Characteristics of Commercial Banks

Characteristics of Commercial Banks- Commercial banks are an organization which normally performs certain financial transactions. It performs the twin task of accepting deposits from members of the public and make advances to needy and worthy people from society. When banks accept deposits its liabilities increase and it becomes a debtor, but when it makes advances its assets increases and it becomes a creditor. Banking transactions are socially and legally approved. It is responsible for maintaining the deposits of its account holders.

Characteristics of Commercial Banks- Among financial institutions, the role of commercial banks is unique.

• Bank demand deposit liabilities constitute a large proportion of ‘narrow money’ i.e. money consisting of currency with the public, demand deposits, and other deposits with RBI, Which includes narrow money, post office savings, bank deposits and time deposits with banks aggregate a large deposit of over 80%.
• Commercial banks are the main channels through which credit and monetary policies are transmitted to the company. Credit and monetary policies are implemented through action on bank reserves (cash and statutory liquidity ratios), margin requirement, and the rate at which scheduled banks can borrow from the RBI.
• They deal in a wide variety of assets and accommodate different types of borrowers.

They facilitate the spread of the monetary policies to non-bank lenders and to other sections of the economy.

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