What are the Functions, Characteristics and Objectives of Commercial Banks?


Welcome to this post, here we will explain what are the functions, characteristics and objectives of commercial banks. But before we will give you a basic concept about what is a commercial bank, thus in this way have extensive knowledge.

What is a commercial bank?

A commercial bank is a financial institution that aims to work in the economic area, being a commercial intermediary. This means that a commercial bank collects deposits from the public area, directing these resources to obtain credit and benefit assignments.

In short the commercial banking activity receives capital of people and companies who want to save, raising funds that are later used for loans. These types of banks generate income due to the interest that they establish for the services rendered or granted to their clients.

Functions performed by a commercial bank

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The conventional operations of a commercial bank go through the starting and maintaining savings or checking accounts. Let’s look at some of the main or fundamental functions that these types of financial institutions carry out in the commercial field of people and companies.

  • Serial management of operations and transfers of the house or home; in particular direct debits of payments.
  • Tax collection operations or official fees.
  • Dissemination of checks and equivalents.
  • Management of user and customer deposits.
  • Granting of loans and credits in order to generate profits.
  • Commodification of various economic products, such as bonuses, insurance and investment projects.
  • Deposits of valuable objects and safekeeping of important documents.

operations of a commercial bank

  • Intervention of purchase and sale of foreign currencies.
  • It is a mediation component between supply and demand of financial merchandise.

Currently, commercial banks have increased in the virtual field, that is, technological advances in the network allow banks to exist in an online context.

Characteristics of a commercial bank

Next we will show you the characteristics that a commercial bank has in the following scheme, it is written in a simple way for you.

  • A commercial bank is categorized as a financial-type body.
  • A commercial body provides financial products that are linked to the user or customer.
  • Commercial banks exist in two different modalities both public and private.
  • They are for-profit organizations to acquire benefits, which differ from institutions that only offer help in a solitary way.
  • These banks work through payment of fees and interest rates.
  • As a general rule, commercial banks are privately owned in a private group, and they work with the objective of being shareholders.
  • Commercial exchange banks hold a greater core in the provision of products and business-level benefits.
  • Commercial banks earn financial funds through the purchase of products, services, and loans by customers who join the bank.
  • These banks have and provide financial security and safeguard customer money.

As you can see, these are the main characteristics of a commercial bank, now we will explain to you what are the objectives pursued by these financial entities.

Objectives of commercial banks

The objectives set by commercial banking entities are important for proper operation, here we show you the objectives they present.

main objectives of a commercial bank

  • Obtaining savings.
  • Promote credits.
  • Generate benefits such as bonuses and benefits.
  • Promote the institution as a service company.
  • Deposits
  • Rate assistance.
  • Generate money flows.
  • Risk management.

Importance of commercial banks

Commercial banks have a relevance in the commercial area and they are a key factor in keeping the money running smoothly. Extending its basic operations to areas such as families and companies, becoming a useful tool to manage the economy of both sectors.

Secondly, these benches serve as a bridge so that many companies and businesses can carry out projects through its financing. If this management did not exist, many plans could not be carried out and achieve their objective, so it plays a fundamental role.

Finally, we hope that this article will be very helpful to you when it comes to understanding the functions, characteristics and objectives of a commercial bank.

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