DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : G.Rajeswari
Designation : Senior Lecturer
Branch : Commercial and Computer Practice
Institute : Government Polytechnic, Srikakulam
Year/Semester : V semester
Subject : Banking
Subject code : CCP 504(B)
Topic : Banking, types of banks
Duration : 50mts
Sub topic : Primary functions of
Commercial Banks
Teaching Aids : PPT
CCP504(B).4 1
 Objectives:-

On Completion of this Topic you, would be

able to understand:

 Primary Functions of Commercial Banks.

CCP504(B).4 2
Recap
 There are various types of Banks which cater to the
needs of the different sectors.
 The Banks are classified on the basis of their
functions, domicile and ownership.
 Commercial banks are one of the various types of
banks which plays a predominant role in the
development of any country.

CCP504(B).4 3
 Name some Banks in your locality?

 Have you ever visited a Bank?

 Have you observed what they will do?

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 Functions of Commercial Banks

Functions of Commercial Banks are classified into 3 categories.

Functions of Commercial Banks

Primary Agency General

Functions Services Utility
Services

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Primary Functions
 Accepting Deposits

 Lending of Loans

 Credit Creation

 Promoting Cheque System

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 Primary Functions
Accepting Deposits:

 The first important function of a bank is to

accept deposits from the public.

 To attract savings from all sorts of

individuals, the banks maintain three types
of deposits.
CCP504(B).4 7
Types of Deposits

 Fixed Deposit Account

 Saving Deposit Account

 Current Deposit Account

 Recurring Deposit Account

 Home Safe Account

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a) Fixed Deposits
 Fixed deposits are also called time deposits or
time liabilities.

 In these deposits, money is deposited by the

public for a fixed period of time.

 Money cannot be withdrawn before the expiry of

the fixed period.

 Higher rate of interest is allowed on these

deposits.

 No cheque facility is allowed on these deposits.

CCP504(B).4 9
b) Savings Deposit Account
 Banks encourage thrift and mobilise savings
through these deposits.
 Any ordinary individual can open a savings bank
account, who is a major.
 Cheque facility is provided on these deposits.
 There is restriction on the number of withdrawals
made by the customer during a given period.
 Rate of interest is low when compared to fixed
deposits.

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c) Current Deposit Account
 Current accounts are generally maintained by the
traders and business people.
 No restrictions are imposed on the number of
withdrawals made by the customers.
 No interest is paid on these deposits.

CCP504(B).4 11
c) Current Deposit Account (contd..)
 Depositors have to pay incidental charges to the
banks for the services rendered by the bank.
 Overdraft facility is provided to the customers on
these accounts.
 These deposits are also called demand liabilities
or demand deposits.

CCP504(B).4 12
d) Recurring Deposits
 Banks encourage regular savings by the public who
have fixed income.

 Money is deposited by the public in monthly

installments for a fixed period.

 Amount is repaid by the Banks on maturity along with

interest.

 Rate of interest is nearly the same as on fixed

deposits.

CCP504(B).4 13
e) Home Safe Account
 This scheme is also aimed at promoting savings
habit among public.

 Under this scheme a safe is supplied to the

customer to keep it at home.

 The customer puts his small savings and bring it to

the bank periodically.

 Interest is allowed on these deposits also.

 Banks credit this amount to the customers account.

CCP504(B).4 14
Summary

 Banks perform primary functions, Agency Services

and General utility services to its customers.

 Collection of deposits is an important primary

function of any bank.

 The various deposits are fixed deposits, Savings

deposits, Current deposits etc.

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 Quiz

1. The following is a primary function of

commercial banks

A. Purchasing Bonds
B. Selling Securities
C. Loans to Government
D. Collection of Deposits

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 Quiz

 Fixed deposits are also called

A. Time Liabilities
B. Demand liabilities
C. Gold
D. None

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 Frequently Asked Questions
1. What is a Current Account?

3. What is a Savings Bank Account?

5. Write any four Features of Savings Bank

Account.

7. Distinguish between a Savings Account and

Current Account.

CCP504(B).4 18
ASSIGNMENT:

Visit any Commercial bank and ask the

procedure to open the following accounts:

4. Savings Bank Account.

5. Current Account.
6. Recurring deposit account.
7. Fixed deposit account.

CCP504(B).4 19
ASSIGNMENT:

2. Home safe account.

3. Fill up the account opening form.
4. Fill up the Pay-in-slip to deposit the amount in
Savings Bank Account.

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