Cheque System
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Primary Functions
Accepting Deposits:
The first important function of a bank is to
accept deposits from the public.
To attract savings from all sorts of
individuals, the banks maintain three types
of deposits.
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Types of Deposits
Fixed Deposit Account
Saving Deposit Account
Current Deposit Account
Recurring Deposit Account
Home Safe Account
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a) Fixed Deposits
Fixed deposits are also called time deposits or
time liabilities.
In these deposits, money is deposited by the
public for a fixed period of time.
Money cannot be withdrawn before the expiry of
the fixed period.
Higher rate of interest is allowed on these
deposits.
No cheque facility is allowed on these deposits.
CCP504(B).4 9
b) Savings Deposit Account
Banks encourage thrift and mobilise savings
through these deposits.
Any ordinary individual can open a savings bank
account, who is a major.
Cheque facility is provided on these deposits.
There is restriction on the number of withdrawals
made by the customer during a given period.
Rate of interest is low when compared to fixed
deposits.
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c) Current Deposit Account
Current accounts are generally maintained by the
traders and business people.
No restrictions are imposed on the number of
withdrawals made by the customers.
No interest is paid on these deposits.
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c) Current Deposit Account (contd..)
Depositors have to pay incidental charges to the
banks for the services rendered by the bank.
Overdraft facility is provided to the customers on
these accounts.
These deposits are also called demand liabilities
or demand deposits.
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d) Recurring Deposits
Banks encourage regular savings by the public who
have fixed income.
Money is deposited by the public in monthly
installments for a fixed period.
Amount is repaid by the Banks on maturity along with
interest.
Rate of interest is nearly the same as on fixed
deposits.
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e) Home Safe Account
This scheme is also aimed at promoting savings
habit among public.
Under this scheme a safe is supplied to the
customer to keep it at home.
The customer puts his small savings and bring it to
the bank periodically.
Interest is allowed on these deposits also.
Banks credit this amount to the customers account.
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Summary
Banks perform primary functions, Agency Services
and General utility services to its customers.
Collection of deposits is an important primary
function of any bank.
The various deposits are fixed deposits, Savings
deposits, Current deposits etc.
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Quiz
1. The following is a primary function of
commercial banks
A. Purchasing Bonds
B. Selling Securities
C. Loans to Government
D. Collection of Deposits
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Quiz
Fixed deposits are also called
A. Time Liabilities
B. Demand liabilities
C. Gold
D. None
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Frequently Asked Questions
1. What is a Current Account?
3. What is a Savings Bank Account?
5. Write any four Features of Savings Bank
Account.
7. Distinguish between a Savings Account and
Current Account.
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ASSIGNMENT:
Visit any Commercial bank and ask the
procedure to open the following accounts:
4. Savings Bank Account.
5. Current Account.
6. Recurring deposit account.
7. Fixed deposit account.
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ASSIGNMENT:
2. Home safe account.
3. Fill up the account opening form.
4. Fill up the Pay-in-slip to deposit the amount in
Savings Bank Account.
CCP504(B).4 20
