Which of the following are primary functions of Commercial Banks?

A. Accepting Deposits

B. Agency Service

C. Discounting Trade Bills

D. Financing Foreign Trade

E. General Utility Service

Choose the correct answer from the options given below:

Correct option is D

The primary functions of commercial banks focus on the core banking activities essential to their operation. These include:
1. A. Accepting Deposits:
· Banks accept deposits in various forms such as savings, current, and fixed deposits, serving as their primary source of funds.
2. C. Discounting Trade Bills:
· Banks provide short-term credit by discounting trade bills, allowing businesses to meet immediate liquidity needs.
3. D. Financing Foreign Trade:
· Commercial banks play a vital role in facilitating international trade by issuing letters of credit, providing foreign exchange services, and financing export/import activities.
· B. Agency Service:
· Considered a secondary function, these services include managing funds, collecting payments, and investments on behalf of clients.
· E. General Utility Service:
· Also a secondary function, examples include offering safe deposit lockers, issuing bank drafts, and providing credit cards.
Information Booster
1. Primary Functions of Commercial Banks:
· Accepting Deposits: The foundation of banking, creating a pool of funds.
· Lending Money: Through loans, overdrafts, and advances.
· Trade Facilitation: Financing and credit for domestic and international trade.
2. Secondary Functions:
· Agency Services: Fund transfers, tax payments, and acting as a trustee.
· Utility Services: Safe custody, remittance, and credit card issuance.
Additional Knowledge
1. Examples of Primary Functions:
· Providing a business loan for expansion.
· Discounting a trade bill to ensure cash flow for a company.
2. Role in Economic Growth:
· By supporting trade, savings, and investment, commercial banks drive economic activity and development.