What is Commercial Bank? Definition of Commercial Bank, Commercial Bank Meaning - The Economic Times (2024)

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What is Commercial Bank? Definition of Commercial Bank, Commercial Bank Meaning - The Economic Times? ›

A commercial bank is a financial institution that provides services like loans, certificates of deposits, savings bank accounts bank overdrafts, etc. to its customers. These institutions make money by lending loans to individuals and earning interest on loans.

What is Commercial Bank? A commercial bank is a kind of financial institution that carries all the operations related to deposit and withdrawal of money for the general public, providing loans for investment, and other such activities. These banks are profit-making institutions and do business only to make a profit.

Commercial bank. financial institution that offers checking accounts, demand deposits, business and personal loans, savings vehicles and a variety of other related financial services.

The term commercial bank refers to a financial institution that accepts deposits and offers different banking and financial products. Commercial banks provide these services to people and businesses.

Commercial banks give loans, take deposits, and provide other account and banking services for their customers. These banks also offer services to small and medium-sized businesses, such as business loans and lines of credit.

Large global banks often provide commercial, retail, and investment banking services through different divisions. The three largest commercial banks in the U.S., according to the Federal Reserve, are JPMorgan Chase (JPM -0.67%), Bank of America (BAC 0.61%), and Citigroup (C -0.11%).

A bank is a financial institution licensed to receive deposits and make loans. There are several types of banks including retail, commercial, and investment banks. In most countries, banks are regulated by the national government or central bank.

Commercial banks are also called 'Joint stock banks' because they are organised in a manner similar to joint stock companies.

The general role of commercial banks is to provide financial services to the general public and business, ensuring economic and social stability and sustainable growth of the economy. In this respect, credit creation is the most significant function of commercial banks.

One of the primary functions of a commercial bank is accepting deposits, allowing customers to deposit and save money. One of the primary functions of a commercial bank is making advances, which allows customers to borrow money (loans, overdrafts, mortgages, credit cards).

What is the difference between a bank and a commercial bank? ›

Central bank can be called the apex bank, which is responsible for formulating the monetary policy of an economy. Commercial banks, on the other hand, are those banks that help in the flow of money in an economy by providing deposit and credit facilities.

Only a small portion of your deposits at a bank are actually held as cash at the bank. The rest of your money (the majority of the bank's assets) is invested by the bank into vehicles such as consumer or business loans, government bonds and credit cards. Borrowers have to pay the bank back with interest.

Banks create money when they lend the rest of the money depositors give them. This money can be used to purchase goods and services and can find its way back into the banking system as a deposit in another bank, which then can lend a fraction of it.

Under the umbrella of banking and finance, the industry has commercial banks—which are consumer facing like Bank of America—as well as central banks—the government entities that regulate the industry and manage monetary policy.

Commercial Banks can be further classified into public sector banks, private sector banks, foreign banks and Regional Rural Banks (RRB). On the other hand, cooperative banks are classified into urban and rural.

The key difference between retail and commercial banking is who the products are designed for. While retail banks service individuals, communities, small businesses, and families, commercial banks focus on larger companies, government entities, and institutions.

Commercial Banks can be further classified into public sector banks, private sector banks, foreign banks and Regional Rural Banks (RRB). On the other hand, cooperative banks are classified into urban and rural. Apart from these, a fairly new addition to the structure is a payments bank.

Commercial banking is another name for corporate banking, which offers banking services to businesses, governments, and other institutions. While retail banking offers its services to people for personal use, commercial banking serves institutions.