An institution licensed to receive and hold deposits, that enables monetary transactions and creates credit. Deposits are used to finance loans that earn a high enough rate of interest to earn a profit after payment of interest to depositors and covering the cost of administration and bad debts.
Below is an illustration of the main activities that a commerical bank undertakes i.e. deposit-taking and lending activites to the retail and household sectors of the economy. They are often called intermediairies because they intermediate funds between surplus units (savers) and deficit units (borrowers).
