The main functioning of the banking system is to :

The primary and traditional functions of the banking system, specifically commercial banks, are to accept deposits from the public and provide credit (loans) to borrowers [2]. Banks act as financial intermediaries by mobilizing savings through various deposit accounts, such as current, savings, and fixed deposits [1]. These funds are then lent out to individuals and businesses, a process known as credit creation [2]. While banks may facilitate government schemes or provide overdraft facilities, the provision of subsidies is generally a fiscal function of the government rather than a core banking operation [3]. The difference between the interest rate paid to depositors and the rate charged to borrowers, known as the 'spread,' constitutes the bank's primary profit [2]. Therefore, the fundamental functioning of the banking system is centered on the dual activities of deposit acceptance and credit provision [1].

Sources

1. [2] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > Commercial Banks > p. 38
2. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > Payments Banks > p. 191
3. [3] https://www.sciencedirect.com/topics/economics-econometrics-and-finance/depository-institution