Commercial banks make money primarily by taking in deposits from customers and then using those funds to make loans. When customers deposit money into their bank accounts, the bank can then lend out those funds to other customers.
The interest rate charged on the loan is usually higher than the rate paid to the customer for their deposit. The difference between the two rates is known as the "spread," which is how banks make their profit.
In addition to loans, commercial embankments also make money through fees charged for services such as ATM use, overdraft protection, and account maintenance. They also earn fees from investment and insurance products they sell, as well as from foreign exchange services.
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Commercial banks also make money through investing their own funds. Banks invest the funds they have on hand in securities, such as bonds and stocks, and earn a return on those investments. Banks also invest in other financial products such as derivatives and commodities.
Overall, commercial banks are able to generate significant profits by taking advantage of the spread between the interest rates they pay to customers and the interest rates they charge on loans. They also earn income from fees and investments.
