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COMMERCIAL BANK

A commercial bank is those financial institutions which accept the deposit from public & advance loans for purpose of consumption or investment . Post Office , LIC , UTI are not banks .
      Post office only accept deposit from public but do not advance loan to other.
 LIC , UTI , IDBI are not banks in sense they do not accept checkable deposits but advance Loan to others.
 
    It is the bank which accept deposits from the public & advance Loans to them , It is owned by both people and by government. It also have relation with public , It creates only Credit and it doesn't have right to issue currency . It is a sense of comptition among various banks .

               
               Money Supply

It refers to stock of money held by public i.e Private Individual & business firms at point of time in an economy.
 Measures of money supply in India -  from April 1977 the RBI has presented four measures of money Supply i.e ~

a) M1 - It is a narrow definition of money & most liquid & easy for transaction.
M1 = C+DD+OD where
C = Currency
DD= Demand deposit
OD= other deposit by RBI

b) M2 - It is a narrow money
M2 = M1 + Saving of people with post offices.

c) M3 - It is a broad definition of money & commonly used for measure of money suply . It includes time deposit , fixed deposit or term deposit.
M3 = M1 + net time deposit with commercial banks.

d) M4 - It is broad definition of money & is least liquid.
M4 = M3 + Saving with post office (other than national saving certificate).

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