▪ A commercial bank is a profit-based financial institution that provides services like

loans, certificates of deposits, savings bank accounts bank overdrafts, etc. to its
customers and help remitance of money from one place to another.
▪ These institutions make money by lending loans to individuals and earning interest on
loans.
▪ Various types of loans given by a commercial bank are business loans, car loans, house
loans, personal loans, and education loans.
▪ Commercial banks provide basic services of banking to their customers and small to
medium-sized businesses.
▪ The origins of banking can be traced back to ancient Mesopotamia, around 2000
BCE, where the first known form of lending took place.
▪ The fall of the Roman Empire in the 5th century led to a decline in banking
activities, but they re-emerged in medieval Europe during the 12th and 13th
centuries.
▪ The 17th and 18th centuries marked the growth of banking in Europe, with the
establishment of banking dynasties such as the Rothschilds and Barings. Joint-
stock banks, which allowed investors to buy shares and participate in profits, also
began to emerge during this period.
▪ Commercial banking activities in Nigeria started 1892 with the establishment of
the African Banking Corporation ledger depositor and Co. a shipping company
based in Liverpool was instrumental in it’s formation. This bank was however,
taken over in 1984 by the bank of the British West African which later became
standard bank and now first bank of Nigeria Plc with the bank on observation.
▪ Commercial Banks can be further classified into:
▪ Public sector banks: These are the nationalised banks
and account for more than 75 per cent of the total
banking business in the country. Majority of stakes in
these banks are held by the government.
▪ Private sector banks: These include banks in which
major stake or equity is held by private shareholders.
▪ Foreign banks: A foreign bank is one that has its
headquarters in a foreign country but operates in
another country as a private entity.
▪
▪Regional Rural Banks (RRB): These are also
scheduled commercial banks but they are established
with the main objective of providing credit to weaker
sections of the society like agricultural labourers,
marginal farmers and small enterprises.
▪Cooperative banks: Co-operative banks are
registered under the Cooperative Societies Act, 1912
and they are run by an elected managing committee.
▪ PRIMARY FUNCTIONS
▪ Accepting Deposits and Advancing of Loans are the two primary functions performed by
commercial banks.
1. Accepting Deposits
▪ Commercial banks accept deposits from their customers in different forms based on the
requirements of different sections of society. The main types of deposits include:
• Demand Deposits or Current Account Deposits: The deposits are repayable on demand by the
banks and are known as demand deposits or current account deposits. These kinds of deposits are
maintained by businessmen to make transactions with these deposits.
• Fixed Deposits or Time Deposits: The deposits in which the depositor, deposits money with the
bank for a fixed time period are known as fixed deposits or time deposits. These deposits do not
enjoy a cheque facility and carry a high interest rate.
• Saving Deposits: The deposits, which include combined features of demand deposits and fixed
deposits are known as saving deposits. The depositors have the cheque facility to withdraw money
from their accounts, but there are some restrictions on the number and amount of withdrawals.
2. Advancing of Loans
▪ The banks are not allowed to keep the amount deposited with them, idle. Therefore, commercial
banks have to keep some amount of the total deposits as cash reserves and lend the rest of the
balance to needy borrowers and charge interest from them. The interest received by commercial
banks from advancing loans is the main source of their income. Some of the different types of
loans and advances made by commercial banks are:
• Cash Credit: The loan given to the borrowers against their current assets like stocks, bonds,
shares, etc., is known as cash credit. For this, a credit limit is sanctioned to the borrower, and
money is credited to this account. The borrower can now withdraw any amount at any time within
his credit limit. Interest is charged from the borrower on the amount actually withdrawn by him.
• Demand Loans: The loans given by the banks which they can recall at any time on demand are
known as demand loans. The entire amount of the demand loan is credited to the borrower’s
account, and interest is charged on that amount.
• Short-term Loans: Personal loans given to borrowers against some collateral security are known
as short-term loans. The amount taken as a loan is credited to the account of the borrower, and
he can withdraw that money from his account. Interest is charged on the entire sum of the loan
granted.
▪SECONDARY FUNCTIONS
1. Overdraft Facility
▪ A facility that allows the customer to overdraw from the amount of his current account upto an agreed limit
is known as an overdraft facility. In general, an overdraft facility is given to respectable and reliable customers
for a short period. Besides, the customers have to pay interest on the amount overdrawn by them.
2. Discounting Bills of Exchange
▪ A facility in which the holder of a bill of exchange, before its maturity date can get the bill discounted with
the bank. The bank pays the amount to the holder after deducting some amount as commission. Now, on the
date of maturity, the party which has accepted the bill pays back the money to the bank.
3. Agency Functions
▪ There are some agency functions performed by commercial banks for which they charge some commission
from their clients. Some of these functions are: Transfer of Funds, Collection and Payment of Various Items,
Purchase and Sale of Foreign Exchange, Purchase and Sale of the Securities, Income Tax Consultancy, Trustee
and Executor Letters of Reference
4. General Utility Functions
Some of the general utility functions performed by commercial banks are:
• Locker Facility: Commercial banks provide their customers with the facility of lockers or safety
vaults so they can keep their valuable things in safe custody.
• Traveller’s Cheques: To avoid the risk of taking cash on their journey, commercial banks
provide their customers with the facility of traveller’s cheques.
• Letter of Credit: Sometimes people need to show their creditworthiness for various reasons.
Commercial banks certify the creditworthiness of their customers whenever required.
• Underwriting Securities: Commercial banks also performs the function of underwriting
securities. And as the public has full faith in the bank’s creditworthiness, they do not hesitate
in purchasing the securities which are underwritten by banks.
• Collection of Statistics: Commercial banks advice their customers on financial matters by
collecting and publishing statistics related to commerce, trade, and industry.
Access Bank Plc. Heritage Bank Plc. Sterling Bank Plc.
Citibank Nigeria Keystone Bank Limited SunTrust Bank Limited
Limited Optimus Bank Titan Trust Bank
Ecobank Nigeria Parallex Bank Limited Limited
Limited Polaris Bank Limited Union Bank Plc.
Fidelity Bank Plc. Premium Trust Bank United Bank for Africa
First Bank of Nigeria Providus Bank Plc. Plc.
Limited Signature Bank Unity Bank Plc.
First City Monument Limited Wema Bank Plc.
Bank Limited Stanbic IBTC Bank Plc. Zenith Bank Plc.
Globus Bank Limited Standard Chartered
Guaranty Trust Bank Bank Limited
Limited