(a) Explain seven functions of a commercial bank. (b) Explain three types of accounts that are operated in a commercial bank.

(a) Seven functions of a commercial bank

1. Acceptance of deposits: it receives and keeps customers' money safely in current, savings and fixed deposit accounts.
2. Granting of loans and overdrafts: it lends money to customers and allows overdrafts to meet their needs.
3. Means of payment: it provides cheques, standing orders and other instruments for settling debts without cash.
4. Agent for payments: it pays and collects money on behalf of customers, such as standing orders and dividends.
5. Safe keeping of valuables: it keeps important documents and valuables for customers in its strong-rooms and safe-deposit boxes.
6. Foreign exchange services: it buys and sells foreign currencies and helps in financing foreign trade.
7. Provision of financial advice and references: it advises customers on investment and gives status enquiries/references on their behalf.

(b) Three types of accounts operated in a commercial bank

1. Current account: a running account from which money can be withdrawn at any time by cheque; it usually earns no interest and may attract bank charges.
2. Savings account: an account that encourages small savers; it earns interest and withdrawals are limited, often needing a passbook or card.
3. Fixed deposit account: money is deposited for a fixed period and cannot be withdrawn before it matures; it earns a higher rate of interest.