Question

1.What is the principal goal of a commercial bank ? How does profitability of a bank and the risks it faces affect this goal?

2.Why are banks regulated?Is the regulation justified?

Answer 1

1.Commercial banks are the banks that provide banking services to the general people and commercial organisations.

The primary goal of commmercial banks is collection of deposits and providing loan/ credit facility to its customers.

Profitability of the bank depends on the interest it earns from the loans and credit facility they give to its customers, and the risk of the banks is covered by the deposits and the security coolected from the customers against which the loans are availed.

2.Banks are regualted because it owns people's money in the form of deposits and lends the same to the needy which is a risk. As banking is a business and also need to earn profit it is necessary to regulate the banking operations because in hassel of attaining the targets there is scope of mistake, and can have a huge impact on the economy of the country. Yes regulation of Banks is justified.