Changes in the Concept of Lending by Commercial
Lovely Professional University
Lovely School of Management
Term Paper of Financial Institution and Services
Topic: Changes in the concept of lending by commercial banks
Submitted to: Submitted by:
Mr.Anoop Mohanty Ravi Rai
RS1804A19
Introduction of commercial banks
Commercial banks are the banks which deal primarily in dealing with accepting deposits and lending loans to the large corporation or retail customers.
Categorization of commercial banks:
[pic]
Functions of Commercial Banks
The functions of commercial banks are divided into two categories:
I) Primary functions, and
ii) Secondary functions including agency functions.
I) Primary functions:
The primary functions of a commercial bank include:
a) Accepting deposits; and
b) Granting loans and advances;
a) Accepting deposits
The most important activity of a commercial bank is to mobilize deposits from the public. People who have surplus income and savings find it convenient to deposit the amounts with banks. Depending upon the nature of deposits, funds deposited with bank also earn interest. Thus, deposits with the bank grow along with the interest earned. If the rate of interest is higher, public are motivated to deposit more funds with the bank. There is also safety of funds deposited with the bank.
b) Grant of loans and advances
The second important function of a commercial bank is to grant loans and advances. Such loans and advances are given to members of the public and to the business community at a higher rate of interest than allowed by banks on various deposit accounts. The rate of interest charged on loans and advances varies depending upon the purpose, period and the mode of repayment. The difference between the rate of interest allowed on deposits and the rate charged on the
Lovely School of Management
Term Paper of Financial Institution and Services
Topic: Changes in the concept of lending by commercial banks
Submitted to: Submitted by:
Mr.Anoop Mohanty Ravi Rai
RS1804A19
Introduction of commercial banks
Commercial banks are the banks which deal primarily in dealing with accepting deposits and lending loans to the large corporation or retail customers.
Categorization of commercial banks:
[pic]
Functions of Commercial Banks
The functions of commercial banks are divided into two categories:
I) Primary functions, and
ii) Secondary functions including agency functions.
I) Primary functions:
The primary functions of a commercial bank include:
a) Accepting deposits; and
b) Granting loans and advances;
a) Accepting deposits
The most important activity of a commercial bank is to mobilize deposits from the public. People who have surplus income and savings find it convenient to deposit the amounts with banks. Depending upon the nature of deposits, funds deposited with bank also earn interest. Thus, deposits with the bank grow along with the interest earned. If the rate of interest is higher, public are motivated to deposit more funds with the bank. There is also safety of funds deposited with the bank.
b) Grant of loans and advances
The second important function of a commercial bank is to grant loans and advances. Such loans and advances are given to members of the public and to the business community at a higher rate of interest than allowed by banks on various deposit accounts. The rate of interest charged on loans and advances varies depending upon the purpose, period and the mode of repayment. The difference between the rate of interest allowed on deposits and the rate charged on the