A commercial bank is a type of bank that provides services such as accepting deposits, making

business loans, and offering basic investment products.

Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits
and loans from corporations or large businesses, as opposed to individual members of the public
(retail banking).
In the US the term commercial bank was often used to distinguish it from an investment bank
due to differences in bank regulation. After the great depression, through the GlassSteagall Act,
the U.S. Congress required that commercial banks only engage in banking activities, whereas
investment banks were limited to capital markets activities. This separation was mostly repealed
in the 1990s.
Origin of the word
See also: History of banking
The name bank derives from the Italian word banco "desk/bench", used during the Renaissance
era by Florentine bankers, who used to make their transactions above a desk covered by a green
tablecloth.
[1]
However, traces of banking activity can be found even in ancient times.
Some have suggested, the word traces its origins back to the Ancient Roman Empire, where
moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a
long bench called a bancu, from which the words banco and bank are derived. As a
moneychanger, the merchant at the bancu did not so much invest money as merely convert the
foreign currency into the only legal tender in Rome that of the Imperial Mint.
[2]

The role of commercial banks;
Commercial banks engage in the following activities: 1;processing of payments by way of
telegraphic transfer, EFTPOS, internet banking, or other means 2; issuing bank drafts and bank
cheques 3 accepting money on term deposit 4; lending money by overdraft, installment loan, or
other means 5; providing documentary and stady, guarantees, performance bonds, securities
underwriting commitments and other forms of off balance sheet exposure.
cash management and treasury
merchant banking and private equity financing
traditionally, large commercial banks also underwrite bonds, and make markets in
currency, interest rates, and credit-related securities, but today large commercial banks
usually have an investment bank arm that is involved in the aforementioned
activities
[clarify]
.
Types of loans granted by commercial banks
Secured loans
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as
collateral for the loan, which then becomes a secured debt owed to the creditor who gives the
loan. The debt is thus secured against the collateral in the event that the borrower defaults, the
creditor takes possession of the asset used as collateral and may sell it to regain some or all of the
amount originally lent to the borrower, for example, foreclosed a portion of the bundle of rights
to specified property. If the sale of the collateral does not raise enough money to pay off the debt,
the creditor can often obtain a deficiency judgment against the borrower for the remaining
amount. The opposite of secured debt/loan is unsecured debt, which is not connected to any
specific piece of property and instead the creditor may only satisfy the debt against the borrower
rather than the borrower's collateral and the borrower.
A mortgage loan is a very common type of debt instrument, used to purchase real estate. Under
this arrangement, the money is used to purchase the property. Commercial banks, however, are
given security - a lien on the title to the house - until the mortgage is paid off in full. If the
borrower defaults on the loan, the bank would have the legal right to repossess the house and sell
it, to recover sums owing to it.
In the past, commercial banks have not been greatly interested in real estate loans and have
placed only a relatively small percentage of assets in mortgages. As their name implies, such
financial institutions secured their earning primarily from commercial and consumer loans and
left the major task of home financing to others. However, due to changes in banking laws and
policies, commercial banks are increasingly active in home financing.
Changes in banking laws now allow commercial banks to make home mortgage loans on a more
liberal basis than ever before. In acquiring mortgages on real estate, these institutions follow two
main practices. First, some of the banks maintain active and well-organized departments whose
primary function is to compete actively for real estate loans. In areas lacking specialized real
estate financial institutions, these banks become the source for residential and farm mortgage
loans. Second, the banks acquire mortgages by simply purchasing them from mortgage bankers
or dealers.
In addition, dealer service companies, which were originally used to obtain car loans for
permanent lenders such as commercial banks, wanted to broaden their activity beyond their local
area. In recent years, however, such companies have concentrated on acquiring mobile home
loans in volume for both commercial banks and savings and loan associations. Service
companies obtain these loans from retail dealers, usually on a nonrecourse basis. Almost all
bank/service company agreements contain a credit insurance policy that protects the lender if the
consumer defaults.
Unsecured loan
Unsecured loans are monetary loans that are not secured against the borrower's assets (no
collateral is involved). There are small business unsecured loans such as credit cards and credit
lines to large corporate credit lines. These may be available from financial institutions under
many different guises or marketing packages:
bank overdrafts
corporate bonds
credit card debt
credit facilities or lines of credit
personal loans
A corporate bond is a bond issued by a corporation. It is a bond that a corporation issues to raise
money in order to expand its business. The term is usually applied to longer-term debt
instruments, generally with a maturity date falling at least a year after their issue date. (The term
"commercial paper" is sometimes used for instruments with a shorter maturity.)
Sometimes, the term "corporate bonds" is used to include all bonds except those issued by
governments in their own currencies. Strictly speaking, however, it applies only to bonds issued
by corporations, not to bonds of local authorities and supranational organizations.
Corporate bonds are often listed on major exchanges (bonds there are called "listed" bonds) and
ECNs like Bonds.com and MarketAxess and the coupon (or interest payment) is usually taxable.
Sometimes, this coupon can be zero, with a high redemption value. However, despite being listed
on exchanges, the vast majority of trading volume in corporate bonds in most developed markets
takes place in decentralized, dealer-based, over-the-counter markets.
Some corporate bonds have an embedded call option that allows the issuer to redeem the debt
before its maturity date. Other bonds, known as convertible bonds, allow investors to convert the
bond into equity.
Corporate credit spreads may alternatively be earned in exchange for default risk through the
mechanism of credit default swaps, which give an unfunded synthetic exposure to similar risks
on the same 'Reference Entities'. However, quite volatile credit default swaps 'basis' make the
spreads on credit default swaps and the credit spreads on corporate bonds be significantly
different.
Assets and Liabilities of Commercial Banks in the United States
Glass-Steagall Act
Mortgage constant
Functions
Commercial banks perform many functions. They satisfy the financial needs of the sectors such
as agriculture, industry, trade, communication, so they play very significant role in a process of
economic social needs. The functions performed by banks, since recently, are becoming
customer-centred and are widening their functions. Generally, the functions of commercial banks
are divided into two categories: primary functions and the secondary functions. The following
chart simplifies the functions of commercial banks.
Commercial banks perform various primary functions, some of them are given below:
Commercial banks accept various types of deposits from public especially from its
clients, including saving account deposits, recurring account deposits, and fixed deposits.
These deposits are payable after a certain time period
Commercial banks provide loans and advances of various forms, including an overdraft
facility, cash credit, bill discounting, money at call etc. They also give demand and
demand and term loans to all types of clients against proper security.
Credit creation is most significant function of commercial banks. While sanctioning a
loan to a customer, they do not provide cash to the borrower. Instead, they open a deposit
account from which the borrower can withdraw. In other words, while sanctioning a loan,
they automatically create deposits, known as a credit creation from commercial banks.
Along with primary functions, commercial banks perform several secondary functions, including
many agency functions or general utility functions. The secondary functions of commercial
banks can be divided into agency functions and utility functions.
The agency functions are the following:
To collect and clear cheque, dividends and interest warrant.
To make payments of rent, insurance premium, etc.
To deal in foreign exchange transactions.
To purchase and sell securities.
To act as trustee, attorney, correspondent and executor.
To accept tax proceeds and tax returns.
The utility functions are the following:
To provide safety locker facility to customers.
To provide money transfer facility.
To issue traveller's cheque.
To act as referees.
To accept various bills for payment: phone bills, gas bills, water bills, etc.
To provide merchant banking facility.
To provide various cards: credit cards, debit cards, smart cards, etc.