What Is Commercial Banking?

The word “commercial” means that the bank is open for business to the public and accepts deposits from different people. Banks are also regulated by a central authority, usually through policies set by governments or other regulatory bodies.

Commercial banking is the business of providing financial services to companies and individuals. It is also called trade or merchant banking. Read more in detail here: what is commercial banking job.

Commercial banking refers to bank goods and services that are tailored to fulfill the financial requirements of businesses, institutions, and government clients rather than individual customers. Savings and checking accounts, merchant services, treasury services, commercial loans, worldwide trade services, payroll services, and other corporate-related products are all examples of commercial banking goods and services.

Commercial Banking vs. Retail Banking

Individual customers and the general public are served through retail banking, which is sometimes known as personal banking or consumer banking. Commercial banking, on the other hand, offers banking services to companies, corporations, governments, and other organizations.

A Commercial Bank’s Functions

A commercial bank is a profit-driven financial organization that accepts deposits, lends money, and provides other financial services such as overdrafts, credit cards, investments, and securities.

The following are the key functions of commercial banks:

• Commercial banks take deposits in the form of savings accounts, checking accounts, time deposits, and fixed deposits from individuals, businesses, and other organizations.
• Commercial banks provide money to its customers in the form of loans, advances, and cash credits. Interest on these loans is a source of profit for commercial banks.

Commercial banks’ supplementary roles include:

• Acting as an agent: Commercial banks sometimes operate as agents for their clients, collecting bills, providing insurance and investment products, and acquiring or redeeming assets on their behalf. A commercial bank may also serve as the executor, administrator, or trustee of a client’s estate, as well as assist clients with income tax returns and refund claims.
• Overdraft facilities, traveler’s checks, locker facilities, debit and credit cards, foreign exchange, money transfer, and discounting bills of exchange are only a few of the financial and utility services offered by certain commercial banks.

Products and Services in Commercial Banking

Commercial banks’ basic products and services are comparable to those given by other banks, including deposit products such as savings and checking accounts. These items are tailored to fulfill the requirements of business clients. They do, however, usually have the same structures and features as those designed for individual customers.

Aside from deposit accounts, commercial banks often provide the following goods and services:

• Industrial loans and other lending services: For commercial banks, loans are the principal source of profit. Commercial banks make money by lending money to businesses and collecting interest from their borrowers.
• Merchant services: Credit card processing, mobile payment solutions, gift cards, and electronic check services are all available via most commercial banks.
• Foreign exchange, foreign trade finance, letters of credit, global payments, export financing, and bank guarantees are examples of global trade services.
• Leasing: Leasing is a popular way for businesses to finance the purchase of real estate, vehicles, manufacturing equipment, and other large fixed assets.
• Commercial banks provide treasury management services such as cash collection, distribution, and fraud protection.
• Retirement programs, employee stock ownership plans, payroll services, consulting services, and insurance products for organizations and institutions are examples of corporate-oriented goods and services.

Commercial Banks Come in a Variety of Shapes and Sizes

Most traditional banks offer both retail banking and commercial banking in their standard products and services. In most cases, business owners do not need to find a new bank as long as they use a bank that also offers Products and Services in Commercial Banking.

There are three Commercial Banks Come in a Variety of Shapes and Sizes, including:

• Private banks: Public banks are a form of commercial bank in which private persons and corporations hold the majority of the capital shares. Banks in the private sector are incorporated as limited-liability corporations.
• Public banks are nationalized, with the government owning the majority of the stock.
• Foreign banks: Foreign banks are headquartered and formed in other countries, with operational branches in other nations. Foreign banks include American Express Bank, HSBC, and Citibank, to name a few.

Pros & Cons

Conclusion

Commercial banking focuses on corporate and government accounts, as well as dealing with company owners and representatives. This is appropriate for developing firms, corporations, government entities, and other institutions that need commercial banking services. It’s vital to remember that various commercial banks provide different goods and services, so choose one that can meet your company’s specific requirements.

Commercial banks are financial institutions that offer a wide range of services to businesses and individuals. These banks provide loans, investments, and other banking products. The features of commercial bank include: deposit taking, lending, international trade finance, securities trading, asset management, and more.

Related Tags

• types of commercial bank
• importance of commercial bank
• what are the five functions of commercial bank
• 10 types of commercial bank
• definition of commercial bank by different authors