The primary functions of a commercial bank are of three types. They are:

(I) Accepting Deposits – The basic deposit accounts offered by commercial banks are listed below:

1. Demand Deposits: These deposits are repayable on demand on any day. 

These consist of –

• Savings Deposits: General public deposit their savings into this account. This account can be opened in one individual’s name or more than one name.
• Current Deposits: This account is suitable for business institutions. Individuals too . can open this account. A higher minimum balance should be kept in this account.

2. Time Deposits: These are repayable after a period. These include –

• Fixed Deposits (FD): Certain amount is deposited for a fixed period for a fixed rate of interest.
• Recurring Deposits (RD): Certain sum is deposited into the account every month for one year or five years or the agreed period. Interest rate is more than savings deposits and almost equal to fixed deposits.

(II) Granting Loans and Advances: Commercial banks lend money in order to earn interest.

1. Advances

• Overdraft: It is a credit facility extended mostly to current account holding business community customers.
• Cash Credit: It is a secured credit facility given mostly to business institutions. Stock in hand, raw materials, other tangible assets, etc., are provided as collateral.
• Discounting of Bills: Business customers approach banks to discount the commercial bills of exchanges and provide money.

2. Loans – Short term and medium term loans are provided by commercial banks against eligible collaterals to business concerns. 

Examples – housing loan, consumer loan, vehicle loan, educational loan, jewel loan, etc.

3. Creation of Credit – Apart from the currency money issued by the RBI, the credit money in circulation created by commercial banks influence economic activities of a country to a large extent. Credit money of commercial banks is far greater in volume than the currency money.