Commercial Banks

Banks have been known as organizations that provide services by receiving deposits and use these for funding revenue-generating assets. They are not just mere institutions that would only receive cash or cash equivalents for deposits and place them for safe-keeping. They could also function as an intermediary between the depositors that provide funds and to the debtors that use the funds for businesses or other purposes. They can perform foreign currency trading as well as trading securities. They can extend loans and profit from it through the accompanying loan interest. They can also perform other transactions aside from deposits and credit loans.

Banks can be of different types. Commercial bank, investment bank and savings bank are some of the types of banking institutions. The commercial bank is functioned typical to a bank. It can accept cash and check deposit account where depositors can deposit in cash or check items. Other transactions that can possibly be made in a commercial banking institution are cash withdrawals of depositor; promotion, acceptance and extension of loans; and fund transfer that can involve checks drawn from other banks.

Commercial banks can also provide services including the promotion, application and processing of credit cards. They can also administer the credit card accounts.

Commercial banks can also involve in trading particularly in foreign currency exchange. They can set the rates of specific foreign currencies for buying and selling to interested clients although the rates have been based from the world foreign exchange market. Foreign exchange rates set by commercial banks may equal to or slightly lesser than the current rates in foreign exchange market. But normally, banks may set rates lower than the current exchange rates in the market to produce a gain from the transaction.

Apart from the check deposit, commercial banks may also provide other deposit accounts such as savings and time deposits. The savings deposit normally involves the usual cash deposits. Savings account depositors do not usually hold checks dissimilar to checking account depositors although they can deposit in their accounts on checques. Interest rates may be earned out from the savings deposits; however, they may have to make regular deposits to maintain their accounts active.

On the other hand, time deposits are good options for those who wish to earn higher interest. The interest rates in this kind of deposit can be as high as 10% or higher than that depending on the offers of various commercial banks. However, there may be limitations as to the period in which the depositors may decide to withdraw some amounts out from their deposits. As opposed to the savings deposits in which depositors can make deposits and cash withdrawals anytime as the banking transactions are open and online, time deposits can have certain dates for withdrawal as set and agreed by the bank officer and depositor.

Furthermore, some banking transactions have been further with the use of modern technology. ATM’s and electronic banking are among the recent commercial banking trends. Commercial banks have provided more convenient way in serving their depositors through the automated teller machine. Even if the bank is closed, depositors can make withdrawals from an open ATM. An ATM card provided by the bank is the medium of banking transaction. Some ATM’s can enable depositors to make deposits.

On the other hand, online banking can provide more convenient ways to depositors in making fund transfer from one account to another. The nature of the transaction can have restrictions because of confidentiality and for security reasons.

Commercial banks can also involve in investment transactions. They can buy bonds from corporations and government and can also associate in the purchasing and marketing of securities. The funds receive by banks from the deposits have been considered as liabilities to them. Meanwhile, the assets they have can include receivables from loans and bonds.

Different commercial banks can have various modes of transactions. However, commercial banks basically functions for cash deposits and granting loans. They have been regarded the first option for applying a loan.