(a) Distinguish between a: →mortgage bank and a merchant bank →commercial bank and a development bank (b) Explain any four functions of commercial banks

Answer Details

(a) → A mortgage bank is a financial institution that specializes in providing loans for the purchase of real estate, while a merchant bank is a financial institution that specializes in providing advisory services to businesses and governments, such as underwriting, corporate finance, and merger and acquisition activities. → A commercial bank is a financial institution that provides a wide range of banking services to individuals, small and medium-sized businesses, and corporations, such as accepting deposits, making loans, and providing investment and advisory services. On the other hand, a development bank is a financial institution that focuses on providing long-term financing and other support for economic development projects, particularly in developing countries.

(b) Four functions of commercial banks are:

1. Accepting deposits: Commercial banks accept deposits from individuals and businesses, which can be withdrawn at any time or kept for a fixed term, depending on the type of account. This allows individuals and businesses to earn interest on their savings and also provides a source of funding for the bank to make loans.
2. Making loans: Commercial banks lend money to individuals and businesses for various purposes, such as purchasing a home or car, starting a business, or financing operations. The bank earns interest on the loans and also helps to stimulate economic growth by providing access to capital.
3. Providing payment services: Commercial banks provide various payment services, such as issuing debit and credit cards, processing checks, and facilitating electronic transfers. This helps individuals and businesses to make transactions and payments more efficiently and securely.
4. Offering investment and advisory services: Commercial banks also offer investment and advisory services to individuals and businesses, such as managing investment portfolios, providing financial planning advice, and offering insurance products. This allows customers to diversify their assets and manage their finances more effectively.