Commercial banks lend money through:

LOAN – Loans are granted to a person having or not having account with the bank. Granting of loans requires more formal arrangements. The periods and terms of the loan are usually stated clearly in the loan agreement.

Over-Draft – This is often granted to customers who have current account with banks. It allows a customer to withdraw on his account even more than the amount he has to his credit in the bank. Although, the customer is charged interest on debit balance. Note that interest increases as the debit balance increases.


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