What is the primary role of a commercial bank?

The primary role of a commercial bank is to accept deposits from the public and provide loans. This function is fundamental to the banking system as it facilitates the flow of money within the economy. By accepting deposits, commercial banks offer individuals and businesses a safe place to store their money while providing interest on those deposits. This accumulation of deposits enables banks to extend loans to borrowers who require funds for various purposes, including personal loans, mortgages, or business financing.

Through this lending process, commercial banks play a critical role in promoting economic growth and stability. They assess the creditworthiness of borrowers, determining the risk associated with providing loans, which is essential for maintaining the health of the financial system. In addition, by creating credit through lending, banks help in the expansion of the money supply in the economy, which is vital for enabling spending and investment.

While other options might reflect services provided by financial institutions, they do not encompass the core function of a commercial bank. For instance, investing in stocks and bonds is typically not a primary function of commercial banks and is more aligned with investment banks or asset management firms. Similarly, providing investment banking services or managing government funds are specialized functions that do not define the primary role of a commercial bank.