Banking Practice Exam 2025 - Free Banking Practice Questions and Study Guide

A commercial bank is primarily defined by its acceptance of demand deposits and its role in providing business loans. Demand deposits are funds that customers can withdraw at any time without any prior notice, making them a significant aspect of a commercial bank's deposit base. Commercial banks are designed to serve the needs of businesses by providing loans to facilitate operations, expansion, and other financial needs. These institutions play a crucial role in the economy by helping businesses maintain liquidity and grow through credit.

By focusing on business loans, commercial banks contribute significantly to the financial stability and growth of the business sector. They possess the ability to assess risk and lend to businesses that might not have access to financing from other sources. The other options do not accurately represent the primary functions of commercial banks, as they focus on certain aspects that do not collectively encapsulate the main purpose of commercial banking. For example, consumer loans and specific account types like NOW accounts relate more to consumer banking rather than the fundamental operations of a commercial bank.