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Finance & Accounting
Pages 4 (1004 words)
Commercial Banks Name University Commercial Banks in Australia Introduction The main purpose of a commercial bank is to provide the facility of depositing money for safe keeping and to provide loans to individuals and private organizations for organizational and personal purposes…
To conduct this purpose commercial banks tend to lend money to private individuals as well as organizations so these individuals and organizations can use this money to make further investments and conduct expenses. Another purpose of such banks is to accept deposits made by individuals and organizations (Viney, 2009, p.50). Commercial banks even conduct several secondary functions which include: creation of credit, funds transfer and services that are general in nature. Sources and Use of Funds The main source of finance for commercial bank which contributes heavily to its cash inflow is deposits. Deposits are regarded as the money that a particular commercial bank’s account holder transfers to the bank for the purpose of safekeeping in order to use this money whenever the account holder needs it. These deposits are added by two kinds of account holders, these include those who have a saving account and who hold a current account. Other than deposits, commercial banks even attain funds through the act of borrowing money. Commercial banks do not normally borrow money but in order to respond to short term financing needs it borrows money from other banks or they even borrow money through the Federal Reserve (Madura, 2011, p.442). Banks even earn money through by charging for the various services it provides to its account holders from those who have borrowed money. ...
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