The commercial banks play a critical role in the economy and the financial system of any country. The banks are crucial when it comes to saving and moving money. It facilitates the movement of money between various parties. To enjoy individual banking services, you might be required to be a client of a given bank. Let us look in-depth some of the essential banking functions and services.
One of the primary roles of the banks is accepting deposits. This is one of the standard services in the banking sector. The deposits that are made to the banks come in various forms. Some of the examples of the deposits that are made to the banks include the saving deposits, fixed deposits, current deposits, and recurring deposits. Some of the deposits are made by account holders whereas the non-account holders make the others.
Banks also help their customers to save through the saving accounts. The savings of the customers are critical because these are some of the things that put the bank afloat. The saving account is suitable for the salaried individuals and people who earn on a regular basis. The interest rate on the saving accounts is typically low. Depending on the bank, the withdrawals of the deposits are usually subject to specific restriction.
Banks also offer the fixed deposits to its customers. For fixed deposits, the customers are not allowed to withdraw their cash until the end of a given period. The fixed deposit accounts usually have a higher rate as compared to the other types of accounts. The withdrawals are strictly prohibited in these accounts until the end of the maturity period. If you have extra cash that you would want it to earn interest then consider opening a fixed deposit account.
Another essential function of the banks is that it offers remittance services. Services like the mail transfers, sending online remittances, and the issue of the demand drafts.
Loans and advances
Giving loans and advances is another vital role that is played by the banks. The banks issue loans to the deserving customers and charge them with a higher interest. In fact, when we consider how banks make money, most of them are usually through the loans and advances. Examples of the loans and advances that are issued by the banks include overdrafts, cash credits, loans, and the bill of exchange.