Business Activity: Centralized Financial institutions focus on Commercial Banks by @swaylee

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Greetings Everyone,
Today we would be looking at a very common concept around the world both in the towns, villages, rural of urban areas. Commercial banks have helped alot of people especially when it comes to borrowing, storing and saving money so today we would be using this post to both learn about them and appreciate them. In this post we would be looking at what they are, types of accounts one can create on them and their functions. Let's dive in.

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Commercial Banks

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Commercial Banks can simply be defined by their key functions. As someone who has gone into a commercial bank, you see a queue of people who want to perform numerous transactions especially making deposits or withdrawals.

Commercial Banks can be defined as a financial institution which promotes saving by accepting deposits of valuables by the public which they use to give loan out to interested members of the public for interest. These deposits made by the public can be withdrawn whenever the depositor wants it to be withdrawn.

Using the Nigerian Banking system for example, when you want to withdraw, you are charged a really small fee whether you perform any transaction with the bank that involves money leaving your bank account whether you withdraw with your debit card, Point of sale machine, mobile transfers or even with your online bank. You also get charged for the money used to send debit or credit alerts to your device.

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Types of Accounts in Commercial Banks

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There are four major types of accounts that can be made in commercial banks. There maybe be many more in several countries but the basi ones include

✓ Current Account

These are accounts usually created by business men/ women, entrepreneurs who make numerous transactions on a daily basis. This kind of account has no limits to the amount of transactions that can be done in a day due to it's nature. Current Account holders are usually allowed overdraft facilities and are required to keep a required minimum amount in their account.

✓ Saving Account

This is the most common bank account I have come across. It is a regular account made for those who do not carry out that much transactions, users are charged when withdrawing often and are given interest for leaving money with the bank for longer periods. The amount of transactions to be carried out on a savings account is capped because it's actually meant for saving and there is a wide range of savings accounts.

✓ Salary Account

This kind of account is usually used in a working environment. Most people are paid their salaries through their bank so a salary account is made and payment of reimbursements, compensations, allowances and salaries from the employer is paid directly into the salary account of the workers.

✓ Fixed Deposit Account

When you go to a bank to create a fixed deposit account, this means you intend to lock up an amount of money in the account without wanting to withdraw it until the deposit matures. You can keep depositing in the fixed deposit account until the maturity date reach, if you are to withdraw before that date, you would lose some of your interest and would have to give the bank an early notice prior to the date of withdrawal. They have a higher interest rate than other kinds of account.

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Activities carried out by Commercial Banks

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There are essentially many functions carried out by commercial banks but for the sake of this post I would be joining some and putting only the important ones.

✓ Accepting Deposits From the Public

Commercial Banks have the primary function of accepting deposits of valuables and fiat currency from the public for safekeeping. The depositor can access their stored valuables through either a checkbook, their mobile phones, credit/ debit card depending on the kind of account you opened.

✓ Give out loans

Commercial Banks give loans to the public so they can help themselves then payback with interest at an appointed day. Under a couple of guarantors and some property which you can drop as collateral incase you are not able to pay back, the bank would collect it. The money used to give out the loans are the deposits of the public but trust that they are in safe hands.

✓ Essential Tools for Economic Development

If you happened to read my previous post on Centra banks, you would find out that center banks utilize commercial banks alot when it comes to making monetary policies and controlling the money supply in the country. By giving out loans, commercial banks help business grow up this in turn increases the economy's Gross Domestic Product and National Income.

✓ They make foreign currencies available

Soo many commercial banks and their branches around the country help change currencies for investors, international travellers and tourists at standard rates. If I want to travel to the Uniter states, I can go to a commercial bank branch and change my naira to U.S Dollars.

They clear cheques for their users and fulfill the order on the check.

They also offer bank overdrafts which is withdrawing more than what is in the account to their users especially those with current accounts.

They pay off bills through the use of a standing order which is a written order by the account holder to pay to a certain user anytime the demand money.

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Conclusion

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Studies have shown that when an article is too long, people often tend to skip it or just flip through it so on this note, the next edition of this post would be delivered tomorrow where we would be looking at advantages and disadvantages of commercial banks and problems faced by commercial banks in Nigeria. So stay tuned and thanks for reading ⭐

Post Name:	Business Activity: Centralized Financial institutions focus on Commercial Banks by @swaylee
Owner's name :	@swaylee
Business Address	Barnawa, Kaduna, Nigeria
About us	Link

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