Commercial Banking
A commercial bank is a type of financial intermediary which provides saving accounts, money market accounts, acceptance of time deposits and checking accounts etc. It raises funds by collecting deposits from businesses and consumers via checkable deposits, savings deposits, and time deposits. It makes loans to businesses and consumers. It also buys corporate bonds and government bonds.
A commercial bank may legally take deposits for checking and savings accounts from consumers. The typical commercial banking process is fairly straightforward. You deposit money into your bank, and the bank loans that money to consumers and companies in need of capital. You borrow to buy a house, finance a car, or finance an addition to your home. Companies borrow to finance the growth of their company or meet immediate cash needs.
Commercial banking also deals with currency exchange, providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures, lending money by overdraft, installment loan, or other means. It issues bank drafts and bank cheques. It is also engaged in sale, distribution or brokerage and similar financial products as a financial supermarket.
Companies that borrow from commercial banks can range in size from the dry cleaner on the corner to a multinational conglomerate. The commercial bank generates a profit by paying depositors a lower interest rate than the bank charges on loans. Banks work with their clients to individually determine the terms of the loans, including the time to maturity and the interest rate charged. The rates are determined through a negotiation between the bank and the company.
Thus, commercial banks help you in many ways to bring an ease and convenience in your financial transactions.