Commercial Banks are the financial institution which accepts deposits from different institutions and advances loans to some other institutions.

The primary functions of a Bank are:

(a) Acceptance of Deposits: It is the most important function of a bank. According to this function, the commercial bank accepts deposits from different individuals and organizations. The bark accepts deposits from them and provides all securities to them.

(b) Making loans and advances: The second important function of bank is advancing loan. The commercial banks earn interest by lending money.

(c) investment of funds: Besides loan and advances, banks also invest a part of its funds in govt, and Industrial securities. Banks purchases both govt, and industrial securities like govt. bills, share, debentures, etc from their market.

(d) Credit Creations: The banks create credit. When a bank advances a loan, it does not give cash to the borrower. It opens an account in the name of the borrower. The borrower is allowed to withdraw money by cheque whenever he needs. This is known as Credit Creation

The secondary functions of a bank are:

(c) Agency functions: These functions are performed by the banker for its own customer. For these services, the bank charges certain commission from its customers. These functions are:

g. Remittance of funds

h. Collection and payment of credit instruments.

i. Execution of standing orders.

j. Purchase and sale of securities

k Collection of Dividend and interest

i. Income tax consultancy

(d) General Utility functions: These are certain utility functions performed by the modern commercial bank to its customer for the community. These are:

g. Safe custody of valuables.

h. Issuing letters of credit.

i. Gift Cheques 

j. Dealing in foreign exchange.

k. Credit cards 

l. Collection of statistics