Q.Explain the primary functions of a commercial bank.

Everything else a commercial bank offers is built on top of two core activities that define it as a bank in the first place.

Deposits give the bank the funds it needs, while the different forms of lending are how it puts those funds to productive use and earns its interest margin.

A commercial bank's primary functions are the two core activities without which it would not be a bank at all: accepting deposits and advancing loans.

Accepting deposits takes four common forms: a current account, mainly for businesses needing frequent, largely unrestricted deposits and withdrawals, usually paying little or no interest; a savings account, for individuals saving part of their income while keeping funds reasonably accessible, paying modest interest; a fixed deposit account, where a lump sum is locked in for a fixed period at the highest interest rate among these options; and a recurring deposit account, where a fixed smaller sum is deposited at regular intervals.

Advancing loans also takes several forms: cash credit, where a limit is sanctioned against security and interest is charged only on the amount actually drawn; an overdraft, allowing a current-account holder to withdraw beyond the balance up to an agreed limit for short-term needs; term loans, a lump sum sanctioned for a stated purpose and period, repayable with interest; and discounting of bills of exchange, where the bank buys a bill before its due date at a discount, giving the holder immediate cash.

Split the answer into the deposits side and the loans side, giving all sub-types under each with a one-line distinguishing feature.

Do not confuse cash credit with an overdraft — cash credit is a separate credit account against security, while an overdraft is drawing beyond the balance in an existing current account.