Explain any two lending money functions of the commercial banks.

Commercial banks lend money to businessmen, farmers, artisans and others in various ways. Two important lending money functions are:

1. Cash Credit — Cash credit is a form of short-term loan in which the bank advances cash loans to the borrower against some tangible security or personal guarantee. The bank fixes a cash credit limit based on the borrower's creditworthiness and the value of the security. The borrower can withdraw money up to this limit according to his needs and can deposit back any surplus. Interest is charged only on the amount actually withdrawn and not on the full limit.

2. Discounting of Bills — Businessmen receive bills of exchange from customers who buy goods on credit. Instead of waiting until the maturity date, the businessman can present the bill to a commercial bank, which pays the amount of the bill before maturity after deducting discount (interest) charges. On the date of maturity, the bank gets the full payment from the acceptor of the bill. If the bill is dishonoured on maturity, the bank receives the payment from the customer who originally discounted the bill. This service helps businesses manage cash flow without waiting for the credit period to end.