Commercial Banks: Commercial Banks And The Economic growth

Commercial bank is a financial institution where people deposit money and valuable assets, get loans for commercial purposes and transact other financial related issues. The commercial banks offer variety of accounts depending on a particular bank, some of the services includes;

Types Of Savings Account Run By Commercial Banks

Savings account: This is a kind of account in commercial banks where depositors deposit their money and can make withdrawal without any prior notice to the bank. This kind of deposit account pays you interest for money deposited with the bank.

Current account: This is a kind of account where customers deposit money and this kind of account allows customers to issue Cheque and can withdraw money from their account with a prior knowledge of the bank. But with the new emerging system of banking there is no more need for prior notice before withdrawal is made. This is a service kind of account where depositor or the owner of the account is charged for every withdrawal made.

Domiciliary account: This is yet another kind of current account where customers only deposit foreign currency. This kind of account gives you access to have different account on the different currency of your choice. There is also a service charge on this kind of account operation.

The commercial banks is a system of banking that runs to make profit from loans given to corporate bodies, companies and individuals for commercial purposes. So when going for a loan in a commercial bank, be sure to pay for the interest which could be up to 20 percent depending on the amount of money involved

Some of the role of a commercial bank includes;

Giving loans to individual: one of the roles of a commercial bank includes giving loans to both individual who wants to go into business or those already in business and also company that seeks to enlarge their business scope. This is done for the purpose of making profit as every loan issued have a percentage of interest that the debtor pays at the given time.

 

Promoting industries and trade: The commercial banks help to promote trade and industries in a society. They help an emerging trade to stabilize by way of either giving loan or helping in securing their finance.

 

Helps economic growth: The most important role of a commercial bank is that they help in the growth of any given economy. They help to boost the economic growth by proper circulations of funds and money.

 

Helps to break new ground for investment: Because the commercial bank is mainly for commercial purposes they help corporate bodies and individual to break new business ground that would yield better profit.

 

Promotion of capital formation: The commercial banks promote capital formation in the society for better investment. Which means that the commercial bank helps to encourage business bodies, and individual to save their money in order to have capital formation.

 

The commercial banks helps to bring rapid growth in a country thereby giving many the chances of doing business even without initial capital start-ups in the way of loan. Most of this loan is accompanied with collateral which would be required before a loan can be issued.

The major role of a Commercial bank in general is solely for transaction of business finance and for securing valuable items of individual bodies and corporate bodies. You can also get a loan from a commercial bank by way of over drafting which is commonly known as Bank Overdraft. This is a kind of way to raise little capital for an individual who wants to raise little money for the expansion of their business. All the person needs to do is to have a certain amount of money in his or her account, then you can overdraft more than what you have which you would later pay into your account as savings but would not be credited into your account.

 

Though most of the commercial banks offer other kind of services which includes

Investment banking

Retail banking

Credit unions

Savings and loans banking

This service is done just to have a kind of one stop shop for your entire investment portfolio without leaving a particular bank.